Exhibit 10.1


 


SERVICE AGREEMENT


 


This SERVICE AGREEMENT (the “Agreement”) is made as of this 11th day of March,
2008, by and between Michael S. Paquette (the “Executive”)
and Montpelier Re Holdings Ltd. (the “Company”).


 


W  I  T
N  E  S  S  E  T  H:


 


WHEREAS, the Executive currently serves as
Senior Vice President and Controller of the Company; and


 


WHEREAS, the Company desires to continue to
employ the Executive, and the Executive desires to continue employment, under
the terms and conditions of this Agreement;


 


NOW, THEREFORE, for and in consideration of
the premises and the mutual covenants and agreements herein contained, and for
other valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:


 


1.                       Employment.  The Company hereby shall continue to employ
the Executive, and the Executive hereby accepts the continuation of employment,
as an Executive Vice President and Chief Financial Officer (“CFO”) of the Company, under the terms and
subject to the conditions set forth herein.


 


2.                       Term.  The Executive shall be employed hereunder
commencing on or about May 1, 2008 and continuing unless and until
terminated in accordance with Section 7 below (the “Term”).


 





















 


3.                       Duties.

                                (a)                                  During the Term, the Executive shall have all
responsibilities commensurate with the position of CFO and shall report to the
Company’s Chief Executive Officer (the “CEO”).  The Executive shall perform such duties and
exercise such powers in relation to the business of the Company, or of any
Group Company (as defined below), as may from time to time be assigned to or
vested in him by the CEO and shall give to the CEO information regarding the
affairs of the Company, and of any Group Company, as it shall require and at
all times in all respects conform to and comply with the reasonable directions
and regulations made by the Company’s Board of Directors (the “Board”). 
The Executive shall perform such services for any Group Company (without
further remuneration except as otherwise agreed), and shall accept such offices
in any such Group Company as the Board may require.  The Executive shall well and faithfully serve
the Company and the Group Companies, and shall use his best endeavors to
promote, develop and extend their businesses and interests, giving at all times
the full benefit of his knowledge, expertise, technical skill and
ingenuity.  For purposes of this
Agreement, “Group Company” shall
mean and include any company which is from time to time a holding company (as
defined by Section 86 of the Bermuda Companies Act 1981 (the “Companies Act”), but irrespective of
whether it is a Bermuda company or an overseas company) of the Company, a
subsidiary company (as so defined) of the Company, a subsidiary company (as so
defined) of a holding company (as so defined) of the Company or in which the
Company owns at least 50% of the issued share capital.


 


                                (b)                                 The Executive agrees that he will devote substantially all
of his time and attention to the affairs of the Company and the Group Companies
and that he will not engage, directly or indirectly, in any other business or
occupation during the Term.  The
Executive may (i) serve on 


2





















 


corporate, civic or charitable boards
or committees and otherwise engage in charitable and civic activities and (ii) engage
in personal investment activities on behalf of himself or his family; provided that the Executive continues to devote
substantially all of his time and attention to the affairs of the Company and the
Group Companies.


 


                                (c)                                  The Company reserves the right to require the Executive not
to attend work and/or not to undertake all or any of his duties hereunder
during a period of up to twelve (12) months immediately preceding the
termination of his employment; provided that
the Company shall continue to pay the Executive’s Base Salary and contractual
benefits for such period.  This Section 3(c) shall
not affect the general right of the Company to suspend the Executive for Cause
(as defined below).


 


4.                       Compensation and Related Matters.  As full
compensation for the Executive’s performance of his duties and responsibilities
hereunder during the Term, the Company shall pay the Executive the compensation
and provide the benefits set forth below and in Section 5 of this
Agreement:


 


                                (a)                                  Base Salary.  During the Term, the Company shall pay the
Executive an annual salary (the “Base Salary”)
of $300,000 U.S., less applicable withholding and other deductions, payable
bi-monthly in arrears on the day appointed by the Board for the payment of
salaries or pro rata if the Executive is employed for less than a full pay
period.  The Compensation and Nominating
Committee of the Board, subject to ratification of the Board, may, in its sole
discretion, increase or decrease the Base Salary at any time during the Term; provided, however, that in no event shall the Base Salary be
decreased at any time during the Term below the rate of $300,000 U.S. per
annum.  The Base Salary shall be
inclusive of any director’s fees or other fees 


 


3





















 


or remuneration payable to the
Executive by the Company or any Group Company and, accordingly, either the
Executive shall pay over or cause to be paid over to the Company all such fees
or remuneration paid or payable to him or the Base Salary shall be reduced by
the amount of such fees or remuneration.


