EXHIBIT 10.5

PRIMUS GUARANTY, LTD.

2004 SHARE INCENTIVE PLAN (Amended on February 1, 2007)

1.

Purpose of the Plan

The purpose of this 2004 Share Incentive Plan (the “Plan”) is to advance the
interests of the Company and its shareholders by providing a means to attract,
retain, and reward employees, officers, directors of the Company and/or any of
the Company’s Subsidiaries and other persons or entities who provide services to
the Company and its Subsidiaries, and to enable such persons to acquire or
increase a proprietary interest in the Company in order to promote a closer
identity of interests between such persons and the Company’s shareholders.

2.

Definitions

Capitalized terms used in the Plan and not defined elsewhere in the Plan shall
have the meaning set forth in this Section.

2.1. “Award” means a compensatory award of Shares or right to receive or
purchase Shares. A compensatory award that is payable solely in cash shall not
be treated as an Award for purposes of the Plan, whether or not the amount
payable is measured in whole or in part by reference to the value of the Shares.

2.2. “Award Agreement” means a written document prescribed by the Committee and
provided to a Participant evidencing the grant of an Award under the Plan.

2.3. “Beneficiary” means the person(s) or trust(s) which have been designated by
a Participant in his or her most recent written beneficiary designation filed
with the Committee to receive any rights with respect to an Award that survive
such Participant’s death. If, upon a Participant’s death, there is no designated
Beneficiary or surviving designated Beneficiary, then the term Beneficiary means
the person(s) or trust(s) entitled by will or the laws of descent and
distribution to receive such rights.

2.4. “Board” means the Board of Directors of the Company.

2.5. “Committee” means the committee appointed by the Board to administer the
Plan or the Board, where the Board is acting as the Committee or performing the
functions of the Committee, as set forth in Section 3.

2.6. “Company” means Primus Guaranty Ltd., a company organized under the laws of
Bermuda.

2.7. “Disability” means a Participant’s physical or mental impairment such that
he or she qualifies for benefits under a long-term disability insurance plan
sponsored by the Company or a Subsidiary.

 

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2.8. “Participant” means any employee (including any officer of the Company),
director or other individual or entity who has been granted an Award under the
Plan.

2.9. “Qualified Member” means a member of the Committee who is a “non-employee
director” of the Company as defined in Rule 16b-3(b)(3) under the United States
Securities Exchange Act of 1934.

2.10. “Retirement” means the termination of employment with the Company and its
Subsidiaries by a Participant, the sum of whose age and full years of completed
service with the Company and its Subsidiaries equals at least 70, with the
written consent of the Committee.

2.11. “Shares” means common shares of the Company and such other securities as
may be substituted or resubstituted for Shares pursuant to Section 6.

2.12. “Subsidiary” means an entity that is, either directly or through one or
more intermediaries, controlled by the Company.

3.

Administration

3.1. Committee. The Plan shall be administered by the Compensation Committee of
the Board, unless the Board shall appoint a different committee. At any time
that a member of the Committee is not a Qualified Member, any action relating to
an Award granted or to be granted to a Participant who is then subject to
Section 16 of the Securities Exchange Act of 1934 in respect of the Company may
be taken either by the Board, a subcommittee of the Committee consisting of two
or more Qualified Members or by the Committee but with each such member who is
not a Qualified Member abstaining or recusing himself or herself from such
action, provided that, upon such abstention or recusal, the Committee remains
composed of two or more Qualified Members. Such action, authorized by such a
subcommittee or by the Committee upon the abstention or recusal of such
non-Qualified Member(s), shall be the action of the Committee for purposes of
the Plan. Other provisions of the Plan notwithstanding, the Board may perform
any function of the Committee under the Plan, and that authority specifically
reserved to the Board under the terms of the Plan, the Company’s Bye-Laws, or
applicable law shall be exercised by the Board and not by the Committee. The
Board shall serve as the Committee in respect of any Awards made to any director
who is not otherwise employed by the Company.

