Document:

Exhibit 10.1

 

 

SECOND AMENDED AND
RESTATED EMPLOYMENT AGREEMENT

 

THIS SECOND AMENDED AND RESTATED
EMPLOYMENT AGREEMENT is effective as of March 10, 2008 (“Effective Date”) by and between LIPID SCIENCES, INC., a
Delaware corporation (the “Company”), and
S. LEWIS MEYER, Ph.D., an individual (the “Employee”) and
amends and restates in its entirety that certain Amended and Restated
Employment Agreement of March 1, 2007 by and between the Company and
Employee.  The Company and the Employee
are each sometimes referred to as a “Party” and together as the “Parties.”

 

W I T N E S S E T H:

 

WHEREAS, the Parties previously entered into an
Amended and Restated Employment Agreement dated as of March 1, 2007
pursuant to which the Company agreed to employ Employee and Employee agreed to
be employed by the Company pursuant to certain terms and conditions; and

 

WHEREAS, the Company desires to continue to employ the
Employee in the manner hereinafter specified and to make provision for payment
of reasonable compensation to the Employee for such services, and the Employee
is willing to be employed by the Company to perform the duties incident to such
employment upon the terms and conditions hereinafter set forth; and

 

WHEREAS, the Parties desire to enter into this
Agreement as of the Effective Date setting forth the terms and conditions of
the continued employment relationship of the Employee with the Company during
the Term (as hereinafter defined).

 

NOW, THEREFORE, in consideration of the foregoing
premises, the mutual covenants, terms and conditions set forth herein, and
other valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:

 

1.                                      EMPLOYMENT AND DUTIES

 

(a)           General.  Effective as of the Effective Date, the
Company hereby continues to employ the Employee as Chief Executive Officer and
President of the Company and the Employee agrees upon the terms and conditions
herein set forth to continue to be employed by the Company.  The Employee shall diligently perform all of
the duties normally accorded to such position and shall report directly to the
Board of Directors of the Company (the “Board”).

 

(b)           Services.  During the Term, the Employee shall well and
faithfully serve the Company, and shall devote substantially all of his
business time and attention to the performance of the duties of such employment
and the advancement of the best interests of the 

 

 

Company and shall not,
directly or indirectly, render services to any other person or organization for
which he receives compensation without the prior written approval of the
Board.  No such approval shall be
required in connection with services the Employee performs with respect to
other persons and entities, including, but not limited, to Lexrite Labs and the
Ambient Capital Group, provided that the aggregate amount of time spent on
these services does not exceed a maximum of eight hours per week and that such
services do not contravene the provisions of Section 5 hereof.  The Employee hereby agrees to refrain from
engaging in any activity that does, shall or could reasonably be deemed to
conflict with the best interests of the Company.

 

(c)           Location of Employment.  The Employee’s place of employment shall be
at the office of the Company located in Pleasanton, California, but the
Employee shall travel to the extent and to the places necessary for the
performance of his duties to the Company.

 

2.                                      TERM OF EMPLOYMENT

 

The term of the Employee’s employment under this
Agreement shall begin as of the Effective Date written above and continue until
April 14, 2009 (the “Term”).

 

3.                                      COMPENSATION AND OTHER
BENEFITS

 

Subject to the provisions of this Agreement including
without limitation the termination provisions contained in Section 4, the
Company shall pay and provide the following compensation and other benefits to
the Employee during the Term as compensation for all services rendered
hereunder:

 

(a)           Salary.  The Company shall continue to pay to the
Employee a salary (the “Salary”) at a
rate of $290,000 per annum, payable to the Employee in accordance with the
normal payroll practices of the Company as are in effect from time to
time.  The amount of the Salary shall be
reviewed annually by the Compensation Committee of the Board and may be
increased on the basis of the review.

 

(b)           Annual Performance Bonus.  The Employee shall be eligible to earn an
annual discretionary cash bonus (the “Annual Bonus”)
in an amount and subject to such other terms and conditions, including
performance objectives, as are determined, by the Board.

 

(c)           Expenses.  The Company shall pay or reimburse the
Employee for all reasonable out-of-pocket expenses incurred by the Employee in
connection with his employment hereunder upon submission of appropriate
documentation or receipts in accordance with the policies and procedures of the
Company as are in effect from time to time. 
No expense payment or reimbursement under this Section 3(d) shall
be “grossed up” or increased to take into account any tax liability incurred by
the Employee as a result of such payment or reimbursement.