 


                                (b)                                 Bonuses.  The Executive shall be entitled to
participate in the Company’s annual bonus plan, with a target bonus equal to
100% of the Base Salary (the “Target Bonus”).  If the Company’s annual bonus plan is
terminated during the Term, the Executive shall remain entitled to an annual
bonus on the same terms and conditions as were contained in such annual bonus
plan, with a target bonus equal to the Target Bonus.  Notwithstanding any provision in such annual
bonus plan to the contrary, the annual bonus, if any, earned by the Executive
with respect to a fiscal year will be paid to the Executive no later than
seventy-five (75) days following the end of such fiscal year.


 


                                (c)                                  Long-Term Incentive Plan.  The Executive will be eligible to participate
in the Company’s long-term incentive plan (the “LTIP”), subject to the provisions of such plan in effect at
the time.


 


                                (d)                                 Benefits.  The Executive shall be eligible to receive
the benefits that the Company generally makes available to its executives (as
the same may be revised from time to time), including but not limited to the
Company’s retirement, savings, medical, dental, life insurance and deferred
compensation plans.


 


                                (e)                                  Vacation.  In addition to the usual public holidays, the
Executive shall be entitled to receive twenty (20) paid vacation days each
year, to be taken at such time or times as may be approved by the CEO.  Any entitlement to vacation days remaining at
the end of any year may 


4





















 


be carried to the next year but no
further.  The Executive’s entitlement to
vacation days (and on termination of employment, vacation pay in lieu of
vacation) shall accrue pro rata throughout each year; provided
that fractions of days shall be disregarded in calculating the entitlement to
vacation or payment in lieu of vacation.


 


                                (f)                                    Currency.  The Base Salary, annual bonuses, cash
settlement, if any, of equity awards and any other cash remuneration or
reimbursement payable by the Company to the Executive shall be denominated in
U.S. dollars, unless the Executive consents, in writing, to use of another
currency.


 


5.                       Reimbursement.  The Executive shall be reimbursed for all
documented business related expenses, subject to the Executive’s presentment to
the Company of appropriate documentation.


 


6.                       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 endeavors 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 any Group Company or of any of their respective clients
entrusted to him or arising or coming to his knowledge during the course of his
employment hereunder or otherwise; provided that
the foregoing shall not prevent or limit the Executive from complying with any
applicable law or with the directive of any court or administrative body or
agency having the legal authority to compel testimony from or the production of
documents by the Executive.  The 


5





















 


provisions of this Section 6(a) shall
not apply to any information which is or becomes publicly known other than as a
result of the Executive’s breach of this Agreement.


 


                                (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 any Group Company or related to any of the matters referred to
in Section 6(a) above 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.


 


7.                       Termination.  The Executive’s employment shall terminate
upon:


 


                                (a)                                  the Executive’s death;


 


                                (b)                                 the Executive’s Disability. 
“Disability” means the
Executive’s inability to perform the duties and responsibilities required of
him hereunder due to a physical and/or mental disability for a period of six (6) consecutive
months or for more than one-hundred eighty (180) working days, whether or not
consecutive, during any twelve (12)- month period; provided
that any such periods may be extended at the sole discretion of the Board.  From the date on which such Disability
commences through the date on which the Executive’s employment hereunder is
terminated by reason of such Disability, the Executive shall continue to
receive the Base Salary (less any Company-paid benefits that he receives, such
as short-term disability or workers compensation, during such period);


 


                                (c)                                  the termination of the Executive’s employment by the Company
for Cause.  “Cause” means the Executive’s (i) conviction of an offense
(other than a road traffic offense or 


6





















 


other non-material offense not subject
to a custodial sentence) or (ii) willful gross negligence or willful gross
misconduct by the Executive in connection with his employment with the Company
or a Group Company which causes or is likely to cause material loss or damage
to the Company or such Group Company;


 