3.2. Powers and Duties of Committee. In addition to the powers and duties
specified elsewhere in the Plan, the Committee shall have full authority and
discretion to:

(a) adopt, amend, suspend, and rescind such rules and regulations and appoint
such agents as the Committee may deem necessary or advisable to administer the
Plan;

(b) correct any defect or supply any omission or reconcile any inconsistency in
the Plan and to construe and interpret the Plan and any Award, rules and
regulations, Award Agreement, or other instrument hereunder;

 

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(c) make determinations relating to eligibility for and entitlements in respect
of Awards, and to make all factual findings related thereto; and

(d) make all other decisions and determinations as may be required under the
terms of the Plan or as the Committee may deem necessary or advisable for the
administration of the Plan.

3.3. Claims. If a Participant, or any person claiming any rights under the Plan
from or through any Participant, disputes any determination relating to the
Participant’s entitlement in respect of an Award, the Participant or such other
person may, within 30 days of the date of such determination, file a written
claim with the Committee (to the attention of “2004 Share Incentive Plan
Committee” addressed to the Company’s corporate headquarters) stating with
specificity the nature of the Participant’s claim and reasons therefor. The
Committee shall consider such claim and render its decision within 60 days of
receipt thereof. Such decision, as well as any determination for which a claim
is not timely filed, shall be final and binding upon the Participant or such
other person, and the Participant or such other person may not further pursue
his or her claim in any court of law or equity or other arbitral proceeding.

3.4. Delegation by Committee. Except to the extent prohibited by applicable law
or the applicable rules of a stock exchange, the Committee may delegate to any
person or persons selected by it, who may or may not be members of the Board,
all or any part of its responsibilities and powers as set in the Plan. Any such
allocation or delegation may be revoked by the Committee at any time.

3.5. Limitation of Liability. Each member of the Committee shall be entitled to,
in good faith, rely or act upon any report or other information furnished to him
by any officer or other employee of the Company or any Subsidiary, the Company’s
independent certified public accountants, or any executive compensation
consultant, legal counsel, or other professional retained by the Company to
assist in the administration of the Plan. No member of the Committee, nor any
officer or employee of the Company acting on behalf of the Committee, shall be
personally liable for any action, determination, or interpretation taken or made
in good faith with respect to the Plan, and all members of the Committee and any
officer or employee of the Company acting on behalf of the Committee or members
thereof shall, to the extent permitted by law, be fully indemnified and
protected by the Company with respect to any such action, determination, or
interpretation.

4.

Shares Available for Awards

4.1. Aggregate Number of Shares Available for Awards. The aggregate number of
Shares for which Awards may be granted under this Plan shall not exceed 12% of
the number of Shares issued and outstanding at the time any Award is granted.
Awards made under this Plan which are forfeited (including a repurchase or
cancellation of Shares subject thereto by the Company in exchange for the price,
if any, paid to the Company for such Shares, or for their par or other nominal
value), cancelled or have expired, shall be disregarded for purposes of the
preceding sentence.

 

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4.2. Type of Shares Deliverable. The Shares delivered in connection with Awards
may consist, in whole or in part, of authorized and unissued Shares, or Shares
acquired in the market for the account of a Participant.

5.

Awards

5.1. Eligibility. The Committee shall have the discretion to select Award
recipients from among the following categories of eligible recipients: (i)
individuals who are employees (including officers) of the Company or any
Subsidiary, (ii) individuals who are members of the Board and not otherwise
employed by the Company or any Subsidiary, (iii) any other individual or entity
who provides substantial personal services to the Company or any Subsidiary,
(iv) any individual who has agreed to become an employee of the Company or a
Subsidiary, provided that no such person may receive any payment or exercise any
right relating to an Award until such person has commenced employment, and (v)
individuals formerly employed by the Company or any Subsidiary as compensation
in respect of their employment with the Company or any Subsidiary.

