EXHIBIT 10.6


 


[Form of
Stock Option Agreement For Non-Employee Directors]


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
Service as Director. If the Grantee’s service as a director terminates, 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 service if the
termination is for any reason other than Cause, death, or Disability;


 


(iii)                              
The
date [one year] following the termination of the Grantee’s service if the
termination is due to death or Disability; or


 


 


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(iv)                             
The
date of termination of the Grantee’s service if the termination is for Cause.


 


Upon termination of the Grantee’s service as a
director, the Option shall expire immediately with respect to the number of
Shares for which the Option was not then vested. If the Grantee dies after
termination of service as a director, 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 service.


 


(c)                                 
Definition of
“Cause.”  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, any material duties under any agreement with the Company
or a Subsidiary.


 


(d)                                
Definition of
“Disability.”  The Grantee’s service as a director shall be deemed
to have terminated due to the Grantee’s Disability if the Grantee would have
been 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
services, had the Grantee been an employee.


 


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


 


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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.


 


(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)                                 
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.


 


(d)                                
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.


 


(e)                                 
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.


 


(f)                                  
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.


 


(g)                                
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.


 


(h)                                
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.


 


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(i)                                   
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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