Exhibit 10.1

2007 EQUITY INCENTIVE PLAN

OF

ENDURANCE SPECIALTY HOLDINGS LTD.

(as amended through March 1, 2012)

 

1. Purpose

The purpose of the 2007 Equity Incentive Plan (the “Plan”) of Endurance
Specialty Holdings Ltd. (the “Company”) is to advance the interests of the
Company and its shareholders by providing a means through which the Company and
the Subsidiaries, as applicable, may attract able persons to enter and remain
directors or employees of the Company and the Subsidiaries. The intent of the
Plan is to provide a means whereby those employees and directors upon whom the
responsibilities of the successful performance, administration and management of
the Company and the Subsidiaries rest, and whose present and potential
contributions to the welfare of the Company are of importance, can acquire and
maintain Ordinary Share ownership. This ownership is intended to strengthen
their commitment to the welfare of the Company and the Subsidiaries, while
promoting a common interest between the Company’s shareholders and such
employees and directors. As used herein with reference to the employment of a
Participant, the term “Company” shall include the Subsidiaries, as applicable.

 

2. Definitions

The following definitions shall be applicable throughout the Plan.

(a) “Administrator” means the Committee, provided that the Committee may
delegate, when permitted by Section 162(m) of the Code, Section 16 of the
Exchange Act and the rules of the Stock Exchange or the Nasdaq National Market,
as applicable, (i) to one or more officers of the Company the power to grant
Incentive Awards in a manner consistent with such delegation; (ii) to one or
more officers of the Company the authority to allocate Incentive Awards among
such employees eligible to receive Incentive Awards under the Plan as such
delegated officer or officers determine consistent with such delegation and
(iii) to such employees or other persons as it determines such ministerial tasks
as it deems appropriate; provided that in the case of any such delegation
pursuant to clauses (i) or (ii), the Committee (w) shall retain sole authority
to grant Incentive Awards to officers of the Company and its Subsidiaries
holding the office of Executive Vice President and above, (x) shall have
specified a specific maximum number of Incentive Awards to be granted or
allocated, (y) shall have specified the consideration, if any, to be paid
therefore and (z) shall have specified that none of the granted or allocated
Incentive Awards may be delivered by the delegated officers to themselves. In
the event of any delegation described in the preceding sentence, the term
“Administrator” shall include the person or persons so delegated to the extent
of such delegation.

(b) “Agreement” means the written agreement between the Company and a
Participant evidencing an Incentive Award.

(c) “Board” means the Board of Directors of the Company.

(d) “Change in Control” means any of the following:

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(1) the acquisition by any individual, entity or group (a “Person”), including
any “person” within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act, of beneficial ownership within the meaning of Rule 13d-3 promulgated under
the Exchange Act, of 50% or more of either (i) the then outstanding Ordinary
Shares of the Company (the “Outstanding Ordinary Shares”) or (ii) the combined
voting power of the then outstanding securities of the Company entitled to vote
generally in the election of directors pursuant to the Bye-Laws of the Company
(the “Outstanding Voting Securities”); excluding, however, the following:
(A) any acquisition directly from the Company (excluding any acquisition
resulting from the exercise of an exercise, conversion or exchange privilege
unless the security being so exercised, converted or exchanged was acquired
directly from the Company), (B) any acquisition by the Company, (C) any
acquisition by an employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or
(D) any acquisition by any corporation pursuant to a transaction which complies
with clauses (i), (ii) and (iii) of subsection (3) of this definition of Change
in Control; provided, further, that for purposes of clause (B), if any Person
(other than the Company or any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company) shall become the beneficial owner of 50% or more of the Outstanding
Ordinary Shares or 50% or more of the Outstanding Voting Securities by reason of
an acquisition by the Company, and such Person shall, after such acquisition by
the Company, become the beneficial owner of any additional Outstanding Ordinary
Shares or any additional Outstanding Voting Securities and such beneficial
ownership is publicly announced, such additional beneficial ownership shall
constitute a Change in Control;

(2) individuals who, as of the date hereof, constitute the Board (the “Incumbent
Board”) cease for any reason to constitute at least a majority of such Board
within a 24 month period; provided, that any individual who becomes a director
of the Company subsequent to the date hereof whose election, or nomination for
election by the Company’s shareholders, was approved by the vote of at least a
majority of the directors then comprising the Incumbent Board shall be deemed a
member of the Incumbent Board; and provided, further, that any individual who
was initially elected as a director of the Company as a result of an actual or
threatened solicitation by a Person other than the Board for the purpose of
opposing a solicitation by any other Person with respect to the election or
removal of directors, or any other actual or threatened solicitation of proxies
or consents by or on behalf of any Person other than the Board shall not be
deemed a member of the Incumbent Board;

(3) the consummation of a reorganization, amalgamation, merger or consolidation
or sale or other disposition of all or substantially all of the assets of the
Company (a “Corporate Transaction”); excluding, however, a Corporate Transaction
pursuant to which (i) all or substantially all of the individuals or entities
who are the beneficial owners, respectively, of the Outstanding Ordinary Shares
and the Outstanding Voting Securities immediately prior to such Corporate
Transaction will beneficially own, directly or indirectly, more than 55% of,
respectively, the outstanding shares of common stock, and the combined voting
power of the outstanding securities entitled to vote generally in the election
of directors, as the case may be, of the corporation resulting

 

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from such Corporate Transaction (including, without limitation, a corporation
which as a result of such transaction owns the Company or all or substantially
all of the Company’s assets either directly or indirectly) in substantially the
same proportions relative to each other as their ownership, immediately prior to
such Corporate Transaction, of the Outstanding Ordinary Shares and the
Outstanding Voting Securities, as the case may be, (ii) no Person (other than:
the Company; any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company; the
corporation resulting from such Corporate Transaction; and any Person which
beneficially owned, immediately prior to such Corporate Transaction, directly or
indirectly, 50% or more of the Outstanding Ordinary Shares or the Outstanding
Voting Securities, as the case may be) will beneficially own, directly or
indirectly, 50% or more of, respectively, the outstanding shares of common stock
of the corporation resulting from such Corporate Transaction or the combined
voting power of the outstanding securities of such corporation entitled to vote
generally in the election of directors and (iii) individuals who were members of
the Incumbent Board will constitute at least a majority of the members of the
board of directors of the corporation resulting from such Corporate Transaction;
or

(4) the consummation of a plan of complete liquidation or dissolution of the
Company.