5.2. Type of Awards. The Committee shall have the discretion to determine the
type of Awards to be granted, including, but not limited to, options to purchase
Shares, bonus Shares or restricted Shares, and appreciation rights, share units
and dividend equivalents that may be settled in Shares. The Committee is
authorized to grant Awards as a bonus, or to grant Awards in lieu of obligations
of the Company or any Subsidiary to pay cash or grant other awards under other
plans or compensatory arrangements, to the extent permitted by such other plans
or arrangements. Shares issued pursuant to an Award in the nature of a purchase
right (e.g., options) shall be purchased for such consideration, paid for at
such times, by such methods, and in such forms, including cash, Share
repurchase, other Awards, Participant services, Award cancellation or other
consideration, as the Committee shall determine, provided that in each case for
such value of not less than the aggregate par value of the relevant Shares.

5.3. Terms and Conditions of Awards. The Committee shall determine the number of
Awards to be granted, the number of Shares to which an Award will relate, all
other terms and conditions of any Award granted under the Plan (including, but
not limited to, any exercise price, grant price, or purchase price, any
restrictions or conditions relating to transferability, forfeiture,
exercisability, or settlement of an Award, and any schedule or performance
conditions for the lapse of such restrictions or conditions, and accelerations
or modifications thereof, based in each case on such considerations as the
Committee shall determine), and all other matters to be determined in connection
with an Award. The Committee may determine whether, to what extent, and under
what circumstances an Award may be settled, or the exercise price of an Award
may be paid, in cash, Shares, other Awards, or other consideration, or an Award
may be canceled, forfeited, or surrendered.

5.4. Option Repricing. As to any Award granted as an option to purchase Shares
or an appreciation right payable in Shares, the Committee is authorized to
subsequently reduce the applicable exercise price relating to such Award, or
take such other action as may be considered a repricing of such Award under
generally accepted accounting principles.

 

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5.5. Stand-Alone, Additional, Tandem, and Substitute Awards. Awards granted
under the Plan may, in the discretion of the Committee, be granted either alone
or in addition to, in tandem with, or in substitution or exchange for, any other
Award or any award granted under another plan of the Company, any Subsidiary, or
any business entity to be acquired by the Company or a Subsidiary, any other
right of a Participant to receive payment from the Company or any Subsidiary.
Such additional, tandem, and substituted or exchanged Awards may be granted at
any time. The Committee may determine that, in granting a new Award, the
intrinsic value of any surrendered Award or award may be applied to reduce the
exercise price of any option or appreciation right or purchase price of any
other Award.

5.6. Acceleration of Vesting. Unless otherwise determined in an Award Agreement,
as to any Participant who was granted an Award in his or her capacity as an
employee, all conditions and/or restrictions relating to the continued
performance of services and/or the achievement of performance objectives with
respect to the exercisability or full enjoyment of an Award shall immediately
lapse (in other words, all Awards hereunder shall immediately vest) upon: (i)
termination of his or her employment by reason of death, Disability or
Retirement, or (ii) a Change in Control (as such term in defined in the Senior
Management Severance Pay Plan) of the Company. Notwithstanding the foregoing,
with respect to any Award pursuant to which the number of Shares that vest
increases or decreases based on achievement that is greater or lower than a
target level of performance over a stated period of time, the number of Shares
for which such Award shall vest upon such termination of employment shall equal
the number of Shares that would have vested if target level performance were
achieved, multiplied by a fraction, the numerator of which is the number of days
during the performance period that the Participant was actually employed, and
the denominator of which is the total number of days in the performance period.

6.

