Document:

EXHIBIT 10.5

 

Exhibit 10.5

Montpelier Long-Term Incentive Plan

	1.	 	PURPOSE

The purpose of the Montpelier Long-Term Incentive Plan (the
“Plan”) is to advance the interests of Montpelier Re Holdings,
Ltd. (the “Company”) and its Members by providing to certain of
the key employees, non-employee directors and consultants of the
Company and its subsidiaries long-term incentive awards relating
to the common shares of the Company having a par value of 1/6
cents per share (“Shares”). The Plan shall become effective as of
January 1, 2005 (the “Effective Date”).

	2.	 	ADMINISTRATION

The Plan shall be administered by the Compensation and Nominating
Committee (the “Committee”), or such other Committee having
responsibility for executive compensation by whatever name, of the
Board of Directors (the “Board”) of the Company. No member of
the Committee shall be an employee of the Company or a subsidiary
of the Company or shall have been eligible within one year prior
to his or her appointment to receive awards under the Plan
(“Awards”). Each member shall meet the appropriate independence
requirements of the SEC, NYSE or other share exchange as
appropriate, BSX, and the BMA, and any other body with enforceable
jurisdiction.

The Committee shall have exclusive authority to select the
individuals to be granted Awards, to determine the type, size and
terms of the Awards and to prescribe the form of the instruments
embodying Awards. The Committee shall be authorized to interpret
the Plan and the Awards granted under the Plan, to establish,
amend and rescind any rules and regulations relating to the Plan
and to make any other determinations which it believes necessary
or advisable for the administration of the Plan. The Committee
may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any Award in the manner and to the
extent the Committee deems desirable to carry it into effect. Any
decision of the Committee in the administration of the Plan, as
described herein, shall be final and conclusive. The Committee
may act only by a majority of its members in office, except that
the members thereof may authorize any one or more of their number
or any officer of the Company to execute and deliver documents on
behalf of the Committee. No member of the Committee shall be
liable for anything done or omitted to be done by him or her or by
any other member of the Committee in connection with the Plan,
except for his or her own willful misconduct or as expressly
provided by statute.

 

 

	3.	 	ELIGIBILITY AND PARTICIPATION
	 
	(a)	 	Eligibility. Only those key employees, non-employee
directors, and consultants of the Company or a subsidiary
thereof who are selected by the Committee (“Participants”)
shall be eligible to receive Awards.
	 
	(b)	 	Participating Subsidiaries. If a subsidiary of the
Company wishes to participate in the Plan, and its
participation shall have been approved by the Board, the
Board of Directors of the subsidiary shall adopt a resolution
in form and substance satisfactory to the Committee
authorizing participation by the subsidiary in the Plan.
	 
	 	 	A subsidiary may cease to participate in the Plan at any
time by action of the Board or by action of the Board of
Directors of such subsidiary, which latter action shall be
effective not earlier than the date of delivery to the
Secretary of the Company of a certified copy of a
resolution of the subsidiary’s Board of Directors taking
such action. Termination of participation in the Plan
shall not relieve a subsidiary of any obligations
theretofore incurred by it under the Plan.
	 
	4.	 	AWARDS
	 
	(a)	 	Type of Awards. Awards under the Plan may consist of
the following: (i) “Share Appreciation Rights,” (ii)
“Restricted Share Units” and/or (iii) “Performance Shares.”
A Share Appreciation Right (“SAR”) entitles the Participant
to receive upon exercise of the Award a payment equal to the
product of (x) the difference between the fair market value
of a Share on the date of grant and the fair market value of
a Share on the date of exercise times (y) the number of
Shares with respect to which the SAR is exercised.
Restricted Share Units (“RSUs”) and Performance Shares
entitle the Participant to receive upon vesting of the Award
a payment equal to the fair market value of a Share on the
valuation date determined by the Committee in its sole
discretion following the vesting date of such Award (the
“Valuation Date”), times the number of RSUs or Performance
Shares that vested. At the discretion of the Committee, the
payment of SARs upon exercise or of RSUs and Performance
Shares upon vesting may be in cash, in Shares of equivalent
value or in some combination thereof.
	 
	(b)	 	Maximum Number of Shares Subject to Awards. Subject
to adjustment as provided in paragraph 11 herein, the maximum
number of Shares that may be issued under the Plan shall be
4,000,000. The maximum number of Shares with respect to
which

 

 

	 	 	Awards granted under the Plan in any calendar year shall
relate shall be 800,000 (the “Annual Limit”). If, pursuant
to the terms of an Award, the number of Shares with respect
to which the Award relates may be increased upon the
attainment of certain performance objectives or upon the
occurrence of such other event(s) as may be specified by
the Committee in an Award Agreement, the maximum number of
Shares with respect to which such Award potentially may
relate shall count against the Annual Limit.
	 
	(c)	 	Rights With Respect to Shares. The Committee may, but
shall in no event be required to, provide dividend equivalent
rights with respect to Awards, subject to such limitations
and conditions as the Committee may establish. Otherwise, a
Participant to whom Awards 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 to which such Awards relate unless and until a Share
certificate is issued to the Participant upon exercise or
vesting of an Award.
	 
	(d)	 	Minimum Vesting Standards. Subject to Section 10, (i)
the vesting period for RSUs with no performance-based vesting
characteristics must be at least three years (vesting may
occur ratably on each month, quarter, or annual anniversary
of the grant date over such vesting period); (ii) the vesting
period for RSUs and Performance Shares with performance-based
vesting characteristics must be at least one year; and (iii)
the Board or the Committee shall not have discretion to
accelerate vesting of RSUs or Performance Shares except in
the event of a Change in Control or the death, disability,
termination of employment or retirement of a Participant. The
foregoing minimum vesting standards shall not apply to SARs.
In addition, the Committee may grant a “de minimis” number of
RSUs and Performance Shares that do not comply with the
foregoing minimum vesting standards. For this purpose “de
minimis” means that the aggregate number of Shares delivered
in respect of such RSUs and Performance Shares will not
exceed ten percent (10%) of the total number of Shares
authorized under the Plan.
	 
	5.	 	SHARE APPRECIATION RIGHTS
	 
	(a)	 	Subject to the terms and provisions of the Plan, SARs
may be granted to Participants in such number, and upon such
terms, and at any time and from time to time as shall be
determined by the Committee.

 

 

	(b)	 	Each SAR grant shall be evidenced by an Award
agreement or notice (the “Award Agreement”) that shall
specify the number of Shares to which the SAR relates, the
term of the SAR, the vesting conditions, and such other
provisions as the Committee shall determine.
	 
