EXHIBIT
10.5


 


[Form
of Option Agreement For Executive Employees]


 


CastlePoint
Holdings, Ltd.

2006 Long Term Equity Compensation Plan


 


Stock
Option Agreement


 


SECTION 1.        
GRANT OF OPTION


 


(a)          
Option. On the terms and
conditions set forth in the Notice of Stock Option Grant and this Stock Option
Agreement (together, the “Agreement”), the Company grants to the Grantee on the
Grant Date the Option to purchase at the Exercise Price the number of Shares
set forth in the Notice of Stock Option Grant.


 


(b)          
Plan and Defined
Terms. The Option is granted pursuant to the Plan, a copy of which the Grantee
acknowledges having received. All terms and conditions applicable to the Option
set forth in the Plan and not set forth herein are hereby incorporated herein
by reference. To the extent any provision hereof is inconsistent with a
provision of the Plan, the provision of the Plan will govern. All capitalized
terms that are used in this Agreement and not otherwise defined therein shall
have the meanings ascribed to them in the Plan.


 


SECTION 2.        
EXERCISE OF THE
OPTION


 


The Option may be
exercised only to the extent it is vested. The Option shall vest in accordance
with the vesting schedule set forth in the Notice of Stock Option Grant. The
Option shall be exercised by written notice to the Committee, specifying the
number of Shares the Grantee desires to purchase together with provision for
payment of the Exercise Price. The Company may require the Grantee to furnish
or execute such other documents as the Company shall reasonably deem necessary
(i) to evidence such exercise and (ii) to comply with or satisfy the
requirements of the Securities Act of 1933, as amended, the Exchange Act,
applicable state or non-U.S. securities laws or any other law.


 


SECTION 3.        
TERM AND EXPIRATION


 


(a)          
Basic Term. Subject to earlier
termination pursuant to the terms hereof, the Option shall expire on the
expiration date set forth in the Notice of Stock Option Grant.


 


(b)          
Termination of
Employment. If the Grantee’s employment is terminated, the vested
portion of the Option shall expire on the earliest of the following to occur:


 


(i)           
The
expiration date set forth in the Notice of Stock Option Grant;


 


(ii)          
The
date three months following the termination of the Grantee’s employment if the
termination is as the result of a voluntary termination by Grantee or a Good
Reason termination by Grantee, a termination in connection with a Change of
Control as provided in Grantee’s employment agreement, or for any reason other
than Cause, death, Disability or Retirement;


 


 


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(iii)         
The
date three years following the termination of the Grantee’s employment if the
termination is due to death or Disability;


 


(iv)         
The
date of termination of the Grantee’s employment if the termination is for
Cause; or


 


(v)          
The expiration date
set forth in the Notice of Stock Option Grant if the termination is for Retirement.


 


Except as provided in this Section 3, upon termination
of the Grantee’s employment, the Option shall expire immediately with respect
to the number of Shares for which the Option was not then vested.
Notwithstanding the foregoing, if the Grantee’s employment is terminated in
connection with a Change of Control as provided in Grantee’s employment
agreement, or if Grantee’s employment terminates as the result of Retirement or
if Grantee terminates employment as the result of death or Disability, all
outstanding Options shall become immediately vested. If the Grantee dies after
termination of employment, but before the expiration of any part of the Option,
the Option (or portion thereof) may be exercised (prior to expiration) by the
personal representative of the Grantee or by any person who has acquired this
Option directly from the Grantee by will, bequest or inheritance, but only to
the extent that the Option was vested at the time of the termination of the
Grantee’s employment.


 


(c)          
Definition of
“Cause.”  If the Grantee has an employment agreement with the Company or a
Subsidiary, the term “Cause” shall have the meaning ascribed to such term in
the Grantee’s employment agreement. If the Grantee’s employment agreement does
not define the term “Cause,” or if the Grantee does not have an employment
agreement with the Company or a Subsidiary, the term “Cause” shall mean (i) the
willful engaging by the Grantee in misconduct that is injurious to the Company
or a Subsidiary (monetarily or otherwise), (ii) the Grantee’s conviction of, or
pleading guilty or nolo contendere to, a crime involving moral turpitude or a
felony, (iii) any serious or continuing breach by the Grantee of any material
term of any agreement with the Company or Subsidiary or any confidentiality,
non-solicitation, or non-competition covenant to which the Grantee is subject,
or (iv) the Grantee’s failure to perform, in a timely, professional and
competent manner, (A) the orders or requests of the Board; (B) the
orders or requests of the CEO or the Grantee’s direct supervisor; or
(C) any material duties under any agreement with the Company or a
Subsidiary.


 


(d)          
Definition of
“Disability.”  The Grantee’s employment shall be deemed to have
terminated due to the Grantee’s Disability if the Grantee is entitled to
long-term disability benefits under the Company’s long-term disability plan or
policy, as in effect on the date of termination of Grantee’s employment.


 


(e)          
Definition of
“Retirement” and “Good Reason”. If the Grantee has an employment
agreement with the Company or a Subsidiary, the terms “Retirement” and “Good
Reason” shall have the meaning ascribed to such term in the Grantee’s
employment agreement. If the Grantee’s employment agreement does not define the
term “Retirement” or Good Reason” or if the Grantee does not have an employment
agreement with the Company or a Subsidiary, the


 


 


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provisions of this Agreement
concerning “Retirement” or “Good Reason” shall not be applicable to Grantee.


