Document:

SERVICE AGREEMENT

THIS AGREEMENT is made as of September 8, 2004

BETWEEN:

MONTPELIER  REINSURANCE LTD., whose registered office is situate at Crown House,
4 Par-la-Ville Road, Hamilton Bermuda (the "Company"); and

KERNAN V. OBERTING (THE "EXECUTIVE"), whose address is Heron's Watch, 164  South
Road, Paget, Bermuda.

WHEREAS the  parties  desire to record the terms and  conditions  upon which the
Executive is employed by the Company.

NOW  THEREFORE in  consideration  of the mutual  covenants  and promises  herein
contained

IT IS HEREBY AGREED as follows:

1.       INTERPRETATION

1.1  In this Agreement unless the context otherwise requires the following words
     and expressions shall have the following meanings:

     THIS  "AGREEMENT"  means this service  agreement and includes all schedules
     hereto;

     THE "BOARD" means the board of directors of the Company;

     THE "COMPANIES ACT" means the Companies Act 1981;

     "GROUP COMPANY" means and includes any company which is from time to time a
     holding  company  (as  defined  by  Section 86 of 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;
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     THE "PARTIES" means the parties to this Agreement;

1.2  In this Agreement unless the context otherwise requires:

         1.2.1    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);
                  and

         1.2.2    references to clauses and schedules are  references to clauses
                  hereof and  schedules  hereto;  references to  sub-clauses  or
                  paragraphs  are,  unless  otherwise   stated,   references  to
                  sub-clauses  of the clause or  paragraphs  of the  schedule in
                  which the reference appears;

         1.2.3    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; and

         1.2.4    references to persons shall include  companies,  partnerships,
                  associations  and bodies of persons,  whether  incorporated or
                  unincorporated.

2. APPOINTMENT

         Subject to, and  conditional  upon,  initial and  continued  permission
         being  granted to work and reside in Bermuda by the Bermuda  Department
         of  Immigration  of the Ministry of Home  Affairs,  the Company  hereby
         appoints the  Executive  and the  Executive  hereby agrees to serve the
         Company as Chief Financial Officer and Executive Vice President subject
         to the terms and conditions hereinafter contained.

3. TERM

         The  appointment of the Executive  hereunder  shall begin on October 1,
         2004 or as soon thereafter as the Executive has received  approval from
         the Bermuda  Department of Immigration  and shall  continue  unless and
         until   terminated  in  accordance  with  the  provisions   hereinafter
         contained.

4. DUTIES AND RESPONSIBILITIES

         During the continuance of his employment hereunder:

<PAGE>

4.1      The  Executive  shall  perform such duties and exercise  such powers in
         relation to the business of the Company or of any Group  Company as may
         from time to time  reasonably  be  assigned  to or vested in him by the
         Board  and shall  give to the  Board  such  information  regarding  the
         affairs of the Company and any Group Company as it shall require and at
         all times and in all respects conform to and comply with the reasonable
         directions  and  regulations  made by 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 Companies as the Board may reasonably require.

4.2      The Executive shall well and faithfully serve the Company and the Group
         Companies  and use his best  endeavours  to promote  develop and extend
         their  businesses and interests giving at all times the full benefit of
         his knowledge, expertise, technical skill and ingenuity.

                                      -2-
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4.3      The  Executive  shall  abide by all  Company  policies  and  procedures
         contained in the Company's  Employee  Handbook,  the terms of which are
         incorporated  by  reference in this  Agreement  and a copy of which has
         been given to the Executive. The Company reserves the right to vary the
         Employee Handbook from time to time

4.4      The  Executive  shall not without the consent of the Board  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

         4.4.1 he may (but without  prejudice to clause 4.2) 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); and

         4.4.2    he may provide limited  services for White Mountains  Capital,
                  Inc, or its affiliates  PROVIDED,  HOWEVER,  that (i) any such
                  work shall not interfere with his performance of his duties to
                  the Company under this  Agreement,  (ii) any services shall be
                  fully  disclosed  to the  Company,  and (iii) the  Company may
                  require him to cease work on any project at any time, PROVIDED
                  FURTHER,  HOWEVER,  that the Company may terminate this clause
                  4.4.2 at any time.

4.5      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 12 months  immediately  preceding the  termination of
         his employment,  provided always that the Company shall continue to pay
         the Executive's salary and contractual  benefits for such period.  This
         Clause 4.5 shall not affect the general right of the Company to suspend
         the Executive for good cause.

5. REMUNERATION AND REIMBURSEMENT

5.1      The Company shall pay to the Executive by way of  remuneration  for his
         services  hereunder  a  salary  at the  rate  (subject  as  hereinafter
         provided) of  US$300,000  per annum.  Such salary shall be inclusive of
         any  director's  fees  payable to the  Executive  by the Company or any
         Group Company and  accordingly  either the Executive  shall pay over or
         procure  to be paid  over to the  Company  all such  fees  received  or
         receivable by him or his  remuneration  hereunder  shall be reduced pro
         tanto. The said salary shall be payable by equal monthly instalments in
         arrears on the day appointed by the Board for the payment of employees'
         salaries or pro rata where the  Executive  is only  employed  hereunder
         during part of the month. The  Compensation  Committee of the Company's
         Board, subject to ratification by the Board, may increase or reduce the
         Executive's  salary on each  anniversary of the date of this Agreement,
         with the first such review to take place on December 31, 2005,  but not
         below the amount of the Executive's starting salary.

                                      -3-
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5.2      The Company shall also pay to the Executive all  reasonable  travelling
         hotel and other  out-of-pocket  expenses which are properly incurred by
         him in or about the  performance of his duties  hereunder and for which
         vouchers (if so required) are provided to the  reasonable  satisfaction
         of the Board.

5.3      The Company will pay for ten  business-class  round-trip flights to the
         East Coast of the United  States  per annum for the  Executive  and his
         household  (or any travel for the  Executive  and his  household to the
         United States up to the annual equivalent cost to the company), outside
         of any normal business travel that may be required, plus a tax gross-up
         payment to  reimburse  the  Executive  for any income taxes paid by the
         Executive on the cost of flights covered by this clause 5.3.

5.4      The Executive shall be entitled to participate in:

         (i)   the Company's Major Medical, Dental and Visions Plans and
               other insurance plans from time to time subject to the
               provisions of the Company's insurance plans in effect at the
               time;

         (ii)  a suitable  pension  arrangement  in accordance  with Bermuda and
               United States law  ("Pension  Plan") from time to time subject to
               the  provisions  of such  pension  plan in  effect  at the  time,
               PROVIDED,  HOWEVER,  that in the event the Executive should leave
               the  Company  of his own  accord  within 12 months of the date of
               this   Agreement   first   written  above  he  will  forfeit  all
               contributions  to the  Pension  Plan made by the  Company  on his
               behalf;

         (iii) the Company's Annual Bonus Plan and Long-Term  Incentive Plan and
               any other  incentive  plan for which the  Executive  is eligible,
               from  time to time  subject  to the  provision  of such  plans in
               effect at the time;

          (iv) Reasonable tax advisory services at the Company's cost; and

         (iii) Any other  employment  benefit  plans or  arrangements  generally
               available  to  Executives  in  the  Company  of  the  Executive's
               stature,  to the extent not  duplicative  of  benefits  otherwise
               provided by the Company.

         The  details  of  these  benefits,  plans  and  schemes  are set out in
         separate  documents,  copies of which will be provided on request.  The
         benefits, plans and schemes may be changed at the Company's discretion.

                                      -4-
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5.5  During the Executive's appointment under this Agreement, he shall receive a
     housing  allowance of USD$12,000 per month,  plus a tax gross-up payment to
     reimburse  the Executive for any income taxes paid by the Executive on such
     allowance as well as any income taxes paid by the Executive on expenses set
     forth in clauses 5.5.1 and 5.5.2.  In addition to the  Executive's  housing
     allowance:

         5.5.1    the Company will provide relocation and furnishing expenses in
                  an amount up to $50,000, provided that the expenses shall have
                  been  approved  in advance by the  Company's  Chief  Executive
                  Officer; and

         5.5.2    upon  termination  of this  Agreement the Company will provide
                  for the  relocation  of the  Executive  and his  family to the
                  United States as set forth in clause 10.2(a).