	(c)	 	SARs shall be exercisable only if and to the extent
they have vested. The vesting of a SAR may be conditioned
upon continued employment or service, as the case may be, of
a Participant, satisfaction of performance goals, or such
other conditions as the Committee may, in its sole
discretion, determine.
	 
	(d)	 	Upon exercise of a SAR, a Participant shall be
entitled to receive a payment from the Company in an amount
determined by multiplying (i) the excess of the fair market
value of a Share on the date of exercise over the fair market
value of a Share on the date the SAR was granted (the “Grant
Price”), times (ii) the number of Shares with respect to
which the SAR is exercised. The fair market value of a Share
for this purpose shall be the 5-day average of the daily
closing prices of the Shares on the New York Stock Exchange
or such other principal securities exchange on which the
Shares are traded, as reported in The Wall Street Journal,
for the 5 consecutive trading days previous to and including
as the last day the relevant date or, if there is no such
trading on the relevant date, then on the last previous day
on which the Shares were traded. At the discretion of the
Committee, the payment upon exercise of a SAR may be in cash,
in Shares of equivalent value or in some combination thereof.
	 
	(e)	 	Each SAR Award Agreement shall set forth the extent to
which the Participant shall have the right to exercise the
SAR following termination of the Participant’s employment or,
if the Participant is a non-employee director or consultant,
service with the Company or any of its subsidiaries. Such
provisions shall be determined in the sole discretion of the
Committee, shall be included in the Award Agreement entered
into with Participants, need not be uniform among all SARs
awarded under the Plan, and may reflect distinctions based on
the reasons for termination of employment or service, as the
case may be.
	 
	(f)	 	Except as otherwise provided in a Participant’s Award
Agreement, SARs shall not be transferable by Participants
otherwise than by will or the laws of descent and
distribution, and shall be exercisable during a Participant’s
lifetime only by such Participant.

 

 

	6.	 	RESTRICTED SHARE UNITS
	 
	(a)	 	Subject to the terms and provisions of the Plan, RSUs
may be granted to Participants in such number, and upon such
terms, and at any time and from time to time as shall be
determined by the Committee.
	 
	(b)	 	Each grant of RSUs shall be evidenced by an Award
Agreement that shall specify the number of Shares to which
the Award relates, the period of restriction, the vesting
conditions, and such other provisions as the Committee shall
determine.
	 
	(c)	 	Subject to the terms and provisions of the Plan, the
Committee shall impose such vesting conditions on any RSUs as
it may deem advisable and as are set forth in the Award
Agreement including, without limitation, vesting conditions
based upon continued employment with or service as a
non-employee director or consultant of the Company or a
subsidiary.
	 
	(d)	 	Subject to the terms of the Plan and the Participant’s
Award Agreement, upon successful completion of any applicable
vesting conditions, the holder of RSUs shall be entitled to
receive a payment equal to the fair market value of a Share
on the Valuation Date (as defined in Section 4(a)) times the
number of RSUs that vested. The fair market value of a Share
for this purpose shall be the 5-day average of the daily
closing prices of the Shares on the New York Stock Exchange
or such other principal securities exchange on which the
Shares are traded, as reported in The Wall Street Journal,
for the 5 consecutive trading days previous to and including
as the last day the Valuation Date or, if there is no such
trading on the Valuation Date, then on the last previous day
on which the Shares were traded. At the discretion of the
Committee, the payment upon vesting of RSUs may be in cash,
in Shares of equivalent value or in some combination thereof.
	 
	(e)	 	Each Award Agreement shall set forth the extent to
which the Participant shall or shall not have the right to
receive a payment with respect to his or her RSUs following
termination of the Participant’s employment or, if the
Participant is a non-employee director or consultant, service
with the Company or any one of its subsidiaries. Such
provisions shall be determined in the sole discretion of the
Committee, shall be included in the Award Agreement entered
into with each Participant, need not be uniform among all
RSUs granted under the Plan, and may reflect distinctions
based on the reasons for termination of employment or
service, as the case may be.

 

 

	(f)	 	Except as otherwise provided in a Participant’s Award
Agreement, RSUs may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than
by will or by the laws of descent and distribution.
	 
	7.	 	PERFORMANCE SHARES
	 
	(a)	 	Subject to the terms and provisions of the Plan,
Performance Shares may be granted to Participants in such
number, and upon such terms, and at any time and from time to
time as shall be determined by the Committee.
	 
	(b)	 	Each grant of Performance Shares shall be evidenced by
an Award Agreement that shall specify the number of Shares to
which the Award relates, the applicable performance
objectives upon which vesting is conditioned, and such other
provisions as the Committee shall determine.
	 
	(c)	 	Subject to the terms and provisions of the Plan, the
Committee shall impose such vesting conditions on any
Performance Shares as it may deem advisable and as are set
forth in the Award Agreement including, without limitation,
vesting conditions based upon achievement of performance
goals (Company-wide, business unit, individual or other) and
continued employment with or service as a non-employee
director or consultant of the Company or a subsidiary.
	 
	(d)	 	The award period (the “Award Period”) in respect of
any Award of Performance Shares shall be such period as the
Committee shall determine. Unless otherwise determined by
the Committee, all Award Periods shall commence as of the
beginning of the fiscal year of the Company in which such
Award is made. An Award Period may contain a number of
performance periods, each of which shall commence on or after
the first day of the Award Period and shall end no later than
the last day of the Award Period. At the time each Award is
made, the Committee shall establish performance objectives to
be attained within the performance periods as the means of
determining the number or percentage of Performance Shares
earned. The performance objectives shall be selected by the
Committee in its sole discretion and specified in the
Participant’s Award Agreement. The performance objectives
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
and 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.

 

 

	 	 	Performance objectives may also be calculated without
regard to extraordinary items.
	 
	(e)	 	Subject to the terms of the Plan and the Participant’s
Award Agreement, upon successful completion of any applicable
vesting conditions, the holder of Performance Shares shall be
entitled to receive a payment equal to the fair market value
of a Share on the Valuation Date (as defined in Section 4(a))
times the number of Performance Shares that vested. The fair
market value of a Share for this purpose shall be the 5-day
average of the daily closing prices of the Shares on the New
York Stock Exchange or such other principal securities
exchange on which the Shares are traded, as reported in The
Wall Street Journal, for the 5 consecutive trading days
previous to and including as the last day the Valuation Date
or, if there is no such trading on the Valuation Date, then
on the last previous day on which the Shares were traded. At
the discretion of the Committee, the payment upon vesting of
Performance Shares may be in cash, in Shares of equivalent
value or in some combination thereof.
	 
