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                                                                   Exhibit 10.11

                              AMENDED AND RESTATED

                             2002 STOCK OPTION PLAN
                                       OF
                        ENDURANCE SPECIALTY HOLDINGS LTD.

1.    Purpose

The purpose of the Amended and Restated 2002 Stock Option Plan (the "Plan") of
Endurance Specialty Holdings Ltd. (the "Company") is to provide a means through
which the Company and the Subsidiaries, as applicable, may attract able persons
to enter and remain in the employ of the Company and the Subsidiaries, and to
provide a means whereby those employees upon whom the responsibilities of the
successful administration and management of the Company and the Subsidiaries
rest, and whose present and potential contributions to the welfare of the
Company are of importance, can acquire and maintain Ordinary Share ownership,
thereby strengthening their commitment to the welfare of the Company and the
Subsidiaries, and promoting an identity of interest between the Company's
shareholders and such employees. As used herein with reference to the employment
of a Participant, the term "Company" shall include the Subsidiaries, as
applicable.

2.    Definitions

The following definitions shall be applicable throughout the Plan.

      (a) "Agreement" means the written agreement between the Company and a
Participant evidencing an Incentive Award.

      (b) "Board" means the Board of Directors of the Company.

      (c) "Cause" means the definition of such term in a Participant's
employment agreement with the Company, including such terms as Serious
Misconduct and Repeated Misconduct, without regard to whether such employment
agreement has expired, or in the absence of such an agreement or definition
therein, (1) any refusal by the Participant to perform the Participant's
employment duties or to perform specific directives of the Board, the Company's
Chief Executive Officer or the Participant's direct supervisor which are
consistent with the scope and nature of the Participant's duties and
responsibilities; (2) any intentional act of fraud, embezzlement or theft by the
Participant in connection with the Participant's duties or in the course of the
Participant's employment with the Company or any prior employment, or the
Participant's admission or conviction of a felony or of any crime involving
moral turpitude, fraud, embezzlement or theft; (3) any breach by the Participant
of any Non-Competition Obligation; (4) any violation by the Participant of any
statutory or common law duty of loyalty to the Company or any Subsidiary; (5)
any other action or omission by the Participant which is considered to be
serious misconduct under The Employment Act 2000; (6) any substandard
performance of the Participant and, within six months of the date the
Participant receives from the Board, the Company's Chief Executive Officer or
the Participant's director supervisor a written warning thereof, repetition of
such substandard performance; and (7) any other action or omission by the
Participant which is considered to be misconduct under The Employment Act 2000
and, within six months of the date the Participant receives from the Board, the
Company's
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Chief Executive Officer or the Participant's direct supervisor a
written warning thereof, repetition of such action or omission.

      (d) "Change in Control" means any of the following:

            (1) the acquisition by any individual, entity or group (a "Person"),
      including any "person" within the meaning of Section 13(d)(3) or 14(d)(2)
      of the Exchange Act, of beneficial ownership within the meaning of Rule
      13d-3 promulgated under the Exchange Act, of 50% or more of either (i) the
      then outstanding Ordinary Shares of the Company (the "Outstanding Ordinary
      Shares") or (ii) the combined voting power of the then outstanding
      securities of the Company entitled to vote generally in the election of
      directors pursuant to the Bye-Laws of the Company (the "Outstanding Voting
      Securities"); excluding, however, the following: (A) any acquisition
      directly from the Company (excluding any acquisition resulting from the
      exercise of an exercise, conversion or exchange privilege unless the
      security being so exercised, converted or exchanged was acquired directly
      from the Company), (B) any acquisition by the Company, (C) any acquisition
      by an employee benefit plan (or related trust) sponsored or maintained by
      the Company or any corporation controlled by the Company or (D) any
      acquisition by any corporation pursuant to a transaction which complies
      with clauses (i), (ii) and (iii) of subsection (3) of this definition of
      Change in Control; provided, further, that for purposes of clause (B), if
      any Person (other than the Company or any employee benefit plan (or
      related trust) sponsored or maintained by the Company or any corporation
      controlled by the Company) shall become the beneficial owner of 50% or
      more of the Outstanding Ordinary Shares or 50% or more of the Outstanding
      Voting Securities by reason of an acquisition by the Company, and such
      Person shall, after such acquisition by the Company, become the beneficial
      owner of any additional Outstanding Ordinary Shares or any additional
      Outstanding Voting Securities and such beneficial ownership is publicly
      announced, such additional beneficial ownership shall constitute a Change
      in Control;

            (2) individuals who, as of the date hereof, constitute the Board
      (the "Incumbent Board") cease for any reason to constitute at least a
      majority of such Board; provided, that any individual who becomes a
      director of the Company subsequent to the date hereof whose election, or
      nomination for election by the Company's shareholders, was approved by the
      vote of at least a majority of the directors then comprising the Incumbent
      Board shall be deemed a member of the Incumbent Board; and provided,
      further, that any individual who was initially elected as a director of
      the Company as a result of an actual or threatened solicitation by a
      Person other than the Board for the purpose of opposing a solicitation by
      any other Person with respect to the election or removal of directors, or
      any other actual or threatened solicitation of proxies or consents by or
      on behalf of any Person other than the Board shall not be deemed a member
      of the Incumbent Board;

            (3) the consummation of a reorganization, amalgamation, merger or
      consolidation or sale or other disposition of all or substantially all of
      the assets of the Company (a "Corporate Transaction"); excluding, however,
      a Corporate Transaction pursuant to which (i) all or substantially all of
      the individuals or entities who are the

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      beneficial owners, respectively, of the Outstanding Ordinary Shares and
      the Outstanding Voting Securities immediately prior to such Corporate
      Transaction will beneficially own, directly or indirectly, more than 60%
      of, respectively, the outstanding shares of common stock, and the combined
      voting power of the outstanding securities entitled to vote generally in
      the election of directors, as the case may be, of the corporation
      resulting from such Corporate Transaction (including, without limitation,
      a corporation which as a result of such transaction owns the Company or
      all or substantially all of the Company's assets either directly or
      indirectly) in substantially the same proportions relative to each other
      as their ownership, immediately prior to such Corporate Transaction, of
      the Outstanding Ordinary Shares and the Outstanding Voting Securities, as
      the case may be, (ii) no Person (other than: the Company; any employee
      benefit plan (or related trust) sponsored or maintained by the Company or
      any corporation controlled by the Company; the corporation resulting from
      such Corporate Transaction; and any Person which beneficially owned,
      immediately prior to such Corporate Transaction, directly or indirectly,
      50% or more of the Outstanding Ordinary Shares or the Outstanding Voting
      Securities, as the case may be) will beneficially own, directly or
      indirectly, 50% or more of, respectively, the outstanding shares of common
      stock of the corporation resulting from such Corporate Transaction or the
      combined voting power of the outstanding securities of such corporation
      entitled to vote generally in the election of directors and (iii)
      individuals who were members of the Incumbent Board will constitute at
      least a majority of the members of the board of directors of the
      corporation resulting from such Corporate Transaction; or

            (4) the consummation of a plan of complete liquidation or
      dissolution of the Company.

      (e) "Code" means the U.S. Internal Revenue Code of 1986, as amended from
time to time.

      (f) "Committee" means the Compensation Committee of the Board or any
subcommittee thereof.

      (g) "Disability" means the definition of such term in a Participant's
employment agreement with the Company without regard to whether the term of such
employment agreement has expired, or in the absence of such agreement or
definition therein, the complete and permanent inability by reason of illness or
accident to perform the duties of the occupation at which a Participant was
employed when such disability commenced, as determined by the Board based upon
medical evidence acceptable to it.

      (h) "Exchange Act" means the U.S. Securities Exchange Act of 1934, as
amended from time to time.

      (i) "Fair Market Value" of an Ordinary Share means, as of any date when
the Ordinary Shares are quoted on The Nasdaq Stock Market, Inc. ("Nasdaq") or
listed on one or more national securities exchanges, the mean of the highest and
lowest sales price reported on Nasdaq or the closing sales price on the
principal national securities exchange on which such Ordinary Shares are listed
and traded for such date. If the day is not a business day, and as a

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result, the preceding sentence next above is inapplicable, the Fair Market Value
of an Ordinary Share shall be determined as of the next earlier business day. If
the Ordinary Shares are not quoted on Nasdaq or listed on such an exchange, or
representative quotes are not otherwise available, the Fair Market Value shall
mean the amount determined by the Board to be the fair market value of the
Ordinary Shares based upon a good faith attempt to value the Ordinary Shares
accurately.

