Exhibit 10.21


 


First Amendment to the


OneBeacon Long-Term Incentive Plan (2007)


 


FIRST


 


                Section 3(b) is hereby
replaced in its entirety with the following:


 


(b)                                 Type of Awards.  Awards shall be limited to the following six
types: (i) “Stock Options,” (ii) “Stock Appreciation Rights,” (iii) “Restricted
Stock,” (iv) “Restricted Stock Units,” (v) “Performance Shares,” and (vi) “Performance
Units.”  Stock Options, which include
“Incentive Stock Options” and other stock options or combinations thereof, are
rights to purchase shares of Common Stock of the Company (“Shares”).  A Stock Appreciation Right is a right to
receive, without payment to the Company, cash and/or Shares in lieu of the
purchase of Shares under the Stock Option to which the Stock Appreciation Right
relates.


 


SECOND


 


                Section 3(d)(ii) is
hereby replaced in its entirety with the following:


 


(ii)                                  A participant to whom Stock
Options, Stock Appreciation Rights, Restricted Stock Units, Performance Shares
or Performance Units are granted (and any person succeeding to such
participant’s rights pursuant to the Plan) shall have no rights as a
shareholder with respect to any Shares issuable pursuant to thereto until the
date of the issuance of a stock certificate (whether or not delivered)
therefor.  Except as provided in Section 5
or 14, no adjustment shall be made for dividends, distributions or other rights
(whether ordinary or extraordinary, and whether in cash, securities or other
property) the record date for which is prior to the date such stock certificate
is issued.


 


THIRD


 


                Section 3 is hereby amended
by adding the following new subsection (e) to the end thereof:


 


(e)                                  Release Condition.  Except as otherwise
determined by the Committee, if a participant’s employment terminates before
the payment, exercise, settlement or removal of restrictions with respect to an
Award, any subsequent payment, exercise, settlement or removal of restrictions
shall be conditioned upon the participant signing a release provided by the 


 


 

















 


 


Committee
as consideration for such payment, exercise, settlement or removal of
restrictions.  If a participant’s
employment is terminated due to a reduction in force before the payment,
exercise, settlement or removal of restrictions with respect to an Award, any
subsequent payment, exercise, settlement or removal of restrictions shall also
be conditioned upon the participant signing any agreement and release provided
to the participant at the time of the termination of employment and within the
time period specified in any such agreement and release.


 


FOURTH


 


                Section 5 is hereby
replaced in its entirety with the following:


 


5.                                      RESTRICTED
STOCK AND RESTRICTED STOCK UNITS


 


(a)                                  The Committee may grant to
participants Restricted Stock and/or Restricted Stock Unit Awards.  A Restricted Stock Award shall consist of a
Share issued or transferred to participants which is subject to transferability
restrictions and/or a substantial risk of forfeiture.  A Restricted Stock Unit Award shall entitle a
Participant to receive, without payment to the Company, an amount equal to the
value of one Share, if the terms and conditions specified herein and in the
Restricted Stock Unit Award agreement are satisfied.


 


(b)                                 Each Award of Restricted
Stock shall comply with the following terms and conditions:


 


(i)                                     The Committee shall determine the number
of Shares of Restricted Stock to be issued to a participant, up to a maximum of
500,000 Shares of Restricted Stock to a participant in one year.


 


(ii)                                  Shares of Restricted Stock issued may not
be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of,
except by will or the laws of descent and distribution, for such period from
the date on which the Award is granted until the Award vests in accordance with
the terms established by the Committee (the “Restricted Period”).  The Company shall have the option to
repurchase the Shares of Restricted Stock at such price as the Committee shall
have fixed, in its sole discretion, when the Award was made, which option will
be exercisable if the participant’s continuous employment with the Company or a
subsidiary shall terminate for any reason, except solely by reason of an event
described in Section 5(b)(iii) or (iv), prior to the expiration of
the Restricted Period or the earlier lapse of the option.  Such option shall be exercisable on such
terms, in such manner and during such period as shall be determined by the
Committee when the Award is made. 
Certificates for Shares issued pursuant to Restricted Stock 


 


 





















 


 