 


(f)           
Definition of “Change
in Control”. If the Grantee has an employment agreement with the Company
or a Subsidiary, the term “Change in Control” shall have the meaning ascribed
to such term in the Grantee’s employment agreement. If the Grantee’s employment
agreement does not define the term “Change in Control” or if the Grantee does
not define the term “Change in Control” or if the Grantee does not have an
employment agreement with the Company or a Subsidiary, the term “Change of
Control” shall have the meaning ascribed to such term in the Plan.


 


(g)          
Employment Agreement.
Notwithstanding
the foregoing, if the terms of any employment agreement between the Grantee and
the Company or a Subsidiary provides more favorable terms concerning the impact
of the Grantee’s termination of employment on the Grantee’s stock option
awards, such terms of the Employment Agreement shall govern.


 


SECTION 4.        
TRANSFERABILITY OF
OPTION


 


(a)          
Generally. Except as provided in
Section 4(b) herein, the Option shall not be transferable by the Grantee other
than by will or the laws of descent and distribution, and the Option shall be
exercisable during the Grantee’s lifetime only by the Grantee or on his or her
behalf by the Grantee’s guardian or legal representative.


 


(b)          
Transfers to Family
Members. Notwithstanding Section 4(a) herein, if the Option is a Nonqualified
Stock Option, subject to the Grantee’s advance written notice of the intent to
transfer the Option and the Committee’s consent to such transfer, the Grantee
may transfer the Option for no consideration to or for the benefit of a Family
Member, subject to such limits or conditions as the Committee may establish.
The transferee shall be subject to all the terms and conditions applicable to
the Option in the event of such transfer. The Option may not be transferred by
any such transferee other than by will or the laws of descent and distribution.


 


(c)          
Definition of “Family
Member.”  For purposes of this Agreement, the term “Family Member” shall
mean any child, stepchild, grandchild, parent, stepparent, grandparent, spouse,
former spouse, sibling, niece, nephew, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law of the Grantee
(including adoptive relationships), any person sharing the same household as
the Grantee (other than a tenant or employee), a trust in which the above
persons have more than fifty percent of the beneficial interests, a foundation
in which the Grantee or the above persons control the management of assets, and
any other entity in which the Grantee or the above persons own more than fifty
percent of the voting interests.


 


SECTION 5.        
MISCELLANEOUS
PROVISIONS


 


(a)          
Tax Withholding. In accordance with
Article 17 of the Plan, the Committee shall have the power and the right to
deduct or withhold, or require the Grantee to remit to the Company, an amount
sufficient to satisfy any federal, state and local taxes (including the
Grantee’s FICA obligations) required by law to be withheld with respect to this
Award.


 


 


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(b)          
Ratification of
Actions. By accepting this Agreement, the Grantee and each person claiming under
or through the Grantee shall be conclusively deemed to have indicated the
Grantee’s acceptance and ratification of, and consent to, any action taken
under the Plan or this Agreement by the Company, the Board, the Committee or
any designee thereof.


 


(c)          
Notice Concerning
Disqualifying Dispositions. If the Option is an Incentive Stock Option, the
Grantee shall notify the Company of any disposition of Shares issued pursuant
to the exercise of the Option if the disposition constitutes a “disqualifying
disposition” within the meaning of Sections 421 and 422 of the Code (or any
successor provision of the Code then in effect relating to disqualifying
dispositions). Such notice shall be provided by the Grantee to the Committee in
writing within 10 days of any such disqualifying disposition.


 


(d)          
Rights as a
Stockholder. Neither the Grantee nor the Grantee’s transferee or
representative shall have any rights as a stockholder with respect to any
Shares subject to this Option until the Option has been exercised and Share
certificates have been issued to the Grantee, transferee or representative, as
the case may be.


 


(e)          
Notice. Any notice to be
served hereunder shall be given personally in writing to the Grantee or to the
Secretary of the Company (as the case may be) or shall be couriered or posted
by registered mail to the Company (to the attention of its Secretary) at its
principal executive office or to the Grantee at the address that he most
recently provided in writing to the Company. Any such notice sent by post shall
be deemed served three days after it is posted, and, in proving such service,
it shall be sufficient to prove that the notice was properly addressed and put
in the post or couriered.


 


(f)           
Choice of Law. This Agreement shall
be governed by, and construed in accordance with, the laws of the State of New
York, as such laws are applied to contracts entered into and performed in such
jurisdiction, without giving effect to conflicts of law principles.


 


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


 


(h)          
Modification or
Amendment. This Agreement may only be modified or amended by written agreement
executed by the parties hereto; provided, however, that the adjustments
permitted pursuant to Section 4.3 of the Plan may be made without such written
agreement.


 


(i)           
Severability. In the event any
provision of this Agreement shall be held illegal or invalid for any reason,
the illegality or invalidity shall not affect the remaining provisions of this
Agreement, and this Agreement shall be construed and enforced as if such
illegal or invalid provision had not been included.


 


(j)           
References to Plan. All references to the
Plan shall be deemed references to the Plan as may be amended from time to
time.


 


 


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