5.6  The  Executive  agrees  that the  Company  may deduct from his pay any sums
     which the Executive may owe the Company including,  without limitation, any
     overpayments  or loans made to him by the Company or losses suffered by the
     Company as a result of the Executive's breach of this Agreement.

                                      -5-
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6. NORMAL HOURS AND HOLIDAYS

         The  Executive  shall conform to such hours of work as may from time to
         time reasonably be required of him and shall not be entitled to receive
         any  additional  remuneration  for work  outside his normal  hours.  In
         addition to the usual public  holidays the Executive  shall be entitled
         without  loss of  remuneration  to 25 days  holiday  in each year to be
         taken at such time or times as may be approved  by the Chief  Executive
         Officer of the Company. Any entitlement to holiday remaining at the end
         of any year may be carried  forward to the next  succeeding year but no
         further.  The  entitlement to holiday (and on termination of employment
         holiday pay in lieu of holiday)  accrues pro rata throughout each year,
         provided that  fractions of days shall be  disregarded  in  calculating
         entitlement to holiday or payment in lieu of holiday.

7. CONFIDENTIALITY

7.1      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  determination  thereof  divulge to
         any  person  whomsoever  and shall  use his  reasonable  endeavours  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.

7.2      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 clause 7.1 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.

8. CHANGE OF STATUS

8.1      If,  before the  expiration or  determination  of this  Agreement,  the
         employment of the Executive  hereunder shall be terminated by reason of
         the liquidation of the Company or for the purpose of  reconstruction or
         amalgamation,  and he shall be offered  employment  with any concern or
         undertaking resulting from such reconstruction or amalgamation on terms
         and conditions not less favourable (financially and in personal status)
         than the terms of this  Agreement,  then he shall have no claim against
         the Company in respect of the  termination of his employment  hereunder
         save in respect of accrued benefits.

8.2      Unless this agreement has  been  terminated  under clause 9, if for any
         reason the Executive shall either:

         8.2.1    at the Company's request  resign as a director of  the Company
                  or any Group Company; or

         8.2.2    be removed from office as a director of  the  Company  or  any
                  Group Company;

         then,  notwithstanding his so ceasing to be a director,  this Agreement
         shall not automatically  terminate and thereupon (and without any claim
         against the Company in respect of such loss of office) the  Executive's
         employment  hereunder  shall continue for the remaining  period of this
         Agreement and all the terms and conditions of this Agreement shall with
         the necessary variations apply to the Executive's employment but in any
         event, the Executive's basic annual salary will not at any time be less
         than the Executive's starting salary under this agreement.

                                      -6-
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9. TERMINATION

9.1      Without  prejudice  to clauses 9.2 or 9.4 either the  Executive  or the
         Company may terminate  this  Agreement by giving to the other party not
         less than 6 months'  written  notice from the  Executive to the Company
         and not less than 12 months'  written  notice  from the  Company to the
         Executive or if the  Executive is  terminated by the Company by payment
         in lieu of notice  of 12  months  salary  payable  in 12 equal  monthly
         instalments.  The  Company may require  that the  Executive  work for a
         portion of the notice  period  provided  that the Company shall pay the
         Executive in lieu of notice the balance of any such notice period.

9.2      This Agreement shall be subject to termination by the Company summarily

         9.2.1    if the  Executive's  application  for  permission  to work and
                  reside in Bermuda is refused or the  Executive's  work  permit
                  and/or  permission  to  reside  is  revoked,  and or a renewal
                  application is refused

         9.2.2    if the  Executive shall become of unsound mind or be or become
                  a patient for the purpose of any statute  relating to   mental
                  health;

         9.2.3    if the Executive  shall at any time be prevented by illness or
                  accident  from  performing  his  duties  for  a  period  of  6
                  consecutive months or if he shall be absent from his duties by
                  reason of illness or accident  for more than 180 working  days
                  in any  consecutive  twelve  months  (provided  that  any such
                  periods may be extended at the sole discretion of the Board);

         9.2.4    other than by written notice, if the Executive  terminates his
                  employment  for any  reason  prior to the  expiration  of this
                  Agreement  other than in accordance  with clause 9.1 or if the
                  Executive  shall  have  failed or  neglected  efficiently  and
                  diligently to discharge his duties hereunder having received a
                  written  warning  for the  misconduct  within  the  previous 6
                  months  or shall  have  committed  any  serious  breach of his
                  obligations  hereunder  or shall  have been  guilty of conduct
                  tending to bring  himself or the Company or any Group  Company
                  into disrepute or calculated or likely to affect prejudicially
                  the  interests  of the  Company or any Group  Company or shall
                  have  committed an act of bankruptcy  or  compounded  with his
                  creditors generally.

9.3      The  termination  by the  Company  of this  Agreement  shall be without
         prejudice  to any claim which the Company may have for damages  arising
         from  any  breach  thereof  by  the  Executive   giving  rise  to  such
         termination.

                                      -7-
<PAGE>

9.4      The normal  retirement  age for employees of the Company is 60 years of
         age. The Executive's  Employment will terminate  automatically  without
         notice on his 60th birthday.

9.5      This Agreement shall not, save as  hereinbefore  set out in this Clause
         9, be subject to  termination  by notice or otherwise by the Company or
         by the Executive.

9.6      If the  Executive  shall be unable to  perform  his duties by reason of
         illness or other  incapacity  he shall  remain  entitled to receive his
         salary  payable  hereunder in full until this  Agreement is  terminated
         pursuant to this Clause 9.

9.7      After  notice of  termination  has been given by either party or if the
         Executive  seeks to resign  without  notice or by giving shorter notice
         than that  required  under this  Agreement  then  provided  the Company
         continues to pay the Executive the  contractual  benefits in accordance
         with this Agreement,  the Company has at its discretion,  the right for
         the notice  period or balance of the notice  period (the "Garden  Leave
         Period") then outstanding  until the termination date of this Agreement
         to:

         9.7.1    exclude the Executive from the Company's  premises and require
                  the Executive not to attend at the Company's premises; and/or

         9.7.2    require the Executive to carry out no duties; and/or

         9.7.3    require  the  Executive  not  to   communicate  or  deal  with
                  employees,    agents,    consultants,    clients    or   other
                  representatives of the Company;

         Provided always that the maximum permitted Garden Leave Period shall be
         six months.

10. CONSEQUENCE OF TERMINATION

10.1     Upon the termination of this Agreement howsoever arising, the Executive
         shall at any time or from time to time  thereafter  upon the request of
         the Company resign,  without claim for compensation for loss of office,
         as a director of the Company and such offices held by him in any of the
         Group Companies as may be so requested and should he fail to do so, the
         Company is hereby irrevocably  authorised to appoint some person in his
         name and on his behalf to sign and do any documents or things necessary
         or requisite to give effect thereto.

10.2     Notwithstanding  anything  else to the  contrary  herein,  should  this
         Agreement terminate:

         (a) pursuant to clause 9.1,  9.2.1,  9.2.2 or 9.2.3 then the  Executive
         shall be entitled to receive three months salary by way of repatriation
         expenses together with three months accommodation allowance at the rate
         set out in clause 5.5 and reimbursement of a one way business class air
         fare  for  himself  and his  family  to the  United  States,  PROVIDED,
         HOWEVER,  that such repatriation expenses shall not be payable pursuant
         to clause 9.2.1 if the Executive's  work permit or permission to reside
         is revoked or renewal  application is refused by the Bermuda Department
         of  Immigration  as a result of any  conviction  under  Bermuda  law or
         conduct by the Executive  amounting to a breach of this Agreement under
         clause 9.2.4;

         (b) pursuant to clause 9.2.2 or clause 9.2.3,  then the Executive shall
         continue to receive his salary for a period of 12 months  following the
         termination  of this  Agreement  and the Company  shall have no further
         obligations to the Executive  arising  hereunder  except as provided in
         clause 10.2(a);

                                      -9-
<PAGE>

         (c) pursuant to clause 9.2.4,  then all payments  under this  Agreement
         shall   immediately  cease  and  the  Company  shall  have  no  further
         obligations to the Executive arising hereunder.

