Exhibit 10.5


 


EMPLOYMENT AGREEMENT


 


This Employment Agreement (the “Agreement”) dated as of May 14, 2007
is entered between Montpelier Re Holdings Ltd. (“Montpelier
Holdings” and, collectively, with its subsidiaries and affiliated
companies, the “Company”), and Stanley J. Kott
(the “Executive”).


 


WHEREAS, the Company and the Executive wish to enter
into an employment agreement whereby the Executive shall be employed by the
Company in accordance with the terms and conditions stated below.


 


NOW, THEREFORE, the parties hereby agree as follows:


 


ARTICLE 1

EMPLOYMENT, DUTIES AND RESPONSIBILITIES


 


Section 1.01.  Employment.  The Executive shall serve as Chief
Executive Officer of Montpelier Underwriting Inc. (“MUI”),
an entity within the Company; provided, however,
that Montpelier Holdings reserves the right to change the entity that employs
the Executive, and correspondingly the Executive’s title, based on the need of
the Company’s growing international infrastructure to comply with various
regulatory and tax regimes; and provided further
that the Executive may be concurrently employed by two entities within the
Company.  The Executive acknowledges that
such employment commenced as of the Commencement Date (as defined below).


 


Section 1.02.  Duties and Responsibilities.  (a)  The Executive shall
report to the President and Chief Executive Officer of Montpelier
Holdings.  Regardless of the entity or
entities that employ(s) the Executive, the Executive’s responsibilities
shall be commensurate with those of executives who occupy chief executive
positions at similarly situated companies.


 


(b)        The Executive shall devote substantially
all of his business time and services to the Company’s business and affairs and
shall perform faithfully the duties reasonably assigned to him to the best of
his ability.  In addition, and as set
forth in greater detail in Article 4, the Executive agrees to be subject
to covenants regarding non-competition and non-solicitation, confidentiality,
untrue statements, intellectual property and nondisparagement.  The Executive agrees that all of his
activities as an employee of the Company shall be in material compliance with
all policies, rules and regulations of the Company and whichever Company
entity(ies) serve(s) as his employer. 
The Executive acknowledges that he has reviewed and acknowledged in
writing the requisite company employee handbook(s), the terms of which are incorporated by reference in this Agreement, and Montpelier
Holdings’ Code of Conduct and Ethics, as each may be amended from time to time.


 

















 


(c)           The Executive shall work in various
locations, including but not limited to MUI’s main office in Hartford,
Connecticut, the Executive’s home in Auburn, New York and such other offices of
the Company in the United States as may be established from time to time.  The Executive shall make himself available to
attend meetings and participate in conference calls at various other locations
and at such times as may be reasonably required.


 


ARTICLE 2

TERM


 


Section 2.01.  Term.  The term of the Executive’s employment
pursuant to this Agreement (the “Term”)
commenced on May 13, 2007 (the “Commencement Date”)
and shall continue for a period of five (5) years from the Commencement
Date.


 


ARTICLE 3

COMPENSATION, BENEFITS AND EXPENSES


 


Section 3.01.  Salary and Benefits.  As compensation and consideration
for the performance by the Executive of his obligations under this Agreement,
the Executive shall be entitled to the following during the Term (subject, in
each case, to the provisions of Article 5).


 


(a)        The Company shall pay the Executive a base salary during the
Term at the rate of US$425,000 per
year, payable monthly in arrears or as outlined in applicable payroll
processes once they have been established.


 


(b)        Beginning with the 2007 year, the Executive shall be entitled
to participate in the MUI Annual Bonus Plan, based upon the performance of
MUI.  The Executive shall be eligible to
receive an annual bonus in an amount of 30% of the MUI pool, based upon his
personal performance; provided that,
in respect of each of the 2007 and 2008 years, the Executive shall be eligible
for a guaranteed minimum bonus equal to 20% of his base salary. At the
discretion of the board and shareholders of MUI and subject to authorization by
the board of Montpelier Holdings, such bonus may be paid in all cash or part
cash and part stock, subject to vesting requirements.  The Executive shall be paid his bonus at the
same time annual bonuses are generally paid to other executives of MUI and, in
any event, no later than March 15 of the year immediately following the
year in respect of which the bonus is being paid; provided
that the Executive is actively employed within the Company on the date that
annual bonuses are paid and has not given or received any notice of termination
of employment.