      (j) "Incentive Award" means any Option, Tandem SAR, Stand-Alone SAR,
Restricted Shares, Phantom Shares, Share Bonus or Other Award granted pursuant
to the terms of the Plan.

      (k) "ISO" means an "incentive stock option" within the meaning of Section
422 of the Code.

      (l) "Issue Date" means the date established by the Company on which
certificates representing Restricted Shares shall be issued by the Company
pursuant to the terms of Section 10(e).

      (m) "Non-Competition Obligation" means any non-competition,
nonsolicitation and similar obligations set forth in a Participant's employment
agreement with the Company (without regard to whether such employment agreement
has expired), or in any other agreement between the Participant and the Company
or any Subsidiary, or in the absence of such an employment agreement or other
agreement, or obligations therein, the obligation of each Participant, in
consideration of the receipt of Incentive Awards hereunder, during the term of
such Participant's employment with the Company (except in accordance with his
duties as an employee of the Company) and for the one year period commencing on
the termination of such Participant's employment, not to directly or indirectly,
whether as an employee, consultant, independent contractor, partner, joint
venturer or otherwise, (A) engage in any business activities reasonably
determined by the Board to be competitive, to a material extent, with any
substantial type or kind of business activities conducted by the Company or any
Subsidiary at the time of such termination; (B) on behalf of any person or
entity engaged in business activities competitive with the business activities
of the Company or any Subsidiary, solicit or induce, or in any manner attempt to
solicit or induce, any person employed by, or as agent of, the Company or any
Subsidiary to terminate such person's employment or agency, as the case may be,
with the Company or the Subsidiary, (C) divert, or attempt to divert, any
person, concern, or entity from doing business with the Company or any
Subsidiary, or attempt to induce any such person, concern or entity to cease
being a customer or supplier of the Company or any Subsidiary; or (D) in any
manner induce or attempt to induce any employee of the Company or any Subsidiary
to terminate or abandon his or her employment for any purpose whatsoever.

      (n) "NQSO" means an Option which is not an ISO.

      (o) "Option" means an option to purchase Ordinary Shares, which may be
either an ISO or a NQSO.

      (p) "Ordinary Shares" means the ordinary shares of the Company, par value
U.S. $1.00 per share.

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      (q) "Other Award" shall mean an award granted pursuant to Section 13
hereof.

      (r) "Partial Exercise" shall mean an exercise of an Incentive Award for
less than the full extent permitted at the time of such exercise.

      (s) "Participant" means an employee of the Company or any Subsidiary who
has been granted one or more Incentive Awards pursuant to the Plan.

      (t) "Phantom Share" shall mean the right, granted pursuant to Section 11,
to receive in cash or Ordinary Shares the Fair Market Value of an Ordinary
Share.

      (u) "Plan" means the Amended and Restated 2002 Stock Option Plan of
Endurance Specialty Holdings Ltd.

      (v) "Qualified Public Offering" shall have the meaning given such term in
the Shareholders Agreement.

      (w) "Reload Options" means Options granted pursuant to Section 7(b)
hereof.

      (x) "Restricted Share" shall mean an Ordinary Share which is granted
pursuant to the terms of Section 10 hereof and which is subject to the
restrictions set forth in Section 10(c).

      (y) "SEC" shall mean the U.S. Securities and Exchange Commission.

      (z) "Shareholders Agreement" means that certain Shareholders Agreement
dated as of the 22nd day of July, 2002, among the Company, Endurance Specialty
Insurance Ltd. and the shareholders and warrant holders of the Company listed on
Schedule A thereto.

      (aa) "Stand-Alone SAR" means a share appreciation right which is granted
pursuant to Section 9 and which is not related to any Option.

      (bb) "Share Bonus" means a bonus payable in Ordinary Shares granted
pursuant to Section 12.

      (cc) "Subsidiary" means any "subsidiary corporation" of the Company within
the meaning of Section 424(f) of the Code.

      (dd) "Tandem SAR" means a share appreciation right which is granted
pursuant to Section 8 and which is related to an Option.

      (ee) "Vesting Date" means the date established by the Board on which
Restricted Shares or Phantom Shares may vest.

      (ff) "Without Cause" means any termination by the Company of the
Participant's employment with the Company for reasons other than Cause or
Disability, including circumstances where the Participant's employment agreement
with the Company has expired and the Company does not offer to the Participant
subsequent employment pursuant to a substantially

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similar employment agreement but instead requires the Participant to sign a
release and a nonsolicitation agreement.

3.    Effective Date, Duration, Shares Reserved

      (a) The Plan shall be effective on the date of its adoption by the Board,
subject to approval by the shareholders of the Company. In the event the Plan is
so approved, it shall continue in effect for a period of ten years from such
date, after which no Incentive Awards may be granted, provided that the
expiration of the Plan shall not affect the obligations of the Company and
Participants with respect to outstanding Incentive Awards.

      (b) Subject to adjustments pursuant to the provisions of Section 16
hereof, the maximum number of Ordinary Shares which may be issued or sold
hereunder shall not exceed 4,986,975. Such Shares may be authorized but unissued
Ordinary Shares or authorized and issued Ordinary Shares held in the Company's
treasury. The grant of a Tandem SAR shall not reduce the number of Ordinary
Shares with respect to which Incentive Awards may be granted pursuant to the
Plan.

      (c) Any Ordinary Shares subject to an Incentive Award that remain unissued
upon the cancellation, surrender, exchange or termination of such Incentive
Award for any reason whatsoever and any Restricted Shares forfeited shall again
become available for Incentive Awards; provided, however, upon the exercise of
any Incentive Award granted in tandem with any other Incentive Award, such
related Incentive Award shall be cancelled to the extent of the number of
Ordinary Shares as to which the Incentive Award is exercised and such number of
Ordinary Shares shall no longer be available for Incentive Awards under the
Plan.

4.    Administration

      The Committee shall administer the Plan. Subject to the provisions of the
Plan, the Committee shall have exclusive power to:

      (a) Select the Participants in the Plan;

      (b) Determine the number of Incentive Awards to be granted to each
Participant;

      (c) Determine the time or times when Incentive Awards will be granted;

      (d) Determine the terms of each Incentive Award, including but not limited
to, the vesting schedule, the type of Incentive Award and the terms for payment
of the exercise price, if any;

      (e) Prescribe the form or forms of Agreements evidencing Incentive Awards;
and

      (f) Determine, in its sole discretion and for any reason at any time, that
any or all outstanding Incentive Awards shall become exercisable in part or in
full.

      Subject to the provisions of the Plan, the Committee shall have the
authority to interpret the Plan and to establish, adopt, or revise such rules
and regulations and to make all such

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determinations relating to the Plan as it may deem necessary or advisable for
the administration of the Plan. Any determinations by the Committee with respect
to the Plan and any Incentive Award granted hereunder shall be final and binding
upon all parties. If the Committee does not exist, or for any other reason
determined by the Board, the Board may take any action under the Plan that would
otherwise be the responsibility of the Committee.

      No member of the Board shall be liable for any action, omission or
determination relating to the Plan, and the Company shall indemnify (to the
extent permitted under Bermuda law and the Bye-Laws of the Company) and hold
harmless each member of the Board and each other employee of the Company to whom
any duty or power relating to the administration or interpretation of the Plan
has been delegated against any cost or expense (including counsel fees) or
liability (including any sum paid in settlement of a claim with the approval of
the Board) arising out of any action, omission or determination relating to the
Plan, unless, in either case, such action, omission or determination was taken
or made by such member of the Board or employee in bad faith and without
reasonable belief that it was in the best interests of the Company.

5.    Eligibility

      Participants shall be limited to officers and employees of the Company or
any Subsidiary who have received written notification from the Committee, or
from a person designated by the Committee, that they have been selected to
receive Incentive Awards under the Plan.

6.    Awards Under the Plan; Agreement.

      The Committee may grant Options, Tandem SARs, Stand-Alone SARs, Restricted
Shares, Phantom Shares, Share Bonuses and Other Awards in such amounts and with
such terms and conditions as the Committee shall determine, subject to the
provisions of the Plan.

      Each Incentive Award granted under the Plan (except an unconditional Share
Bonus) shall be evidenced by an Agreement which shall contain such provisions as
the Committee may in its sole discretion deem necessary or desirable. By
accepting an Incentive Award, a Participant thereby agrees that the Incentive
Award shall be subject to all of the terms and provisions of the Plan and the
applicable Agreement.