11.      NON-COMPETITION

11.1     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 clause 4.4 he will not in Bermuda,  the United  States of
         America, the United Kingdom or the European Union:

         11.1.1   during the period of 12 months  following the  termination  of
                  his employment  hereunder (howsoever caused) either on his own
                  account or for any other person,  firm or company  directly or
                  indirectly  be engaged in or  concerned  with any  business or
                  undertaking which is engaged in or carries on in Bermuda,  the
                  United States of America,  the United  Kingdom or the European
                  Union  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,  PROVIDED,
                  HOWEVER,  that the Executive shall be permitted to provide the
                  limited services set forth in clause 4.4.2.

         11.1.2   During  the  period of 12  months  following  the  termination
                  aforesaid  either on his own account or for any other  person,
                  firm or company directly or indirectly solicit, interfere with
                  or  endeavour  to entice  away from the  Company  or any Group
                  Company the custom of any  person,  firm or company who at the
                  date  of  termination  aforesaid  or who in the  period  of 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.

         11.1.3   During  the  period of 12  months  following  the  termination
                  aforesaid  either on his own account or for any other  person,
                  firm or company solicit the services of or endeavour 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.

                                      -10-
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11.2     While the  restrictions  aforesaid are  considered by the Parties to be
         reasonable  in all the  circumstances  it is agreed that if any of such
         restrictions  shall,  taken together,  be adjudged to go beyond what is
         reasonable  in  all  the   circumstances  for  the  protection  of  the
         legitimate  interests of the Company or any Group  Company but would be
         adjudged  reasonable  if part of the wording  thereof  were  deleted or
         modified the said  restrictions  shall apply with such words deleted or
         modified.

11.3     The Executive hereby agrees that he will at the request and 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 the terms of such restrictions and
         provisions  will  not  be  more  onerous  than  the   restrictions  and
         provisions of this agreement.

12.      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  determination  of his  employment  hereunder  wrongfully
         represent himself as being employed by or connected with the Company or
         any Group Company.

13.      SCHEDULES

         The  provisions  set  out in any  schedule  hereto  shall  apply  as if
         incorporated in this Agreement.

14.      INTELLECTUAL PROPERTY

14.1     The Executive may make discover or create Intellectual  Property in the
         course of his duties  under  this  Agreement  and  agrees  that in this
         respect he has a special  obligation  to further the  interests  of the
         Company.

14.2     Subject to the  provisions  of the  Patents and Designs Act 1930 or any
         applicable Patents and design legislation and any applicable  Copyright
         legislation,  if at any time during his employment under this Agreement
         the  Executive  makes or  discovers  or  participates  in the making or
         discover of any Intellectual  Property  relating to or capable of being
         used in the  business  for the time being  carried on by the Company or
         any Group  Companies  full details of the  Intellectual  Property shall
         immediately  be  communicated  by him to the  Company  and shall be the
         absolute  property  of the  Company.  At the request and expense of the
         Company the Executive shall give and supply all such  information  data
         drawings  and  assistance  as may be requisite to enable the Company to
         exploit  the  Intellectual  Property  to the best  advantage  and shall
         execute  all  documents  and do all things  which may be  necessary  or
         desirable for obtaining patent or other protection for the Intellectual
         Property in such parts of the world as may be  specified by the Company
         and for vesting the same in the Company or as it may direct.

                                      -10-
<PAGE>

14.3     The Executive  irrevocably  appoints the Company to be his agent in his
         name and on his behalf to sign,  execute or do any such  instrument  or
         thing and  generally  to use his name for the  purpose of giving to the
         Company (or its  nominee)  or any third  party the full  benefit of the
         provisions  of this  clause.  A  certificate  in writing  signed by any
         director or the  secretary  of the Company that any  instrument  or act
         falls within the authority conferred by this clause shall be conclusive
         evidence that such is the case.

14.4     If the  Intellectual  Property  is not the  property of the Company the
         Company shall subject to the provisions of the any  applicable  Patents
         legislation  have the right to acquire  for itself or its  nominee  his
         rights in the Intellectual Property within 3 months after disclosure to
         the Company under clause 14.2 on fair and reasonable terms to be agreed
         or in the absence of agreement to be determined by a single  arbitrator
         who shall be agreed by the  parties  and in the  absence  of  agreement
         shall  be  appointed  by the  Appointment  Committee  of the  Chartered
         Institute of Arbitrators Bermuda Branch.

14.5     The  Executive  waives  all  such  moral  rights  as  may  exist  under
         applicable  law in  respect  of any acts of the  Company or any acts of
         third  parties  done with the  Company's  authority  in relation to any
         Intellectual Property which is the property of the Company by virtue of
         this clause.

14.6     Rights and obligations  under this clause shall continue in force after
         termination of this Agreement in respect of Intellectual  Property made
         during the  Executive's  Employment  under this  Agreement and shall be
         binding upon his representatives.

15.       DISCIPLINE AND GRIEVANCE PROCEDURES

         If the Executive has a grievance regarding the Employment he should, in
         the first instance, speak to the Chairman of the Company's Compensation
         and  Nominating  Committee.  If the  grievance  is not  resolved to his
         satisfaction,  he should then refer to the grievance procedure outlined
         in the Company's Employee Handbook,  which is incorporated by reference
         in this Agreement  pursuant to clause 4.3. All disciplinary  procedures
         applicable to the Executive are also outlined in the Company's Employee
         Handbook.

                                      -11-
<PAGE>

16.      DELEGATION

         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.

17.      NOTICES

         Notices may be given by either Party by pre-paid first class post or by
         hand  delivery  addressed  to the  other  Party  at (in the case of the
         Company) its  registered  office for the time being and (in the case of
         the Executive)  his last known  address.  Any such notice given by post
         shall be  deemed  to have  been  served  on the  second  week day after
         despatch  (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

18. MISCELLANEOUS

18.1     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.

18.2     If any of the clauses,  conditions,  covenants or  restrictions of this
         Agreement or any deed or document  emanating  from it shall be found to
         be void but  would  be  valid if some  part  thereof  were  deleted  or
         modified,  then such clause,  condition,  covenant or restriction shall
         apply with such deletion or modification as may be necessary to make it
         valid and effective.

18.3     This  Agreement  shall be  binding  and  enure for the  benefit  of the
         successors of the Parties but shall not be assignable.

18.4     This  Agreement  (together  with  any  documents  referred  to  herein)
         constitutes  the whole  agreement  between the Parties  relating to its
         subject matter.

18.5     The headings in this  Agreement are inserted for  convenience  only and
         shall not affect the construction of this Agreement.

18.6     This  Agreement  may be  executed  in  counterparts  each of which when
         executed  and  delivered  shall  constitute  an  original  but all such
         counterparts together shall constitute one and the same instrument.

18.7     No provision in this  Agreement may be amended unless such amendment is
         agreed to in writing,  signed by the Executive and by a duly authorised
         officer of the Company.  No waiver by either Party of any breach by the
         other Party of any  condition  or  provision  of this  Agreement  to be
         performed  by such other Party shall be deemed a waiver of a similar or
         dissimilar  condition  or  provision  at  the  same  or  any  prior  or
         subsequent  time.  Any  waiver  must be in  writing  and  signed by the
         Executive or a duly authorised officer of the Company,  as the case may
         be.

                                      -12-
<PAGE>

18.8     This  Agreement  shall be governed by and construed in accordance  with
         the laws of Bermuda and the Parties  hereby  irrevocably  submit to the
         non-exclusive jurisdiction of the courts of Bermuda.

IN WITNESS  WHEREOF,  the Parties have  executed  this  Agreement as of the date
first written above.