 


(c)        The Executive shall be entitled to welfare and retirement
benefits (excluding his vacation and sick leave entitlement) in an amount of up
to


 


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US$100,000.  This entitlement shall be comprised of a
package of life insurance policies, long-term care benefits covering the
Executive and his spouse and disability policies, as well as company
contributions to a deferred income fund and a defined contribution plan.  The Executive and the Company anticipate that
the annual cost for some of these benefits (e.g., long-term
care benefits, disability policies and, to the extent the Executive is able to
participate in one, a 401(k) plan) shall increase over time, thereby
reducing the annual cost of other benefits (e.g., company
contributions to a deferred income fund) borne by the Company.


 


(d)        In addition to ten (10) paid public U.S. holidays, the
Executive’s vacation entitlement shall be thirty (30) working days per calendar
year (prorated according to the Commencement Date) as set out in the MUI
employee handbook.  The Executive shall
also be entitled to up to ten (10) sick leave days (prorated according to
the Commencement Date) as set out in the MUI employee handbook.


 


Section 3.02.  Long-Term Incentive Plan.  The Executive shall be
granted a one-time award of restricted stock units (“RSUs”)
representing the value of 100,000 common shares of Montpelier Holdings,
pursuant to Montpelier Holdings’ Long-Term Incentive Plan (“LTIP”), which became effective on May 23, 2007.  This award shall be made as soon as
reasonably practicable, subject to the approval of Montpelier Holdings’
Compensation and Nominating Committee (the “Committee”),
and shall vest pro rata over five (5) years,
beginning with the first anniversary of the Commencement Date. The shares
underlying the RSUs shall not be transferable until the fifth anniversary of
the Commencement Date.  In the event the
one-time award of RSUs is not made to the Executive on a timely basis, the
Executive shall receive, in lieu of such RSUs, on each anniversary of the
Commencement Date for a five (5) year period beginning on the Commencement
Date, an amount in cash equal to one-fifth of the value of the common shares
underlying such RSUs, measured as of the Commencement Date; provided that the Executive is actively employed within the
Company on the date of such cash payment and has not given or received any
notice of termination of employment. 
Beginning with the 2008 year, subject to satisfactory performance and
the approval of the Committee, the Executive shall be eligible for
participation in the LTIP at a level and with terms and conditions that are
commensurate with those generally of other executives of the Company.


 


Section 3.03.  Expenses.  The Company shall reimburse the Executive for all reasonable travel,
hotel and other out-of-pocket expenses which are properly incurred by the
Executive in or about the performance of his duties hereunder and for which
receipts (if so required) are provided to the Company’s reasonable satisfaction.


 


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ARTICLE 4

COVENANTS


 


Section 4.01. 
Non-competition; Non-solicitation.  Since
the Executive has obtained in the course of his employment on and after the
Commencement Date and is likely to obtain in the course of his employment
hereunder knowledge of the trade secrets and also other confidential
information in regard to the business of the Company and of any of the entities
within the Company with which he becomes associated, the Executive hereby
agrees with the Company that he shall not in Bermuda, the United States of
America, the United Kingdom or the European Union:


 


(a)        During the Executive’s
employment within the Company and the period of twelve (12) months following
the termination of his employment for any reason other than as a result of his
death (the “Relevant Period”), either on his
own account or for any other person, firm or entity, directly or indirectly be
engaged in or concerned with any business or undertaking which is engaged in or
carries on in Bermuda, the United States of America, the United Kingdom or the
European Union any insurance business which competes or seeks to compete with
the business carried on by the Company at the date of termination.


 


(b)        During the Executive’s
employment within the Company and the Relevant Period, either on his own
account or for any other person, firm or company, directly or indirectly
solicit, interfere with or endeavour to entice away from the Company the
business of any person, firm or entity that was a customer or client in the
habit of dealing with the Company or that was to the Executive’s knowledge
negotiating with the Company in relation to all or part of its business.


 


(c)        During the Executive’s
employment within the Company and the Relevant Period, either on his own
account or for any other person, firm or entity, solicit the services of or
recruit, hire or employ or endeavour to entice away from the Company any
director, employee or other personnel of the Company (whether or not such
person would commit any breach of his or her agreement of employment or other
service by reason of leaving the service of the Company), nor shall the
Executive knowingly employ or aid or assist in or procure the employment by any
other person, firm or entity of any such person.


