Document:

Exhibit 4.3

 

Genworth Life and Annuity Insurance Company

 

Funding Agreement

 

POLICYHOLDER: 
Genworth Global Funding Trust 2008-12, its successors and permitted assignees

 

POLICY NUMBER: GS-R6028

 

EFFECTIVE DATE: April 3,
2008

 

ISSUE STATE:  Virginia

 

Genworth
Life and Annuity Insurance Company (“GLAIC”) (which term includes its
successors and permitted assignees) and the Policyholder hereby agree to the
terms of this funding agreement (this “Policy”).  This Policy, including the attached
Accumulation Fund Schedule, and any amendments thereto, constitutes the entire
contract between GLAIC and the Policyholder.  
This Policy is delivered in the Issue State and governed by the laws of
that state.

 

In witness whereof, GLAIC
and the Policyholder have agreed to this Policy as of the Effective Date and
caused the same to be in full force and effect.

 

	
  /s/ Thomas E. Duffy

  	
   

  	
  /s/Pamela S. Schutz

  	
   

  
	
  Secretary

  	
  President

  

 

Genworth Life and Annuity
Insurance Company

6610 West Broad Street

Richmond, VA  23230

1-800-635-8056

 

 

Table of
Contents

 

Section 1 —
Accumulation Fund — Establishment and Operation

 

Section 2 —
Payments From the Accumulation Fund

 

Section 3 —
Termination of Agreement

 

Section 4 —
General Provisions

 

Section 5 —
Definitions

 

 

SECTION 1 — ACCUMULATION FUND — ESTABLISHMENT
AND OPERATION

 

1.1                               POLICY PAYMENTS. 
The Policyholder agrees to pay to GLAIC in the currency specified in the
Accumulation Fund Schedule (the “Specified Currency”), and by wire transfer,
the Net Deposit Amount on the Deposit Date. 
Regardless of the Effective Date of the Policy or the Deposit Date
specified in the Accumulation Fund Schedule, this Policy shall become effective
only upon the receipt by GLAIC, or its designee, of the Net Deposit Amount.

 

1.2                               ESTABLISHMENT OF THE ACCUMULATION
FUND.  Upon the receipt by GLAIC of the Net Deposit
Amount, GLAIC will establish an Accumulation Fund.  The Accumulation Fund is a general account
record that reflects the Fund Balance under this Policy.  GLAIC is neither a trustee nor a fiduciary
with respect to the Accumulation Fund. 
The Net Deposit Amount is allocated to GLAIC’s general account for
investment but all funds received under this Policy will become the exclusive
property of GLAIC without any duty or requirement for segregation or separate
investment.  The Fund Balance is not
affected by the investment results of the assets held in the general account.

 

1.3                               INTEREST ON THE ACCUMULATION
FUND.  The Guaranteed Rate for the Accumulation Fund
is effective until the Fund Balance is paid in full to the Policyholder.  Interest is credited based upon the
methodology specified in the Accumulation Fund Schedule.

 

1.4                               VALUE OF THE ACCUMULATION
FUND.  The Fund Balance on any given day equals the Deposit
Amount plus interest, if any, credited thereon at the Guaranteed Rate, less any
payments made under Section 2 of the Policy.

 

SECTION 2 — PAYMENTS FROM THE ACCUMULATION
FUND

 

2.1                               PERIODIC
PAYMENTS.  GLAIC will pay the Policyholder the amounts
specified in the Accumulation Fund Schedule as Periodic Payouts, including the
Maturity Payout, on the dates specified (subject to Section 4.7).  Such payment amounts are adjusted to reflect
any other payment payable under this Section of the Policy.  The interest factor used in making such
adjustments is the Guaranteed Rate.

 

2.2                               OPTIONAL
REPAYMENT.  If so indicated in the Accumulation Fund
Schedule, GLAIC shall pay to the Policyholder the amount the Policyholder needs
to redeem or repay any notes or other instruments issued by the Policyholder
and backed by this Policy, pursuant to any limited right of redemption or
repayment contained in such note or instrument. 
GLAIC may require reasonable evidence that the redemption or repayment
request satisfies all the terms and conditions described in the prospectus,
prospectus supplement and/or pricing supplement applicable to such note or
other instrument.  Additional
restrictions, if any, on the Policyholder’s reimbursement rights under this Section may
be included in the Accumulation Fund Schedule.