(e) “Code” means the U.S. Internal Revenue Code of 1986, as amended from time to
time.

(f) “Committee” means the Compensation Committee of the Board or any
subcommittee thereof, provided that the members of the Compensation Committee
shall be “non-employee directors” as contemplated by Rule 16b-3 under the
Exchange Act or any successor rule, shall be “independent directors” under the
rules of the applicable Stock Exchange and shall qualify to administer the Plan
as “outside directors” as contemplated by Section 162(m) of the Code.

(g) “Director” means a member of the Board who is not an officer or employee of
the Company or any Subsidiary. Any person serving solely as a director of one or
more the Subsidiaries shall not be a Director.

(h) “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended
from time to time.

(i) “Fair Market Value” of an Ordinary Share means, (i) if the Ordinary Shares
are at the time listed on a Stock Exchange, the closing selling price per
Ordinary Share on the date in question on such Stock Exchange, as such price is
officially quoted in the composite tape of transactions on such Stock Exchange
or, if there is no closing selling price for the Ordinary Shares on the date in
question then the closing selling price on the last preceding date for which
such quotation exists, (ii) if the Ordinary Shares are at such time traded on
the Nasdaq National Market, the closing selling price per Ordinary Share on the
date in question, as such price is reported by the National Association of
Securities Dealers on the Nasdaq National Market or, if there is no closing
selling price for the Ordinary Shares on the date in question then the closing

 

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selling price on the last preceding date for which such quotation exists or
(iii) if the Ordinary Shares are not at the time listed on a Stock Exchange or
quoted on the Nasdaq National Market, the amount determined by the Administrator
to be the fair market value of the Ordinary Shares based upon a good faith
attempt to value the Ordinary Shares accurately.

(j) “Incentive Award” means any Option, Tandem SAR, Stand-Alone SAR, Restricted
Shares, Restricted Share Unit, Share Bonus or Other Award granted pursuant to
the terms of the Plan.

(k) “ISO” means an “incentive stock option” within the meaning of Section 422 of
the Code.

(l) “NQSO” means an Option which is not an ISO.

(m) “Option” means an option to purchase Ordinary Shares, which may be either an
ISO or a NQSO.

(n) “Ordinary Shares” means the ordinary shares of the Company, par value U.S.
$1.00 per share.

(o) “Other Award” means an award granted pursuant to Section 13 hereof.

(p) “Partial Exercise” means an exercise of an Incentive Award for less than the
full extent permitted at the time of such exercise.

(q) “Participant” means a Director or an employee of the Company or any
Subsidiary who has been granted one or more Incentive Awards pursuant to the
Plan.

(r) “Prior Plans” shall mean, collectively, the Company’s Amended and Restated
2002 Stock Option Plan and Amended and Restated 2003 Non-Employee Director
Equity Incentive Plan.

(s) “Restricted Share” means an Ordinary Share which is granted pursuant to the
terms of Section 11 hereof and which is subject to the restrictions set forth in
Section 11(c).

(t) “Restricted Share Unit” means a grant of a right to obtain the value of an
Ordinary Share which is subject to restrictions against transfer, forfeiture and
such other terms and conditions determined by the Administrator, as provided in
Section 11.

(u) “SEC” means the U.S. Securities and Exchange Commission.

(v) “Share Bonus” means a bonus payable in Ordinary Shares granted pursuant to
Section 12.

(w) “Stand-Alone SAR” means a share appreciation right which is granted pursuant
to Section 10 and which is not related to any Option.

 

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(x) “Stock Exchange” means any stock exchange upon which the Ordinary Shares are
listed for trading and, if there is more than one such stock exchange, the stock
exchange determined by the Administrator to the primary trading market for the
Ordinary Shares.

(y) “Subsidiary” means any “subsidiary corporation” of the Company within the
meaning of Section 424(f) of the Code.

(z) “Substitute Awards” means Incentive Awards granted or Ordinary Shares issued
by the Company in assumption of, or in substitution or exchange for, awards
previously granted, or the right or obligation to make future awards, in each
case by a company acquired by the Company or any Subsidiary or with which the
Company or any Subsidiary combines.

(aa) “Tandem SAR” means a share appreciation right which is granted pursuant to
Section 9 and which is related to an Option.

(bb) “Vesting Date” means the date established by the Administrator on which
Restricted Shares or Phantom Shares may vest.

 

3. Effective Date, Duration, Shares Reserved

(a) The Plan shall be effective on the date of its adoption by the Board,
subject to approval by the shareholders of the Company. In the event the Plan is
so approved, it shall continue in effect for a period of ten years from the date
of its adoption by the Board, after which no Incentive Awards may be granted,
provided that the expiration of the Plan shall not affect the obligations of the
Company and Participants with respect to outstanding Incentive Awards.

(b) Subject to adjustments pursuant to the provisions of Section 16 hereof, a
total of 3,895,000 Ordinary Shares shall be authorized for issuance under the
Plan, which is comprised of 1,280,000 Ordinary Shares authorized for issuance
and approved by the Company’s shareholders on May 9, 2007, 820,000 Ordinary
Shares from the Prior Plans authorized for issuance and approved by the
Company’s shareholders on May 9, 2007 and 1,795,000 Ordinary Shares authorized
for issuance upon the approval of the second amendment to the Plan by the
Company’s shareholders on May 13, 2010. The grant of a Tandem SAR shall not
reduce the number of Ordinary Shares with respect to which Incentive Awards may
be granted pursuant to the Plan.