SIGNED by                                                       )
on behalf of Montpelier Reinsurance Ltd.                        )
in the presence of:                                             )

----------------------
Witness

SIGNED by _____________________                                 )
in the presence of:                                             )

----------------------
Witness

                                      -13-EXHIBIT 10.18

VERINT SYSTEMS INC.

2004 STOCK INCENTIVE COMPENSATION PLAN

	
  1.

  	
  Purposes of
  the Plan.

	
   
	
   

	
  The purposes
  of the Plan are to assist the Company, its Subsidiaries and Affiliates in
  attracting and retaining valued Directors, Employees and Consultants, to
  align their respective interests with stockholders’ interests through
  equity-based compensation and to permit the granting of awards that is
  intended to constitute performance-based compensation for certain executive
  officers under Section 162(m) of the Code.

	
   

	
  2.
	
  Definitions.

	
   
	
   

	
   
	
  2.1
	
  “Affiliate”
  means any entity other than the Subsidiaries in which the Company has a
  substantial direct or indirect equity interest, as determined by the Board.

	
   
	
   
	
   

	
   
	
  2.2
	
  “Award”
  means an award of Deferred Stock, Restricted Stock, Options or SARs under the
  Plan.

	
   
	
   
	
   

	
   
	
  2.3
	
  “Board”
  means the Board of Directors of the Company.

	
   
	
   
	
   

	
   
	
  2.4
	
  “Change in
  Control” means (i) the Board (or, if approval of the Board is not required as
  a matter of law, the stockholders of the Company) shall approve (a) any
  consolidation or merger of the Company in which the Company is not the
  continuing or surviving corporation or pursuant to which shares of Common
  Stock would be converted into cash, securities or other property, other than
  a merger of the Company in which the holders of Common Stock immediately
  prior to the merger have the same proportionate ownership of common stock of
  the surviving corporation immediately after the merger, or (b) any sale,
  lease, exchange or other transfer (in one transaction or a series of related
  transactions) of all, or substantially all, the assets of the Company or (c)
  the adoption of any plan or proposal for the liquidation or dissolution of
  the Company; (ii) any person (as such term is defined in Section 13(d) of the
  1934 Act), corporation or other entity other than the Company shall make a
  tender offer or exchange offer to acquire any Common Stock (or securities
  convertible into Common Stock) for cash, securities or any other
  consideration, provided that (a) at least a portion of such securities sought
  pursuant to the offer in question is acquired and (b) after consummation of
  such offer, the person, corporation or other entity in question is the
  “beneficial owner” (as such term is defined in Rule 13d-3 under the 1934
  Act), directly or indirectly, of 20% or more of the outstanding shares of
  Common Stock (calculated as provided in paragraph (d) of such Rule 13d-3 in
  the case of rights to acquire Common Stock); (iii) during any period of two
  consecutive years, individuals who at the beginning of such period
  constituted the entire Board ceased for any reason to constitute a majority
  thereof unless the election, or the nomination for election by the Company’s
  stockholders, of each new director was approved by a vote of at least
  two-thirds of the directors then still in office who were directors at the
  beginning of the period; or (iv) the occurrence of any other event the
  Committee determines shall constitute a “Change in Control” hereunder.

	
   
	
   
	
   

	
   
	
  2.5
	
  “Code” means
  the Internal Revenue Code of 1986, as amended.

	
   
	
   
	
   

	
   
	
  2.6
	
  “Committee”
  means the Board or the committee designated by the Board to administer the
  Plan under Section 4.  

	
   
	
   
	
   

	
   
	
  2.7
	
  “Common
  Stock” means the common stock of the Company, par value $.001 per share, or such
  other class or kind of shares or other securities resulting from the
  application of Section 10.

1

EXHIBIT 10.18

	
   
	
  2.8
	
  “Company”
  means Verint Systems Inc., a Delaware corporation, or any successor
  corporation.

	
   
	
   
	
   

	
   
	
  2.9
	
  “Consultant”
  means any person (other than an Employee or a Director) who is engaged by the
  Company, a Subsidiary or an Affiliate to render consulting or advisory
  services to the Company or such Subsidiary or Affiliate.

	
   
	
   
	
   

	
   
	
  2.10
	
  “Continuous
  Service” means that the provision of services to the Company or a Subsidiary
  or Affiliate in any capacity of Employee, Director or Consultant is not
  interrupted or terminated.  In
  jurisdictions requiring notice in advance of an effective termination as an
  Employee, Director or Consultant, Continuous Service shall be deemed
  terminated upon the actual cessation of providing services to the Company or
  a Subsidiary or Affiliate notwithstanding any required notice period that
  must be fulfilled before a termination as an Employee, Director or Consultant
  can be effective under applicable labor laws.  Continuous Service shall not be considered interrupted in the
  case of (i) any approved leave of absence, (ii) transfers among the
  Company, any Subsidiary or Affiliate, or any successor, in any capacity of
  Employee, Director or Consultant, or (iii) any change in status as long
  as the individual remains in the service of the Company or a Subsidiary or
  Affiliate in any capacity of Employee, Director or Consultant (except as
  otherwise provided in the Award agreement). 
  An approved leave of absence shall include sick leave, military leave,
  or any other authorized personal leave. 
  For purposes of each Incentive Stock Option granted under the Plan, if
  such leave exceeds ninety (90) days, and reemployment upon expiration of such
  leave is not guaranteed by statute or contract, then the Incentive Stock
  Option shall be treated as a Non-Qualified Option on the day three (3) months
  and one (1) day following the expiration of such ninety (90) day period.

	
   
	
   
	
   

	
   
	
  2.11
	
  “Deferral
  Period” means the period during which the receipt of a Deferred Stock Award
  under Section 6 of the Plan will be deferred.

	
   
	
   
	
   

	
   
	
  2.12
	
  “Deferred
  Stock” means an Award made under Section 6 of the Plan to receive Common
  Stock at the end of a specified Deferral Period.

	
   
	
   
	
   

	
   
	
  2.13
	
  “Director”
  means each member of the Board who is not an Employee, who does not receive
  compensation from the Company or any Subsidiary in any capacity other than as
  a Director and whose membership on the Board is not attributable to any
  contract between the Company and such Director or any other entity with which
  such Director is affiliated.

	
   
	
   
	
   

	
   
	
  2.14
	
  “Employee”
  means an officer or other employee of the Company, a Subsidiary or an
  Affiliate, including a director who is such an employee.

	
   
	
   
	
   

	
   
	
  2.15
	
  “Fair Market
  Value” means, as of any date, the value of Common Stock determined as
  follows:

	
   
	
   
	
   

	
   
	
   
	
  (a)
	
  If the
  Common Stock is listed on one or more established stock exchanges or national
  market systems, including without limitation The Nasdaq National Market or The
  Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value
  shall be the closing sales price for such stock (or the closing bid, if no
  sales were reported) as quoted on the principal exchange or system on which
  the Common Stock is listed (as determined by the Committee) on the date of
  determination (or, if no closing sales price or closing bid was reported on
  that date, as applicable, on the last trading date such closing sales price
  or closing bid was reported), as reported in The Wall Street Journal or such
  other source as the Committee deems reliable;

2

EXHIBIT 10.18

	
   
	
   
	
  (b)
	
  If the
  Common Stock is regularly quoted on an automated quotation system (including
  the OTC Bulletin Board) or by a recognized securities dealer, its Fair Market
  Value shall be the closing sales price for such stock as quoted on such
  system or by such securities dealer on the date of determination, but if
  selling prices are not reported, the Fair Market Value of a share of Common
  Stock shall be the mean between the high bid and low asked prices for the
  Common Stock on the date of determination (or, if no such prices were
  reported on that date, on the last date such prices were reported), as
  reported in The Wall Street Journal or such other source as the Committee
  deems reliable; or

	
   
	
   
	
   
	
   

	
   
	
   
	
  (c)
	
  In the absence of an established market for the Common Stock of the
  type described in (a) and (b), above, the Fair Market Value thereof shall be
  determined by the Committee in good faith.