 


Section 4.02. 
Confidentiality.  (a)  The Executive shall not either during the continuance
of his employment hereunder (otherwise than in the proper performance of his
duties hereunder) or at any time after the termination thereof divulge to any
person whomsoever and shall use his reasonable endeavours to prevent the
publication or disclosure of any trade secret or other confidential information
concerning the business, finances, accounts, dealings, transactions or affairs
of the Company or of any of its clients entrusted to him or arising or coming
to his knowledge during the course of his employment hereunder or otherwise.


 


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(b)        The
Executive shall upon the termination of his employment hereunder immediately
deliver up to the Company all fee schedules, lists of clients, correspondence
and other documents, papers and property belonging to the Company or related to
any of the matters referred to in Section 4.02(a) which may have been
prepared by him or have come into his possession in the course of his
employment hereunder and shall not retain any copies thereof.


 


Section 4.03. Untrue Statements. 
The Executive agrees to not knowingly at any time make any untrue statement
in relation to the Company and, in particular, to not after the termination of
his employment wrongfully represent himself as being employed by or connected
with the Company.


 


Section 4.04.  Company Work-Product.  The Executive agrees to disclose
fully to the Company, and to assign and transfer to the Company immediately
upon origination or acquisition thereof, the right, title and interest in and
to any and all inventions, discoveries, improvements, innovations, copyrights,
trademarks, trade secrets and/or designs (“Work Product”)
made, discovered, developed or secured by the Executive, solely or jointly with
others or otherwise, either:


 


(a)        During the period of the Executive’s
services with the Company, if such Work Product is related, directly or
indirectly, to the business of, or to the research or development work of, the
Company;


 


(b)        With the use of the time, materials,
whether tangible or intangible, or facilities of the Company; or


 


(c)        Within the Relevant Period if conceived
as a result of and attributable to work done during such employment and relates
to a method, substance, article, procedure and/or process within the scope of
the business of the Company, together with rights to all intellectual property
rights which may be granted thereon.


 


Immediately upon making, discovering,
developing or securing any such Work Product, the Executive shall notify the
Company and shall execute and deliver to the Company, without further
compensation, such documents as may be necessary to prepare or prosecute
applications for such Work Product and to assign and transfer to the Company
the Executive’s right, title and interest in and to such Work Product and
intellectual property rights thereof. 
The Executive acknowledges that he has carefully read and considered the
provisions of this Section 4.04 and, having done so, agrees that the
restrictions set forth herein are fair and reasonable and are reasonably
required for the protection of the interests of the Company, its officers,
directors and other employees.


 


Section 4.05.  Nondisparagement.  During the Executive’s employment
within the Company and the period ending on the third anniversary of the date on which the Executive’s
employment terminates for any reason, (i) the Executive


 


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agrees not to make or cause any other person
or entity to make any statement which disparages the Company in writing, orally
or otherwise, and (ii) the Company shall direct the executive officers and
directors not to make any statement which disparages the Executive in writing,
orally or otherwise.


 


Section 4.06.  Remedies.  If any provision contained in this
Article 4 shall for any reason be held invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not
affect any other provisions of this Agreement, but such provision shall be
amended or deemed amended to apply as to such maximum time and to such maximum
extent as determined to be valid, binding and enforceable. The provisions of
this Article 4 shall survive any termination of this Agreement pursuant to
Article 5.  The Executive
acknowledges and agrees that the Company’s remedies at law for a breach or
threatened breach of any of the provisions of Article 4 would be
inadequate and, in recognition of this fact, agrees that, in the event of such
a breach or threatened breach, in addition to any remedies at law, the Company,
without posting any bond, shall be entitled to obtain equitable relief in the
form of specific performance, temporary restraining order, temporary or
permanent injunction or any other equitable remedy which may be then available.


 


ARTICLE 5

TERMINATION


 


Section 5.01.  Notice of Termination.  In the event that the Company terminates the
employment of the Executive during the Term, the Company shall give the
Executive twelve (12) months’ advance written notice.  In the event that the Executive terminates
his employment during the Term, the Executive shall give the Company six (6) months’
advance written notice.  Notwithstanding
the foregoing:


 


(a)        The period of notice may be waived either in whole or partly
by mutual agreement of the Executive and the Company.


 


(b)        During the period of notice, the Executive shall continue to
be paid his base salary, but shall not be eligible for any annual bonus or
accrual of vacation or sick leave.  In
lieu of such period of notice, and at the Company’s discretion, the Executive
may receive a lump sum payment in cash.