 

1

 

2.3                               OPTIONAL
REDEMPTION.  If so indicated in the Accumulation Fund
Schedule, GLAIC may elect to pay
the Policyholder all or any part of the Fund Balance on the Call Dates
specified in the Accumulation Fund Schedule. 
Unless otherwise provided in the Accumulation Fund Schedule, GLAIC will
give the Policyholder at least thirty-five (35) calendar days and no more than
seventy-five (75) calendar days notice of its intent to make such
pre-payment.  No adjustment will be made
to the amount of such payment, unless such adjustment is specifically provided
for in the Accumulation Fund Schedule.

 

2.4                               MATURITY
PAYMENTS.  GLAIC shall pay the Policyholder the Fund
Balance on the Maturity Date.

 

2.5                               FORM OF
PAYMENT.  All payments GLAIC makes to the Policyholder
will be made in the Specified Currency, by wire transfer, unless otherwise
agreed in writing by the parties hereto.  Unless otherwise stated in the Accumulation
Fund Schedule, all payments GLAIC makes will be net of any applicable withholding
or deduction for or on account of any present or future taxes, duties, levies,
assessments or other governmental charges of whatever nature imposed or levied
by or on behalf of any governmental authority having the power to tax.  Unless otherwise specified in the Accumulation
Fund Schedule, such net payments fully satisfy GLAIC’s obligation to the Policyholder
with respect to the full amount due.

 

SECTION 3 — TERMINATION OF AGREEMENT

 

3.1                               AUTOMATIC
TERMINATION/ACCELERATION.  This Policy
terminates with respect to the Accumulation Fund when the Fund Balance is zero
and GLAIC’s obligations hereunder shall automatically accelerate upon the
occurrence of an Event of Default described in Section 3.3(a).

 

3.2                               EARLY
TERMINATION/ACCELERATION.  The Policyholder may
accelerate this Policy by giving GLAIC not less than two (2) Business Days’
written notice upon the occurrence of an Event of Default specified in Section 3.3
b., c. or d. below.  GLAIC may accelerate
this Policy, in whole but not in part, by giving the Policyholder not less than
forty-five (45) days’, but no more than seventy-five (75) days’, prior written
notice of the occurrence of a Tax Event as described in Section 3.4,
provided, however that this Policy shall not be terminated until the Fund
Balance has been paid to the Policyholder in full.

 

3.3                               EVENTS OF DEFAULT. 
An Event of Default occurs if:

 

a.               GLAIC is dissolved or a resolution is
passed or proceeding is instituted for the winding-up, liquidation or similar
arrangement of GLAIC (other than pursuant to a consolidation, amalgamation or
merger);

b.              GLAIC breaches any material obligation,
representation or certification contained herein, provided that there is no
bona fide dispute as to whether such breach has occurred and that such breach
continues for fifteen (15) Business Days following the Policyholder’s written
notice to GLAIC of such breach;

 

2

 

c.               GLAIC fails to make any required Periodic
Payout (other than the Maturity Payout) described in the Accumulation Fund
Schedule or any other payment described in Sections 2.2 or 2.3 of this Policy
or any other funding agreement GLAIC issues in connection with the Program, and
such failure continues for seven (7) Business Days after the due date
thereof;

d.              GLAIC fails to make the Maturity Payout
described in the Accumulation Fund Schedule or in any other funding agreement
GLAIC issues in connection with the Program and such failure is continuing as
of the end of the Business Day following the due date thereof.

 

3.4                               TAX EVENT.  A “Tax Event” occurs if GLAIC has received an
opinion of independent legal counsel stating in effect that there is more than
an insubstantial risk that as a result of 
any amendment to, or change (including any announced prospective change)
in, the laws (or regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein or any amendment to, or
change in, an interpretation or application of any such laws or regulations by
any governmental authority in the United States, which amendment or change is
enacted, promulgated, issued or announced on or after the Deposit Date, the
Policyholder is or will be within ninety (90) days of the date thereof, (1) subject
to an entity level U.S. federal income tax with respect to interest accrued or
received on this Policy or (2) subject to more than a de minimis amount of
taxes, duties or other governmental charges.