 

(d)           Retirement, Welfare and Fringe
Benefits.  The Employee shall be
eligible to participate in the retirement, medical, disability and life
insurance plans applicable to senior officers of the Company generally in accordance
with the terms of such plans as in effect from time to time.  The foregoing shall not be construed to limit
the ability of the Company or any of its affiliates to amend, modify or
terminate any such benefit plans, policies or programs at any time and from
time to time.

 

2

 

(e)           Vacation.  The Employee shall be entitled to annual
vacation in accordance with the Company’s policies applicable to senior
officers of the Company generally as are in effect from time to time.

 

4.                                      TERMINATION OF
EMPLOYMENT

 

Subject to the notice and other provisions of this Section 4,
the Company shall have the right to terminate the Employee’s employment
hereunder, and the Employee shall have the right to resign, at any time for any
reason or for no stated reason.

 

(a)           Termination for Cause or
Resignation.  (i) If, prior to
the expiration of the Term, the Employee’s employment is terminated by the
Company for “Cause” (as
hereinafter defined) or if the Employee resigns from his employment hereunder,
the Employee shall be entitled to payment of (A) his Salary accrued up to
and including the date of termination or resignation, and (B) any
unreimbursed expenses.  Except to the
extent required by the terms of the benefits provided under Section 3(e) or
applicable law, the Employee shall have no right under this Agreement or
otherwise to receive any other compensation or to participate in any other
plan, program or arrangement after such termination or resignation of
employment with respect to the year of such termination or resignation and
later years.

 

(ii)           Termination for “Cause” shall mean a
termination of the Employee’s employment with the Company because of (A) a
plea of guilty or nolo contendere
to, or conviction for, the commission of a felony offense by the Employee; (B) the
involvement by the Employee as a party to any litigation or regulatory
proceeding or in any other circumstance known to the general public that, in
the good faith determination of the Board, is reasonably certain to subject the
Employee, the Company or its affiliates to disrepute, ridicule, contempt or
scandal or that is reasonably certain to reflect unfavorably upon the
reputation of the Employee, the Company or its affiliates or the Company’s
products or technologies; (C) the willful and continued failure to perform
in any material respect the Employee’s duties; (D) an intentional act of
fraud, embezzlement, theft or a material and dishonest act against the Company
or its affiliates; or (E) a material breach by the Employee of the terms
and provisions of the Agreement.

 

(iii)          Termination of the Employee’s
employment for Cause shall be communicated by delivery to the Employee of a
written notice from the Company stating that the Employee will be terminated for
Cause, specifying the particulars thereof and the effective date of such
termination.  In the cases of Sections
4(a)(ii)(B), 4(a)(ii)(C) and 4(a)(ii)(E), the Employee shall have thirty
(30) business days from the date of receipt of such notice to effect a cure of
the actions constituting Cause, or to effect a cure of the adverse effect such
actions.  Upon cure or correction thereof
by the Employee to the reasonable satisfaction of the Company, the action shall
no longer constitute Cause for purposes of this Agreement.  The date of a resignation by the Employee
shall be the date specified in a written notice of resignation from the
Employee to the Company.  The Employee
shall provide at least 90 days’ advance written notice of his resignation.

 

3

 

(b)                                 Termination without Cause.

 

(i)            If,
prior to or at any time following the expiration of the Term, the Company
terminates the Employee’s employment for any reason other than Disability or
Cause (such termination or resignation being hereinafter referred to as a “Termination without Cause”), the Employee shall be entitled
to (A) payment of his Salary accrued up to and including the date of such
Termination without Cause, (B) payment of any unreimbursed expenses, and (C) severance,
subject to the Employee’s execution and delivery of a release in the form then
deemed appropriate by the Company and in exchange for consulting services of
the Employee, consisting of (1) continuation of his Salary, at the rate in
effect on the date of the Termination without Cause, for 12 months commencing
on the date next following the date of the Termination without Cause (the “Severance Period”) and (2) continued participation on
the same terms and conditions as are in effect immediately prior to the
Termination without Cause in the Company’s health and medical plans provided to
the Employee pursuant to Section 3(e) above at the time of such
Termination without Cause through the expiration of the Severance Period, or
until the Employee becomes eligible to participate in a subsequent employer’s
benefit plan, whichever occurs first. 
For the avoidance of doubt, Employee is entitled to the benefits of
subsections (A), (B) and (C) herein if Employee’s employment is
terminated without Cause at any time on or after the Effective Date.  Anything herein to the contrary
notwithstanding, the Company shall have no obligation to continue to maintain
during the Severance Period any plan, program or level of benefits solely as a
result of the provisions of this Agreement, but this provision shall apply with
respect to any substitute or replacement plan.