(c) If any Ordinary Shares subject to an Incentive Award or to an award under
the Prior Plans are forfeited, expire or otherwise terminate without issuance of
such Ordinary Shares, or any Incentive Award or award under the Prior Plans is
settled for cash or otherwise does not result in the issuance of all or a
portion of the Ordinary Shares subject to such Award or award under the Prior
Plans (including on payment in Shares on exercise of a share appreciation
right), such Ordinary Shares shall, to the extent of such forfeiture,
expiration, termination, cash settlement or non-issuance, again be available for
issuance under the Plan. In the event that (i) any Incentive Award granted
hereunder is exercised through the tendering of Ordinary Shares (either actually
or by attestation) or by the withholding of Ordinary Shares by the Company, or
(ii) withholding tax liabilities arising from such Incentive Award are satisfied
by the tendering of Shares (either actually or by attestation) or by the
withholding of Ordinary Shares by the Company, then the Ordinary Shares so
tendered or withheld shall be available for issuance under

 

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the Plan. In the event that (i) any award granted under the Prior Plans is
exercised through the tendering of Ordinary Shares (either actually or by
attestation) or by the withholding of Ordinary Shares by the Company, or
(ii) withholding tax liabilities arising from such awards are satisfied by the
tendering of Ordinary Shares (either actually or by attestation) or by the
withholding of Ordinary Shares by the Company, then the Ordinary Shares so
tendered or withheld shall be available for issuance under the Plan.

(d) Substitute Awards shall not reduce the Ordinary Shares authorized for grant
under the Plan or authorized for grant to a Participant in any calendar year.
Additionally, in the event that a company acquired by the Company or any
Subsidiary or with which the Company or any Subsidiary combines has shares
available under a pre-existing plan approved by shareholders and not adopted in
contemplation of such acquisition or combination, the shares available for grant
pursuant to the terms of such pre-existing plan (as adjusted, to the extent
appropriate, using the exchange ratio or other adjustment or valuation ratio or
formula used in such acquisition or combination to determine the consideration
payable to the holders of common stock of the entities party to such acquisition
or combination) may be used for Incentive Awards under the Plan and shall not
reduce the Ordinary Shares authorized for grant under the Plan; provided that
Incentive Awards using such available shares shall not be made after the date
awards or grants could have been made under the terms of the pre-existing plan,
absent the acquisition or combination, and shall only be made to individuals who
were not employees or Directors prior to such acquisition or combination.

 

4. Administration

The Administrator shall administer the Plan. Subject to the provisions of the
Plan, the Administrator shall have exclusive power to:

(a) Select the Participants in the Plan;

(b) Determine the number of Incentive Awards to be granted to each Participant;

(c) Determine the time or times when Incentive Awards will be granted;

(d) Determine the terms of each Incentive Award, including but not limited to,
the vesting schedule, the type of Incentive Award and the terms for payment of
the exercise price, if any;

(e) Prescribe the form or forms of Agreements evidencing Incentive Awards; and

(f) Determine, in its discretion and for any reason at any time, that any or all
outstanding Incentive Awards shall become exercisable in part or in full.

Subject to the provisions of the Plan, the Administrator shall have the
authority to interpret the Plan and to establish, adopt, or revise such rules
and regulations and to make all such determinations relating to the Plan as it
may deem necessary or advisable for the administration of the Plan. Any
determinations by the Administrator with respect to the Plan and any Incentive
Award granted hereunder shall be final and binding upon all parties with no
requirement whatsoever that the Administrator follow past practices, act in a
manner consistent

 

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with past practices or treat a Participant in a manner consistent with the
treatment afforded other Participants with respect to the Plan, any Agreement or
any Incentive Award. If the Administrator does not exist, or for any other
reason determined by the Board, the Board may take any action under the Plan
that would otherwise be the responsibility of the Administrator.

No Administrator or member of the Board shall be liable for any action, omission
or determination relating to the Plan, and the Company shall indemnify (to the
extent permitted under Bermuda law and the Bye-Laws of the Company) and hold
harmless each Administrator and member of the Board against any cost or expense
(including counsel fees) or liability (including any sum paid in settlement of a
claim with the approval of the Board) arising out of any action, omission or
determination relating to the Plan, unless, in either case, such action,
omission or determination was taken or made by such Administrator or member of
the Board in bad faith and without reasonable belief that it was in the best
interests of the Company.

 

5. Eligibility

Participants shall be limited to Directors of the Company or officers or
employees of the Company or any Subsidiary who have received written
notification from the Administrator, or from a person designated by the
Committee, that they have been selected to receive Incentive Awards under the
Plan.

 

6. Awards Under the Plan; Agreement.

The Administrator may grant Incentive Awards in such amounts and with such terms
and conditions as the Administrator shall determine in its discretion, subject
to the provisions of the Plan; provided, that (i) there shall be no minimum
vesting period for unconditional Share Bonuses, (ii) the minimum vesting period
for Incentive Awards granted to non-employee directors pursuant to Section 7 of
the Plan and for performance-based Incentive Awards shall be one year, (iii) the
vesting schedule for all other Incentive Awards under the Plan shall be no
faster than ratably over a three year period following the date of grant and
(iv) the number of Share Bonuses and any other Incentive Awards granted under
the Plan that have no vesting requirements shall be limited to 5% of the total
number of Ordinary Shares authorized for issuance under the Plan; provided, that
the restrictions set forth in clauses (ii), (iii) and (iv) shall not apply to
the earlier vesting of Incentive Awards in connection with a Participant’s
death, disability, retirement or termination of employment following a Change in
Control.

The maximum number of Options, Stand-Alone SARs and Tandem SARs (collectively,
“Exercisable Awards”) that may be granted to any individual Participant in any
fiscal year will be 500,000 and the maximum number of Restricted Shares,
Restricted Share Units, Share Bonuses and full value Other Awards (collectively,
“Full Value Awards”) that may be granted to any individual Participant in any
fiscal year shall be 250,000 (in each case subject to adjustment pursuant to the
provisions of Section 16 hereof). In the event that more than one type of
Incentive Award is granted to an individual Participant in a fiscal year, the
maximum number of Incentive Awards which may be granted to such individual
Participant in such fiscal year shall be determined by the following formula:
(a) 500,000 less (b) the number of Exercisable Awards previously granted to such
individual Participant during such fiscal year and less (c) two times the number
of Full Value Awards previously granted to such individual Participant during
such

 

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fiscal year. If an Incentive Award is subject to a performance period greater
than one fiscal year, the maximum number of Incentive Awards which may be
granted to any individual Participant set forth above will equal the annual
maximum number of Incentive Awards which may be granted to any individual
Participant in a fiscal year times the number of years in the performance
period. The foregoing provisions will be construed in a manner consistent with
Section 162(m) of the Code.

Each Incentive Award granted under the Plan (except an unconditional Share
Bonus) shall be evidenced by an Agreement which shall contain such provisions as
the Administrator may in its discretion deem necessary or desirable. By
accepting an Incentive Award, a Participant thereby agrees that the Incentive
Award shall be subject to all of the terms and provisions of the Plan and the
applicable Agreement.