	
   
	
   
	
   
	
   

	
   
	
  2.16
	
  “Holder”
  means an individual to whom an Award is made.

	
   
	
   
	
   

	
   
	
  2.17
	
  “Hostile
  Change in Control” means any Change in Control described in Section 2.4(ii)
  that is not approved or recommended by the Board.

	
   
	
   
	
   

	
   
	
  2.18
	
  “Incentive
  Stock Option” means an Option intended to meet the requirements of an
  incentive stock option as defined in Section 422 of the Code and designated
  as an Incentive Stock Option.

	
   
	
   
	
   

	
   
	
  2.19
	
  “1934 Act”
  means the Securities Exchange Act of 1934, as amended.

	
   
	
   
	
   

	
   
	
  2.20
	
  “Non-Employee
  Director” means a person defined in Rule 16b-3(b)(3) promulgated by the
  Securities and Exchange Commission under the 1934 Act, or any successor
  definition adopted by the Securities and Exchange Commission.

	
   
	
   
	
   

	
   
	
  2.21
	
  “Non-Qualified
  Option” means an Option not intended to be an Incentive Stock Option, and
  designated as a Non-Qualified Option.

	
   
	
   
	
   

	
   
	
  2.22
	
  “Option”
  means any stock option granted from time to time under Section 8 of the
  Plan.

	
   
	
   
	
   

	
   
	
  2.23
	
  “Outside
  Director” means a member of the Board who is an “outside director” within the
  meaning of Section 162(m) of the Code and the regulations promulgated
  thereunder.

	
   
	
   
	
   

	
   
	
  2.24
	
  “Plan” means
  the Verint Systems Inc. 2004 Stock Incentive Compensation Plan herein set
  forth, as amended from time to time.

	
   
	
   
	
   

	
   
	
  2.25
	
  “Restricted
  Stock” means Common Stock awarded under Section 7 of the Plan.

	
   
	
   
	
   

	
   
	
  2.26
	
  “Restriction
  Period” means the period during which Restricted Stock awarded under Section
  7 of the Plan is subject to forfeiture.

	
   
	
   
	
   

	
   
	
  2.27
	
  “Retirement”
  means retirement from Continuous Service pursuant to the relevant provisions
  of the applicable pension plan of the applicable entity or as otherwise
  determined by the Committee.

	
   
	
   
	
   

	
   
	
  2.28
	
  “SAR” means
  a stock appreciation right awarded under Section 9 of the Plan.

	
   
	
   
	
   

	
   
	
  2.29
	
  “Subsidiary”
  means any corporation (other than the Company) in an unbroken chain of
  corporations beginning with the Company (or any subsequent parent of the
  Company) if each of the corporations other than the last corporation in the
  unbroken chain owns stock possession
  50% or more of the total combined voting power of all classes of stock in one
  of the other corporations in such chain.

3

EXHIBIT 10.18

	
   
	
  2.30
	
  “Ten Percent
  Stockholder” means a person who on any given date owns, either directly or
  indirectly (taking into account the attribution rules contained in Section
  424(d) of the Code), stock possessing more than 10% of the total combined
  voting power of all classes of stock of the Company or a Subsidiary.

	
   
	
   
	
   

	
  3.
	
  Eligibility.

	
   
	
   

	
   
	
  Any
  Director, Employee or Consultant is eligible to receive an Award.

	
   
	
   

	
  4.
	
  Administration
  and Implementation of Plan.

	
   
	
   

	
   
	
  4.1
	
  The Plan
  shall be administered by the Committee, which shall have full power to
  interpret and administer the Plan and full authority to act in selecting the
  Employees and Consultants to whom Awards will be granted, in determining the
  type and amount of Awards to be granted to each such Employee or Consultant,
  the terms and conditions of Awards granted under the Plan and the terms of
  agreements which will be entered into with Holders.

	
   
	
   
	
   

	
   
	
  4.2
	
  With respect
  to grants of Awards to Directors or Employees who are also officers or
  Directors of the Company, the Plan shall be administered by (a) the
  Board or (b) a Committee designated by the Board, which Committee shall
  be composed of Non-Employee Directors and constituted in such a manner as to
  satisfy the applicable laws and to permit such grants and related
  transactions under the Plan to be exempt from Section 16(b) of the 1934
  Act in accordance with Rule 16b-3.

	
   
	
   
	
   

	
   
	
  4.3
	
  Grants of
  Awards to any “covered employee” within the meaning of Section 162(m)(3)
  of the Code and intended to qualify as performance-based compensation under
  Section 162(m) of the Code shall be made only by a Committee (or
  subcommittee of a Committee) which is comprised solely of two or more Outside
  Directors.

	
   
	
   
	
   

	
   
	
  4.4
	
  The
  Committee’s powers shall include, but not be limited to: determining whether,
  to what extent and under what circumstances an Option may be exchanged for
  cash, Common Stock, Restricted Stock, Deferred Stock or some combination
  thereof; determining whether, to what extent and under what circumstances an
  Award is made and operates in tandem with other Awards made hereunder;
  determining whether, to what extent and under what circumstances Common Stock
  or cash payable with respect to an Award shall be deferred, either
  automatically or at the election of the Holder (including the power to add
  deemed earnings to any such deferral); and granting Awards (other than
  Incentive Stock Options) that are transferable by the Holder.

	
   
	
   
	
   

	
   
	
  4.5
	
  The Committee
  shall have the power to adopt regulations for carrying out the Plan and to
  make changes in such regulations, as it shall, from time to time, deem
  advisable.  Any interpretation by the
  Committee of the terms and provisions of the Plan and the administration
  thereof, and all action taken by the Committee, shall be final and binding on
  all Holders.

4

EXHIBIT 10.18

	
   
	
  4.6
	
  The
  Committee may condition the grant of any Award or the lapse of any Deferral
  or Restriction Period (or any combination thereof) upon the Holder’s
  achievement of a Performance Goal that is established by the Committee before
  the grant of the Award.  For this
  purpose, a “Performance Goal” shall mean a goal that must be met by the end
  of a period specified by the Committee (but that is substantially uncertain
  to be met before the grant of the Award) based upon: (i) the price of Common
  Stock, (ii) the market share of the
  Company, its Subsidiaries or Affiliates (or any business unit thereof), (iii)
  sales by the Company, its Subsidiaries or Affiliates (or any business unit
  thereof), (iv) earnings per share of Common Stock, (v) pre-tax or net income
  of the Company, its Subsidiaries or Affiliates (or any business unit
  thereof), (vi) net revenue, operating income, or cash flow of the Company,
  its Subsidiaries, or Affiliates (or any business unit thereof), (vii) return
  on assets, investments or stockholder equity of the Company, or (viii) costs
  of the Company, its Subsidiaries or Affiliates (or any business unit
  thereof).  An Award that is subject to
  the achievement of a Performance Goal shall, for the purposes of the Plan, be
  referred to as a “Performance Based Award.” 
  The Committee shall have discretion to determine the specific targets
  with respect to each of these categories of Performance Goals.  Before granting an Award or permitting the
  lapse of any Deferral or Restriction Period subject to this Section, the
  Committee shall certify that an individual has satisfied the applicable
  Performance Goal.  In its discretion,
  the Committee may reduce the amount available to vest, become exercisable or
  be delivered or paid under any Performance Based Award based on factors it
  determines appropriate.

	
   
	
   
	
   

	
  5.
	
  Shares of
  Stock Subject to the Plan.

	
   
	
   

	
   
	
  5.1
	
  Subject to
  adjustment as provided in Section 10, the total number of shares of Common
  Stock available for Awards under the Plan (including Incentive Stock Options)
  shall be 3,000,000 shares.  In
  addition, the total number of shares of Common Stock available for Awards
  under the Plan (including Incentive Stock Options) shall be increased by any
  shares of Common Stock (up to a maximum of 1,000,000 shares) that are
  represented by awards under the Company’s Stock Incentive Compensation Plan
  that are forfeited, expire or are cancelled without delivery of the shares or
  which result in forfeiture of the shares back to the Company on or after
  July 28, 2004.