7.    Options

      (a) General. Options may be granted under the Plan from time to time as
determined by the Committee. Subject to the provisions of the Plan, the
Committee will determine the terms of Options to be granted. Options may be
granted at an exercise price per Ordinary Share which is below, equal to or
above Fair Market Value, as determined by the Committee in its sole discretion.
Except as provided in Section 7(c)(ii) of the Plan, all Options granted under
the Plan will have a maximum term of ten years from the date of grant, subject
to earlier termination as provided in the Plan or in a Participant's Agreement.

      (b) Reload Options. (i) Reload Options may be granted from time to time by
the Committee, in its sole discretion, in the event a Participant, while
employed by the Company,

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exercises an Option by the delivery of Ordinary Shares which have been held by
the Participant for a period of at least six months, or in the event a
Participant's tax withholding obligations upon exercise of Options are satisfied
by either the Participant delivering Ordinary Shares held by the Participant or
the Company withholding Ordinary Shares, in each case with an aggregate Fair
Market Value equal to the minimum tax withholding amount due thereon, as
provided in Section 15(c) hereof. Such Reload Options shall entitle the
Participant to purchase that number of Ordinary Shares equal to the number of
Ordinary Shares so delivered to, or withheld by, the Company, provided that the
total number of Ordinary Shares covered by Reload Options shall not exceed the
number of Ordinary Shares subject to the original Option grant.

            (ii) The exercise price per Ordinary Share subject to Reload Options
shall be the Fair Market Value of an Ordinary Share on the date such Reload
Option is granted. The duration of such Reload Option shall not extend beyond
ten years from the date of grant of the underlying Option to which the grant of
the Reload Option relates. Reload Options shall be fully vested and exercisable
on the date of grant. Other specific terms and conditions applicable to Reload
Options granted under the Plan shall be determined by the Committee.

      (c) Special Provisions Applicable to ISOs. The following special
provisions shall be applicable to ISOs granted under the Plan.

            (i) No ISOs shall be granted under the Plan after ten years from the
earlier of (1) the date the Plan is adopted by the Board, or (2) the date the
Plan is approved by the Company's shareholders.

            (ii) If an ISO shall be granted to a person who owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company, any of its Subsidiaries, or any "parent corporation" of
the Company within the meaning of Section 424(e) of the Code (a "Ten Percent
Holder"), such ISO will have a maximum term of five years from the date of
grant, subject to earlier termination as provided in the Plan or in a
Participant's Agreement.

            (iii) If the aggregate fair market value of the Ordinary Shares with
respect to which ISOs are exercisable for the first time by any Participant
during a calendar year (under all plans of the Company and its parent
corporations and Subsidiaries) exceeds the amount established by the Code
(currently U.S. $100,000), such ISOs shall be treated, to the extent of such
excess, as NQSOs. For purposes of the preceding sentence, the fair market value
of the Ordinary Shares shall be based on the Fair Market Value per share,
determined at the time the ISOs covering such shares were granted.

            (iv) The exercise price per Ordinary Share subject to an ISO may not
be less than 100% of the Fair Market Value per share on the date the ISO is
granted; provided, however, that the exercise price per Ordinary Share subject
to an ISO granted to a Ten Percent Holder shall be the price (currently 110% of
Fair Market Value) required by the Code in order to constitute an ISO.

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8.    Tandem SARs.

      The Committee may grant in connection with any Option granted hereunder
one or more Tandem SARs relating to a number of Ordinary Shares less than or
equal to the number of Ordinary Shares subject to the related Option. A Tandem
SAR may be granted in connection with an Option only at the same time that such
Option is granted; provided, however, that a Tandem SAR granted in connection
with a NQSO may be granted subsequent to the time that such NQSO is granted.

      (a) Benefit Upon Exercise. The exercise of a Tandem SAR with respect to
any number of Ordinary Shares shall entitle the Participant to a cash payment,
for each such share, equal to the excess of (1) the Fair Market Value of an
Ordinary Share on the exercise date over (2) the option exercise price of the
related Option. Such payment shall be made as soon as practicable after the
effective date of such exercise.

      (b) Term and Exercise of Tandem SAR.

(i) A Tandem SAR shall be exercisable only if and to the extent that its related
Option is exercisable.

            (ii) The exercise of a Tandem SAR with respect to a number of
Ordinary Shares shall cause the immediate and automatic cancellation of its
related Option with respect to an equal number of Ordinary Shares. The exercise
of an Option, or the cancellation, termination or expiration of an Option (other
than pursuant to this Section 8(b)(ii)), with respect to a number of Ordinary
Shares shall cause the automatic and immediate cancellation of any related
Tandem SARs to the extent of the number of Ordinary Shares subject to such
Option which is so exercised, cancelled, terminated or expired.

            (iii) A Tandem SAR may be exercised for all or any portion of the
Ordinary Shares as to which it is exercisable; provided, that no Partial
Exercise of a Tandem SAR shall be with respect to less than 100 Ordinary Shares.

            (iv) No Tandem SAR shall be assignable or transferable otherwise
than together with its related Option.

            (v) A Tandem SAR shall be exercised by delivering notice to the
Company's principal office, to the attention of its Secretary. Such notice shall
be accompanied by the applicable Agreement, shall specify the number of Ordinary
Shares with respect to which the Tandem SAR is being exercised and the effective
date of the proposed exercise and shall be signed by the Participant or other
person then having the right to exercise the Option to which the Tandem SAR is
related.

9.    Stand-Alone SARs.

      (a) Exercise Price. The exercise price per Ordinary Share of a Stand-Alone
SAR shall be determined by the Committee at the time of grant.

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      (b) Benefit Upon Exercise. The exercise of a Stand-Alone SAR with respect
to any number of Ordinary Shares shall entitle the Participant to a payment, for
each such Ordinary Share, equal to the excess of (1) the Fair Market Value of an
Ordinary Share on the exercise date over (2) the exercise price of the
Stand-Alone SAR. Such payments shall be made as soon as practicable after such
exercise, in cash and/or Ordinary Shares, as determined by the Committee.

      (c) Term and Exercise of Stand-Alone SARs.

            (i) Unless the applicable Agreement provides otherwise, a
Stand-Alone SAR shall become cumulatively exercisable as to 20% of the Ordinary
Shares covered thereby on the date of grant, with an additional 20% of such
Stand-Alone SAR becoming cumulatively exercisable on each succeeding annual
anniversary of the date of grant. The Committee shall determine the expiration
date of each Stand-Alone SAR.

            (ii) A Stand-Alone SAR may be exercised for all or any portion of
the Ordinary Shares as to which it is exercisable; provided, that no Partial
Exercise of a Stand-Alone SAR shall be with respect to less than 100 Ordinary
Shares.

            (iii) A Stand-Alone SAR shall be exercised by delivering notice to
the Company's principal office, to the attention of its Secretary. Such notice
shall be accompanied by the applicable Agreement, shall specify the number of
Ordinary Shares with respect to which the Stand-Alone SAR is being exercised and
the effective date of the proposed exercise and shall be signed by the
Participant.

10.   Restricted Shares.

      (a) Issue Date and Vesting Date. At the time of the grant of Restricted
Shares, the Committee shall establish an Issue Date or Issue Dates and a Vesting
Date or Vesting Dates with respect to such Restricted Shares. The Committee may
divide such Restricted Shares into classes and assign a different Issue Date
and/or Vesting Date for each class. If the Participant is employed by the
Company on an Issue Date (which may be the date of grant), the specified number
of Restricted Shares shall be issued in accordance with the provisions of
Section 10(e). Provided that all conditions to the vesting of a Restricted Share
imposed pursuant to Section 10(b) are satisfied, and except as provided in
Section 14, upon the occurrence of the Vesting Date with respect to a Restricted
Share, such restricted Share shall vest and the restrictions of Section 10(c)
shall lapse.

      (b) Conditions to Vesting. At the time of grant of Restricted Shares, the
Committee may impose such restrictions or conditions to the vesting of such
Restricted Shares as it, in its absolute discretion, deems appropriate.

      (c) Restrictions on Transfer Prior to Vesting. Prior to the vesting of a
Restricted Share, no transfer of a Participant's rights with respect to such
Restricted Share, whether voluntary or involuntary, by operation of law or
otherwise, shall be permitted. Immediately upon any attempt to transfer such
rights, such Restricted Share, and all of the rights related thereto, shall be
forfeited by the Participant.