 

7. Non-Employee Director Options and Restricted Shares

(a) The Committee may from time to time grant to the Directors Incentive Awards.
The Committee shall have the authority to grant from time to time to one or more
Directors additional Incentive Awards as compensation for service as a
non-executive chairman of the Board, a lead director of the Board or a chairman
of a standing or ad-hoc committee of the Board. In addition, the Committee shall
have the authority to grant from time to time to one or more Directors Incentive
Awards in lieu of all or a portion of such Directors’ cash compensation. The
terms and conditions of the Incentive Awards granted to Directors shall be
determined by the Committee at the time of grant of such Incentive Awards,
subject to the following limitations.

(b) Option Term. Each Option granted to a Director under this Plan shall expire
on the earlier of (1) the tenth annual anniversary of the date of grant of such
Option or (2) the first anniversary of the last day on which a Director serves
on the Board.

(c) Exercisability of Options. Each Option granted to a Director under this Plan
shall be exercisable on or after the first anniversary of the date of grant of
such Option and shall remain exercisable until the expiration of such Option.

(d) Non-Qualified Options. Each Option granted to a Director under this Plan
shall be a NQSO.

(e) Vesting of Incentive Awards Granted to Directors. At the time of the grant
of any Incentive Awards to Directors, the Committee shall establish a vesting
date or vesting dates with respect to such Incentive Awards or such other
conditions or restrictions to vesting as it deems appropriate; provided, that,
other than Share Bonuses, none of the Incentive Awards granted to Directors
pursuant to this Section 7 shall vest in advance of the 12 month anniversary of
the date of grant.

 

8. Options

(a) General. Options may be granted under the Plan from time to time as
determined by the Administrator. Subject to the provisions of the Plan, the
Administrator will determine the

 

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terms of Options to be granted, including the date or dates on which such
Options shall become exercisable. Except as provided in Section 8(b)(iv) of the
Plan, Options may only be granted at an exercise price per Ordinary Share which
is equal to or above Fair Market Value on the date of grant of such Options, as
determined by the Administrator in its discretion, other than in connection with
Substitute Awards. Except as provided in Section 8(b)(ii) of the Plan, all
Options granted under the Plan will have a maximum term of ten years from the
date of grant, subject to earlier termination as provided in the Plan or in a
Participant’s Agreement.

(b) Special Provisions Applicable to ISOs. The following special provisions
shall be applicable to ISOs granted under the Plan.

(i) No ISOs shall be granted under the Plan after ten years from the earlier of
(1) the date the Plan is adopted by the Board, or (2) the date the Plan is
approved by the Company’s shareholders.

(ii) If an ISO shall be granted to a person who owns stock possessing more than
10% of the total combined voting power of all classes of stock of the Company,
any of its Subsidiaries, or any “parent corporation” of the Company within the
meaning of Section 424(e) of the Code (a “Ten Percent Holder”), such ISO will
have a maximum term of five years from the date of grant, subject to earlier
termination as provided in the Plan or in a Participant’s Agreement.

(iii) If the aggregate fair market value of the Ordinary Shares with respect to
which ISOs are exercisable for the first time by any Participant during a
calendar year (under all plans of the Company and its parent corporations and
Subsidiaries) exceeds the amount established by the Code (currently U.S.
$100,000), such ISOs shall be treated, to the extent of such excess, as NQSOs.
For purposes of the preceding sentence, the fair market value of the Ordinary
Shares shall be based on the Fair Market Value per share, determined at the time
the ISOs covering such shares were granted.

(iv) The exercise price per Ordinary Share subject to an ISO granted to a Ten
Percent Holder shall be the price (currently 110% of Fair Market Value) required
by the Code in order to constitute an ISO.

 

9. Tandem SARs.

The Administrator may grant in connection with any Option granted hereunder one
or more Tandem SARs relating to a number of Ordinary Shares less than or equal
to the number of Ordinary Shares subject to the related Option. A Tandem SAR may
be granted in connection with an Option only at the same time that such Option
is granted.

(a) Benefit Upon Exercise. The exercise of a Tandem SAR with respect to any
number of Ordinary Shares shall entitle the Participant to a cash payment,
Ordinary Shares or any combination thereof, in the discretion of the
Administrator, for each such Tandem SAR, equal to the excess of (1) the Fair
Market Value of an Ordinary Share on the exercise date over (2) the option
exercise price of the related Option. Such payment or delivery shall be made as
soon as practicable after the effective date of such exercise.

 

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(b) Term and Exercise of Tandem SAR.

(i) A Tandem SAR shall be exercisable only if and to the extent that its related
Option is exercisable.

(ii) The exercise of a Tandem SAR with respect to a number of Ordinary Shares
shall cause the immediate and automatic cancellation of its related Option with
respect to an equal number of Ordinary Shares. The exercise of an Option, or the
cancellation, termination or expiration of an Option (other than pursuant to
this Section 8(b)(ii)), with respect to a number of Ordinary Shares shall cause
the automatic and immediate cancellation of any related Tandem SARs to the
extent of the number of Ordinary Shares subject to such Option which is so
exercised, cancelled, terminated or expired.

(iii) A Tandem SAR may be exercised for all or any portion of the Ordinary
Shares as to which it is exercisable; provided, that no Partial Exercise of a
Tandem SAR shall be with respect to less than 100 Ordinary Shares.

(iv) No Tandem SAR shall be assignable or transferable otherwise than together
with its related Option.

(v) A Tandem SAR shall be exercised by delivering notice to the Company’s
principal office, to the attention of its Secretary. Such notice shall be
accompanied by the applicable Agreement, shall specify the number of Ordinary
Shares with respect to which the Tandem SAR is being exercised and the effective
date of the proposed exercise (which shall not be earlier than the date of such
notice) and shall be signed by the Participant or other person then having the
right to exercise the Option to which the Tandem SAR is related.

 

10. Stand-Alone SARs.

(a) Exercise Price. The exercise price per Ordinary Share of a Stand-Alone SAR
shall be determined by the Administrator at the time of grant, but in no event
shall be less than the Fair Market Value per Ordinary Share on the date of grant
(other than in connection with Substitute Awards).