 

(ii)           The date of termination of employment
without Cause shall be the date specified in a written notice of termination to
the Employee. For the avoidance of doubt, Employee’s employment will continue
until the date specified in the written notice of termination to the Employee.

 

(c)           Termination Due to Disability.  In the event of the Employee’s Disability,
the Company shall be entitled to terminate his employment.  In the case that the Company terminates the
Employee’s employment due to Disability, the Employee shall be entitled to his
Salary up to and including the date of termination as well as any unpaid
expense reimbursements.  As used in this Section 4(c),
the term “Disability” shall mean the Company’s
determination that due to physical or mental illness or incapacity, whether
total or partial, the Employee is substantially unable to perform his duties
hereunder for a period of 90 consecutive days or shorter periods aggregating 90
days during any period of 180 consecutive days.

 

(d)           Death.  Except as provided in this Section 4(d),
no Salary or benefits shall be payable under this Agreement following the date
of the Employee’s death.  In the event of
the Employee’s death, any Salary earned by the Employee up to the date of
death, as well as any unreimbursed expenses, shall be paid to the Employee’s
estate or Employee’s named beneficiary within a reasonable period following his
death.

 

5.                                      PROTECTION OF THE COMPANY’S
INTEREST

 

(a)           Employee Confidential Information
and Invention Agreement.  The
Employee hereby acknowledges that he has previously executed and delivered to
the Company 

 

4

 

the Company’s Employee Confidential
Information and Invention Agreement (the “Confidentiality Agreement”),
which is attached hereto as Annex A.  The
Employee hereby acknowledges and understands that the provisions of the
Confidentiality Agreement are incorporated into this Agreement.

 

(b)                                 Protection of Trade Secrets;
Non-Solicitation.

 

(i)            The Employee acknowledges that in
the course of his employment with the Company, he has and will in the course of
his continued employment with the Company become familiar with the trade
secrets of the Company and its affiliates and with other Confidential
Information (as defined in the Confidentiality Agreement) concerning the
business of the Company and its affiliates and that his services have been and
will be of special, and unique and extraordinary value to the Company and its
affiliates.  Because of the foregoing and
in further consideration of the compensation and other benefits to be provided
to the Employee hereunder, the Employee hereby agrees that, during the Term,
and at any time thereafter, he shall not, directly or indirectly, use trade
secrets (as such term is defined in Section 3426(1)(d) of the Uniform
Trade Secrets Act) of the Company or its affiliates or Confidential Information
or otherwise engage in unfair competition against the Company or any of its
affiliates.

 

(ii)           During the Term, and continuing
through the first anniversary of the termination date of the Employee’s
employment for any reason (the “Restricted Period”),
the Employee shall not directly or indirectly through another person or entity
induce or attempt to induce any customer, supplier, licensee, licensor,
franchisee or other business relation of the Company or any such affiliate that
is within any geographical area in which the Company or its affiliates engage
or plan to engage in such businesses to cease doing business with the Company
or such affiliate or in any way interfere with the relationship between any
such customer, supplier, licensee or business relation and the Company or any
such affiliate.

 

(c)           Extension of Time of Restrictions.  The Restricted Period shall be extended by
the length of any period during which the Employee is in breach of the
restrictions set forth in Section 5(b).

 

(d)           Non-Disparagement.  The Employee agrees that at any time during
his employment with the Company or at any time thereafter, the Employee shall
not make, or cause or assist any other person to make, any statement or other
communication which impugns or attacks, or is otherwise critical of, the
reputation, business or character of the Company, any subsidiary or any of
their respective officers, directors, employees, products or services.

 

(e)           Enforcement.  The Employee hereby acknowledges that he has
carefully reviewed the provisions of this Agreement and agrees that the provisions
are fair and equitable, and that they are necessary and reasonable in order to
protect the Company and its affiliates in the conduct of their business.  However, in light of the possibility of
differing interpretations of law and change in circumstances, the parties
hereto agree that if any one or more of the provisions of this Section 5
(including any provision contained in the Confidentiality Agreement) is
determined by a court or other tribunal of competent jurisdiction to be
invalid, void or unenforceable under circumstances then existing, the parties
hereto agree that the maximum 

 

5

 

period, scope or
geographical area reasonable or enforceable under such circumstances shall be
substituted for the stated period, scope or area.