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      (d) Dividends on Restricted Shares. The Committee in its discretion may
require that any dividends paid on Restricted Shares be held in escrow until all
restrictions on such Restricted Shares have lapsed.

      (e) Issuance of Certificates.

            (i) Reasonably promptly after the Issue Date with respect to
Restricted Shares, the Company shall cause to be issued a share certificate,
registered in the name of the Participant to whom such Restricted Shares were
granted, evidencing such Restricted Shares; provided that the Company shall not
cause such a share certificate to be issued unless it has received a stock power
duly endorsed in blank with respect to such Restricted Shares. Each such share
certificate shall bear the following legend:

            THE TRANSFERABILITY OF THIS CERTIFICATE AND THE ORDINARY SHARES
            REPRESENTED HEREBY ARE SUBJECT TO THE RESTRICTIONS, TERMS AND
            CONDITIONS (INCLUDING FORFEITURE PROVISIONS AND RESTRICTIONS AGAINST
            TRANSFER) CONTAINED IN THE AMENDED AND RESTATED 2002 STOCK OPTION
            PLAN OF ENDURANCE SPECIALTY HOLDINGS LTD. AND AN AGREEMENT ENTERED
            INTO BETWEEN THE REGISTERED OWNER OF SUCH SHARES AND THE COMPANY. A
            COPY OF THE PLAN AND AGREEMENT IS ON FILE IN THE OFFICE OF THE
            SECRETARY OF THE COMPANY, CROWN HOUSE, 4 PAR-LA-VILLE ROAD, HAMILTON
            HM 08, BERMUDA.

Such legend shall not be removed until such Restricted Shares vest pursuant to
the terms hereof.

            (ii) Each certificate issued pursuant to this Section 10(e),
together with the stock powers relating to the Restricted Shares evidenced by
such certificate, shall be held by the Company unless the Committee determines
otherwise.

      (f) Consequences of Vesting. Upon the vesting of a Restricted Share
pursuant to the terms hereof, the restrictions of Section 10(c) shall lapse with
respect to such Restricted Share. Reasonably promptly after a Restricted Share
vests, the Company shall cause to be delivered to the Participant to whom such
Restricted Shares were granted, a certificate evidencing such Restricted Share,
free of the legend set forth in Section 10(e).

      (g) Special Provisions Regarding Restricted Shares. Notwithstanding
anything to the contrary contained herein, Restricted Shares granted pursuant to
this Section 10 may be based on the attainment by the Company of performance
goals pre-established by the Committee, based on one or more of the following
criteria: (1) return on total shareholder equity; (2) earnings per Ordinary
Share; (3) net income (before or after taxes); (4) revenues; (5) return on
assets; (6) strategic goals; (7) any combination of , or a specified increase
in, any of the foregoing; and (8) such other criteria as the Committee may
approve. Such Restricted Shares shall be released from restrictions only after
the attainment of such performance measures has been certified by the Committee.

11.   Phantom Shares.

      (a) Vesting Date. At the time of the grant of Phantom Shares, the
Committee shall establish a Vesting Date or Vesting Dates with respect to such
Phantom Shares. The Committee

                                       11
<PAGE>
may divide such Phantom Shares into classes and assign a differing Vesting Date
for each class. Provided that all conditions to the vesting of a Phantom Share
imposed pursuant to Section 11(c) are satisfied, and except as provided in
Section 14, upon the occurrence of the Vesting Date with respect to a Phantom
Share, such Phantom Share shall vest.

      (b) Benefit Upon Vesting. Upon the vesting of a Phantom Share, the
Participant shall be entitled to receive, within 30 days of the date on which
such Phantom Share vests, an amount, in cash and/or Ordinary Shares, as
determined by the Committee, equal to the sum of (1) the Fair Market Value of an
Ordinary Share on the date on which such Phantom Share vests and (2) the
aggregate amount of cash dividends paid with respect to an Ordinary Share during
the period commencing on the date on which the Phantom Share was granted and
terminating on the date on which such Phantom Share vests.

      (c) Conditions to Vesting. At the time of the grant of Phantom Shares, the
Committee may impose such restrictions or conditions to the vesting of such
Phantom Shares as it, in its absolute discretion, deems appropriate.

      (d) Special Provisions Regarding Phantom Shares. Notwithstanding anything
to the contrary contained herein, the vesting of Phantom Shares granted pursuant
to this Section 11 may be based on the attainment by the Company of one or more
of the performance criteria set forth in Section 10(g) hereof . No payment in
respect of any such Phantom Share award will be paid until the attainment of the
respective performance measures have been certified by the Committee.

12.   Share Bonuses.

      In the event that the Committee grants a Share Bonus, a certificate for
Ordinary Shares comprising such Share Bonus shall be issued in the name of the
Participant to whom such grant was made and delivered to such Participant as
soon as practicable after the date on which such Share Bonus is payable.

13.   Other Awards.

      Other forms of Incentive Awards ("Other Awards") valued in whole or in
part by reference to, or otherwise based on, Ordinary Shares may be granted
either alone or in addition to other Incentive Awards under the Plan. Subject to
the provisions of the Plan, the Committee shall have sole and complete authority
to determine the persons to whom and the time or times at which such Other
Awards shall be granted, the number of Ordinary Shares to be granted pursuant to
such Other Awards and all other conditions of such Other Awards.

14.   Termination of Employment.

Except to the extent specifically provided otherwise in a Participant's
Agreement, the following provisions shall apply to Incentive Awards upon a
Participant's termination of employment with the Company.

                                       12
<PAGE>
      (a) In General. In the event a Participant's employment with the Company
is terminated for Cause, all unvested Incentive Awards granted to the
Participant shall be immediately forfeited. In the event of the termination of a
Participant's employment with the Company, or in the event the Participant's
employment agreement with the Company has expired and the Participant elects not
to enter into a subsequent, substantially similar, employment agreement offered
to the Participant by the Company, the Participant shall be able to exercise or
receive any Incentive Awards which were vested as of the date of termination
until and including the earlier to occur of (i) the date which is 90 days after
the date of the termination of the Participant's employment and (ii) the date
the Incentive Awards otherwise would expire.

      (b) Death or Disability. In the event a Participant's employment with the
Company is terminated by reason of his or her death or Disability or if such
Participant shall die or become subject to a Disability within 30 days of his or
her termination of employment Without Cause, all Incentive Awards which have not
vested as of the date of such termination shall continue to vest for a period of
one year following the Participant's termination of employment in accordance
with their vesting schedule, notwithstanding such termination of employment, and
the Participant shall be able to exercise or receive any vested Incentive Awards
until and including the earlier to occur of (i) the date which is one year after
the date on which the Participant's termination of employment occurs, and (ii)
the date the Incentive Awards otherwise would expire.

15.   General

      (a) Privileges of Share Ownership. No person shall be entitled to the
privileges of share ownership in respect of Ordinary Shares which are subject to
Incentive Awards until:

            (A)   A share certificate representing the Ordinary Shares has
                  actually been issued to that person in accordance with the
                  terms of the Plan and the applicable Agreement;

            (B)   prior to the occurrence of a Qualified Public Offering, such
                  person has executed the Shareholders Agreement; and

            (C)   the issue of such Ordinary Shares has been approved by the
                  Bermuda Monetary Authority.

      (b) Government and other Regulations. The obligations of the Company under
the Plan shall be subject to all applicable laws, rules, regulations and other
governmental requirements.

      (c) Tax Withholding. The Company shall have the right to deduct from any
payment to a Participant pursuant to the Plan any income or other taxes required
by law to be withheld in respect thereof. It shall be a condition to the
obligation of the Company to issue Ordinary Shares to a Participant upon the
exercise of an Incentive Award by such Participant that such Participant (or any
beneficiary or person entitled to exercise such Incentive Award) pay to the
Company, upon demand, such amount as may be requested by the Company for the
purpose of satisfying any liability to withhold income or other taxes. In the
event any such amount so requested is not paid, the Company may refuse to issue
Ordinary Shares to such Participant upon the exercise by such Participant of an
Incentive Award. Unless the Committee shall in its sole discretion

                                       13
<PAGE>
determine otherwise, payment for taxes required to be withheld may be made in
cash, or in whole or in part by an election by a Participant, in accordance with
such rules as may be adopted by the Committee from time to time, (i) to have the
Company withhold Ordinary Shares otherwise issuable upon exercise of an
Incentive Award having a Fair Market Value equal to the minimum tax withholding
liability and/or (ii) to tender to the Company Ordinary Shares held by such
Participant having a Fair Market Value equal to the minimum tax withholding
liability.