(b) Benefit Upon Exercise. The exercise of a Stand-Alone SAR with respect to any
number of Ordinary Shares shall entitle the Participant to a cash payment,
Ordinary Shares or any combination thereof, in the discretion of the
Administrator, for each such Stand-Alone SAR, equal to the excess of (1) the
Fair Market Value of an Ordinary Share on the exercise date over (2) the
exercise price of the Stand-Alone SAR. Such payment or delivery shall be made as
soon as practicable after such exercise, in cash and/or Ordinary Shares, as
determined by the Administrator.

(c) Term and Exercise of Stand-Alone SARs.

(i) The Administrator shall determine the expiration date of each Stand-Alone
SAR.

 

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(ii) A Stand-Alone SAR may be exercised for all or any portion of the Ordinary
Shares as to which it is exercisable; provided, that no Partial Exercise of a
Stand-Alone SAR shall be with respect to less than 100 Ordinary Shares.

(iii) A Stand-Alone SAR shall be exercised by delivering notice to the Company’s
principal office, to the attention of its Secretary. Such notice shall be
accompanied by the applicable Agreement, shall specify the number of Ordinary
Shares with respect to which the Stand-Alone SAR is being exercised and the
effective date of the proposed exercise (which shall not be earlier than the
date of such notice) and shall be signed by the Participant.

 

11. Restricted Shares and Restricted Share Units.

(a) Vesting Date. At the time of the grant of Restricted Shares or Restricted
Share Units, the Administrator shall establish a Vesting Date or Vesting Dates
with respect to such Restricted Shares or Restricted Share Units or such other
conditions or restrictions to vesting as it deems appropriate. Upon the
satisfaction of all conditions to the vesting of a Restricted Share or
Restricted Share Unit, and except as provided in Section 14, such Restricted
Share or Restricted Share Unit shall vest and the restrictions of Section 11(c)
shall lapse.

(b) Restrictions on Transfer Prior to Vesting. Prior to the vesting of a
Restricted Share or Restricted Share Unit, no transfer of a Participant’s rights
with respect to such Restricted Share or Restricted Share Unit, whether
voluntary or involuntary, by operation of law or otherwise, shall be permitted.
Immediately upon any attempt to transfer such rights, such Restricted Share or
Restricted Share Unit, and all of the rights related thereto, shall be forfeited
by the Participant.

(c) Dividends on Restricted Shares and Restricted Share Units. The Administrator
in its discretion may permit the payment of dividends or the crediting of
dividend equivalents to a Participant holding Restricted Shares or Restricted
Share Units. The Administrator in its discretion may determine the date or dates
of vesting of any dividend equivalents or require that any dividends paid on
Restricted Shares and Restricted Share Units be held in escrow until all
restrictions on such Restricted Shares or Restricted Share Units have lapsed;
provided that any dividend equivalents or any dividends paid on performance
based Restricted Shares and Restricted Share Units shall be held in escrow until
all restrictions on such performance based restricted Shares or Restricted Share
Units have been released upon the attainment of all applicable performance
goals.

(d) Issuance of Certificates.

(i) Reasonably promptly after the grant date with respect to Restricted Shares,
the Company shall cause to be issued a share certificate, registered in the name
of the Participant to whom such Restricted Shares were granted, evidencing such
Restricted Shares; provided that the Company shall not cause such share
certificate to be issued unless it has received a stock power duly endorsed in
blank with respect to such Restricted Shares. Each such share certificate shall
bear the following legend:

The transferability of this certificate and the ordinary shares represented
hereby are subject to the restrictions, terms and conditions (including

 

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forfeiture provisions and restrictions against transfer) contained in the 2007
Equity Incentive Plan of Endurance Specialty Holdings Ltd. and an Agreement
entered into between the registered owner of such shares and the Company. A copy
of the Plan and Agreement is on file in the office of the Secretary of the
Company, Wellesley House, 90 Pitts Bay Road, Pembroke HM 08, Bermuda.

Such legend shall not be removed until such Restricted Shares vest pursuant to
the terms hereof. At the discretion of the Administrator, Restricted Shares may
be issued in book-entry form so long as the restrictive legends required by the
Plan or the Agreement governing the Incentive Award are included as part of such
book-entry record.

(ii) Each certificate issued pursuant to this Section 11(d), together with the
stock powers relating to the Restricted Shares evidenced by such certificate,
shall be held by the Company or the Company’s agent unless the Administrator
determines otherwise.

(e) Consequences of Vesting of a Restricted Share. Upon the vesting of a
Restricted Share pursuant to the terms hereof, the restrictions of Section 11(b)
shall lapse with respect to such Restricted Share. Reasonably promptly after a
Restricted Share vests, the Company shall cause to be delivered to the
Participant to whom such Restricted Shares were granted, a certificate
evidencing such Restricted Share, free of the legend set forth in Section 11(d).

(f) Consequences of Vesting of a Restricted Share Unit. Upon the vesting of a
Restricted Share Unit pursuant to the terms hereof, the Company shall deliver to
the Participant an amount equal to the Fair Market Value on the date of vesting
of the Ordinary Shares to which the Restricted Share Units relate. In the
discretion of the Administrator, such amount may be delivered in cash, Ordinary
Shares, other property or any combination thereof.

(g) Performance Based Restricted Shares and Restricted Share Units. In addition
to or in lieu of conditioning the release of restrictions applicable to
Restricted Shares or Restricted Share Unites on the continued employment of the
Participant for the restricted period applicable to the Restricted Shares or
Restricted Share Units, the Administrator may condition release of such
restrictions on the attainment of one or more performance goals during the
restricted period. The performance goals are to be pre-established by the
Committee in its discretion and set forth in the Agreement governing the grant
of such Restricted Shares or Restricted Share Units, based on one or more of the
following criteria: (1) return on shareholder equity; (2) earnings per Ordinary
Share; (3) growth in book value per Ordinary Share; (4) growth in price to book
value per Ordinary Share; (5) net income (before or after taxes); (6) gross
premiums written or net premiums written; (7) return on assets; (8) return on
capital; (9) return on investment; (10) investment income; (11) increases in
share price; (102 total shareholder return; (13) portfolio yield; (14) loss
ratio; (135 underwriting ratio; (16) general and administrative expense ratio;
(17) combined ratio; (18) market share; (19) strategic goals; or (20) any
combination of, or a specified increase in, any of the foregoing. The
performance goals may be based upon the attainment of specified levels of
performance under one or more of the measures described above relative to the
performance of other entities. To the extent permitted under Section 162(m) of
the Code (including, without limitation, compliance with any requirements for
shareholder approval), the Administrator in its sole discretion may designate
additional business criteria on which the