	(f)	 	Each Award Agreement shall set forth the extent to
which the Participant shall have the right to receive payment
of Performance Shares following termination of the
Participant’s employment or, if the Participant is a
non-employee director or consultant, service with the Company
or any one of its subsidiaries. Such provisions shall be
determined in the sole discretion of the Committee, shall be
included in the Award Agreement entered into with
Participants, need not be uniform among all Performance
Shares awarded under the Plan, and may reflect distinctions
based on the reasons for termination of employment or
service, as the case may be.
	 
	(g)	 	Except as otherwise provided in a Participant’s Award
Agreement, Performance Shares may not be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated,
other than by will or by the laws of descent and
distribution.
	 
	8.	 	TERMINATION WITHOUT CAUSE

For purposes of this Plan, “Termination Without Cause” shall mean
a termination of the Participant’s employment with the Company and
any subsidiary of the Company other than for death, disability or
for Cause. “Cause” shall mean (a) willful gross negligence or
willful gross misconduct by the Participant in connection with his
or her employment with the Company or one of its subsidiaries
which causes, or is likely to cause, material loss or damage to
the Company or (b) conviction of an offense (other than a road
traffic offense or other non-material offense not

 

 

subject to a custodial sentence). Notwithstanding anything herein
to the contrary, if the Participant’s employment with the Company
or one of its subsidiaries shall terminate due to a Change in
Control, as described in subparagraph 10(b)(iii), where the
Participant is employed by the purchaser, as described in such
subparagraph, and such purchaser formally assumes the Company’s
obligations under this Plan or places the Participant in a similar
or like plan with no diminution of the value of the awards
outstanding at the time of the Change in Control, such termination
shall not be deemed to be a “Termination Without Cause.”

A Participant shall be deemed to be disabled if the Participant is
unable to perform in all material respects his or her duties and
responsibilities to the Company, or any subsidiary of the Company,
by reason of a physical or mental disability or infirmity which
inability is reasonably expected to be permanent and has continued
(a) for a period of six consecutive months or (b) such shorter
period as the Committee may determine in good faith. The
disability determination shall be in the sole discretion of the
Committee and a Participant (or his or her representative) shall
furnish the Committee with medical evidence documenting the
Participant’s disability or infirmity, which is reasonably
satisfactory to the Committee.

	9.	 	CONSTRUCTIVE TERMINATION

“Constructive Termination” shall mean a termination of a
Participant’s employment with the Company or a subsidiary at the
initiative of the Participant that the Participant declares by
prior written notice delivered to the Secretary of the Company to
be a Constructive Termination by the Company or subsidiary and
which follows (a) a material decrease in his or her salary or
bonus opportunity or (b) a material diminution in the authority,
duties or responsibilities of his or her position with the result
that the Participant makes a determination in good faith that he
or she cannot continue to carry out his or her job in
substantially the same manner as it was intended to be carried out
immediately before such diminution. Notwithstanding anything
herein to the contrary, Constructive Termination shall not occur
within the meaning of this paragraph 9 unless, within 120 days of
the event constituting Constructive Termination, the Participant
has given to the Company or subsidiary, as the case may be, a
notice of intent to terminate employment due to a Constructive
Termination and the Company or subsidiary, as the case may be, has
been given an opportunity (and has failed) over a 30 day period to
cure the circumstances constituting Constructive Termination.

	10.	 	CHANGE IN CONTROL
	 
	(a)	 	If within 24 months following the occurrence of a
Change in Control (as defined in subparagraph (b)) there is a
Termination Without Cause (as defined in paragraph 8) or a
Constructive

 

 

	 	 	Termination (as defined in paragraph 9) of the employment
of a participant, then, except as otherwise specifically
provided in a Participant’s Award Agreement, and unless
otherwise specifically prohibited under applicable laws, or
by the rules and regulations of any governing governmental
agencies or securities exchanges:

	(i)	 	any and all SARs granted hereunder shall
become immediately exercisable;
	 
	(ii)	 	any period(s) of restriction imposed on
RSUs shall lapse; and
	 
	(iii)	 	the target performance goals or payout
opportunities attainable under all outstanding Awards
of Performance Shares shall be deemed to have been
fully attained for all then open performance periods.

	(b)	 	For purposes of this Plan, a “Change in Control”
within the meaning of subparagraph 10(a) shall occur if:

	(i)	 	any “person” or “group” (within the
meaning of Sections 12(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the
“Exchange Act”)), other than the Company or one of its
subsidiaries, becomes the “beneficial owner” (within
the meaning of Rule 13d-3 under the Exchange Act) of
thirty-five percent (35%) or more of the Company’s
then outstanding Shares; provided, however, that if
all or substantially all of the individuals and
entities who were the “beneficial owners” of the
Company’s outstanding Shares immediately prior to such
acquisition beneficially own, directly or indirectly,
more than fifty percent (50%) of the outstanding
Shares of the “person” or “group” that acquired the
Company’s Shares (the “Successor Entity”) in
substantially the same proportions as their ownership
immediately prior to such Successor Entity’s
acquisition of the Company’s then outstanding Shares,
such acquisition shall not constitute a Change in
Control; provided, further, that for purposes of this
subparagraph 10(b)(i), the following acquisitions (or
changes in beneficial ownership resulting from the
following acquisitions) shall not constitute a Change
in Control: (A) any acquisition by the Company or (B)
any acquisition by an employee benefit plan (or
related trust) sponsored or maintained by the Company
or any entity controlled by the Company;

 

 

	(ii)	 	the Continuing Directors, as defined in
subparagraph 10(c), cease for any reason to constitute
a majority of the Board; or
	 
	(iii)	 	the business of the Company for which
the Participant’s services are principally performed
is disposed of by the Company pursuant to a sale or
other disposition of all or substantially all of the
business or business related assets of the Company
(including the sale or disposition of shares of a
subsidiary of the Company);

	 	 	provided, however, that the Board shall have the discretion
to determine in good faith prior to the occurrence of an
event described in subparagraph (b)(i), (b)(ii) or (b)(iii)
that such an event shall not result in a Change in Control.
The Board’s decision in this regard shall be final and
binding on all parties, including, without limitation, the
Company, the Participants and their beneficiaries.
	 
	(c)	 	For the purposes of this Plan, “Continuing Director”
shall mean a member of the Board (i) who is not an employee
of the Company or its subsidiaries or a holder of, or an
employee or an affiliate of an entity or group that holds,
thirty-five percent (35%) or more of the Company’s Shares and
(ii) who either was a member of the Board on January 1, 2002,
or who subsequently became a director of the Company and
whose election, or nomination for election, by the Company’s
shareholders was approved by a vote of a majority of the
Continuing Directors then on the Board (which term, for
purposes of this definition, shall mean the whole Board and
not any committee thereof). Any action, approval of which
shall require the approval of a majority of the Continuing
Directors, may be authorized by one Continuing Director, if
he or she is the only Continuing Director on the Board, but
no such action may be taken if there are not Continuing
Directors on the Board.
	 