                                (d)                                 the termination of the Executive’s employment by the
Executive for Good Reason.  “Good Reason” means, without the Executive’s
consent, (i) a decrease in the Executive’s Base Salary (except as
authorized under Section 4(a) above) or any material decrease in
bonus opportunity, (ii) a material diminution in the authority, duties or
responsibilities of the Executive’s position with the result that the Executive
makes a determination in good faith that he cannot continue to carry out his
job in substantially the same manner as it was intended to be carried out
immediately before such diminution, (iii) a relocation of the Executive’s
principal place of employment by more than fifty (50) miles from the location
at which he is then principally employed or (iv) a material breach by the
Company of the terms of this Agreement or of any award to the Executive under
the LTIP; provided that the Executive shall have
provided written notice to the Company setting forth the conduct alleged to
constitute Good Reason within one-hundred twenty (120) days after the first
occurrence of the conduct, and the Company shall have failed to cure the
conduct within thirty (30) days after receipt of the notice.


 


                                (e)                                  the termination of the Executive’s employment by the Company
without Cause; or


 


                                (f)                                    the termination of the Executive’s employment by the
Executive without Good Reason.


 


7





















 


 


8.                       Termination Payments and Benefits.


 


                                (a)                                  If the Executive’s employment is terminated (i) by the
Company for Cause, (ii) by the Executive without Good Reason or (iii) as
a result of the Executive’s death or Disability, then in full satisfaction of
the Company’s obligations under this Agreement, the Executive, his
beneficiaries or estate, as appropriate, shall be entitled to receive, no later
than seventy-five (75) days following such termination, (A) the Base
Salary provided for herein up to and including the effective date of
termination, prorated on a daily basis, (B) payment for any accrued but
unused vacation days as of the effective date of termination and (C) any
reimbursements to which he may be entitled under Section 5 above (such
payments, collectively, the “Accrued
Obligations”).


 


                                (b)                                 If the Executive’s employment is terminated by (i) the
Company without Cause or (ii) the Executive for Good Reason, then in full
satisfaction of the Company’s obligations under this Agreement, the Executive,
his beneficiaries or estate, as appropriate, shall be entitled to receive (A) the
Accrued Obligations, payable no later than seventy-five (75) days following
such termination, (B) continued payment of the Base Salary for a period of
twelve (12) months following such termination, less applicable withholding and
other deductions, payable bi-monthly in arrears on the day appointed by the
Board and (C) medical benefit continuation under the Company’s medical
plan for the Executive and his dependents at the Company’s expense for a period
of twelve (12) months following such termination.  The payments and benefits upon termination
under clauses (B) and (C) shall be subject to and conditioned upon
the Executive’s execution, within sixty (60) days following such termination, of
a general release of claims against the Company in the form provided by the
Company.


8





















 


9.                       Non-Competition
and Non-Solicitation.


 


                                (a)                                  During the Term, the Executive
shall not directly or indirectly engage in any other business or be concerned
or interested in any other business of a similar nature to or which would or
might compete with the business for the time being carried on by the Company or
any Group Company save that he may (but without prejudice to Section 3
above) be interested as a holder or beneficial owner of not more than 5% of any
class of stock, shares or debentures in any company (other than the Company, in
which case, such limit shall not apply) whose stock, shares or debentures are
listed or dealt in on an appointed stock exchange (as defined in the Companies
Act).


 


                                (b)                                 Since the Executive has obtained
in the course of his employment prior to the date hereof 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 Group Company with which he becomes associated, the
Executive hereby agrees with the Company that in addition to the restrictions
contained in Section 9(a) above, he will not in Bermuda, the United
States, the United Kingdom or the European Economic Community, during the
period of twelve (12) months following the termination of his employment
hereunder (howsoever caused), either on his own account or for any other
person, firm or company:


 


                                                                                (i)                                     directly or indirectly be engaged
in or concerned with any business or undertaking which is engaged in or carried
on in Bermuda, the United States, the United Kingdom or the European Economic
Community any insurance business which competes or seeks to compete with the
business carried on by the Company or any other Group Company at the date of
termination.