 

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performance goals may be based or adjust, modify or amend the aforementioned
business criteria. Performance goals may include a threshold level of
performance below which no Restricted Shares or Restricted Share Units will be
earned, a level of performance at which the target amount of any Restricted
Shares or Restricted Share Units will be earned and a level of performance at
which the maximum amount of any Restricted Shares or Restricted Share Units will
be earned. The Administrator in its sole discretion shall have the authority to
make equitable adjustments to the performance goals in recognition of unusual or
non-recurring events affecting the Company or any Subsidiary of the Company or
the financial statements of the Company or any Subsidiary of the Company, in
response to changes in applicable laws or regulations, including changes in
generally accepted accounting principles or practices, or to account for items
of gain, loss or expense determined to be extraordinary or unusual in nature or
infrequent in occurrence or related to the disposal of a segment of a business
or related to a change in accounting principles, as applicable. Any performance
goal established by the Administrator must be objective so that a third party
with knowledge of the relevant facts could determine whether the performance
goal has been attained. In addition, there must be substantial uncertainty
whether any performance goal established by the Administrator will be attained
at the time it is established by the Administrator. Restricted Shares and
Restricted Share Units conditioned upon the attainment of performance goals
shall be released from restrictions only after the attainment of such
performance measures has been certified by the Administrator.

Performance-based Restricted Share and Restricted Share Unit Awards under the
Plan are intended to constitute qualified performance based compensation for
purposes of Section 162(m)(4)(c) of the Code and the Treasury Regulations
thereunder, and the provision of this Section 11 (and the other provisions of
the plan relating to performance based Restricted Share and Restricted Share
Unit awards) shall be interpreted and administered to effectuate that intent.
Moreover, the Administrator may revise or modify the requirements of this
Section 11 or the terms of outstanding performance based Restricted Share and
Restricted Share Unit awards to the extent the Administrator determines, in its
discretion, that such revision or modification is necessary for such Incentive
Awards to constitute performance based compensation for purposes of
Section 162(m) of the Code.

 

12. Share Bonuses.

In the event that the Administrator grants a Share Bonus, a certificate for
Ordinary Shares comprising such Share Bonus shall be issued in the name of the
Participant to whom such grant was made and delivered to such Participant as
soon as practicable after the date on which such Share Bonus is payable.

 

13. Other Awards.

Other forms of Incentive Awards (“Other Awards”) valued in whole or in part by
reference to, or otherwise based on, Ordinary Shares may be granted either alone
or in addition to other Incentive Awards under the Plan. Subject to the
provisions of the Plan, the Administrator shall have sole and complete authority
to determine the persons to whom and the time or times at which such Other
Awards shall be granted, the number of Ordinary Shares to be granted pursuant to
such Other Awards and all other terms and conditions of such Other Awards.

 

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14. Termination of Employment.

Except to the extent specifically provided otherwise in a Participant’s
Agreement or as determined in the discretion of the Administrator, the following
provisions shall apply to Incentive Awards, other than Incentive Awards granted
to Directors, upon a Participant’s termination of employment with the Company.

(a) Unvested Incentive Awards. In the event a Participant’s employment with the
Company is terminated for any reason other than as may be specifically provided
in a Participant’s Agreement, all unvested Incentive Awards granted to the
Participant shall be immediately forfeited, subject to the provisions of the
subsection (b) below.

(b) Unexercised Incentive Awards. In the event of the termination of a
Participant’s employment with the Company for any reason other than as may be
specifically provided in a Participant’s Agreement, the Participant shall be
able to exercise any Incentive Awards which were vested as of the date of
termination until and including the earlier to occur of (i) the date which is 90
days after the date of the termination of the Participant’s employment and
(ii) the date the Incentive Awards otherwise would expire.

 

15. General

(a) Privileges of Share Ownership. Except for Restricted Shares or as otherwise
required by applicable law, no person shall be entitled to the privileges of
share ownership in respect of Ordinary Shares which are subject to Incentive
Awards until the Ordinary Shares have actually been issued to that person in
accordance with the terms of the Plan and the applicable Agreement free of any
applicable restrictions otherwise imposed pursuant to the Plan or the applicable
Agreement.

(b) Government and other Regulations. The obligations of the Company under the
Plan shall be subject to all applicable laws, rules, regulations and other
governmental requirements.

(c) Tax Withholding. The Company shall have the right to deduct from any payment
to a Participant pursuant to the Plan any income or other taxes required by law
to be withheld in respect thereof. It shall be a condition to the obligation of
the Company to issue Ordinary Shares to a Participant upon the exercise of an
Incentive Award by such Participant that such Participant (or any beneficiary or
person entitled to exercise such Incentive Award) pay to the Company, upon
demand, such amount as may be requested by the Company for the purpose of
satisfying any liability to withhold income or other taxes. In the event any
such amount so requested is not paid, the Company may refuse to issue Ordinary
Shares to such Participant upon the exercise by such Participant of an Incentive
Award. Unless the Administrator shall in its discretion determine otherwise,
payment for taxes required to be withheld may be made in cash, or in whole or in
part, in accordance with such rules as may be adopted by the Administrator from
time to time, (i) by withholding Ordinary Shares otherwise issuable upon
exercise of an Incentive Award having a Fair Market Value equal to the minimum
tax withholding liability and/or (ii) tendering to the Company Ordinary Shares
held by such Participant having a Fair Market Value equal to the tax withholding
liability.

 

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(d) Payment of Exercise Price. The exercise price of Incentive Awards may be
paid in cash or by such other means as may be approved by the Administrator in
its discretion, including but not limited to (i) withholding Ordinary Shares
otherwise issuable upon exercise of an Incentive Award having a Fair Market
Value equal to the exercise price of such Incentive Award and/or (ii) delivery
of Ordinary Shares having a Fair Market Value equal to the exercise price of
such Incentive Award. In the event the Company has in effect at the time of
exercise of an Incentive Award a share repurchase program, in its discretion and
subject to such terms and conditions as it may impose, the Administrator may
permit a Participant to exercise an Incentive Award and pay the exercise price
and/or by delivering to the Company a written notice of exercise which includes
a request that the Company repurchase (and retain the repurchase price of) that
number of Ordinary Shares having a Fair Market Value on the date of exercise
equal of the exercise price and/or the related tax withholding liability of the
number of Ordinary Shares with respect to which the Participant exercises the
Incentive Award.