Awards shall bear an appropriate legend referring to
the foregoing option and other restrictions. 
Any attempt to dispose of any such Shares in contravention of the
foregoing option and other restrictions shall be null and void and without
effect.  If Shares issued pursuant to a
Restricted Stock Award shall be repurchased pursuant to the option described
above, the participant to whom the Award was granted, or in the event of his
death after such option becomes exercisable, his executor or administrator,
shall forthwith deliver to the Secretary of the Company any certificates for
the Shares awarded to the participant, accompanied by such instruments of
transfer, if any, as may reasonably be required by the Secretary of the
Company.  If the option described above
is not exercised by the Company, such option and the restriction imposed
pursuant to the first sentence of this Section 5(b)(ii) shall
terminate and be of no further force and effect.  Notwithstanding anything to the contrary in
this Section 5(b)(ii), neither any Restricted Period nor any option shall
lapse to the extent the Company or any subsidiary would be unable to take a
deduction with respect to such lapse by reason of Section 162(m) of
the Code.


 


(iii)                               If a participant who has been in the
continuous employment of the Company or of a subsidiary shall:


 


(A)                              die or become
disabled (as defined in Section 8) during the Restricted Period, the
option of the Company to repurchase (and any and all other restrictions on) a
pro rata portion of the Shares awarded to him under such Award shall lapse and
cease to be effective as of the date on which his death or disability occurs
which shall be determined as follows: (A) the number of Shares awarded
under the Award multiplied  by (B) a percentage, the
numerator of which is equal to the number of months elapsed in the Restricted
Period as of the date of death or disability (counting the month in which the
death or disability occurred as a full month) and the denominator of which is
equal to the number of months in the Restricted Period.


 


(B)                                voluntarily terminate
his employment with the Company (including retirement) during the Restricted
Period, the Committee may determine that all or any portion of the option to
repurchase and any and all other restrictions on some or all of the Shares
awarded to him under such Award, if such option and other restrictions are
still in effect, shall lapse and cease to be effective as of the date on which
such voluntary termination or retirement occurs.


 


 





















 


 


(iv)                              In the event within 24 months after a
Change in Control as defined in Section 10(a) and during the
Restricted Period:


 


(A)                              there is a
Termination Without Cause, as defined in Section 11, of the employment of
a participant;


 


(B)                                there is a
Constructive Termination, as defined in Section 12, of the employment of a
participant; or


 


(C)                                there occurs an
Adverse Change in the Plan, as defined in Section 13, in respect of a
participant, then


 


the option to repurchase (and any and all other
restrictions on) all Shares awarded to him under his Award shall lapse and
cease to be effective as of the date on which such event occurs.


 


(c)                                  Each Award of Restricted
Stock Units shall comply with the following terms and conditions:


 


(i)                                     The Committee shall determine the target
number of Restricted Stock Units to be granted to a participant.  The maximum number of Restricted Stock Units
that may be earned by a participant for any single award period (“Award
Period”) of one year or longer shall not exceed 500,000, reduced by the number
of any Performance Share Awards granted under Section 6 for such
Performance Period.


 


(ii)                                  Each Restricted Stock Unit will represent
one Share and the value of such Share shall be credited to a notional account
maintained by the Company.  At the sole
discretion of the Committee, an Award Agreement may provide that each
Restricted Stock Unit shall also entitle the holder to an amount equal to the
value of dividends paid in respect of one Share during the period the
Restricted Stock Unit is outstanding, which amount shall also be credited to
the notional account.


 


(iii)                               Restricted Stock Units may be subject to
such terms and conditions as the Committee determines appropriate, including,
but not limited to, service-based vesting requirements and/or performance
objectives.  Any such performance
objectives (“Performance Objectives”) shall be approved by the Committee (i) while
the outcome for each designated performance period (“Performance Period”) is
substantially uncertain and (ii) no more than 90 days after the
commencement of the Performance Period to which the Performance Objective
relates or, if less than 90 days, the number of days which is equal to 25
percent of the relevant Performance Period. 
The Performance Objectives established with respect to a Restricted
Stock Unit Award shall be specific performance targets 


 


 





















 