	11.	 	DILUTION AND OTHER ADJUSTMENTS

In the event of any change in the outstanding Shares of the
Company by reason of any Share split, Share dividend,
recapitalization, merger, consolidation, reorganization,
combination or exchange of Shares or other similar event, and if
the Committee shall determine, in its sole discretion, that such
change equitably requires an adjustment to the maximum number of
Awards or Shares that may be granted hereunder, the number of
Shares to which outstanding Awards of SARs, RSUs, and Performance
Shares relate, the Grant Price per Share under any outstanding
SAR, or any performance goal, then such adjustment shall be made
by the

 

 

Committee and shall be conclusive and binding for all purposes of
the Plan.

	12.	 	DEFERRAL OF AWARDS

	Subject to the terms and conditions of the Montpelier Re Holdings
Ltd. Voluntary Deferred Compensation Plan (including, without
limitation, eligibility restrictions and the timely filing of
deferral elections) and such other restrictions and conditions as
the Committee may prescribe, a Participant may elect to defer
receipt of payment that otherwise would be made under an Award.

	13.	 	DISPUTE RESOLUTION
	 
	(a)	 	If a dispute arises out of or relates to this Plan or
a Participant’s Award Agreement or the breach thereof, and if
the dispute cannot be settled through negotiation, the
parties agree first to try in good faith to settle the
dispute by mediation administered by the American Arbitration
Association under its National Rules for the Resolution of
Employment Disputes, before resorting to binding arbitration
as provided for in subparagraph 13(b).
	 
	(b)	 	If a dispute arising out of or relating to this Plan
or a Participant’s Award Agreement cannot be settled amicably
by the parties through negotiation or mediation, such dispute
shall be finally, exclusively and conclusively settled by
mandatory arbitration conducted expeditiously in accordance
with the American Arbitration Association rules, by a single
independent arbitrator. If the parties are unable to agree
on the selection of an arbitrator, then either the
Participant or the Company may petition the American
Arbitration Association for the appointment of the
arbitrator, which appointment shall be made within ten (10)
days of the petition therefor. Either party to the dispute
may institute such arbitration proceeding by giving written
notice to the other party. A hearing shall be held by the
arbitrator in New York or Bermuda, as agreed by the parties
(or, failing such agreement, in Bermuda), within thirty (30)
days of his or her appointment. The decision of the
arbitrator shall be final and binding upon the parties and
shall be rendered pursuant to a written decision that
contains a detailed recital of the arbitrator’s reasoning.
Judgment upon the award rendered may be entered in any court
having jurisdiction thereof.
	 
	14.	 	DESIGNATION OF BENEFICIARY BY PARTICIPANT

A Participant may name a beneficiary to receive any payment to
which he or she may be entitled in respect of Awards under the
Plan in the event of his or her death on a form to be provided by
the Committee. A Participant

 

 

may change his or her beneficiary designation from time to time in
the same manner. If no designated beneficiary is living on the
date on which any amount becomes payable to a Participant’s
executors or administrators, the term “beneficiary” as used in the
Plan shall include such person or persons.

	15.	 	APPLICATION OF SECURITIES LAWS

If applicable, the issuance or delivery of Shares pursuant to the
Plan shall be subject to, and shall comply with, any applicable
requirements of federal and state securities laws, rules and
regulations (including, without limitation, the provisions of the
Securities Act of 1933, the Act, and the rules and regulations
promulgated thereunder), any securities exchange upon which the
Shares may be listed and any other law or regulation applicable
thereto. The Company shall not be obligated to issue or deliver
any Shares pursuant to the Plan if such issuance or delivery
would, in the opinion of the Committee, violate any such
requirements. The foregoing shall not, however, be deemed to
require the Company to effect any registration of Shares under any
such law or regulation, although the Company may elect to do so.

	16.	 	BERMUDA GOVERNMENT REGULATIONS

The Company shall not issue any Shares hereunder unless and until
all licenses, permissions and authorizations required to be
granted by the Government of Bermuda, or by any authority or
agency thereof, shall have been duly received.

	17.	 	MISCELLANEOUS PROVISIONS
	 
	(a)	 	No employee or other person shall have any claim or
right to be granted an Award under the Plan. Neither the
Plan nor any action taken hereunder shall be construed as
giving any individual any right to be retained in the service
or employ of the Company or any subsidiary. In the event of
a Participant’s termination of employment or service with the
Company or a subsidiary, the Participant shall not be
entitled by way of compensation for breach of his or her
employment agreement to any remuneration for his or her loss
of rights under the Plan.
	 
	(b)	 	Except as otherwise specifically provided in a
Participant’s Award Agreement, a Participant’s rights and
interest under the Plan may not be assigned or transferred in
whole or in part either directly or by operation of law or
otherwise (except in the event of a Participant’s death),
including but not limited to, execution, levy, garnishment,
attachment, pledge, bankruptcy or in any other

 

 

	 	 	manner and no such right or interest of any Participant in
the Plan shall be subject to any obligation or liability or
such Participant.
	 
	(c)	 	The Company and its subsidiaries shall have the right
to deduct from any payment made under the Plan any federal,
state or local income or other taxes required by law to be
withheld with respect to such payment. It shall be a
condition to the obligation of the Company to make a payment
upon exercise of a SAR, vesting of RSUs or Performance
Shares, or other event in connection with which a tax
withholding obligation arises, that the Participant (or any
beneficiary or person entitled to payment hereunder) pay to
the Company (either in cash or, if the Committee shall
permit, in Shares having a fair market value at such time
equal to the minimum amount required to be withheld), upon
its demand, such amount as may be required by the Company for
the purpose of satisfying any liability to withhold federal,
state or local income or other taxes. If the amount
requested is not paid, the Company may refuse to make a
payment to such Participant.
	 
	(d)	 	The expenses of the Plan shall be borne by the
Company. However, if an Award is made to an employee,
non-employee director or consultant in the service of a
subsidiary and if such Award results in payment of cash to
the Participant, such subsidiary shall pay to the Company an
amount equal to such cash payment.
	 
	(e)	 	The Plan, and all obligations of the Company under the
Plan with respect to Awards granted hereunder, shall be
binding on any successor to the Company, whether the
existence of such successor is the result of a direct or
indirect purchase, merger, consolidation, or otherwise, of
all or substantially all of the business and/or assets of the
Company and the Company shall not approve or enter into any
such transaction unless, as a term thereof, the successor to
the Company agrees to be so bound.
	 