 


(c)        The Company may terminate the Executive’s employment immediately
in the event that the Executive commits any act of gross default, serious
misconduct, dishonesty or fraud resulting in serious harm or injury either to
the reputation or business of the Company, or the clients of the Company.


 


Section 5.02.  Death.  In the event the Executive dies
during the Term, this Agreement and the Executive’s employment shall
automatically terminate, such termination to be effective on the date of the
Executive’s death.


 


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Section 5.03.  Disability.  In the event that the Executive
shall suffer a medical disability which prevents him from performing
satisfactorily any of his obligations hereunder for a period of at least one
hundred eighty (180) consecutive days, the Company shall have the right to
terminate this Agreement and the Executive’s employment, such termination to be
effective upon the giving of notice thereof to the Executive in accordance with
Section 6.06.


 


Section 5.04.  Effect of Termination.  (a)  In the event of termination of the
Executive’s employment, whether before or after the Term, by either party for
any reason, or by reason of the Executive’s death or disability, the Company
shall pay to the Executive (or his beneficiary in the event of his death) any
base salary earned but not paid to the Executive prior to the effective date of
such termination.


 


(b)        During the Term, the Executive shall be eligible to
participate in the Montpelier Re Holdings Ltd. Severance Plan (the “Severance Plan”) as a Group B Executive (as defined in the
Severance Plan).  Payment of a severance
benefit under the Severance Plan shall be subject to and conditioned upon the
Executive’s execution of a separation agreement and general release under which
the Executive agrees to a general release of all claims against the
Company.  Under the Severance Plan, the
Committee shall have complete discretion to determine the form of that release.


 


(c)        Upon the termination
of this Agreement howsoever arising, the Executive shall at any time or from
time to time thereafter upon the request of the Company resign, without claim
for compensation for loss of office, as a director of the Company and such
offices held by him in the Company as may be so requested and, should he fail
to do so, the Company is hereby irrevocably authorized to appoint some person
in his name and on his behalf to sign and do any documents or things necessary
or requisite to give effect thereto.


 


ARTICLE 6

MISCELLANEOUS


 


Section 6.01.  Benefit Assignment;
Beneficiary.  This Agreement
shall inure to the benefit of and be binding upon the Company and its
successors and assigns, including any entity or person which may acquire all or
substantially all of the Company’s assets or business, or with or into which
the Company may be consolidated or merged. 
This Agreement shall also inure to the benefit of, and be enforceable
by, the Executive and his personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.  If the Executive should die while any amount
would still be payable to the Executive hereunder if he had continued to live,
all such amounts shall be paid in accordance with the terms of this Agreement
to the Executive’s beneficiary,


 


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devisee, legatee or other designee, or if
there is no such designee, to the Executive’s estate.


 


Section 6.02.  No Violation.  The Executive represents and
warrants that:


 


(a)        The Executive is not subject to any employment agreement or
understanding with any prior employer or any other person, entity or
organization that restricts the Executive’s ability to negotiate or execute the
terms of this Agreement or that prevents the Executive from entering into
employment within the Company as of the Commencement Date;


 


(b)        The Executive does not possess any material, tangible,
confidential or proprietary information belonging to any prior employer or its
affiliates;


 


(c)        The Executive has not made any material misrepresentation or
omission in the course of his offer of employment within the Company; and


 


(d)        No representations were made to the Executive concerning his
offer of employment within the Company or the terms or conditions of his
employment within the Company.


 


Section 6.03.  Confidential Terms.  Without limiting the generality of
Section 4.02, the terms of this Agreement are strictly confidential, and
the Executive agrees not to disclose the contents to any person or entity
except to his spouse, attorney or financial or tax advisor.  If the Executive discloses the contents of
this Agreement other than as permitted by this Section 6.03 without prior
authorization, the Company reserves the right to rescind all of the terms of
this Agreement and subject the Executive to disciplinary action, including
termination of the Executive’s employment.