	
   
	
   
	
   

	
   
	
  5.2
	
  The maximum
  number of shares of Common Stock subject to all Awards that may be awarded to
  any Director, Employee, or Consultant shall not exceed 1,000,000 during any
  calendar year (the “Individual Limit”). Notwithstanding the foregoing, the
  Individual Limit may be adjusted to reflect the effect on shares of Common
  Stock of any transaction or event described in Section 10.

	
   
	
   
	
   

	
   
	
  5.3
	
  Any shares
  issued by the Company through the assumption or substitution of outstanding
  grants from an acquired company shall not (i) reduce the shares available for
  Awards under the Plan, or (ii) be counted against the Individual Limit.  Any shares issued hereunder may consist,
  in whole or in part, of authorized and unissued shares or treasury
  shares.  If any shares subject to any
  Award granted hereunder are forfeited or such Award otherwise terminates
  without the issuance of such shares or the payment of other consideration in
  lieu of such shares, the shares subject to such Award, to the extent of any
  such forfeiture or termination, shall again be available for Awards under the
  Plan.

	
   
	
   
	
   

	
  6.
	
  Deferred
  Stock.

	
   
	
   

	
  An Award of
  Deferred Stock is an agreement by the Company to deliver to the recipient a
  specified number of shares of Common Stock at the end of a specified deferral
  period or periods.  Such an Award
  shall be subject to the following terms and conditions.

	
   

	
   
	
  6.1
	
  Deferred
  Stock Awards shall be evidenced by Deferred Stock agreements.  Such agreements shall conform to the
  requirements of the Plan and may contain such other provisions, as the
  Committee shall deem advisable.

	
   
	
   
	
   

	
   
	
  6.2
	
  Upon
  determination of the number of shares of Deferred Stock to be awarded to a
  Holder, the Committee shall direct that the same be credited to the Holder’s
  account on the books of the Company but that issuance and delivery of the
  same shall be deferred until the date or dates provided in Section 6.5
  hereof.  Prior to issuance and
  delivery hereunder the Holder shall
  have no rights as a stockholder with respect to any shares of Deferred Stock
  credited to the Holder’s account.

5

EXHIBIT 10.18

	
   
	
   
	
   

	
   
	
  6.3
	
  Amounts
  equal to any dividends declared during the Deferral Period with respect to
  the number of shares covered by a Deferred Stock Award may or may not be paid
  to the Holder currently, or may or may not be deferred and deemed to be
  reinvested in additional Deferred Stock, or otherwise reinvested on such
  terms as are determined at the time of the Award by the Committee, in its
  sole discretion, and specified in the Deferred Stock agreement.

	
   
	
   
	
   

	
   
	
  6.4
	
  The
  Committee may condition the grant of an Award of Deferred Stock or the
  expiration of the Deferral Period upon the Holder’s achievement of one or
  more Performance Goal(s) specified in the Deferred Stock agreement.  If the Employee or Consultant fails to
  achieve the specified Performance Goal(s), either the Committee shall not
  grant the Deferred Stock Award to such Employee or Consultant or the Holder
  shall forfeit the Award and no Common Stock shall be transferred to him
  pursuant to the Deferred Stock Award. 
  Unless otherwise determined by the Committee at the time of an Award,
  dividends paid during the Deferral Period on Deferred Stock subject to a
  Performance Goal shall be reinvested in additional Deferred Stock and the
  lapse of the Deferral Period for such Deferred Stock shall be subject to the
  Performance Goal(s) previously established by the Committee.  The Deferral Period shall provide a
  three-year minimum period before a Deferred Stock award shall be fully
  delivered.  

	
   
	
   
	
   

	
   
	
  6.5
	
  The Deferred
  Stock agreement shall specify the duration of the Deferral Period taking into
  account the cause of the termination of a Holder’s Continuous Service (such
  as death, disability or Retirement). 
  The Deferral Period may consist of one or more installments.  The Deferral Period shall be determined at
  the discretion of the Committee. At the end of the Deferral Period or any
  installment thereof (unless the Holder elects a longer period for distribution,
  if permitted by the Committee) the shares of Deferred Stock applicable to
  such installment credited to the account of a Holder shall be issued and
  delivered to the Holder (or, where appropriate, the Holder’s legal
  representative) in accordance with the terms of the Deferred Stock
  agreement.  The Committee may, in its
  sole discretion, accelerate the delivery of all or any part of a Deferred
  Stock Award or waive the deferral limitations for all or any part of a
  Deferred Stock Award in certain circumstances including, among others, a
  Holder’s death, disability or a Change in Control.  

	
   
	
   
	
   

	
  7.
	
  Restricted
  Stock.

	
   
	
   

	
  An
  Award of Restricted Stock is a grant by the Company of a specified number of
  shares of Common Stock to the Employee or Consultant, which shares are
  subject to forfeiture upon the happening of specified events.  Such an Award shall be subject to the
  following terms and conditions:

	
   

	
   
	
  7.1
	
  Restricted
  Stock shall be evidenced by Restricted Stock agreements.  Such agreements shall conform to the
  requirements of the Plan and may contain such other provisions, as the
  Committee shall deem advisable.

	
   
	
   
	
   

	
   
	
  7.2
	
  Upon
  determination of the number of shares of Restricted Stock to be granted to
  the Holder, the Committee shall direct that a certificate or certificates
  representing the number of shares of Common Stock be issued to the Holder
  with the Holder designated as the registered owner.  The certificate(s) representing such shares shall be legended
  as to sale, transfer, assignment, pledge or other encumbrances during the
  Restriction Period and deposited by the Holder, together with a stock power
  endorsed in blank, with the Company, to be held in escrow during the
  Restriction Period.

6

EXHIBIT 10.18

	
   
	
  7.3
	
  Unless
  otherwise determined by the Committee at the time of an Award, during the
  Restriction Period the Holder shall have the right to receive dividends from
  and to vote the shares of Restricted Stock.

	
   
	
   
	
   

	
   
	
  7.4
	
  The
  Committee may condition the grant of an Award of Restricted Stock or the expiration
  of the Restriction Period upon the Employee or Consultant’s achievement of
  one or more Performance Goal(s) specified in the Restricted Stock
  agreement.  If the Employee or
  Consultant fails to achieve the specified Performance Goal(s), either the
  Committee shall not grant the Restricted Stock to such Employee or Consultant
  or the Holder shall forfeit the Award of Restricted Stock and the Common
  Stock shall be forfeited to the Company. 
  The Restriction Period shall provide a three-year minimum period
  before a Restricted Stock award shall fully vest.  

	
   
	
   
	
   

	
   
	
  7.5
	
  The
  Restricted Stock agreement shall specify the duration of the Restriction
  Period and the performance, employment or other conditions (including the
  termination of a Holder’s Continuous Service whether due to death,
  disability, Retirement or other cause) under which the Restricted Stock may
  be forfeited to the Company.  The
  Restriction Period shall be determined at the discretion of the Committee.  At the end of the Restriction Period
  (unless the Holder elects a longer period for distribution, if permitted by
  the Committee) the restrictions imposed hereunder shall lapse with respect to
  the number of shares of Restricted Stock as determined by the Committee, and
  the legend shall be removed and such number of shares delivered to the Holder
  (or, where appropriate, the Holder’s legal representative).  The Committee may, in its sole discretion,
  modify or accelerate the vesting and delivery of shares of Restricted Stock
  in certain circumstances including, among others, a Holder’s death,
  disability or a Change in Control.

	
   
	
   
	
   

	
  8.
	
  Options.

	
   
	
   

	
  Options give
  an Employee, Consultant or Director the right to purchase a specified number
  of shares of Common Stock, Deferred Stock or Restricted Stock (as selected by
  the Committee) from the Company for a specified time period at a fixed
  price.  Options granted to Employees
  may be either Incentive Stock Options or Non-Qualified Options.  Option granted to Directors and
  Consultants shall be Non-Qualified Options. The grant of Options shall be subject to the following terms and
  conditions:

	
   

	
   
	
  8.1
	
  Options
  shall be evidenced by Option agreements. 
  Such agreements shall conform to the requirements of the Plan, and may
  contain such other provisions, as the Committee shall deem advisable.