	(f)	 	The Plan shall be unfunded. The Company shall not be
required to establish any special or separate fund or to make
any other segregation of assets to assure the payment of any
Award under the Plan.
	 
	(g)	 	By accepting any Award or other benefit under the
Plan, each Participant and each person claiming under or
through him or her shall be conclusively deemed to have
indicated his or her acceptance and ratification of, and
consent to, any action taken under the Plan by the Company,
the Board or the Committee.

 

 

	(h)	 	The provisions of the Plan shall be severable and the
invalidity or unenforceability, in while or in part, of any
provision shall not affect the validity or enforceability of
the other provisions hereof.
	 
	18.	 	AMENDMENT
	 

	 	The Plan may be amended at any time and from time to time by the
Board; provided, however, that no amendment that (a) materially
increases the benefits accruing to Participants under the Plan,
(b) materially increases the number of Shares that may be issued
under the Plan, or (c) materially modifies the requirements for
participation in the Plan shall be effective unless such amendment
is approved by the Company’s shareholders. In addition, no
amendment that is required to be approved by the Company’s
shareholders by law, rule or regulation, including stock exchange
listing rules, shall be effective unless such amendment is
approved by the Company’s shareholders. No amendment of the Plan
shall adversely affect any right of any Participant with respect
to any Award previously granted without such Participant’s written
consent
	 

	19.	 	TERMINATION
	 

	 	This Plan shall terminate upon the earlier of the following dates
or events to occur:
	 

	(a)	 	the adoption of a resolution of the Board terminating
the Plan; or
	 
	(b)	 	five years after the Effective Date hereof.
	 

	 	No termination of the Plan shall alter or impair any of the rights
or obligations of any person, without his or her consent, under
any Award previously granted under the Plan.
	 

	20.	 	GOVERNING LAW

The Plan shall be governed by and construed in accordance with the laws of
Bermuda, without regard to conflicts of laws principles.EXHIBIT 10.6

 

Exhibit 10.6

Montpelier Re Holdings Ltd.

Performance Unit Plan

	1.	 	PURPOSE
	 
	 	 	The purpose of the Montpelier Re Holdings Ltd. Performance Unit Plan (the
“Plan”) is to advance the interests of Montpelier Re Holdings Ltd. (the
“Company”) and its Members by providing long-term incentives to certain key
employees of the Company and of its Subsidiaries.
	 
	2.	 	ADMINISTRATION
	 
	 	 	The Plan shall be administered by a committee (the “Committee”) comprised of
the members of the Compensation Committee of the Board of Directors of the
Company (the “Board”). The Committee shall have exclusive authority to
select the employees to be granted performance unit awards under the Plan
(“Awards”), to determine the size and terms of the Awards, to determine the
performance targets, and to prescribe the form of the instruments embodying
Awards. The Committee shall be authorized to interpret the Plan and any
instruments related to Awards, to establish, amend and rescind any rules and
regulations relating to the Plan or to Awards and to make any other
determinations that it believes are necessary or advisable for the
administration of the Plan. The Committee may correct any defect or supply
any omission or reconcile any inconsistency in the Plan or in any
instruments related to Awards in the manner and to the extent the Committee
deems desirable to carry it into effect. Any decision of the Committee in
the administration of the Plan, as described herein, shall be final and
conclusive. The Committee may act only by a majority of its members in
office, except that the members thereof may authorize any one or more of
their number or any officer of the Company to execute and deliver documents
and to take other actions on behalf of the Committee. No member of the
Committee shall be liable for anything done or omitted to be done by him or
by any other member of the Committee in connection with the Plan, except for
his own willful misconduct or as expressly provided by statute.
	 
	3.	 	PARTICIPATION

	a)	 	Participation of Employees. Only those key employees of the Company or
a Subsidiary thereof who are selected by the Committee shall be
eligible to receive Awards. No employee or other person shall have any
claim or right to be granted an Award under the Plan and the granting
of an Award to an employee shall not entitle that employee to any
future grants of Awards.
	 
	(b)	 	Participation of Subsidiaries. If a Subsidiary of the Company wishes to
participate in the Plan and its participation shall have been approved by the
Board, the Board of Directors of the Subsidiary shall adopt a resolution in form
and substance satisfactory to the Committee authorizing participation by the
Subsidiary in the Plan. A Subsidiary may cease to participate in the Plan at any
time by action of the Board or by action of the Board of Directors of such
Subsidiary, which latter action shall be effective not earlier than the date of
delivery to the Secretary of the Company of a certified copy of a resolution of
the Subsidiary’s Board of Directors taking such action. Termination of
participation in the Plan shall not relieve a Subsidiary of any obligations
theretofore incurred by it under the Plan.

1

 

	4.	 	AWARDS
	 
	(a)	 	Type of Awards. Awards shall be limited to Performance Units.
	 
	(b)	 	Rights With Respect to Performance Units Paid with Shares. An employee to whom
Performance Units are granted (and any person succeeding to such employee’s rights pursuant to the Plan) shall have no rights as a holder with respect to any Share issuable pursuant thereto until the date of the entry of the holder’s name and address in the Company’s Register of Members. Except as provided in paragraph 8, 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 Share certificate is issued.

	5.	 	PERFORMANCE UNITS
	 
	 	 	The Award of Performance Units to a participant will entitle him to receive,
without payment to the Company, all or part of a specified amount (the
“Actual Value”) determined by the Committee, if the terms and conditions
specified herein and in the Award are satisfied. Payment in respect of an
Award shall be made as provided in subparagraphs 5(e) or 5(f), as the case
may be. Each Award of Performance Units shall be subject to the following
terms and conditions:

	(a)	 	Number of Awards and Terms and Conditions. The Committee shall
determine the number of Performance Units to be granted to each
participant. Performance Units may be issued in different classes or
series having different terms and conditions.
	 
	(b)	 	Award Period. The award period (the “Award Period”) in respect of any
Award of Performance Units shall be such period as the Committee shall
determine commencing as of the beginning of the fiscal year of the
Company in which such Award is made. An Award Period may contain a
number of performance periods; each performance period shall commence
on or after the first day of the Award Period and shall end no later
than the last day of the Award Period.
	 
	(c)	 	Performance Objectives. At the time each Award is made, the Committee
shall establish individual and/or Company performance objectives to be
attained within the performance periods as the means of determining
Actual Value. The performance objectives shall be selected by the
Committee in its sole discretion. The performance objectives may relate
to the Company, one or more of its Subsidiaries or one or more of its
divisions, units, partnerships, joint venturers 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, the
performance objectives may be calculated without regard to
extraordinary items.
	 