      (d) Payment of Exercise Price. The exercise price of Incentive Awards may
be paid in cash or by such other means as may be approved by the Committee in
its discretion; provided that any right to pay such exercise price by tendering
Ordinary Shares shall be limited to shares which have been held by the
Participant for at least six months.

      (e) Claim to Incentive Awards; Employment Rights. No officer, employee or
other person shall have any claim or right to be granted Incentive Awards under
the Plan nor, having been selected for the grant of Incentive Awards, to be
selected for additional grants. Neither this Plan nor any action taken hereunder
shall be construed as giving any Participant any right to be retained in the
employ of the Company.

      (f) Agreements. Each Participant to whom Incentive Awards are granted
under the Plan shall be required to enter into a written Agreement authorized by
the Committee in respect of such grant. The Committee may, in any such
Agreement, prescribe terms and conditions governing the grant.

      (g) Payments to Persons other than Participants. If the Board shall find
that any person to whom any amount is payable under the Plan is unable to care
for his affairs because of illness or accident, or is a minor, or has died, then
any payment due to such person or his estate (unless a prior claim therefor has
been made by a duly appointed legal representative), may, if the Board so
directs, be paid to his spouse, child, relative, an institution maintaining or
having custody of such person, or any other person deemed by the Board to be a
proper recipient on behalf of such person otherwise entitled to payment. Any
such payment shall be a complete discharge of the liability of the Board and the
Company therefor.

      (h) Governing Law. (1) The Plan, each Incentive Award hereunder and the
related agreement shall be governed by and construed in accordance with the laws
of Bermuda without reference to the principles of conflicts of law thereof and
the Company and any Participant accepting an Incentive Award hereunder submit to
the non-exclusive jurisdiction of the courts of Bermuda in respect of matters
arising hereunder.

            (2) All disputes, controversies or claims arising out of, relating
      to or in connection with the Plan, each Incentive Award hereunder and the
      related agreement, or the breach, termination or validity thereof, shall
      be finally settled by arbitration. The arbitration shall be conducted in
      accordance with the rules of the International Chamber of Commerce except
      as same may be modified herein or by mutual agreement of the parties. The
      seat of the arbitration shall be Bermuda and it shall be conducted in the
      English language. The arbitration shall be conducted by one arbitrator who
      shall be selected by BIBA (Bermuda International Business Association), in
      the event that the parties fail to agree. The arbitral award shall be in
      writing, shall state reasons for the

                                       14
<PAGE>
      award, and shall be final and binding on the parties. The award may
      include an award of costs, including reasonable attorneys fees and
      disbursements. Judgment on the award may be entered by any court having
      jurisdiction thereof or having jurisdiction over the parties or their
      assets.

      (i) Funding. No provision of the Plan shall require the Company for the
purpose of satisfying any obligations under the Plan, to purchase assets or
place any assets in a trust or other entity to which contributions are made or
otherwise to segregate any assets, nor shall the Company maintain separate bank
accounts, books, records or other evidence of the existence of a segregated or
separately maintained or administered fund for such purposes. Participants shall
have no rights under the Plan other than as unsecured general creditors of the
Company, except that insofar as they may have become entitled to payment of
additional compensation by performance of services, they shall have the same
rights as other employees under general law.

      (j) Nontransferability. Unless otherwise provided by the Committee,
Incentive Awards granted under the Plan may not be sold, assigned, donated, or
transferred or otherwise disposed of, mortgaged, pledged or encumbered except,
in the event of a Participant's death, by will or the laws of descent and
distribution. During a Participant's lifetime, Incentive Awards granted under
the Plan may be exercised only by the Participant. Ordinary Shares acquired
pursuant to the exercise or vesting of an Incentive Award granted hereunder
shall not, in addition to any restrictions imposed by the Shareholders
Agreement, Section 15(k) hereinbelow or by law, be transferable prior to a
Qualified Public Offering without the Participant first offering to sell such
Ordinary Shares to the Company (subject to Bermuda law), on no less than thirty
(30) days advance written notice, at the price for which the Participant has a
bona fide offer from a third party to purchase such Ordinary Shares. The Company
has no obligation to purchase the Ordinary Shares from the Participant. As used
in this paragraph, "bona fide offer from a third party" means an agreement for
the purchase of the Ordinary Shares, executed by the Participant and the third
party, with completion subject only to the Company's right to repurchase under
this subsection.

      (k) Restrictive Legends. The certificates evidencing Ordinary Shares
issued under the Plan shall bear such restrictive legends as the Committee deems
necessary to reflect transfer restrictions applicable thereto.

      (l) Relationship to other Benefits. No payment under the Plan shall be
taken into account in determining any benefits under any pension, retirement,
profit sharing, group insurance or other benefit plan of the Company or any
Subsidiary except as otherwise specifically provided therein.

      (m) Expenses. The expenses of administering the Plan shall be borne by the
Company and its Subsidiaries, as applicable.

      (n) Titles and Headings. The titles and headings of the sections in the
Plan are for convenience of reference only, and in the event of any conflict,
the text of the Plan, rather than such titles or headings shall control.

16.   Changes in Capital Structure

                                       15
<PAGE>
      Incentive Awards under the Plan shall be subject to adjustment or
substitution, as determined by the Committee in its sole discretion, as to the
number, price or kind of Ordinary Shares or other consideration subject to such
Incentive Awards or as otherwise determined by the Committee to be equitable (i)
in the event of changes in the outstanding Ordinary Shares or in the capital
structure of the Company, by reason of share dividends, share splits,
recapitalizations, reorganizations, amalgamations, mergers, consolidations,
combinations, exchanges, liquidations, spinoffs or other relevant changes in
capitalization, or any distributions to holders of Ordinary Shares other than a
regular cash dividend, occurring after the date of grant of any such Incentive
Awards or (ii) in the event of any change in applicable laws or any change in
circumstances which results in or would result in any substantial dilution or
enlargement of the rights granted to, or available for, Participants in the
Plan, or which otherwise warrants equitable adjustment because it interferes
with the intended operation of the Plan. In addition, in the event of any such
adjustment or substitution, the aggregate number and class of securities
available under the Plan shall be appropriately adjusted, as determined by the
Committee in its sole discretion. The decisions of the Committee regarding any
such adjustment or substitution shall be final, binding and conclusive on all
parties.

17.   Effect of Change in Control

      (a) Notwithstanding any provision in this Plan or any agreement relating
to an Incentive Award, in the event of a Change in Control as defined in
paragraph (3) or (4) of Section 2(d) hereof in connection with which the holders
of Ordinary Shares receive shares of common stock that are registered under
Section 12 of the Exchange Act, all outstanding Incentive Awards shall
immediately become exercisable in full and there shall be substituted for each
Ordinary Share available under this Plan, whether or not then subject to an
outstanding Incentive Award, the number and class of shares into which each
outstanding Ordinary Share shall be converted pursuant to such Change in
Control. In the event of any such substitution, the purchase or exercise price
per share, if any, of each Incentive Award shall be appropriately adjusted by
the Committee (whose determination shall be final, binding and conclusive), such
adjustments to be made without an increase in the aggregate purchase or exercise
price, if any.

      (b) Notwithstanding any provision in this Plan or any Agreement relating
to an Incentive Award, in the event of a Change in Control as defined in
paragraph (1) or (2) of Section 2(d) hereof, or in the event of a Change in
Control as defined in paragraph (3) or (4) of Section 2(d) hereof in connection
with which the holders of Ordinary Shares receive consideration other than
shares of common stock that are registered under Section 12 of the Exchange Act,
each outstanding Incentive Award shall be surrendered to the Company by the
holder thereof, and each such Incentive Award shall immediately be canceled by
the Company, and the holder shall receive, within ten days of the occurrence of
a Change in Control, a cash payment from the Company in an amount equal to the
number of Ordinary Shares then subject to such Incentive Award, multiplied by
the excess, if any, of the greater of (A) the highest per share price offered to
shareholders of the Company in any transaction whereby the Change in Control
takes place or (B) the Fair Market Value of an Ordinary Share on the date of
occurrence of the Change in Control, over the purchase or exercise price, if
any, per Ordinary Share subject to the Incentive Award.