 


Section 6.04.  Section 409A.  Notwithstanding any provision of
this Agreement to the contrary, if at the time of the termination of the
Executive’s employment the Executive is a “specified employee” (as defined in Section 409A
of the Internal Revenue Code of 1986, as amended (the “Code”)),
the Executive shall not be entitled to any payments upon such termination until
the earlier of (i) the date which is 6 months after his termination of
employment for any reason other than death or disability (as such term is used
in Section 409A(a)(2)(C) of the Code) or (ii) the date of his
death or disability (as such term is used in Section 409A(a)(2)(C) of
the Code).  The provisions of this Section 6.04
shall only apply if required to comply with Section 409A of the Code.  In addition, if any provision of this
Agreement would subject the Executive to any additional tax or interest under Section 409A
of the Code or any regulations or Treasury guidance promulgated thereunder,
then upon written request by the Executive, the Company shall reform such
provision; provided that the Company shall (i) maintain,
to the maximum extent practicable, the original intent of the applicable
provision without subjecting the Executive to such additional tax or interest;
and (ii) not incur any additional compensation expense as a result of such
reformation.


 


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This Section 6.04 does not guarantee
that the amounts or benefits owed or that may be owed to the Executive under
this Agreement shall not be subject to Section 409A of the Code.


 


Section 6.05.  Withholding of Tax.  All payments made to the Executive
under this Agreement are subject to such withholdings of tax and other ordinary
employee deductions as may be required by law.


 


Section 6.06.  Notices.  Any notice required or permitted
hereunder shall be in writing and shall be sufficiently given if personally
delivered or if sent by telegram or telex or by registered or certified mail,
postage prepaid, with return receipt requested, addressed:


 


(a)        In the case of the Company, to Montpelier Re Holdings Ltd.,
Attention: General Counsel, or to such other address and/or to the attention of
such other person as the Company shall designate by written notice to the
Executive; and


 


(b)        In the case of the Executive, to the address appearing on the
employment records of the Company, from time to time, or to such other address
as the Executive shall designate by written notice to the Company.


 


Any notice given hereunder shall be deemed to have
been given at the time of receipt thereof by the person to whom such notice is
given.


 


Section 6.07.  Entire Agreement;
Amendment.  This Agreement
contains the entire agreement of the parties hereto with respect to the terms
and conditions of the Executive’s employment during the Term and supersedes any
and all prior agreements and understandings (including the offer letter dated May 11,
2007), whether written or oral, between the parties hereto with respect to the
subject matter herein.  This Agreement
may not be changed or modified except by an instrument in writing signed by
both of the parties hereto.


 


Section 6.08.  No Waiver.  No waiver by either party of any
breach by the other party of any condition or provision contained in this
Agreement to be performed by such other party shall be deemed a waiver of a
similar or dissimilar condition or provision at the same or any prior or
subsequent time.  Any waiver must be in
writing.


 


Section 6.09.  Headings.  The article and section headings
herein are for convenience of reference only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.


 


Section 6.10.  Governing Law.  This Agreement shall be governed
by, and construed and interpreted in accordance with, the internal laws of the
State of Connecticut without reference to the principles of conflict of laws.


 


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Section 6.11.  Agreement to Take
Actions.  Each party hereto
shall execute and deliver such documents, certificates, agreements and other
instruments, and shall take such other actions, as may be reasonably necessary
or desirable in order to perform his or its obligations under this Agreement or
to effectuate the purposes hereof.


 


Section 6.12.  Jurisdiction.  The Executive and the Company each
hereby irrevocably and unconditionally submit to:


 


(a)        Arbitration brought in the Hartford, Connecticut metropolitan
area in the resolution of any dispute arising out of or relating to this
Agreement, and


 


(b)        The non-exclusive jurisdiction of any Connecticut State court
or Federal court of the United States of America sitting in Hartford,
Connecticut, and any appellate court from any thereof for recognition or
enforcement of any arbitration decision. 
Each of the parties hereto agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.


 


Section 6.13.  WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT.


 


Section 6.14.  Survivorship.  The respective rights and
obligations of the parties hereunder shall survive any termination of this
Agreement to the extent necessary to the intended preservation of such rights
and obligations.


 


Section 6.15.  Severability.  The invalidity or unenforceability
of any provision or provisions of this Agreement shall not affect the validity
or enforceability of any other provision or provisions of this Agreement, which
shall remain in full force and effect.


 


Section 6.16.  Counterparts.  This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an original but
all of which together shall constitute one and the same instrument.


 


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IN WITNESS WHEREOF, each of the parties hereto has
duly executed this Agreement as of the date first above written.


 


	
   

  	
   

  	
  MONTPELIER
  RE HOLDINGS LTD

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  ANTHONY TAYLOR

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Anthony
  Taylor

  
	
   

  	
   

  	
   

  	
  Title:

  	
  President
  and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  STANLEY
  J. KOTT

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  /s/
  STANLEY J. KOTT