	(d)	 	Termination of Employment. Except as otherwise determined by the
Committee, a participant’s Performance Units shall be cancelled if the
participant’s continuous employment with the Company and all of its
Subsidiaries shall terminate for any reason prior to the end of the
Award Period, except solely by reason of a period of Related
Employment, and except as otherwise specified in this subparagraph 5(d)
or in subparagraph 5(e). Notwithstanding the foregoing, if the
participant’s employment terminates because he has:

2

 

	(i)	 	died or become Disabled prior to the end of the Award Period,
the Performance Units shall be cancelled at the end of the next
ending performance period and he, or his legal representative, as
the case may be, shall receive payment in respect of such
Performance Units which he would have received had he been in
continuous employment with the Company through the end of that
period and had the individual performance objectives, if any, that
were imposed been achieved; provided, however, that no such
continuation shall be deemed to have occurred for purposes of
applying subparagraph 5(e) in the event of an Adverse Change in the
Plan in respect of the participant following a Change in Control; or
	 
	(ii)	 	retired under an approved retirement program of the Company
or a Subsidiary of the Company (or such other plan as may be
approved by the Committee, in its sole discretion, for this purpose)
prior to the end of the Award Period, and

	(A)	 	at the time of his retirement, the participant is 65 years old
or older, the Performance Units shall be cancelled at the end of the next
ending performance period, and he shall receive the Maximum Value in
respect to such Performance Units, at the date of cancellation,
	 
	(B)	 	at the time of his retirement the participant is less than 65
years old and his retirement occurs prior to the end of the first
performance period in the Award Period, and before 24 months have elapsed
since the first day of the Award Period, the participant shall receive
payment with respect to the Actual Value of one-ninth of the Performance
Units awarded to him under the Award, and
	 
	(C)	 	at the time of his retirement the participant is less than 65 years
old and his retirement occurs prior to the end of the first performance
period in the Award Period and after at least 24 months have elapsed since
the first day of the Award Period, the participant shall receive payment
with respect to the Actual Value of two-ninths of the Performance Units
awarded to him under the Award.

(e) Change in Control or Unfriendly Change in Control of the Company. If
there occurs,

	(i)	 	either a Change in Control of the Company or the disposition
by the Company of the business of the Company for which the
participant’s services are principally performed pursuant to a sale
or other disposition of all or substantially all of the business or
business-related assets of the Company or all or substantially all
of the assets or shares of a Subsidiary of the Company for which the
participant’s services are principally performed, and on the date of
such transaction or within 24 months thereafter (but in any event
prior to the end of the Award Period):

	(A)	 	there is a Termination Without Cause of the employment of a
participant;
	 
	(B)	 	there is a Constructive Termination of the employment of a
participant; or
	 
	(C)	 	there occurs an Adverse Change in the Plan in respect of a
participant, or

	(ii)	 	an Unfriendly Change in Control of the Company, then:

3

 

	(A)	 	the participant shall receive the Maximum Value of:

	(1)	 	that number of Performance Units which is in the same proportion to
the total number of Performance Units awarded to the participant under such
Award as

	(x)	 	the number of full months which have elapsed since the
first day of the Award Period to the end of the first month in
which occurs the Unfriendly Change in Control of the Company
or one of the events described in clauses (A), (B) or (C) of
subparagraph 5(e)(i) is to
	 
	(y)	 	the total number of months in the Award Period, less

	(2)	 	the number of Performance Units awarded to the participant
under the Award in respect of which payment has already been made
to the participant or his beneficiary, and
	 
	(B)	 	if the number of Performance Units determined pursuant to
subpart (1) of clause (A) above is less than the number of
Performance Units subject to the particular Award, the participant
shall receive the Actual Value of the remaining Performance Units.
The Actual Value of the remaining Performance Units shall be
determined as follows:

	(x)	 	if the Committee shall have determined, prior to the
Change in Control or Unfriendly change in Control of the
Company, as the case may be, of the Company and based on the
most recent performance status reports, that the performance
objectives for the particular Award were being met at the date
of the determination, the Actual Value of the remaining
Performance Units subject to the particular Award shall be
equal to their Maximum Value, and
	 
	(y)	 	if the determination of the Committee was that the
performance objectives for the particular Award were not being
met at the date of the determination, the Actual Value of the
remaining Performance Units subject to the particular Award
shall be such amount as shall have been determined by the
Committee as provided above in this subparagraph 5(e), but in
no event shall Actual Value be less than fifty percent (50%)
of Maximum Value for this purpose.

Payment of any amount in respect of Performance Units as described above
in this subparagraph 5(e) shall be made as promptly as possible after the
occurrence of one of the events described in clauses 5(e)(i)(A) through
5(e)(i)(C) or 5(e)(ii), as the case may be. Notwithstanding anything
herein to the contrary, if, following a Change in Control of the Company
(other than an Unfriendly Change in Control of the Company), a
participant’s employment remains continuous through the end of a
performance period, then the participant shall be paid with respect to
those Performance Units for which he would have been paid had there not
been a Change in Control of the Company and the Actual Value of those
Shares shall be determined in accordance with subparagraph 5(f).

4

 

     (f) Payment of Awards.

	(i)	 	Except as otherwise provided in subparagraph 5(e), as soon as
practicable after the end of the performance period or such earlier
date as the Committee in its sole discretion may designate, the
Committee shall determine whether the conditions of subparagraphs
5(c) and/or 5(d) have been met and, if so, shall certify such fact
to the Board and shall ascertain the Actual Value of the Performance
Units. The Committee shall cause an amount equal to the Actual Value
of the Performance Units earned by the participant to be paid to
him or his beneficiary.
	 
	(ii)	 	Payment of any amount in respect of the Performance Units
shall be made by the Company as promptly as practicable or, if the
participant elects, shall be deferred to such other time or times as
the Committee shall determine, and may be made in cash, in Shares,
or partly in cash and partly in Shares as determined by the
Committee. Such deferred payments may be made by undertaking to pay
cash in the future, together with such additional amounts as may
accrue thereon until the date or dates of payment, as determined by
the Committee in its discretion.