(e) Claim to Incentive Awards; Employment Rights. Other than as set forth in
Section 7 of the Plan, no director, officer, employee or other person shall have
any claim or right to be granted Incentive Awards under the Plan nor, having
been selected for the grant of Incentive Awards, to be selected for additional
grants. Neither this Plan nor any action taken hereunder shall be construed as
giving any Participant any right to be retained as a director or in the employ
of the Company.

(f) Payments to Persons other than Participants. If the Administrator shall find
that any person to whom any amount is payable under the Plan is unable to care
for his affairs because of illness or accident, or is a minor, or has died, then
any payment due to such person or his estate (unless a prior claim therefor has
been made by a duly appointed legal representative), may, if the Administrator
so directs, be paid to his spouse, child, relative, an institution maintaining
or having custody of such person, or any other person deemed by the
Administrator to be a proper recipient on behalf of such person otherwise
entitled to payment. Any such payment shall be a complete discharge of the
liability of the Administrator, the Board and the Company therefor.

(g) Governing Law.

(i) The Plan, each Incentive Award hereunder and the related Agreement shall be
governed by and construed in accordance with the laws of Bermuda without
reference to the principles of conflicts of law thereof and the Company and any
Participant accepting an Incentive Award hereunder submit to the non-exclusive
jurisdiction of the courts of Bermuda in respect of matters arising hereunder.

(ii) All disputes, controversies or claims arising out of, relating to or in
connection with the Plan, each Incentive Award hereunder and the related
agreement, or the breach, termination or validity thereof, shall be finally
settled by arbitration. The arbitration shall be conducted in accordance with
the rules of the International Chamber of Commerce except as same may be
modified herein or by mutual agreement of the parties. The seat of the
arbitration shall be Bermuda and it shall be conducted in the English language.
The arbitration shall be conducted by one arbitrator who shall be selected by
BIBA (Bermuda International Business Association), in the event that the parties
fail to agree. The arbitral award shall be in

 

15

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writing, shall state reasons for the award, and shall be final and binding on
the parties. The award may not include an award of costs. Judgment on the award
may be entered by any court having jurisdiction thereof or having jurisdiction
over the parties or their assets.

(h) Funding. No provision of the Plan shall require the Company for the purpose
of satisfying any obligations under the Plan, to purchase assets or place any
assets in a trust or other entity to which contributions are made or otherwise
to segregate any assets, nor shall the Company maintain separate bank accounts,
books, records or other evidence of the existence of a segregated or separately
maintained or administered fund for such purposes. Participants shall have no
rights under the Plan other than as unsecured general creditors of the Company,
except that insofar as they may have become entitled to payment of additional
compensation by performance of services, they shall have the same rights as
other employees under general law.

(i) Nontransferability. Except as provided below, no Award and no Shares subject
to Awards described herein that have not been issued or as to which any
applicable restriction, performance or deferral period has not lapsed, may be
sold, assigned, transferred, pledged or otherwise encumbered, other than by will
or the laws of descent and distribution, and such Award may be exercised during
the life of the Participant only by the Participant or the Participant’s
guardian or legal representative. To the extent and under such terms and
conditions as determined by the Administrator, a Participant may assign or
transfer an Award (each transferee thereof, a “Permitted Assignee”) to (i) the
Participant’s spouse, children or grandchildren (including any adopted and step
children or grandchildren, parents, grandparents or siblings, (ii) to a trust
for the benefit of one or more if the Participant or the persons referred to in
clause (i), (iii) to a partnership, limited liability company or corporation in
which the participant or the persons referred to in clause (i) are the only
partners, members or shareholders or (iv) for charitable donations; provided
that such Permitted Assignee shall be bound by and subject to all of the terms
and conditions of the Plan and the Agreement relating to the transferred Award
and shall execute an agreement satisfactory to the Company evidencing such
obligations; and provided further that such Participant shall remain bound by
the terms and conditions of the Plan. The Company shall cooperate with any
Permitted Assignee and the Company’s transfer agent in effectuating any transfer
permitted under this Section.

(j) Restrictive Legends. The certificates evidencing Ordinary Shares issued
under the Plan shall bear such restrictive legends as the Administrator deems
necessary to reflect transfer restrictions applicable thereto.

(k) Relationship to other Benefits. No payment under the Plan shall be taken
into account in determining any benefits under any pension, retirement, profit
sharing, group insurance or other benefit plan of the Company or any Subsidiary
except as otherwise specifically provided therein.

(l) Repricing and Exchange of Incentive Awards. Other than pursuant to the
provisions of Section 16 hereof, without prior shareholder approval no Incentive
Award having an exercise price may (i) have its exercise price per Ordinary
Share reduced after it is granted, (b) be cancelled in exchange for cash or
another Incentive Award (other than in connection with Substitute Awards), and
(c) be subject to any other action that would be treated as a repricing under
the rules and regulations of the principal securities market on which the
Ordinary Shares are traded.

 

16

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(m) Expenses. The expenses of administering the Plan shall be borne by the
Company and its Subsidiaries, as applicable.

(n) Titles and Headings. The titles and headings of the sections in the Plan are
for convenience of reference only, and in the event of any conflict, the text of
the Plan, rather than such titles or headings shall control.

 

16. Changes in Capital Structure

Incentive Awards under the Plan shall be subject to adjustment or substitution,
as determined by the Committee in its discretion, as to the number, price or
kind of Ordinary Shares or other consideration subject to such Incentive Awards
or as otherwise determined by the Committee to be equitable (i) in the event of
changes in the outstanding Ordinary Shares or in the capital structure of the
Company, by reason of share dividends, share splits, recapitalizations,
reorganizations, amalgamations, mergers, consolidations, combinations,
exchanges, liquidations, spinoffs or other relevant changes in capitalization,
or any distributions to holders of Ordinary Shares other than a regular cash
dividend, occurring after the date of grant of any such Incentive Awards or
(ii) in the event of any change in applicable laws or any change in
circumstances which results in or would result in any substantial dilution or
enlargement of the rights granted to, or available for, Participants in the
Plan, or which otherwise warrants equitable adjustment because it interferes
with the intended operation of the Plan. In addition, in the event of any such
adjustment or substitution, the aggregate number and class of securities
available under the Plan, shall be appropriately adjusted, as determined by the
Committee in its discretion. The decisions of the Committee regarding any such
adjustment or substitution shall be final, binding and conclusive on all
parties.