                                       16
<PAGE>
18.   Nonexclusivity of the Plan

      The adoption of this Plan by the Board shall not be construed as creating
any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of equity incentive awards otherwise than under this Plan, and such
arrangements may be either applicable generally or only in specific cases.

19.   Amendments and Termination

      The Board may at any time terminate the Plan. With the express written
consent of an individual Participant, the Committee may cancel or reduce or
otherwise alter the Participant's outstanding Incentive Awards. The Board may,
at any time, or from time to time, amend or suspend and, if suspended,
reinstate, the Plan in whole or in part. Notwithstanding anything herein which
could be deemed to be to the contrary, the Board may not take any action,
including any amendment or termination of the Plan, which shall impair to any
extent the rights of a Participant in respect of Incentive Awards previously
granted to a Participant without the written consent of such Participant. Except
as provided in Section 16, the Board may not, without approval of the
shareholders of the Company, increase the aggregate number of Ordinary Shares
issuable under the Plan.

20.   Non-Competition Obligations

      Each Participant, as condition of, and in consideration of, the granting
of an Incentive Award, shall expressly agree to be bound by a Non-Competition
Obligation.

                                       17<PAGE>
                                                                   Exhibit 10.12

                           2003 NON-EMPLOYEE DIRECTOR
                              EQUITY INCENTIVE PLAN
                                       OF
                        ENDURANCE SPECIALTY HOLDINGS LTD.

1.    Purpose

The purpose of the 2003 Non-Employee Director Equity Incentive Plan (the "Plan")
of Endurance Specialty Holdings Ltd. (the "Company") is to promote the interests
of the Company and its shareholders by enhancing the Company's ability to
attract and retain the services of experienced and knowledgeable directors and
by encouraging directors to acquire an increased proprietary interest in the
Company.

2.    Definitions

The following definitions shall be applicable throughout the Plan.

      (a)   "Board" means the Board of Directors of the Company.

      (b)   "Change in Control" means any of the following:

            (1) the acquisition by any individual, entity or group (a "Person"),
      including any "person" within the meaning of Section 13(d)(3) or 14(d)(2)
      of the Exchange Act, of beneficial ownership within the meaning of Rule
      13d-3 promulgated under the Exchange Act, of 50% or more of either (i) the
      then outstanding Ordinary Shares of the Company (the "Outstanding Ordinary
      Shares") or (ii) the combined voting power of the then outstanding
      securities of the Company entitled to vote generally in the election of
      directors pursuant to the Bye-Laws of the Company (the "Outstanding Voting
      Securities"); excluding, however, the following: (A) any acquisition
      directly from the Company (excluding any acquisition resulting from the
      exercise of an exercise, conversion or exchange privilege unless the
      security being so exercised, converted or exchanged was acquired directly
      from the Company), (B) any acquisition by the Company, (C) any acquisition
      by an employee benefit plan (or related trust) sponsored or maintained by
      the Company or any corporation controlled by the Company or (D) any
      acquisition by any corporation pursuant to a transaction which complies
      with clauses (i), (ii) and (iii) of subsection (3) of this definition of
      Change in Control; provided, further, that for purposes of clause (B), if
      any Person (other than the Company or any employee benefit plan (or
      related trust) sponsored or maintained by the Company or any corporation
      controlled by the Company) shall become the beneficial owner of 50% or
      more of the Outstanding Ordinary Shares or 50% or more of the Outstanding
      Voting Securities by reason of an acquisition by the Company, and such
      Person shall, after such acquisition by the Company, become the beneficial
      owner of any additional Outstanding Ordinary Shares or any additional
      Outstanding Voting Securities and such beneficial ownership is publicly
      announced, such additional beneficial ownership shall constitute a Change
      in Control;
<PAGE>
            (2) individuals who, as of the date hereof, constitute the Board
      (the "Incumbent Board") cease for any reason to constitute at least a
      majority of such Board; provided, that any individual who becomes a
      director of the Company subsequent to the date hereof whose election, or
      nomination for election by the Company's shareholders, was approved by the
      vote of at least a majority of the directors then comprising the Incumbent
      Board shall be deemed a member of the Incumbent Board; and provided,
      further, that any individual who was initially elected as a director of
      the Company as a result of an actual or threatened solicitation by a
      Person other than the Board for the purpose of opposing a solicitation by
      any other Person with respect to the election or removal of directors, or
      any other actual or threatened solicitation of proxies or consents by or
      on behalf of any Person other than the Board shall not be deemed a member
      of the Incumbent Board;

            (3) the consummation of a reorganization, amalgamation, merger or
      consolidation or sale or other disposition of all or substantially all of
      the assets of the Company (a "Corporate Transaction"); excluding, however,
      a Corporate Transaction pursuant to which (i) all or substantially all of
      the individuals or entities who are the beneficial owners, respectively,
      of the Outstanding Ordinary Shares and the Outstanding Voting Securities
      immediately prior to such Corporate Transaction will beneficially own,
      directly or indirectly, more than 60% of, respectively, the outstanding
      shares of common stock, and the combined voting power of the outstanding
      securities entitled to vote generally in the election of directors, as the
      case may be, of the corporation resulting from such Corporate Transaction
      (including, without limitation, a corporation which as a result of such
      transaction owns the Company or all or substantially all of the Company's
      assets either directly or indirectly) in substantially the same
      proportions relative to each other as their ownership, immediately prior
      to such Corporate Transaction, of the Outstanding Ordinary Shares and the
      Outstanding Voting Securities, as the case may be, (ii) no Person (other
      than: the Company; any employee benefit plan (or related trust) sponsored
      or maintained by the Company or any corporation controlled by the Company;
      the corporation resulting from such Corporate Transaction; and any Person
      which beneficially owned, immediately prior to such Corporate Transaction,
      directly or indirectly, 50% or more of the Outstanding Ordinary Shares or
      the Outstanding Voting Securities, as the case may be) will beneficially
      own, directly or indirectly, 50% or more of, respectively, the outstanding
      shares of common stock of the corporation resulting from such Corporate
      Transaction or the combined voting power of the outstanding securities of
      such corporation entitled to vote generally in the election of directors
      and (iii) individuals who were members of the Incumbent Board will
      constitute at least a majority of the members of the board of directors of
      the corporation resulting from such Corporate Transaction; or

            (4) the consummation of a plan of complete liquidation or
      dissolution of the Company.

                                      -2-
<PAGE>
      (c) "Code" means the U.S. Internal Revenue Code of 1986, as amended from
time to time.

      (d) "Committee" means the Compensation Committee of the Board or any
subcommittee thereof.

      (e) "Director" means a non-employee member of the Board.

      (f) "Exchange Act" means the U.S. Securities Exchange Act of 1934, as
amended from time to time.

      (g) "Fair Market Value" of an Ordinary Share means, as of any date when
the Ordinary Shares are quoted on The Nasdaq Stock Market, Inc. ("Nasdaq") or
listed on one or more national securities exchanges, the mean of the highest and
lowest sales price reported on Nasdaq or the closing sales price on the
principal national securities exchange on which such Ordinary Shares are listed
and traded for such date. If the day is not a business day, and as a result, the
preceding sentence next above is inapplicable, the Fair Market Value of an
Ordinary Share shall be determined as of the next earlier business day. If the
Ordinary Shares are not quoted on Nasdaq or listed on such an exchange, or
representative quotes are not otherwise available, the Fair Market Value shall
mean the amount determined by the Board to be the fair market value of the
Ordinary Shares based upon a good faith attempt to value the Ordinary Shares
accurately. Notwithstanding the foregoing, under no circumstances shall the Fair
Market Value of an Ordinary Share be less than the par value of such Ordinary
share.

      (h) "Option" means an option to purchase Ordinary Shares granted pursuant
to the Plan.

      (i) "Ordinary Shares" means the ordinary shares of the Company, par value
U.S. $1.00 per share.

      (j) "Qualified Public Offering" shall have the meaning given such term in
the Shareholders Agreement.

      (k) "RSU" shall have the meaning set forth in Section 7 of the Plan.

      (l) "Shareholders Agreement" means that certain Shareholders Agreement
dated as of the 22nd day of July, 2002, among the Company, Endurance Specialty
Insurance Ltd. and the shareholders and warrant holders of the Company listed on
Schedule A thereto.

3.    Effective Date, Duration, Shares Reserved

      (a) The Plan shall be effective on the date of its adoption by the Board,
subject to approval by the shareholders of the Company. In the event the Plan is
so approved, it shall continue in effect for a period of ten years from such
date of such adoption by the Board, after which no Options or RSUs may be
granted, provided that the

                                      -3-
<PAGE>
expiration of the Plan shall not affect the obligations of the Company and
Directors with respect to outstanding Options and RSUs.