	
   
	
   
	
   

	
   
	
  8.2
	
  The price
  per share at which Common Stock may be purchased upon exercise of an Option
  shall be determined by the Committee, but, in the case of grants of Incentive
  Stock Options, shall be not less than the Fair Market Value of a share of
  Common Stock on the date of grant.  In
  the case of any Incentive Stock Option granted to a Ten Percent Stockholder,
  the option price per share shall not be less than 110% of the Fair Market
  Value of a share of Common Stock on the date of grant.  The option price per share for
  Non-Qualified Options may be less than the Fair Market Value of a share of
  Common Stock on the date of grant only if granted expressly in lieu of cash
  compensation, and the option price may be set at a discount of not more than
  a 15% from the Fair Market Value of a share of Common Stock on the date of
  grant.

	
   
	
   
	
   

	
   
	
  8.3
	
  The Option
  agreements shall specify when an Option may be exercised and the terms and
  conditions applicable thereto.  The
  term of an Option shall in no event be greater than ten years (five years in
  the case of an Incentive Stock Option granted to a Ten Percent Stockholder).

7

EXHIBIT 10.18

	
   
	
  8.4
	
  Each
  provision of the Plan and each Option agreement relating to an Incentive
  Stock Option shall be construed so that each Incentive Stock Option shall be
  an incentive stock option as defined in Section 422 of the Code, and any
  provisions of the Option agreement thereof that cannot be so construed shall
  be disregarded.  Incentive Stock
  Options may not be granted to employees of Affiliates.

	
   
	
   
	
   

	
   
	
  8.5
	
  No Incentive
  Stock Option shall be transferable otherwise than by will or the laws of
  descent and distribution and, during the lifetime of the Holder, shall be
  exercisable only by the Holder.  Upon
  the death of a Holder, the person to whom the rights have passed by will or
  by the laws of descent and distribution may exercise an Incentive Stock
  Option only in accordance with this Section 8.  Notwithstanding the foregoing, the Holder may designate a beneficiary
  of the Holder’s Incentive Stock Option in the event of the Holder’s death on
  a beneficiary designation form if such a form is provided by the Committee.

	
   
	
   
	
   

	
   
	
  8.6
	
  Except as
  provided in an Option agreement, the option price of the shares of Common
  Stock upon the exercise of an Option shall be paid in full at the time of the
  exercise in cash, in shares of Common Stock valued at Fair Market Value on
  the date of exercise or a combination of cash and such shares of Common
  Stock, or through a cashless exercise method; provided, however that shares
  used for payment must be shares of Common Stock held by the Holder for a
  period of more than six (6) months. 
  To facilitate the foregoing, the Company may enter into agreements for
  coordinated procedures with one or more brokerage firms. With the consent of
  the Committee, payment upon the exercise of a Non-Qualified Option may be
  made in whole or in part by Restricted Stock (based on the fair market value
  of the Restricted Stock on the date the Option is exercised, as determined by
  the Committee).  In such case the
  Common Stock to which the Option relates shall be subject to the same
  forfeiture restrictions originally imposed on the Restricted Stock exchanged
  therefor.  The Committee may prescribe
  any other method of payment that it determines to be consistent with
  applicable law and the purpose of the Plan.

	
   
	
   
	
   

	
   
	
  8.7
	
  With the
  Holder’s consent, the Committee may amend any outstanding Option to deliver
  shares of Deferred Stock or Restricted Stock instead of Common Stock.

	
   
	
   
	
   

	
   
	
  8.8
	
  If a
  Holder’s Continuous Service terminates by reason of death, any unexercised
  Option granted to the Holder shall become immediately exercisable and may
  thereafter be exercised by the Holder’s transferee or legal representative,
  until one (1) year after such termination of Continuous Service.

	
   
	
   
	
   

	
   
	
  8.9
	
  Except as
  provided in an Option agreement, if a Holder’s Continuous Service terminates
  by reason of disability (as determined by the Committee), any unexercised
  Option granted to the Holder shall become immediately exercisable and may
  thereafter be exercised by the Holder (or, where appropriate, the Holder’s
  transferee or legal representative), until the earlier of the date specified
  in the applicable Option Agreement or 90 days after such termination of
  Continuous Service.

	
   
	
   
	
   

	
   
	
  8.10
	
  If a
  Holder’s Continuous Service terminates for any reason other than death or
  disability, all unexercised Options awarded to the Holder shall terminate on
  the date specified in the applicable Option agreement or, if none is so
  specified, 90 days after such termination of Continuous Service, except that
  if a Director’s Continuous Service terminates for any reason other than death
  or disability, all unexercised Options awarded to the Holder shall terminate
  on the date specified in the applicable Option agreement or, if none is so
  specified, three years after such termination of Continuous Service.

8

EXHIBIT 10.18

	
   
	
  8.11
	
  The
  Committee or the Board may in their discretion extend the period during which
  an Option held by a Director, Employee or Consultant may be exercised to such
  period, not to exceed
  three years following the termination of a Director’s, Employee’s or
  Consultant’s Continuous Service, as the Committee or the Board may determine
  to be appropriate in any particular instance.  The Committee may, in its sole discretion, modify or accelerate
  the vesting and delivery of Options in certain circumstances including, among
  others, a Holder’s death, disability or a Change in Control.

	
   
	
   
	
   

	
  9.
	
  Stock
  Appreciation Rights.

	
   
	
   

	
  SARs are
  rights to receive a payment in cash, Common Stock, Restricted Stock or
  Deferred Stock (as selected by the Committee) equal to the increase in the
  Fair Market Value of a specified number of shares of Common Stock from the
  date of grant of the SAR to the date of exercise.  The grant of SARs shall be subject to the following terms and
  conditions:

	
   

	
   
	
  9.1
	
  SARs shall
  be evidenced by SAR agreements.  Such
  agreements shall conform to the requirements of the Plan and may contain such
  other provisions, as the Committee shall deem advisable.  A SAR may be granted in tandem with all or
  a portion of a related Option under the Plan (“Tandem SAR”), or may be
  granted separately (“Freestanding SAR”). 
  A Tandem SAR may be granted either at the time of the grant of the
  Option or at any time thereafter during the term of the Option and shall be
  exercisable only to the extent that the related Option is exercisable.  In no event shall any SAR be exercisable
  within the first six months of its grant.

	
   
	
   
	
   

	
   
	
  9.2
	
  The base
  price of a Tandem SAR shall be the option price under the related
  Option.  The base price of a
  Freestanding SAR shall be not less than 85% of the Fair Market Value of the
  Common Stock, as determined by the Committee, on the date of grant of the
  Freestanding SAR.

	
   
	
   
	
   

	
   
	
  9.3
	
  A SAR shall
  entitle the Holder to receive a payment equal to the excess of the Fair
  Market Value of the shares of Common Stock covered by the SAR on the date of
  exercise over the base price of the SAR. 
  Such payment may be in cash, in shares of Common Stock, in shares of
  Deferred Stock, in shares of Restricted Stock or any combination, as the
  Committee shall determine.  Upon
  exercise of a Tandem SAR as to some or all of the shares of Common Stock
  covered by the grant, the related Option shall be canceled automatically to
  the extent of the number of shares of Common Stock covered by such exercise,
  and such shares shall no longer be available for purchase under the Option
  pursuant to Section 8.  Conversely, if
  the related Option is exercised as to some or all of the shares of Common Stock
  covered by the Award, the related Tandem SAR, if any, shall be canceled
  automatically to the extent of the number of shares of Common Stock covered
  by the Option exercise.

	
   
	
   
	
   

	
   
	
  9.4
	
  SARs shall
  be subject to the same terms and conditions applicable to Options as stated
  in Sections 8.3, 8.5, 8.7, 8.8, 8.9, 8.10, and 8.11.

	
   
	
   
	
   

	
  10.
	