 

(f)            Remedies.  The Employee acknowledges that the Company
has a compelling business interest in preventing unfair competition stemming
from the intentional or inadvertent use or disclosure of the Company’s
confidential and proprietary information, including trade secrets of the
Company.  The Employee further
acknowledges and agrees that damages for a breach or threatened breach of any
of the covenants set forth in this Section 5 (including any provision
contained in the Confidentiality Agreement) will be difficult to determine and
will not afford a full and adequate remedy, and therefore agrees that the
Company, in addition to seeking actual damages in connection therewith and the
termination of the Company’s obligations in Section 4(b), may seek
specific enforcement of any such covenant in any court of competent
jurisdiction, including, without limitation, by the issuance of a temporary or
permanent injunction without the necessity of showing any actual damages or
posting any bond or furnishing any other security, and that the specific
enforcement of the provisions of this Agreement will not diminish the Employee’s
ability to earn a livelihood or create or impose upon the Employee any undue
hardship. The Employee also agrees that any request for such relief by the
Company shall be in addition to, and without prejudice to, any claim for
monetary damages that the Company may elect to assert.

 

6.                                      GENERAL PROVISIONS

 

(a)           No Other Severance Benefits.  Except as specifically set forth in this
Agreement, the Employee covenants and agrees that he shall not be entitled to
any other form of severance benefits from the Company, including, without
limitation, benefits otherwise payable under the Company’s regular severance
policies, if any, in the event his employment hereunder ends for any reason
and, except with respect to obligations of the Company expressly provided for
herein, the Employee unconditionally releases the Company and its subsidiaries
and affiliates, and their respective directors, officers, employees and
stockholders, or any of them, from any and all claims, liabilities or
obligations under any severance arrangements of the Company or any of its
subsidiaries or affiliates.

 

(b)           Tax Withholding.  All amounts paid to Employee hereunder shall
be subject to all applicable federal, state and local wage withholding.

 

(c)           Notices.  Any notice hereunder by either party to the
other shall be given in writing by personal delivery, or certified mail, return
receipt requested, or (if to the Company) by facsimile, in any case delivered
to the applicable address set forth below:

 

	
   

  	
  (i)

  	
   

  	
  To the Company:

  	
   

  	
  Lipid
  Sciences, Inc.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  7068 Koll Center
  Parkway, Suite 401

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Pleasanton, CA
  94566-3111

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Facsimile No.:
  (925) 249-4040

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Attn: Chairman
  of the Board of Directors

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  With a copy to:

  	
   

  	
  Allen Matkins Leck Gamble Mallory & 

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Natsis LLP

  

 

6

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
  Three Embarcadero Center, Suite 1200

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  San Francisco, CA 94111

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Fax: (415) 837-1516

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Attn: Roger S. Mertz, Esq.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (ii)

  	
   

  	
  To the Employee:

  	
   

  	
  S. Lewis Meyer, Ph.D.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Last known
  residential address

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  and fax number
  on file with the Company

  

 

or to such other persons
or other addresses as either party may specify to the other in writing.

 

(d)           Representation by the Employee.  The Employee represents and warrants that his
entering into this Agreement does not, and that his performance under this
Agreement and consummation of the transactions contemplated hereby will not,
violate the provisions of any agreement or instrument to which the Employee is
a party or any decree, judgment or order to which the Employee is subject, and
that this Agreement constitutes a valid and binding obligation of the Employee
in accordance with its terms.  Breach of
this representation will render all of the Company’s obligations under this
Agreement void ab initio.

 

(e)           Assignment; Assumption of
Agreement.  No right, benefit or
interest hereunder shall be subject to assignment, encumbrance, charge, pledge,
hypothecation or setoff by the Employee in respect of any claim, debt,
obligation or similar process.  The
Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
or assets of the Company to assume expressly and to agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place.

 

(f)            Amendment.  No provision of this Agreement may be
amended, modified, waived or discharged unless such amendment, modification,
waiver or discharge is agreed to in writing and signed by the parties.  No waiver by either party hereto at any time
of any breach by the other party hereto of, or compliance with, any condition
or provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same
or at any prior or subsequent time.

 

(g)           Severability.  If any term or provision hereof is determined
to be invalid or unenforceable in a final court or arbitration proceeding, (i) the
remaining terms and provisions hereof shall be unimpaired and (ii) the
invalid or unenforceable term or provision shall be deemed replaced by a term
or provision that is valid and enforceable and that comes closest to expressing
the intention of the invalid or unenforceable term or provision.

 

(h)           Governing Law.  This Agreement shall be governed by and
construed in accordance with the laws of the State of California (determined
without regard to the choice of law provisions thereof).