Adjustments

In the event of any change in the outstanding Shares by reason of any Share
dividend or split, reorganization, recapitalization, merger, amalgamation,
consolidation, spin-off, combination or exchange of Shares, repurchase,
liquidation, dissolution or other corporate exchange, any large, special and
non-recurring dividend or distribution to shareholders, or other similar
corporate transaction, the Committee may make such substitution or adjustment,
if any, as it deems to be equitable and in order to preserve, without enlarging,
the rights of Participants, as to (i) the number and kind of Shares which may be
delivered in connection with Awards granted thereafter, (ii) the number and kind
of Shares subject to or deliverable in respect of outstanding Awards, and (iii)
the exercise price, grant price or purchase price relating to any Award. In
addition, the Committee is authorized to make adjustments in the terms and
conditions of, and the criteria included in, Awards (including cancellation of
Awards in exchange for the intrinsic (i.e., in-the-money) value, if any, of the
vested portion thereof, substitution of Awards using securities or other
obligations of a successor or other entity, acceleration of the expiration date
for Awards, or adjustment to performance goals in respect of Awards) in
recognition of unusual or nonrecurring events (including events described in the
preceding sentence, as well as acquisitions and dispositions of businesses and
assets) affecting the Company, any Subsidiary or any business unit, or the
financial statements of the Company or any Subsidiary, or in response to changes
in applicable laws, regulations, or accounting principles. Notwithstanding the
foregoing, if any such event will result in the acquisition of all or
substantially all of the Company’s outstanding Shares, then if the document
governing such acquisition (e.g., merger agreement) specifies the treatment of
outstanding Awards, such treatment shall govern without the need for any action
by the Committee.

 

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7.

General Provisions

7.1. Compliance with Laws and Obligations. The Company shall not be obligated to
issue or deliver Shares in connection with any Award or take any other action
under the Plan in a transaction subject to the registration requirements of any
applicable securities law, any requirement under any listing agreement between
the Company and any securities exchange or automated quotation system, or any
other law, regulation, or contractual obligation of the Company, until the
Company is satisfied that such laws, regulations, and other obligations of the
Company have been complied with in full. Certificates representing Shares issued
under the Plan will be subject to such stop-transfer orders and other
restrictions as may be applicable under such laws, regulations, and other
obligations of the Company, including any requirement that a legend or legends
be placed thereon.

7.2. Limitations on Transferability. Awards and other rights under the Plan will
not be transferable by a Participant except to a Beneficiary in the event of the
Participant’s death (to the extent any such Award, by its terms, survives the
Participant’s death), and, if exercisable, shall be exercisable during the
lifetime of a Participant only by such Participant or his guardian or legal
representative; provided, however, that such Awards and other rights may be
transferred during the lifetime of the Participant, for purposes of the
Participant’s estate planning or other purposes consistent with the purposes of
the Plan (as determined by the Committee), and may be exercised by such
transferees in accordance with the terms of such Award, but only if and to the
extent permitted by the Committee. Awards and other rights under the Plan may
not be pledged, mortgaged, hypothecated, or otherwise encumbered, and shall not
be subject to the claims of creditors. A Beneficiary, transferee, or other
person claiming any rights under the Plan from or through any Participant shall
be subject to all terms and conditions of the Plan and any Award Agreement
applicable to such Participant, except as otherwise determined by the Committee,
and to any additional terms and conditions deemed necessary or appropriate by
the Committee.

7.3. No Right to Continued Employment; Leaves of Absence. Neither the Plan, the
grant of any Award, nor any other action taken hereunder shall be construed as
giving any employee, consultant, director, or other person the right to be
retained in the employ or service of the Company or any of its Subsidiaries (for
the vesting period or any other period of time), nor shall it interfere in any
way with the right of the Company or any of its Subsidiaries to terminate any
person’s employment or service at any time. Unless otherwise specified in the
applicable Award Agreement, (i) an approved leave of absence shall not be
considered a termination of employment or service for purposes of an Award under
the Plan, and (ii) any Participant who is employed by or performs services for a
Subsidiary shall be considered to have terminated employment or service for
purposes of an Award under the Plan if such Subsidiary is sold or no longer
qualifies as a Subsidiary of the Company, unless such Participant remains
employed by the Company or another Subsidiary.