 

17. Effect of Change in Control

(a) Unless otherwise provided in an Agreement, in the event of a Change in
Control of the Company in which the successor company assumes or substitutes for
an Incentive Award, if a Participant’s employment with such successor company
(or a subsidiary thereof) terminates within 24 months following such Change in
Control (or such other period set forth in the Agreement, including prior
thereto, if applicable): (i) Options, Tandem SARs and Stand-Alone SARs
outstanding as of the date of such termination of employment will immediately
vest, become fully exercisable, and may thereafter be exercised for 24 months
(or the period of time set forth in the Agreement), (ii) restrictions and
deferral limitations on Restricted Shares and Restricted Share Units shall lapse
and the Restricted Shares and Restricted Share Units shall become free of all
restrictions and limitations and become fully vested, and (iii) the restrictions
and deferral limitations and other conditions applicable to any Other Awards
shall lapse, and such Other Awards shall become free of all restrictions,
limitations or conditions and become fully vested and transferable to the full
extent of the original grant. For the purposes of this Section 17(a), an
Incentive Award shall be considered assumed or substituted for if following the
Change in Control the Incentive Award confers the right to purchase or receive,
for each Ordinary Share subject to the Incentive Award immediately prior to the
Change in Control, the

 

17

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consideration (whether stock, cash or other securities or property) received in
the transaction constituting a Change in Control by holders of Ordinary Shares
for each Ordinary Share held on the effective date of such transaction (and if
holders were offered a choice of consideration, the type of consideration chosen
by the holders of a majority of the outstanding Ordinary Shares); provided,
however, that if such consideration received in the transaction constituting a
Change in Control is not solely common stock of the successor company, the
Administrator may, with the consent of the successor company, provide that the
consideration to be received upon the exercise or vesting of an Incentive Award,
for each Ordinary Share subject thereto, will be solely common stock of the
successor company substantially equal in fair market value to the per Ordinary
Share consideration received by holders of Ordinary Shares in the transaction
constituting a Change in Control. The determination of such substantial equality
of value of consideration shall be made by the Administrator in its sole
discretion and its determination shall be conclusive and binding.

(b) Unless otherwise provided in an Agreement, in the event of a Change in
Control of the Company to the extent the successor company does not assume or
substitute for an Incentive Award: (i) those Options, Tandem SARs and
Stand-Alone SARs outstanding as of the date of the Change in Control that are
not assumed or substituted for shall immediately vest and become fully
exercisable, (ii) restrictions and deferral limitations on Restricted Shares and
Restricted Share Units that are not assumed or substituted for shall lapse and
the Restricted Shares and Restricted Share Units shall become free of all
restrictions and limitations and become fully vested, and (iii) the restrictions
and deferral limitations and other conditions applicable to any Other Awards
that are not assumed or substituted for shall lapse, and such Other Awards shall
become free of all restrictions, limitations or conditions and become fully
vested and transferable to the full extent of the original grant.

(c) In the case of any Incentive Award providing for the payment of deferred
compensation subject to Section 409A of the Code, any payment of such deferred
compensation by reason of a Change in Control shall be made only if the Change
in Control is one described in subsection (a)(2)(A)(v) of Section 409A and the
guidance thereunder or any successor thereto and shall be paid consistent with
the requirements of Section 409A of the Code. If any deferred compensation that
would otherwise be payable by reason of a Change in Control cannot be paid by
reason of the immediately preceding sentence, it shall be paid as soon as
practicable thereafter consistent with the requirements of Section 409A of the
Code, as determined by the Administrator.

 

18. Nonexclusivity of the Plan

The adoption of this Plan by the Board shall not be construed as creating any
limitations on the power of the Board to adopt such other incentive arrangements
as it may deem desirable, including, without limitation, the granting of equity
incentive awards otherwise than under this Plan, and such arrangements may be
either applicable generally or only in specific cases.

 

19. Amendment, Suspension and Termination

The Board may at any time terminate the Plan. The Board may, at any time, or
from time to time, suspend and, if suspended, reinstate, the Plan in whole or in
part. For the purpose of

 

18

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conforming to any changes in applicable law or governmental regulations, or for
any other lawful purpose, the Board shall have the right, without approval of
the shareholders of the Company, to amend or revise the terms of the Plan at any
time; provided, however, that no such amendment or revision shall (i) with
respect to the Plan, increase the maximum number of Ordinary Shares in the
aggregate which are subject to the Plan(other than in accordance with
Section 16), (ii) with respect to which Incentive Awards, increase the maximum
number of Ordinary Shares in the aggregate which may be made to individual
Participants (other than in accordance with Section 16), (iii) materially change
the class of persons eligible to be Participants under the Plan or materially
increase the benefits accruing to Participants under the Plan or (iv) amend
Section 15(l) of the Plan. In addition, with respect to an Incentive Award
previously granted under the Plan, the Board may not cancel or reduce or
otherwise alter such outstanding Incentive Award without the express written
consent of the individual Participant holding such Incentive Award.

 

20. Compliance with Section 409A of the Code

This Plan is intended to comply and shall be administered in a manner that is
intended to comply with Section 409A of the Code and shall be construed and
interpreted in accordance with such intent. To the extent that an Incentive
Award or the payment, settlement or deferral thereof is subject to Section 409A
of the Code, the Award shall be granted, paid, settled or deferred in a manner
that will comply with Section 409A of the Code, including regulations or other
guidance issued with respect thereto, except as otherwise determined by the
Committee. Any provision of this Plan that would cause the grant of an Incentive
Award or the payment, settlement or deferral thereof to fail to satisfy
Section 409A of the Code shall be amended to comply with Section 409A of the
Code on a timely basis, which may be made on a retroactive basis, in accordance
with regulations and other guidance issued under Section 409A of the Code.

 

19