 


established by the Committee with respect to one or
more of the following criteria selected by the Committee: (i) consolidated
earnings before or after taxes (including earnings before interest, taxes,
depreciation and amortization); (ii) net income; (iii) operating
income; (iv) earnings per Share; (v) book value per Share; (vi) return
on stockholders’ equity; (vii) expense management; (viii) return on
investment; (ix) improvements in capital structure; (x) share price;
(xi) combined ratio; (xii) operating ratio; (xiii) profitability of an
identifiable business unit or product; (xiv) maintenance or improvement of
profit margins; (xv) market share; (xvi) revenues or sales; (xvii) costs;
(xviii) cash flow; (xix) working capital; (xx) return on assets; (xxi) customer
satisfaction; (xxii) employee satisfaction; (xxiii) economic value per Share,
(xxiv) underwriting return on capital and (xxv) underwriting return on
equity.  The foregoing criteria may
relate to the Company, one or more of its subsidiaries or one or more of its
divisions, units, partnerships, joint ventures or minority investments, product
lines or products or any combination of the foregoing, and may be applied on an
absolute basis and/or be relative to one or more peer group companies or
indices, or any combination thereof, all as the Committee shall determine.  In addition, to the degree consistent with Section 162(m) of
the Code (or any successor section thereto), the Performance Objectives may be
calculated without regard to extraordinary items.


 


(iv)                              The Award Period in respect of any grant
of a Restricted Stock Unit shall be such period as the Committee shall
determine.  An Award Period may contain a
number of separate Performance Periods as designated by the Committee.


 


(v)                                 Except as otherwise provided in a
Restricted Stock Unit Award agreement (including in accordance with Sections
5(c)(vi) and (vii)), Restricted Stock Units shall be canceled if the
participant’s continuous employment with the Company or any of its subsidiaries
shall terminate for any reason prior to the end of the Award Period.


 


(vi)                              At the sole discretion of the Committee,
a Restricted Stock Unit Award agreement may provide that, if a participant who
has been in the continuous employment of the Company or of a subsidiary shall:


 


(A)                              die or become
disabled (as defined in Section 8) during the Award Period, any and all
restrictions on a pro rata portion of the Shares awarded to him under such
Award shall lapse and cease to be effective as of the date on which his death
or disability occurs which shall be determined as follows: 


 


 





















 


 


(A)                              the number of
Shares awarded under the Award multiplied  by (B) a
percentage, the numerator of which is equal to the number of months elapsed in
the Award Period as of the date of death or disability (counting the month in
which the death or disability occurred as a full month) and the denominator of
which is equal to the number of months in the Award Period; or


 


(B)                                voluntarily
terminate his employment with the Company (including retirement) during the
Award Period, the Committee may determine that any and all restrictions on some
or all of the Shares awarded to him under such Award, if such option and other
restrictions are still in effect, shall lapse and cease to be effective as of
the date on which such voluntary termination or retirement occurs.


 


(vii)                           At the sole discretion of the Committee,
a Restricted Stock Unit Award agreement may provide that, in the event within
24 months after a Change in Control as defined in Section 10(a) and
during the Award Period:


 


(A)                              there is a
Termination Without Cause, as defined in Section 11, of the employment of
a participant;


 


(B)                                there is a
Constructive Termination, as defined in Section 12, of the employment of a
participant; or


 


(C)                                there occurs an
Adverse Change in the Plan, as defined in Section 13, in respect of a
participant, then


 


any and all restrictions on all Shares awarded to him
under his Award shall lapse and cease to be effective as of the date on which
such event occurs.


 


(viii)                        As soon as practicable after the end of
each Performance Period, the Committee shall determine and certify in writing
the extent to which the terms and conditions of the Restricted Stock Unit have
been satisfied (including, if applicable, the extent to which any applicable
Performance Objectives have been achieved).


 


(ix)                                Unless payment is deferred in accordance
with Section 21, the Committee shall cause an amount equal to the value of
the Restricted Stock Units earned by the participant to be paid to him or his
beneficiary no later than 2 1/2 months after the end of the Company’s fiscal
year in which such Restricted Stock Units are earned.   Restricted Stock Units may be settled in
cash, in Shares or partly in cash and partly in Shares as determined by the
Committee.