	6.	 	RESTRICTIONS ON DISTRIBUTIONS OF SHARES AND SHARE TRANSFERABILITY
	 
	 	 	Notwithstanding anything herein to the contrary, no Shares shall be issued
hereunder unless counsel for the Company is satisfied that such issuance
will be in compliance with applicable laws (including, without limitation,
United States federal and state securities laws, Bermuda law and any
applicable Bermuda Monetary Authority permissions required) and applicable
requirements of any securities exchange or similar entity, and unless the
participant’s tax obligations have been satisfied pursuant to subparagraph
10(c). The Committee may require each individual receiving Shares pursuant
to an Award to represent to and agree with the Company in writing that such
individual is acquiring the Shares without a view to distribution thereof.
The Committee may impose such restrictions on any Shares acquired pursuant
to Awards as it may deem advisable, including, without limitation,
restrictions to comply with Bermuda law, applicable securities laws, the
requirements of any stock exchange or market upon which such Shares are then
listed and/or traded and with any blue sky or state securities laws
applicable to such Shares.
	 
	7.	 	DEFINITIONS
	 
	 	 	For the purposes of the Plan and instruments entered into pursuant to the
Plan, unless otherwise defined herein or in any related agreements, the
following terms shall have the meanings set forth below:

	(a)	 	“Actual Value” means the potential value of an Award, as determined by
the Committee pursuant to paragraph 5.
	 
	(b)	 	“Adverse Change in the Plan” means

	(i)	 	termination of the Plan pursuant to paragraph 14;
	 
	(ii)	 	amendment of the Plan pursuant to paragraph 11 that
materially diminishes the value of Awards that may be granted under
the Plan, either to individual

5

 

	 	 	participants or in the aggregate, unless there is substituted
concurrently authority to grant longterm incentive awards of
comparable value to individual participants in the Plan or in the
aggregate, as the case may be; or
	 
	(iii)	 	in respect of any holder of an Award, a material diminution
in his rights held under such Award (except as may occur under the
terms of the Award as originally granted), unless there is
substituted concurrently a long-term incentive award with a value at
least comparable to the loss in value attributable to such
diminution in rights.

	(c)	 	“Award” means, individually or collectively, a grant of Performance
Units under the Plan.
	 
	(d)	 	“Award Period” means the period during which an Award is scheduled to be
outstanding, as described in subparagraph 5(b).
	 
	(e)	 	“Board” means the Board of Directors of the Company.
	 
	(f)	 	“Cause” means:

	(i)	 	an act or omission by the participant that constitutes a
felony or any crime involving moral turpitude; or
	 
	(ii)	 	gross negligence or willful gross misconduct by the
participant in connection with his employment by the Company or by a
Subsidiary of the Company.

	(g)	 	“Change in Control of the Company” means the occurrence of any of the
following:

	(i)	 	any person or group (within the meaning of Section 13(d) and
14(d)(2) of the Exchange Act), other than the Company or its
Subsidiaries, becomes the beneficial owner (within the meaning of
Rule 13d-3 under the Exchange Act) of thirty-five percent (35%) or
more of the Company’s then outstanding Shares; or
	 
	(ii)	 	the Continuing Directors cease for any reason to constitute a
majority of the Board of the Company.

	 	 	A Change in Control of the Company within the meaning of this subparagraph
7(g) also may constitute an Unfriendly Change in Control of the Company within
the meaning of subparagraph 7(s). Notwithstanding anything herein to the
contrary, a Change in Control shall not occur upon an underwritten public
offering of the Company’s Shares.

	(h)	 	“Committee” means the committee established pursuant to paragraph 2 that
administers the Plan and Awards granted under the Plan.
	 
	(i)	 	“Constructive Termination” means a termination of employment with the
Company or a Subsidiary of the Company at the initiative of the participant
that the participant declares by prior written notice delivered to the
Secretary of the Company to be a Constructive Termination by the Company or
a Subsidiary of the Company and which follows:

6

 

	(i)	 	a material decrease in his salary; or
	 
	(ii)	 	a material diminution in the authority, duties or
responsibilities of his position with the result that the
participant 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.
Notwithstanding anything herein to the contrary, Constructive
Termination shall not occur within the meaning of this subparagraph
7(i) until and unless 30 days have elapsed from the date the Company
receives such written notice without the Company curing or causing
to be cured the circumstance or circumstances described in this
subparagraph 7(i) on the basis of which the declaration of
Constructive Termination is given.

	(j)	 	“Continuing Director” means a member of the Board:

	(i)	 	who is not an employee of the Company or a Subsidiary of the
Company or of a holder of (or an employee or an affiliate of an
entity or group that holds) thirty-five percent (35%) or more of the
Company’s Shares, and
	 
	(ii)	 	who either was a member of the Board on January 1, 2002, or
who subsequently became a director of the Company and whose
election, or nomination for election, by the Company’s holders was
approved by a vote of a majority of the Continuing Directors then on
the Board (which term, for purposes of this definition, shall mean
the whole Board and not any committee thereof). Any action, approval
of which shall require the approval of a majority of the Continuing
Directors, may be authorized by one Continuing Director, if he is
the only Continuing Director on the Board, but no such action may be
taken if there are no Continuing Directors on the Board.

	(k)	 	“Disabled” means the physical or mental condition of a participant,
which the Committee determines would entitle him to payment of monthly
disability benefits under any longterm disability plan of the Company
or a Subsidiary of the Company in which he is a participant.
	 
	(l)	 	“Exchange Act” means the United States Securities Exchange Act of 1934,
as amended.
	 
	(m)	 	“Maximum Value” means, with respect to each Performance Unit, the book
value per Share as stated in the most recent audited accounts of the
Company on the date the Award is paid or becomes payable to
participants or, in the event that Shares are publicly traded on a
recognized stock exchange, the closing price of the Shares as at the
date prior to the day that the Award is paid.
	 
	(n)	 	“Performance Units” means a hypothetical unit used as a measure of a
participant’s potential benefit under the Plan, which has a value
determined pursuant to the terms of the Plan.
	 
	(o)	 	“Related Employment” means the employment of an individual by an
employer which is neither the Company nor a Subsidiary provided:

7

 

	(i)	 	such employment is undertaken and continued by the individual
at the request of the Company or a Subsidiary;
	 
	(ii)	 	immediately prior to undertaking such employment, the
individual was an employee of the Company or a Subsidiary, or was
engaged in Related Employment; and
	 
	(iii)	 	such employment is recognized by the Committee, in its sole
discretion, as Related Employment for the purposes of the Plan and
the participant’s Award(s). For purposes of the Plan and a
participant’s Award(s), a participant’s Related Employment shall be
treated as employment by the Company and termination of Related
Employment shall be treated as a termination of employment with the
Company.

	(p)	 	“Shares” means common shares of the Company, par value U.S. $0.01 per
Share.
	 
	(q)	 	“Subsidiary” means a “subsidiary corporation” as defined in Section 86
of the
Companies Act 1981, as amended.
	 
	(r)	 	“Termination Without Cause” means a termination of the participant’s
employment with the Company or a Subsidiary of the Company by the Company or
the Subsidiary other than:

	(i)	 	because of the participant’s death or Disability, or
	 
	(ii)	 	for Cause.