 

(i)            Entire Agreement.  This Agreement and the Confidentiality
Agreement contain the entire agreement of the Employee, the Company and any predecessors
or affiliates thereof with respect to the subject matter hereof and all prior
agreements and negotiations are superceded hereby.

 

7

 

(j)            Counterparts.  This Agreement may be executed by the parties
hereto in counterparts, each of which shall be deemed an original, but both
such counterparts shall together constitute one and the same document.

 

(k)           Survival.  The provisions of Sections 4 and 5
(including the provisions of the Confidentiality Agreement) shall survive the
termination of this Agreement.

 

IN
WITNESS WHEREOF,
the parties have executed this Agreement, effective as of the day and year
first written above.

 

	
   

  	
  LIPID
  SCIENCES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sandra Gardiner

  
	
   

  	
   

  	
  Name: Sandra Gardiner

  
	
   

  	
   

  	
  Title: Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EMPLOYEE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ S. Lewis Meyer, Ph.D.

  
	
   

  	
   

  	
  S. LEWIS MEYER, Ph.D.

  

 

8Exhibit 10.1

 

SERVICE AGREEMENT

 

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

 

W  I  T
N  E  S  S  E  T  H:

 

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

 

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

 

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

 

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

 

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

 

 

3.                       Duties.

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

 

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

2

 

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

 

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

 

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

 

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

 

3

 

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

 

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

 

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

 

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

 

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

4

 

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

 

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

 

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

 

6.                       Confidentiality.

 

                                (a)                                  The Executive shall not, either during the continuance of
his employment hereunder (otherwise than in the proper performance of his
duties hereunder) or at any time after the termination thereof, divulge to any
person whomsoever and shall use his reasonable endeavors to prevent the
publication or disclosure of any trade secret or other confidential information
concerning the business, finances, accounts, dealings, transactions or affairs
of the Company or any Group Company or of any of their respective clients
entrusted to him or arising or coming to his knowledge during the course of his
employment hereunder or otherwise; provided that
the foregoing shall not prevent or limit the Executive from complying with any
applicable law or with the directive of any court or administrative body or
agency having the legal authority to compel testimony from or the production of
documents by the Executive.  The 

5

 

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

 

                                (b)                                 The Executive shall upon the termination of his employment
hereunder immediately deliver up to the Company all fee schedules, lists of
clients, correspondence and other documents, papers and property belonging to
the Company or any Group Company or related to any of the matters referred to
in Section 6(a) above which may have been prepared by him or have
come into his possession in the course of his employment hereunder and shall
not retain any copies thereof.

 

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

 

                                (a)                                  the Executive’s death;

 

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

 

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

6

 

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

 

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

 

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

 

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

 

7

 

 

8.                       Termination Payments and Benefits.

 

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

 

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

8

 

9.                       Non-Competition
and Non-Solicitation.

 

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

 

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

 

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

 

9

 

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

 

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

 

                                (c)                                  If any provision contained in
this Section 9 shall for any reason be held invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, but such provision
shall be amended or deemed amended to apply as to such maximum time and to such
maximum extent as determined to be valid, binding and enforceable.  The provisions of this Section 9 shall
survive any expiration or termination this Agreement.  The Executive acknowledges and agrees that
the Company’s remedies at law for a breach or threatened breach of any of the
provisions of this Section 9 would be inadequate and, in recognition of
this fact, agrees that, in the event of such breach or threatened breach, in
addition to any remedies at law, the Company, without posting any bond, shall
be entitled to obtain equitable relief in the form of specific performance,
temporary 

10

 

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

 

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

 

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

 

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

11

 

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

 

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

 

13.                 Miscellaneous.

 

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

 

12

 

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

 

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

 

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

 

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

 

                                (f)                                    Interpretation.

 

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

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

13

 

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

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

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

 

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

 

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

 

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

 

14

 

                                If to the Executive:                                             Michael
S. Paquette

 44 South Main Street

 Hanover, New Hampshire 03755

 

                                If to the Company:                                             Montpelier Re Holdings

                                                                                                                                                                                 Montpelier
House

                                                                                                                                                                                 94
Pitts Bay Road

                                                                                                                                                                                 Pembroke,
Bermuda HM08

 

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

 

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

 

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

 

15

 

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

 

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

 

 

	
  MONTPELIER RE HOLDINGS, LTD.

  	
   

  	
  EXECUTIVE

  

 

 

	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   /s/ CHRISTOPHER L. HARRIS

  	
  By:

  	
   /s/ MICHAEL S. PAQUETTE

  	 

	
   

  	
  Christopher L. Harris,
  President

  	
   

  	
  Michael S. Paquette

  

 

16

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