 


9





















 


                                                                                (ii)                                  directly or indirectly solicit,
interfere with or endeavor to entice away from the Company or any Group Company
any person, firm or company who at the date of termination aforesaid or who in
the period of twelve (12) months immediately prior to such date was a customer
or client of or in the habit of dealing with the Company or any Group Company
or who at such date was to his knowledge negotiating with the Company or any
Group Company in relation to all or part of its business.


 


                                                                                (iii)                               solicit the services of or
endeavor to entice away from the Company or any Group Company any director,
employee or consultant of the Company or any Group Company (whether or not such
person would commit any breach of his contract of employment or engagement by
reason of leaving the service of such company) nor shall the Executive
knowingly employ or aid or assist in or procure the employment by any other
person, firm or company of any such person.


 


                                (c)                                  If any provision contained in
this Section 9 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 Section 9 shall
survive any expiration or termination this Agreement.  The Executive acknowledges and agrees that
the Company’s remedies at law for a breach or threatened breach of any of the
provisions of this Section 9 would be inadequate and, in recognition of
this fact, agrees that, in the event of such 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 


10





















 


restraining
order, temporary or permanent injunction or any other equitable relief which
may then be available.


 


                                (d)                                 The Executive hereby agrees that
he will at the request and at the cost of the Company enter into a direct
agreement or undertaking with any Group Company whereby he will accept
restrictions and provisions corresponding to the restrictions and provisions
herein contained (or such of them as may be appropriate in the circumstances)
in relation to such services and such area and for such period as such company
or companies may reasonably require for the protection of its or their
legitimate interests provided that he terms of such restrictions and provisions
will not be more onerous than the restrictions and provisions of this
Agreement.


 


10.                 Successors.  The Executive’s performance hereunder is
personal to the Executive and shall not be assignable by the Executive.  The Company may at any time and from time to time
delegate its power and authority under this Agreement to any Group Company and
such delegation (or the revocation thereof) shall be effective upon the Company’s
giving written notice of the same to the Executive.  The Company may assign this Agreement to any
Group Company or to any successor to all or substantially all of the business
and/or assets of the Company, whether directly or indirectly, by purchase,
merger, consolidation, acquisition of stock or otherwise; provided,
however, that any such Group Company, successor and the Company
remain jointly liable to the Executive for performance of this Agreement.  This Agreement shall inure to the benefit of
and be binding upon the Company and its successors and assigns.


 


11.                 Legal
Expenses.  The Company will pay or reimburse the
Executive for all costs and expenses (including court costs and attorney’s
fees) incurred by the Executive as a result of any 


11





















 


claim, action or proceeding arising out
of, or challenging the validity, or enforceability of, this Agreement or any
provision hereof or any benefit or award contemplated herein, but only if the
Executive is the prevailing party, in whole or in significant part, with
respect to such claim, action or proceeding. 
The Executive will pay or reimburse the Company for all costs and
expenses (including court costs and attorney’s fees) incurred by Company as a
result of any claim, action or proceeding arising out of, or challenging the
validity, or enforceability of, this Agreement or any provision hereof or any
benefit or award contemplated herein, but only if the Company is the prevailing
party, in whole or in significant part, with respect to such claim, action or
proceeding.


 


12.                 Survival
of Operative Sections.  The expiration or termination of this
Agreement howsoever arising shall not operate to affect such of the provisions
hereof as are expressed or intended to remain in full force and effect
notwithstanding such termination.


 


13.                 Miscellaneous.


 


                                (a)                                  Waiver; Amendment.  The failure of a party to enforce any term,
provision or condition of this Agreement at any time or times shall not be
deemed a waiver of that term, provision or condition for the future, nor shall
any specific waiver of a term, provision or condition at one time be deemed a
waiver of such term, provision or condition for any future time or times.  This Agreement may be amended or modified
only by a writing signed by both parties hereto.


 


12





















 


                                (b)                                 Governing Law; Jurisdiction.  This Agreement shall be governed by and
construed in accordance with the laws of the State of Connecticut, and the
parties irrevocably submit to the non-exclusive jurisdiction of the federal and
state courts of the State of Connecticut.


 


                                (c)                                  Section Captions.  Section and other captions contained in
this Agreement are for reference purposes only and are in no way intended to
describe, interpret, define or limit the scope, extent or intent of this
Agreement or any provision hereof.