  Adjustments
  Upon Changes in Capitalization.

	
   
	
   

	
  In the event
  of a reorganization, recapitalization, stock split, spin-off, split-off,
  split-up, stock dividend, issuance of stock rights, combination of shares,
  merger, consolidation or any other change in the corporate structure of the
  Company affecting Common Stock, or any distribution to stockholders other
  than a regular cash dividend, the Board shall make appropriate adjustment in
  the number and kind of shares authorized by the Plan, the Individual Limit
  set forth in Section 5.2, and any adjustments to outstanding Awards as it
  determines appropriate.  No fractional
  shares of Common Stock shall be issued pursuant to such an adjustment.  The Committee may determine to pay the
  Fair Market Value of any fractional shares resulting from adjustments
  pursuant to this Section in cash to the Holder.

9

EXHIBIT 10.18

	
  11.
	
  Adjustments
  Upon a Change in Control.

	
   

	
  Except as
  otherwise provided in an applicable agreement, upon the occurrence of a
  Change in Control (other than a Hostile Change in Control), the Committee may
  elect to provide that all outstanding Options and SARs shall immediately vest
  and become exercisable, each Deferral Period and Restriction Period shall
  immediately lapse or all shares of Deferred Stock subject to outstanding
  Awards shall be issued and delivered to the Holder.  In the event of a Hostile Change in Control, each of the
  foregoing actions shall occur automatically upon the occurrence of such
  Hostile Change in Control.  At any
  time before a Change in Control, the Committee may, without the consent of
  any Holder of an Option or SAR, (i) require the entity effecting the
  Change in Control or a parent or subsidiary of such entity to assume each
  outstanding Option and SAR or substitute an equivalent option or stock
  appreciation right therefor or (ii) terminate and cancel all outstanding
  Options and SARs upon the Change in Control. 
  In connection with any such termination and cancellation of
  outstanding Options and SARs upon a Change in Control, the Committee may
  cause the payment to the Holder of each such Option or SAR, cash equal to the
  product of (x) the difference between the Fair Market Value of Common
  Stock on the date of the Change in Control and the exercise price (or base
  price) of such Option or SAR and (y) the number of vested (and, at the
  discretion of the Committee, unvested) shares of Common Stock subject to such
  Option or SAR.  For the purposes of
  this Section, an Option or SAR shall be considered assumed if, following the
  closing of the Change in Control transaction, the Option or SAR confers the
  right to purchase (or determines appreciation), for each share of Common
  Stock subject to the Option or SAR immediately prior to the closing of such
  transaction, the consideration (whether stock, cash, or other securities or
  property) received in such transaction by holders of Common Stock for each
  share held on the effective date of the transaction (and if holders were
  offered a choice of consideration, the type of consideration chosen by the
  holders of a majority of the outstanding shares of Common Stock); provided,
  however, that if such consideration received in such Change in Control
  transaction was not solely common stock of the successor corporation or its
  parent, the Committee may, with the consent of the successor corporation,
  provide for the consideration to be received upon the exercise of the Option
  or SAR, for each share of Common Stock subject to the Option or SAR, to be solely
  (or to be based solely on) common stock of the successor corporation or its
  parent equal in fair market value to the per share consideration received by
  holders of Common Stock in such transaction.

	
   

	
  12.
	
  Effective
  Date, Termination and Amendment.

	
   
	
   

	
  The Plan
  shall become effective upon approval of the Plan by the stockholders of the
  Company and shall remain in full force and effect until the earlier of July
  27, 2014 or the date it is terminated by the Board.  The Board shall have the power to amend, suspend or terminate
  the Plan at any time, provided that no such amendment shall be made without
  stockholder approval which shall:

	
   

	
   
	
  12.1
	
  Increase
  (except as provided in Section 10) the total number of shares available for
  issuance pursuant to the Plan;

	
   
	
   
	
   

	
   
	
  12.2
	
  Reduce the
  exercise or base prices of outstanding Options or SARs or cancel or amend
  outstanding Options or SARs for the purpose of repricing, replacing, or
  regranting such Options or SARs with an exercise price that is less than the
  exercise or base price of such Options or SARs immediately preceding such
  cancellation or amendment;

	
   
	
   
	
   

	
   
	
  12.3
	
  Increase the
  Individual Limit (except as provided Section 10); 

	
   
	
   
	
   

	
   
	
  12.4
	
  Change the
  class of individuals eligible to receive an Award; or

	
   
	
   
	
   

	
   
	
  12.5
	
  Materially
  change the provisions of this Section 12.

                    Termination
  of the Plan pursuant to this Section 12 shall not affect Awards outstanding
  under the Plan at the time of termination.

10

EXHIBIT 10.18

	
  13.
	
  Transferability.

	
   

	
  Except as
  provided below, Awards may not be pledged, assigned or transferred for any
  reason during the Holder’s lifetime, and any attempt to do so shall be
  void.  The Committee may grant Awards
  (except Incentive Stock Options) that are transferable by the Holder during such Holder’s
  lifetime, but such Awards shall be transferable only to the extent specifically provided in the agreement entered into with the Holder.  The
transferee of the Holder shall, in all cases, be subject to the provisions of the agreement between the Company and the Holder.

	
   

	
  14.
	
  General
  Provisions.

	
   
	
   

	
   
	
  14.1
	
  Nothing
  contained in the Plan, or any Award granted pursuant to the Plan, shall
  confer upon any Holder any right with respect to Continuous Service, nor
  interfere in any way with the right of the Company, a Subsidiary or Affiliate
  to terminate the Continuous Service of any Holder at any time.

	
   
	
   
	
   

	
   
	
  14.2
	
  In
  connection with the transfer of shares of Common Stock as a result of the
  exercise or vesting of an Award or upon any other event that would subject
  the Holder to taxation, the Company shall have the right (a) (1) to require
  the Holder to pay an amount in cash or (2) to retain or sell without notice,
  or to demand surrender of, shares of Common Stock in value sufficient to
  cover the minimum amount of any tax, including any Federal, state or local
  income tax, required by any governmental entity to be withheld or otherwise
  deducted and paid with respect to such transfer (“Withholding Tax”), and (b)
  to make payment (or to reimburse itself for payment made) to the appropriate
  taxing authority of an amount in cash equal to the amount of such Withholding
  Tax, remitting any balance to the employee. 
  For purposes of this Section 14.2, the value of shares of Common Stock
  so retained or surrendered shall be the Fair Market Value on the date that
  the amount of the Withholding Tax is to be determined (the “Tax Date”), and
  the value of shares of Common Stock so sold shall be the actual net sale
  price per share (after deduction of commissions) received by the Company.  Notwithstanding the foregoing, the Holder
  shall be entitled to satisfy the obligation to pay any Withholding Tax, in
  whole or in part, by providing the Company with funds sufficient to enable
  the Company to pay such Withholding Tax or by requiring the Company to retain
  or to accept upon delivery thereof shares of Common Stock (other than
  unvested Restricted Stock) sufficient in value (determined in accordance with
  the preceding sentence) to cover the amount of such Withholding Tax.  Each election by a Holder to have shares
  retained or to deliver shares for this purpose shall be subject to the
  following restrictions: (i) the election must be in writing and made on or
  prior to the Tax Date; and (ii) the election shall be subject to the
  disapproval of the Committee.

	
   
	
   
	
   

	
   
	
  14.3
	
  With respect
  to Holders subject to Section 16 of the 1934 Act, transactions under the Plan
  are intended to comply with all applicable conditions of Rule 16b-3 or its
  successors under the 1934 Act.  To the
  extent any provision of the Plan or action by the Committee fails to so
  comply, it shall be deemed null and void, to the extent permitted by law and
  deemed advisable by the Committee.

	
   
	
   
	
   

	
   
	
  14.4
	
  To the
  extent that Federal laws (such as the 1934 Act, the Code or the Employee
  Retirement Income Security Act of 1974) do not otherwise control, the Plan
  and all determinations made and actions taken pursuant hereto shall be
  governed by the law of New York and construed accordingly.

11

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