      (b) Subject to adjustments pursuant to the provisions of Section 9 hereof,
the maximum number of Ordinary Shares which may be issued or sold hereunder
shall not exceed 750,000. Such shares shall be authorized but unissued shares;
provided, however, that Ordinary Shares with respect to which an Option has been
exercised or an RSU has been settled shall not again be available for issuance
hereunder. If outstanding Options granted hereunder shall terminate or expire
for any reason without being wholly exercised, the Ordinary Shares allocable to
the unexercised portion of such Option will again be available for issuance
under the Plan. The number of Ordinary Shares available for issuance shall be
increased by the number of shares tendered to or withheld by the Company in
connection with the payment of the purchase price or tax withholding obligations
relating to any Option or RSU hereunder.

4.    Administration

      Subject to the provisions of the Plan, the Committee shall have the
authority to interpret the Plan and to establish, adopt, or revise such rules
and regulations and to make all such determinations relating to the Plan as it
may deem necessary or advisable for the administration of the Plan. Any
determinations by the Committee with respect to the Plan and any Option or RSU
granted hereunder shall be final and binding upon all parties. If the Committee
does not exist, or for any other reason determined by the Board, the Board may
take any action under the Plan that would otherwise be the responsibility of the
Committee.

      No member of the Board shall be liable for any action, omission or
determination relating to the Plan, and the Company shall indemnify (to the
extent permitted under Bermuda law and the Bye-Laws of the Company) and hold
harmless each member of the Board and each other employee of the Company to whom
any duty or power relating to the administration or interpretation of the Plan
has been delegated against any cost or expense (including counsel fees) or
liability (including any sum paid in settlement of a claim with the approval of
the Board) arising out of any action, omission or determination relating to the
Plan, unless, in either case, such action, omission or determination was taken
or made by such member of the Board or employee in bad faith and without
reasonable belief that it was in the best interests of the Company.

5.    Eligibility

      Participants shall be limited to Directors.

6.    Director Options

      (a) Initial Grant. Each Director in office on the date of approval of the
Plan by the shareholders of the Company shall be granted on such date an Option
to purchase 5,000 Ordinary Shares with a per Ordinary Share exercise price equal
to the Fair Market Value of one Ordinary Share on such date.

                                      -4-
<PAGE>
      (b) Annual Grant. Each Director in office at the close of business on the
date of the Annual General Meeting of shareholders of the Company shall be
granted on such date an Option to purchase 5,000 Ordinary Shares (subject to
adjustments pursuant to the provisions of Section 9 hereof) with a per Ordinary
Share exercise price equal to the Fair Market Value of one Ordinary Share on
such date.

      (c) Term. Each Option granted to a Director under this Plan shall expire
on the earlier of (1) the tenth annual anniversary of the date of grant of such
Option or (2) the first annual anniversary of the last day on which a Director
serves on the Board.

      (d) Exercisability. Each Option granted to a Director under this Plan
shall be exerciseable on or after the six month anniversary of the date of grant
of such Option.

      (e) Non-Qualified Options. Each Option granted to a Director under this
Plan shall be a non-qualified option, not entitled to special tax treatment
under Section 422 of the Code.

7.    Director Restricted Share Units.

      (a) Each director may make an irrevocable election on or before the 30th
day prior to the end of the calendar quarter during which the Plan is adopted by
the shareholders of the Company (with respect to the calendar year during which
this Plan is adopted) and on or before December 31 (with respect to the next
succeeding calendar year), to defer payment of all or a designated portion (in
increments of $5,000) of the cash compensation otherwise subsequently payable
during the calendar year as his or her annual retainer for service as a
Director.

      (b) All compensation which a Director elects to defer pursuant to this
Section 7 shall be credited in the form of restricted share units ("RSUs") to a
bookkeeping account maintained by the Company in the name of the Director. Each
RSU shall represent the right to receive one Ordinary Share at the time
determined pursuant to the terms of the Plan. In consideration for forgoing cash
compensation, the number of RSUs so credited will be equal to the number of
Ordinary Shares having an aggregate Fair Market Value (on the date the
compensation would otherwise have been paid) equal to the amount by which the
Director's cash compensation was reduced pursuant to the deferral election.

      (c) If any dividend is payable on Ordinary Shares during the deferral
period, dividend equivalents equal to the dividend that would have been payable
on the RSUs credited to a Director's account if such RSUs had constituted
Ordinary Shares shall be credited in the form of additional RSUs to such
Director's bookkeeping account, with such credit determined on the basis of the
Fair Market Value on the date of payment of such dividend.

      (d) Any election by a Director to defer payment of such Director's cash
compensation shall be accompanied by an irrevocable election by such Director
with respect to:

                                      -5-
<PAGE>
            (1) the settlement date for the RSUs, which shall be either (A) the
      date he or she ceases to be a Director or (B) a date certain after he or
      she ceases to be a Director, but in no event more than ten years after
      ceasing to be a Director; and

            (2) the settlement option for the RSUs, which shall be one of (A) a
      single settlement, (B) five annual installments or (C) ten annual
      installments, in each case commencing on the settlement date elected
      pursuant to Section 7(d)(1) hereof.

On such settlement date or dates, the Company shall deliver to the Director one
Ordinary Share for each RSU in such Director's bookkeeping account up to the
proportional amount previously elected by such Director to be distributed. A
corresponding reduction in the number of RSUs in such Director's bookkeeping
account shall be made at the time of such distribution.

      (e) Deferrals of Director compensation hereunder shall continue until the
Director notifies the Company in writing, prior to any December 31, that he or
she wishes to receive a greater or lesser portion of his or her compensation for
the next succeeding calendar year to be paid in cash on a current basis.

8.    General

      (a) Privileges of Share Ownership. No Director shall be entitled to the
privileges of share ownership in respect of Ordinary Shares which are subject to
Options or RSUs until:

            (1) A share certificate representing the Ordinary Shares has
      actually been issued to that person in accordance with the terms of the
      Plan and the applicable Agreement;

            (2) prior to the occurrence of a Qualified Public Offering, such
      person has executed the Shareholders Agreement; and

            (3) the issue of such Ordinary Shares has been approved by the
      Bermuda Monetary Authority.

      (b) Compliance with Legal and Trading Requirements. The Plan shall be
subject to all applicable laws, rules and regulations, including, but not
limited to, Bermuda, U.S. federal and state laws, rules and regulations, and to
such approvals by any regulatory or governmental agency as may be required. The
Company, in its discretion, may postpone the issuance or delivery of Ordinary
Shares under the Plan and under any Option or RSU until completion of such stock
exchange or market system listing or registration or qualification of such
Ordinary Shares or other required action under any Bermuda, U.S. state or
federal law, rule or regulation or under laws, rules or regulations of other
jurisdictions as the Company may consider appropriate, and may require any
Director to make such representations and furnish such information as it may
consider appropriate in connection with the issuance or delivery of Ordinary
Shares in compliance with applicable laws, rules and regulations. No provisions
of the Plan shall be

                                      -6-
<PAGE>
interpreted or construed to obligate the Company to register any Ordinary Shares
under Bermuda, U.S. federal or state law or under the laws of other
jurisdictions.

      (c) Tax Withholding. The Company is authorized to withhold from any
Ordinary Shares delivered under this Plan or on exercise of an Option or RSU,
any amounts of withholding and other taxes due in connection therewith, and to
take such other action as the Company may deem advisable to enable the Company
and a Director to satisfy obligations for the payment of any withholding taxes
and other tax obligations relating thereto. This authority shall include
authority to withhold or receive Ordinary Shares or other property and to make
cash payments in respect thereof in satisfaction of a Director's tax
obligations.

      (d) Payment of Exercise Price. The exercise price of Options may be paid
in cash or by such other means as may be approved by the Committee in its
discretion; provided that any right to pay such exercise price by tendering
Ordinary Shares shall be limited to shares which have been held by the Director
for at least six months.

      (e) No Right to Continued Service. Neither the Plan nor any action taken
thereunder shall be construed as giving any Director the right to be retained in
the service of the Company or any of its subsidiaries or affiliates, nor shall
it interfere in any way with the right of the Company or any of its subsidiaries
or affiliates to terminate any Director's service at any time.