 

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7.4. Taxes. The Company and any Subsidiary is authorized to withhold from any
delivery of Shares in connection with an Award, any other payment relating to an
Award, or any payroll or other payment to a Participant, amounts of withholding
and other taxes due or potentially payable in connection with any transaction
involving an Award, and to take such other action as the Committee may deem
advisable to enable the Company, its Subsidiaries and Participants to satisfy
obligations for the payment of withholding taxes and other tax obligations
relating to any Award. This authority shall include authority to withhold Shares
or receive or accept Shares by way of repurchase, Participant services, or other
consideration and to make cash payments in respect thereof in satisfaction of
withholding tax obligations.

7.5. Changes to the Plan and Awards. The Board may amend, suspend, discontinue,
or terminate the Plan or the Committee’s authority to grant Awards under the
Plan without the consent of shareholders or Participants, except that any
amendment shall be subject to the approval of the Company’s shareholders at or
before the next annual meeting of shareholders for which the record date is
after the date of such Board action if such shareholder approval is required by
any applicable law, regulation or stock exchange rule, and the Board may
otherwise, in its discretion, determine to submit other such amendments to
shareholders for approval; provided, however, that, without the consent of an
affected Participant, no such action may materially impair the rights of such
Participant under any Award theretofore granted. The Committee may amend,
suspend, discontinue, or terminate any Award theretofore granted and any Award
Agreement relating thereto; provided, however, that, without the consent of an
affected Participant, no such action may materially impair the rights of such
Participant under such Award. Any action taken by the Committee pursuant to
Section 6 shall not be treated as an action described in this Section 7.5.

7.6. No Right to Awards; No Shareholder Rights. No Participant or other person
shall have any claim to be granted any Award under the Plan, and there is no
obligation for uniformity of treatment of Participants, employees, consultants,
or directors. No Award shall confer on any Participant any of the rights of a
shareholder of the Company unless and until Shares are duly issued or
transferred and delivered to the Participant in accordance with the terms of the
Award.

7.7. Unfunded Status of Awards; Creation of Trusts. The Plan is intended to
constitute an “unfunded” plan for incentive and deferred compensation. With
respect to any payments not yet made to a Participant pursuant to an Award,
nothing contained in the Plan or any Award shall give any such Participant any
rights that are greater than those of a general creditor of the Company;
provided, however, that the Committee may authorize the creation of trusts or
make other arrangements to meet the Company’s obligations under the Plan to
deliver cash, Shares, other Awards, or other consideration pursuant to any
Award, which trusts or other arrangements shall be consistent with the
“unfunded” status of the Plan unless the Committee otherwise determines.

7.8. Nonexclusivity of the Plan. Neither the adoption of the Plan by the Board
nor the submission of the Plan or of any amendment to shareholders for approval
shall be construed as creating any limitations on the power of the Board to
adopt such other compensatory

 

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arrangements as it may deem desirable, including the granting of awards
otherwise than under the Plan, and such arrangements may be either applicable
generally or only in specific cases.

7.9. Successors and Assigns. The Plan and Award Agreements may be assigned by
the Company to any successor to the Company’s business. The Plan and any
applicable Award Agreement shall be binding on all successors and assigns of the
Company and a Participant, including any permitted transferee of a Participant,
the Beneficiary or estate of such Participant and the executor, administrator or
trustee of such estate, or any receiver or trustee in bankruptcy or
representative of the Participant’s creditors.

7.10. Governing Law. The Plan and all Award Agreements shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of New York, except to the
extent that the laws of Bermuda apply as a result of the Company being
incorporated in Bermuda.

7.11. Severability of Provisions. If any provision of the Plan shall be held
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provisions hereof, and the Plan shall be construed and enforced as if
such provisions had not been included.

7.12. Plan Termination. Unless earlier terminated by the Board, the Plan shall
terminate on the day before the tenth anniversary of the later of the date the
Company’s shareholders originally approved the Plan (May 27, 2004) or the date
of any subsequent shareholder approval of the Plan. Upon any such termination of
the Plan, no new authorizations of grants of Awards may be made, but
then-outstanding Awards shall remain outstanding in accordance with their terms,
and the Committee otherwise shall retain its full powers under the Plan with
respect to such Awards.

 

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