 


 





















 


 


FIFTH


 


                Section 6(a) is hereby
replaced in its entirety with the following:


 


(a)                                  The Committee shall determine the target
number of Performance Shares to be granted to a participant.  The maximum number of Performance Shares that
may be earned by a participant for any single Award Period of one year or
longer shall not exceed 500,000, reduced by the number of any Restricted Stock
Unit Awards granted under Section 5 for such Award Period.  Performance Share Awards may be granted in
different classes or series having different terms and conditions.


 


SIXTH


 


                Sections 6(g) and (h) are
hereby replaced in their entirety with the following:


 


(g)                                 Except as otherwise provided in Sections
6(e) or (f), as soon as practicable after the end of the Award Period or
such earlier date as the Committee in its sole discretion may designate, the
Committee shall (i) determine, based on the extent to which the applicable
Performance Objectives have been achieved, the Performance Percentage
applicable to an Award of Performance Shares, (ii) calculate the Actual
Value of the Performance Share Award and (iii) shall certify in writing
the foregoing.


 


(h)                                 Unless payment is deferred
in accordance with Section 21, the Committee shall cause an amount equal
to the Actual Value of the Performance Shares earned by the participant to be
paid to him or his beneficiary no later than 2 1/2 months after the end of the
Company’s fiscal year in which such Performance Shares are earned.  Performance Shares may be settled in cash, in
Shares or partly in cash and partly in Shares as determined by the Committee.


 


SEVENTH


 


                Sections 7(f) and (g) are
hereby replaced in their entirety with the following:


 


(f)                                    Except as otherwise provided in Sections
7(d) and (e), as soon as practicable after the end of the Award Period or
such earlier date as the Committee in its sole discretion may designate, the
Committee shall (i) determine, based on the extent to which the applicable
Performance Objectives have been achieved, the Performance Percentage applicable
to an Award of Performance Units, (ii) calculate the Earned Value of the
Performance Unit Award and (iii) shall certify in writing all of the
foregoing.


 


 

















 


 


(g)                                 Unless payment is deferred
in accordance with Section 21, the Committee shall cause an amount equal
to the Earned Value of the Performance Units earned by the participant to be
paid to him or his beneficiary no later than 2 1/2 months after the end of the
Company’s fiscal year in which such Performance Units are earned.    Performance Units may be settled in cash,
in Shares or partly in cash and partly in Shares as determined by the
Committee.


 


EIGHTH


 


                A new Section 21 shall be
added to the end of the Plan as follows:


 


21.          Deferral of
Awards/Settlements and Section 409A Compliance


 


(a)                                  At the sole discretion of
the Committee, the payment or settlement of an Award may be deferred by the
Committee or the Participant in accordance with procedures adopted by the
Committee.  Notwithstanding the preceding
sentence, if an Award is subject to Section 409A of the Code or the
deferral of such Award or settlement causes the Award to be subject to Section 409A,
any such deferral must be in compliance with Section 409A of the Code (and
the applicable guidance issued thereunder) and the terms of the Plan and Award
agreement shall be interpreted consistent therewith.


 


(b)                                 Notwithstanding any
provision of the Plan or any Award agreement to the contrary, each Award
granted under the Plan either shall be excepted from the requirements of Section 409A
of the Code or shall comply with the requirements of Section 409A of the
Code, and the terms of the Plan and each Award agreement shall be interpreted
consistent therewith.  An Award that is
excepted from the requirements of Section 409A of the Code may not be amended
or otherwise modified in such a manner that the Award becomes subject to Section 409A
of the Code unless the Committee expressly provides that the amendment or
modification is intended to subject the Award to the requirements of Section 409A
of the Code and the amended or modified Award complies with such
requirements.  An Award that is subject
to the requirements of Section 409A of the Code may not be amended or
otherwise modified in such a manner that the Award no longer complies with Section 409A
of the Code unless the Committee expressly provides that the amendment or
modification is intended to be non-compliant with Section 409A of the
Code.


 


NINTH


 


The
effective date of this First Amendment shall be February 26, 2008, unless
provided otherwise herein.