      (f) Agreements. Each Director to whom Options are granted under the Plan
shall be required to enter into a written agreement authorized by the Committee
in respect of such grant.

      (g) Payments to Persons other than Directors. If the Board shall find that
any person to whom any amount is payable under the Plan is unable to care for
his affairs because of illness or accident, or is a minor, or has died, then any
payment due to such person or his estate (unless a prior claim therefor has been
made by a duly appointed legal representative), may, if the Board so directs, be
paid to his spouse, child, relative, an institution maintaining or having
custody of such person, or any other person deemed by the Board to be a proper
recipient on behalf of such person otherwise entitled to payment. Any such
payment shall be a complete discharge of the liability of the Board and the
Company therefor.

      (h) Governing Law.

            (1) The Plan, each Option and RSU hereunder and each related
      agreement shall be governed by and construed in accordance with the laws
      of Bermuda without reference to the principles of conflicts of law thereof
      and the Company and any Director accepting a grant hereunder submit to the
      non-exclusive jurisdiction of the courts of Bermuda in respect of matters
      arising hereunder.

                                      -7-
<PAGE>
            (2) All disputes, controversies or claims arising out of, relating
      to or in connection with the Plan, each Option and RSU hereunder and the
      related agreement, or the breach, termination or validity thereof, shall
      be finally settled by arbitration. The arbitration shall be conducted in
      accordance with the rules of the International Chamber of Commerce except
      as same may be modified herein or by mutual agreement of the parties. The
      seat of the arbitration shall be Bermuda and it shall be conducted in the
      English language. The arbitration shall be conducted by one arbitrator who
      shall be selected by BIBA (Bermuda International Business Association), in
      the event that the parties fail to agree. The arbitral award shall be in
      writing, shall state reasons for the award, and shall be final and binding
      on the parties. The award may include an award of costs, including
      reasonable attorneys fees and disbursements. Judgment on the award may be
      entered by any court having jurisdiction thereof or having jurisdiction
      over the parties or their assets.

      (i) Funding. No provision of the Plan shall require the Company for the
purpose of satisfying any obligations under the Plan, to purchase assets or
place any assets in a trust or other entity to which contributions are made or
otherwise to segregate any assets, nor shall the Company maintain separate bank
accounts, books, records or other evidence of the existence of a segregated or
separately maintained or administered fund for such purposes. Directors shall
have no rights under the Plan other than as unsecured general creditors of the
Company.

      (j) Nontransferability. Unless otherwise provided by the Committee,
Options and RSUs granted under the Plan may not be sold, assigned, donated, or
transferred or otherwise disposed of, mortgaged, pledged or encumbered except,
in the event of a Director's death, by will or the laws of descent and
distribution. During a Director's lifetime, Options and RSUs granted under the
Plan may be exercised or settled only by the Director. Shares acquired pursuant
to the exercise of an Option or settlement of an RSU granted hereunder shall not
be transferable prior to a Qualified Public Offering without the Director first
offering to sell such shares to the Company (subject to Bermuda law), on no less
than thirty (30) days advance written notice, at the price for which the
Director has a bona fide offer from a third party to purchase such shares. The
Company has no obligation to purchase the Ordinary Shares from the Director. As
used in this paragraph, "bona fide offer from a third party" means an agreement
for the purchase of the shares, executed by the Director and the third party,
with completion subject only to the Company's right to repurchase under this
subsection.

      (k) Restrictive Legends. The certificates evidencing Ordinary Shares
issued under the Plan shall bear such restrictive legends as the Committee deems
necessary to reflect transfer restrictions applicable thereto.

      (l) Fractional Shares. No fractional Ordinary Shares shall be distributed
under the Plan and, instead, the Fair Market Value of such fractional Ordinary
Share shall be distributed in cash, with the Fair Market Value determined as of
the date the fractional Ordinary Share would otherwise have been distributable.

                                      -8-
<PAGE>
      (m) Relationship to Other Benefits. No payment under the Plan shall be
taken into account in determining any benefits under any other benefit plan for
Directors of the Company except as otherwise specifically provided therein.

      (n) Expenses. The expenses of administering the Plan shall be borne by the
Company.

      (o) Titles and Headings. The titles and headings of the sections in the
Plan are for convenience of reference only, and in the event of any conflict,
the text of the Plan, rather than such titles or headings shall control.

9.    Changes in Capital Structure

      Options and RSUs under the Plan shall be subject to adjustment or
substitution, as determined by the Committee in its sole discretion, as to the
number, price or kind of shares or other consideration subject to such Options
or RSUs or as otherwise determined by the Committee to be equitable (i) in the
event of changes in the outstanding Ordinary Shares or in the capital structure
of the Company, by reason of share dividends, share splits, recapitalizations,
reorganizations, amalgamations, mergers, consolidations, combinations,
exchanges, liquidations, spinoffs or other relevant changes in capitalization,
or any distributions to holders of Ordinary Shares other than a regular cash
dividend, occurring after the date of grant of any such Options or RSUs or (ii)
in the event of any change in applicable laws or any change in circumstances
which results in or would result in any substantial dilution or enlargement of
the rights granted to, or available for, Directors in the Plan, or which
otherwise warrants equitable adjustment because it interferes with the intended
operation of the Plan. In addition, in the event of any such adjustment or
substitution, the aggregate number and class of securities available under the
Plan shall be appropriately adjusted, as determined by the Committee in its sole
discretion. The decisions of the Committee regarding any such adjustment or
substitution shall be final, binding and conclusive on all parties.

10.   Effect of Change in Control

      (a) Notwithstanding any provision in this Plan or any agreement relating
to an Option or RSU, in the event of a Change in Control as defined in paragraph
(3) or (4) of Section 2(b) hereof in connection with which the holders of
Ordinary Shares receive shares of common stock that are registered under Section
12 of the Exchange Act, (1) all outstanding Options shall immediately become
exercisable in full and (2) all outstanding RSUs shall be settled at the time of
such Change in Control and there shall be substituted for each Ordinary Share
available under this Plan, whether or not then subject to an outstanding Option
or RSU, the number and class of shares into which each outstanding Ordinary
Share shall be converted pursuant to such Change in Control. In the event of any
such substitution, the purchase price per Ordinary Share of each Option or RSU
shall be appropriately adjusted by the Committee (whose determination shall be
final, binding and conclusive), such adjustments to be made without an increase
in the aggregate purchase price, if any.

                                      -9-
<PAGE>
      (b) Notwithstanding any provision in this Plan or any agreement relating
to an Option or RSU, in the event of a Change in Control as defined in paragraph
(1) or (2) of Section 2(b) hereof, or in the event of a Change in Control as
defined in paragraph (3) or (4) of Section 2(b) hereof in connection with which
the holders of Ordinary Shares receive consideration other than shares of common
stock that are registered under Section 12 of the Exchange Act, each outstanding
Option and RSU shall be surrendered to the Company by the holder thereof, and
each such Option and RSU shall immediately be canceled by the Company, and the
holder shall receive, within ten days of the occurrence of a Change in Control,
a cash payment from the Company in an amount equal to the number of Ordinary
Shares then subject to such Option or RSU, multiplied by the excess, if any, of
the greater of (A) the highest per share price offered to shareholders of the
Company in any transaction whereby the Change in Control takes place or (B) the
Fair Market Value of an Ordinary Share on the date of occurrence of the Change
in Control, over the purchase price per Ordinary Share subject to the Option or
RSU (which purchase price shall be assumed to be zero for the purpose of
calculating the value of RSUs).

11.   Nonexclusivity of the Plan

      The adoption of this Plan by the Board shall not be construed as creating
any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable.

12.   Amendments and Termination

      The Board may at any time terminate the Plan. In addition to the
adjustments and changes to Options and RSUs which may be made pursuant to
Sections 9 and 10 hereof, with the express written consent of an individual
Director, the Committee may cancel or reduce or otherwise alter the Director's
outstanding Options or RSUs. The Board may, at any time, or from time to time,
amend or suspend and, if suspended, reinstate, the Plan in whole or in part.
Notwithstanding anything herein which could be deemed to be to the contrary, the
Board may not take any action, including any amendment or termination of the
Plan, which shall impair to any extent the rights of a Director in respect of
Options or RSUs previously granted to a Director without the written consent of
such Director, except as expressly provided in Section 10 hereof. Except as
provided in Section 9, the Board may not, without approval of the shareholders
of the Company, increase the aggregate number of Ordinary Shares issuable under
the Plan.

                                      -10-

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