Notwithstanding anything herein to the contrary, unless otherwise determined
by the Committee, if the participant’s employment with the Company and its
Subsidiaries shall terminate due to the disposition of the business of the
Company for which the participant’s services are principally performed
pursuant to a sale or other disposition of all or substantially all of the
business or business-related assets of the Company or all or substantially
all of the assets or shares of a Subsidiary of the Company for which the
participant’s services are principally performed, such termination shall be
deemed to be a “Termination Without Cause” for purposes of subparagraph 5(e)
hereof.

	(s)	 	“Unfriendly Change in Control of the Company” means the occurrence of
the following:

	(i)	 	any person or group (within the meaning of Section 13(d) and
14(d)(2) of the Exchange Act), other than the Company, becomes the
beneficial owner within the meaning of Rule 13d-3 under the Exchange
Act) of thirty-five percent (35%) or more of the Company’s then
outstanding Shares through a transaction that is opposed by the
Company’s Chairman; and
	 
	(ii)	 	a majority of the Company’s Continuing Directors, by
resolution adopted within 30 days following the date the Company
becomes aware that subparagraph 7(s)(i) has been satisfied,
determines that a Change in Control has occurred.

8

 

	8.	 	ANTI-DILUTION AND OTHER ADJUSTMENTS
	 
	 	 	In the event of any change in the outstanding Shares of the Company by
reason of any share split, share dividend, recapitalization, merger,
consolidation, reorganization, combination or exchange of Shares or other
similar event, and if the Committee shall determine, in its sole discretion,
that such change equitably requires an adjustment of the Maximum Value or
Actual Value of Performance Units which have been awarded to any
participant, the Award Periods, or the performance objectives or performance
periods, then such adjustment shall be made by the Committee and shall be
conclusive and binding.
	 
	9.	 	DESIGNATION OF BENEFICIARY BY PARTICIPANT
	 
	 	 	A participant may name a beneficiary to receive any payment to which he may
be entitled in respect of Performance Units under the Plan in the event of
his death, on a form to be provided by the Committee. A participant may
change his beneficiary from time to time in the same manner. If no
designated beneficiary is living on the date on which any amount becomes
payable to a participant’s executors or administrators, the term
“beneficiary” as used in the Plan shall include such person or persons.

	10.	 	MISCELLANEOUS PROVISIONS
	 
	(a)	 	Limitation of Rights. Neither the Plan nor any action taken hereunder
shall be construed as giving an employee any right to be retained in
the employ of the Company or any Subsidiary of the Company.
	 
	(b)	 	Transferability. A participant’s rights and interest under the Plan may
not be assigned or transferred in whole or in part either directly or
by operation of law or otherwise (except in the event of a
participant’s death), including but not limited to, execution, levy,
garnishment, attachment, pledge, bankruptcy or in any other manner and
no such right or interest of any participant in the Plan shall be
subject to any obligation or liability of such participant.
	 
	(c)	 	Withholding. The Company and its Subsidiaries shall have the right to
deduct from any payment (whether in shares or cash) made under the Plan
any federal, state or local income or other taxes required by law to be
withheld with respect to such payment. It shall be a condition to the
obligation of the Company to issue Shares or cash upon payment of a
Performance Unit that the participant (or any beneficiary) pay to the
Company, upon its demand, such amount as may be required by the Company
for the purpose of satisfying any tax withholding obligations. If the
amount requested is not paid, the Company may refuse to issue payment.
	 
	(d)	 	Expenses. The expenses of the Plan shall be borne by the Company.
However, if an Award is made to an employee of a Subsidiary:

	(i)	 	if such Award results in payment of cash to the participant, such
Subsidiary shall pay to the Company an amount equal to such cash
payment; and
	 
	(ii)	 	if the Award results in the issuance to the participant of Shares, such
Subsidiary shall pay to the Company an amount equal to fair market
value thereof, as determined by the Committee, on the date such Shares
are issued (or, in the case

9

 

	 	 	of issuance of Restricted Share or of Shares subject to transfer and
forfeiture conditions, equal to the fair market value thereof on the
date on which such Shares are no longer subject to applicable
restriction), minus the amount, if any, received by the Company in
exchange for such Shares.

	(e)	 	Unfunded Plan. The Plan shall be unfunded. The Company shall not be
required to establish any special or separate fund or to make any other
segregation of assets to assure the payment of any Award under the
Plan.
	 
	(f)	 	Acceptance and Ratification by Participants. By accepting any Award or
other benefit under the Plan, each participant and each person claiming
under or through him shall be conclusively deemed to have indicated his
acceptance and ratification of, and consent to, any action taken under
the Plan by the Company, the Board or the Committee.
	 
	(g)	 	Gender and Number. Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine, the plural
shall include the singular and the singular shall include the plural.
	 
	(h)	 	Headings Not Part of Plan. Headings of paragraphs and subparagraphs
hereof are inserted for convenience and reference only; they do not
constitute part of the Plan.

(i) Governing Law. To the extent not preempted by United States Federal
law, the Plan, and all agreements hereunder, shall be construed in
accordance with, and governed by, the laws of Bermuda.
	 
	(j)	 	The provisions of the Plan shall be severable and the invalidity or
unenforceability, in while or in part, of any provision shall not
affect the validity or enforceability of the other provisions hereof.

	11.	 	AMENDMENT
	 
	 	 	The Plan and any Award instruments may be amended at any time and from time
to time by the Board. No amendment of the Plan or an Award instrument shall
adversely affect any right of any participant with respect to any Award
previously granted without such participant’s written consent. For purposes
of this paragraph 11, an adjustment made in good faith by the Committee
pursuant to paragraph 8 shall not be deemed to have adversely affected an
Award previously granted hereunder.
	 
	12.	 	SUCCESSORS
	 
	 	 	All obligations of the Company under the Plan with respect to Awards granted
hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, share exchange, or other transaction involving all or
substantially all of the business and/or assets of the Company.
	 
	13.	 	EFFECTIVE DATE OF PLAN
	 
	 	 	The Plan shall be effective as of January 8, 2002.

10

 

	14.	 	TERMINATION

	 	 	The Plan shall terminate upon the earlier of the following dates or events
to occur:
	 
	 	 	(a) the adoption of a resolution of the Board terminating the Plan; or
	 
	 	 	(b) January 8, 2012.
	 
	 	 	No termination of the Plan shall alter or impair any of the rights or
obligations of any person, without his consent, under any Award previously
granted under the Plan.

As originally approved by the Board of Directors on

January 8, 2002.

11

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