 


                                (d)                                 Severability.  Each provision of this Agreement is intended
to be severable.  If any term or
provision hereof is illegal or invalid for any reason whatsoever, such
illegality or invalidity shall not affect the validity of the remainder of this
Agreement.


 


                                (e)                                  Integration.  No agreements, plans or representations, oral
or otherwise, express or implied, unless specifically referred to herein (which
reference includes the plans and agreements described in the preceding sentence
of this Section 14(e)), with respect to the subject matter hereof have
been made by either party which are not set forth expressly in this Agreement.


 


                                (f)                                    Interpretation.


 


                                                (i)                                     No provision of this Agreement is to be interpreted for or
against any party because that party drafted such provision.

                                                (ii)                                  For purposes of this Agreement, “herein, “hereby,” “hereof”,
“hereinafter,” “herewith,” “hereafter” and “hereinafter” refer to this
Agreement in its entirety, and not to any particular paragraph.




13





















 


                                                (iii)                               References to statutory provisions shall be construed as
references to those provisions as amended or re-enacted or as their application
is modified by other provisions from time to time and shall include references
to any provisions of which they are re-enactments (whether with or without
modification).




                                                (iv)                              References to the singular shall include the plural and vice
versa and references to the masculine shall include the feminine and/or neuter
and vice versa.




                                                (v)                                 References to persons shall include companies, partnerships,
associations and bodies of persons, whether incorporated or unincorporated.


 


                                (g)                                 Counterparts.  This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, and all of which
shall constitute one and the same instrument.


 


                                (h)                                 Untrue Statements.  The Executive shall not knowingly at any time
make any untrue statement in relation to the Company or any Group Company and
in particular shall not after the termination of his employment hereunder
wrongfully represent himself as being employed by or connected with the Company
or any Group Company.


 


                                (i)                                     Notices.  All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand delivery, or by facsimile (with confirmation of
transmission), or by overnight courier, or by registered or certified mail,
return receipt requested, postage prepaid, in each case addressed as follows:


 


14





















 


                                If to the Executive:                                             Michael
S. Paquette


 44 South Main Street


 Hanover, New Hampshire 03755


 


                                If to the Company:                                             Montpelier Re Holdings


                                                                                                                                                                                 Montpelier
House


                                                                                                                                                                                 94
Pitts Bay Road


                                                                                                                                                                                 Pembroke,
Bermuda HM08


 


or
to such other address as either party shall have furnished to the other in
writing in accordance herewith.  Any such
notice given by post shall be deemed to have been served on the second weekday
after dispatch (public holidays excepted) and any notice so given by hand shall
be deemed to have been served when delivered if delivered during normal
business hours or, if delivered outside such hours, at the next time after
delivery when normal business hours commence.


 


                                (j)                                     No Limitations.  The Executive represents his employment by
the Company hereunder does not conflict with or breach any confidentiality,
non-competition or other agreement to which he is a party or to which he may be
subject.


 


                                (k)                                  Section 409A.  Notwithstanding any other provision of this
Agreement, if at the time of termination of the Executive’s employment he is a “specified
employee” (as defined in Section 409A of the U.S. Internal Revenue Code
and any regulations or Treasury guidance promulgated thereunder (“Section 409A”)) and any payments upon
such termination under Section 8 above will result in additional tax or
interest to the Executive, he will not be entitled to such payments until the
earlier of (i) the date that is six (6) months after such termination
of employment or (ii) any earlier date that does not result in any
additional tax or interest to the Executive under Section 409A.  In addition, if any provision of this
Agreement would subject the Executive to any additional tax or interest under Section 409A,
then the Company shall reform 


 


15





















 


such provision; provided
that the Company shall (A) maintain, to the maximum extent practicable,
the original intent of the applicable provision without subjecting the
Executive to such additional tax or interest and (B) not incur any
additional compensation expense as a result of such reformation.


 


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


 


 


	
  MONTPELIER RE HOLDINGS, LTD.

  	
   

  	
  EXECUTIVE

  



 


 


	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   /s/ CHRISTOPHER L. HARRIS

  	
  By:

  	
   /s/ MICHAEL S. PAQUETTE

  	 

	
   

  	
  Christopher L. Harris,
  President

  	
   

  	
  Michael S. Paquette

  



 


16