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EXHIBIT 10.19
January 4, 2006
Mr. Lawrence E. Daurelle
c/o Reliance Standard Life Insurance Company
2001 Market Street, Suite 1500
Philadelphia, Pennsylvania 19103-7303
Re: Stock Option Award
Agreement
Dear Larry:
We
are pleased to inform you that, pursuant to action taken by the
Stock
Option and Compensation Committee (the "Committee") of the Board of
Directors of
Delphi Financial Group, Inc. ("Delphi") under Section 5 of the 2003
Employee
Long-Term Incentive and Share Award Plan (the "Plan"), you have
been granted
options to purchase up to 50,000 shares of Delphi's Class A Common
Stock (the
"Stock") at the price of $46.65 per share (the "Options"), which
was the fair
market value of the Stock as of December 28, 2005, the date of such
action, as
determined under the Plan. This notice, once countersigned by you,
shall
constitute an "Award Agreement" as defined in Section 2(c) of the
Plan.
Capitalized terms used but not defined herein shall have the
respective meanings
set forth in the Plan.
The
Options will become exercisable, in accordance with the procedures
set
forth herein, in their entirety if the aggregate Pre-Tax Operating
Income, as
defined in Exhibit A hereto ("Pre-Tax Operating Income"), of
Reliance Standard
Life Insurance Company of Texas and its consolidated subsidiaries
(collectively,
"the RSL Companies") for the period consisting of Delphi's 2004,
2005, 2006,
2007 and 2008 fiscal years (the "Performance Period") is at least
$646,159,683.
Alternatively, if the RSL Companies' aggregate Pre-Tax Operating
Income for such
period does not reach $646,159,683, but is greater than
$559,927,799, a reduced
number of the Options shall become exercisable in accordance with
such
procedures, to be determined by interpolating between zero and
50,000 in
relation to the point at which the Pre-Tax Operating Income amount
falls in the
range between $559,927,799 and $646,159,683.
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Lawrence E. Daurelle
January 4, 2006
Page 2
In
addition, if prior to December 31, 2008, your employment with
Delphi's
subsidiary, Reliance Standard Life Insurance Company ("RSL"),
terminates due to
death or Disability or is terminated by RSL without Cause or by you
for Good
Reason, then, notwithstanding any provisions hereof or of the Plan
to the
contrary, with respect to Options that have not become exercisable
prior to such
termination pursuant to the provisions of the preceding paragraph,
such Options
will become exercisable at such time, if any, as would have been
the case
pursuant to such paragraph if not for such termination; provided,
however, that
the number of Options that becomes exercisable will, in each case,
be reduced by
a percentage equal to the applicable percentage of the Performance
Period during
which you were not employed by RSL by reason of such termination.
For purposes
of this paragraph, the following definitions shall apply:
"Disability" shall mean an illness, injury, accident or condition
of either
a physical or psychological nature as a result of which you are
unable to
perform substantially the duties and responsibilities of your
position during a
period of 180 days during a period of 365 consecutive calendar
days.
"Cause" shall mean (i) conviction of a felony or other crime
involving
fraud, dishonesty or moral turpitude, (ii) fraud or intentional
misrepresentation, embezzlement, misappropriation or conversion of
assets or
opportunities of Delphi or any Subsidiary thereof, or any
unauthorized
disclosure of confidential information or trade secrets of Delphi
or any
Subsidiary thereof (a "Breach of Confidentiality"), or (iii) gross
neglect of
duties of your office specified by the Board of Directors of
RSL.
"Good Reason" shall mean (i) reduction of your base salary for any
fiscal
year to less than 100 percent of the rate of base salary in effect
for you as of
the date of this Award Agreement; or (ii) the failure of RSL to
continue in
effect any retirement, life insurance, medical insurance or
disability plan in
which you were participating of as the date of this Award
Agreement, except, as
to any such plan, where RSL provides you with a plan that provides
substantially
comparable benefits or where the discontinuation of such plan
applies generally
with respect to
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Lawrence E. Daurelle
January 4, 2006
Page 3
the employees of RSL (or, in the case of a plan furnished only to a
specified
group of RSL employees, with respect to such group).
Options which do not become exercisable pursuant to the
preceding
provisions of this Award Agreement shall expire and terminate in
their entirety
without becoming exercisable.
For
purposes of application of the foregoing provisions relating to
the
exercisability of the Options, the following procedures shall
apply:
Each
determination of Pre-Tax Operating Income shall be made by
Delphi,
based upon a statement of operations of the RSL Companies for the
applicable
period conforming to the provisions of Exhibit A hereto and in form
and
substance reasonably acceptable to Delphi.
Delphi shall notify you in writing, within 105 days following the
close of
the Performance Period, of its determination as to the level of
aggregate
Pre-Tax Operating Income achieved and, based on such determination,
the extent
to which the Options have become exercisable pursuant to the second
(or, if
applicable, third) paragraph of this Award Agreement. Options
having become
exercisable, as described in such notice, shall for all purposes of
the Plan be
exercisable immediately as of the date of such notice.
Options that become exercisable as provided herein will, if not
sooner
exercised or terminated pursuant to the provisions hereof,
terminate at the
close of business on December 28, 2015. The Options are in all
respects subject
to each of the terms and conditions of the Plan, a copy of which is
attached
hereto as Exhibit B, except as otherwise provided herein and except
that: (i)
the provisions of Sections 5(b)(iii), (iv), (vi) and (viii) of the
Plan will not
limit your ability to exercise, following a termination of your
employment by
RSL or for the other reasons set forth therein, Options that have
become
exercisable as of the date of such termination or that become
exercisable
thereafter pursuant to the third paragraph of this Award Agreement;
provided,
however, that the Options will terminate in their entirety upon the
occurrence
of a Breach of
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Lawrence E. Daurelle
January 4, 2006
Page 4
Confidentiality on your part occurring subsequent to such
termination of
employment; (ii) for purposes of Section 5(b)(v) of the Plan, your
discharge for
cause shall result in the termination of Options that are
exercisable at the
time of such discharge only where the Committee determines that the
discharge
was based on an event of the type described in clause (ii) of the
definition of
"Cause" above; and (iii) notwithstanding the provisions of Section
5(b)(ix) of
the Plan, the exercise price for the Options may be paid by your
directing that
Delphi withhold from the Option shares a number of shares having a
market value,
at the time of exercise, equal to such exercise price, so long as
such payment
method will not, in Delphi's judgment, result in adverse accounting
consequences
for Delphi; and (iv) the provisions of Section 8(a) of the Plan
shall not apply
to the Options.
In
addition, RSL, by its execution of this Award Agreement, has agreed
that
if it terminates your employment without Cause or if you terminate
your
employment for Good Reason (as such term is defined above)
subsequent to the
occurrence of a Change of Ownership, and all or a portion of the
Options remain
outstanding as of the date (the "Termination Date") of such
termination (whether
such Options are then exercisable for shares of Delphi or another
company, cash
or other property), then, so long as the Performance Condition has
then been
satisfied and unless, in connection with such termination, the
Committee (or, if
applicable, such other committee, person or entity as then has the
authority to
do so) effects an Accelerated Vesting with respect to such
remaining Options,
RSL shall pay or cause to be paid to you the Black-Scholes Value of
such
remaining Options within thirty (30) days following the Termination
Date. The
foregoing agreement (the "Contingent Payment Agre