 

Notwithstanding anything to the contrary in
this Section 3, if GLAIC shall comply in all respects with the
requirements of this Section 3, but an event of default has occurred with
respect to the notes backed by the Policy and as a result payments with respect
to the notes have been accelerated, otherwise than by reason of any default
under this Policy by GLAIC, no Event of Default (as defined above) under this
Policy shall be deemed to have occurred, no payments with respect to this Policy
shall be accelerated and GLAIC will remain obligated to make payments under
this Policy as if no Event of Default had occurred with respect to the notes.

 

SECTION 4 — GENERAL PROVISIONS

 

4.1                               PAYMENT UPON
TERMINATION.  Unless otherwise specified in the Accumulation
Fund Schedule, GLAIC shall pay the Policyholder the Fund Balance on the
Maturity Date.  Such payment fully
discharges GLAIC’s obligation to the Policyholder under this Policy.

 

4.2                               DISCLAIMER OF
RESPONSIBILITY.  GLAIC’s only liability
is as set out in this Policy, including the Accumulation Fund Schedule attached
hereto.  In performing its obligations
under this Policy, GLAIC is not acting as a fiduciary or agent for the
Policyholder or anyone else regardless of whether or not they are directly or
indirectly associated with the Policyholder.

 

4.3                               NOTICES.  All agreements, notices, directions, consents,
elections or other communication (“Notices”) required by this Policy must be in
writing, directed to the applicable address designated on the face page.  Any such Notices may be given by facsimile
transmission or other acceptable electronic means.  All Notices are effective when received.

 

3

 

4.4                               AMENDMENTS.  This Policy may be amended only by mutual
written agreement between the parties hereto.

 

4.5                               CONFLICT.  To the extent that there is a conflict in
terms between the Policy and the Accumulation Fund Schedule, the Accumulation
Fund Schedule will control the conduct of the parties.

 

4.6                               TRANSFERABILITY/ASSIGNMENT.  This Policy and the Accumulation Fund
established pursuant to it may solely be sold, assigned, transferred or pledged
in accordance with, and for the purposes contemplated by, the documents and
agreements governing the establishment and operation of the Program.  GLAIC will maintain a record of ownership of
this Policy on its books and records.

 

4.7                               PAYMENTS BY
GLAIC.  When this Policy provides that GLAIC will
make a payment to the Policyholder, such payment shall be made to the
Policyholder or to the agent the Policyholder designates.  Unless otherwise specified in the
Accumulation Fund Schedule, if a payment date is not a Business Day, GLAIC will
pay such amount on the next Business Day.

 

4.8                               WAIVER BY
GLAIC.  At the Policyholder’s request, GLAIC may
waive any terms, conditions or adjustments provided for in this Policy.  Any such waiver is subject to any limitations
GLAIC specifies in making the waiver and does not require GLAIC to grant
similar future waivers to the Policyholder or anyone else.  A failure or delay in exercising a right
under this Policy does not waive GLAIC’s right or ability to assert such right
in the future.

 

4.9                               MUTUAL
REPRESENTATIONS.  The parties mutually
represent and warrant, each to the other, that:

 

a.               This Policy is its legal, valid and
binding obligation, enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditor’s rights, and subject, as to enforceability, to general
principals of equity, regardless of whether enforcement is sought in proceeding
in equity or law;

b.              It has the power to enter into this
Policy and to consummate the transactions contemplated hereby;

c.               All information provided in connection
with this Policy is, to the best of its knowledge and belief, true, correct and
complete;

d.              The execution and the delivery of this
Policy and the performance of obligations hereunder do not and will not
constitute or result in a default, breach or violation, of the terms or
provisions of its certificate, articles or charter of incorporation,
declaration of trust, by-laws or any agreement, instrument, mortgage, judgment,
injunction or order applicable to it or any of its property.

 

4

 

4.10                        TAX
PROVISIONS.  The Policyholder and each transferee and
assignee of this Policy, to the extent required by law, agree to provide GLAIC
with any properly completed tax forms that are needed for GLAIC to satisfy its
tax reporting obligations with respect to amounts held under this Policy.  This Policy is intended to be ignored for
U.S. federal, state and local income and franchise tax purposes. To the extent
it cannot be ignored, GLAIC and the Policyholder and each transferee and
assignee of this Policy agree to treat this Policy as GLAIC’s debt obligation
for U.S. federal, state and local income and franchise tax purposes.

 

SECTION 5 — DEFINITIONS

 

5.1                               POLICY DEFINITIONS. 
The following terms have the meanings indicated:

 

“Accumulation
Fund” is the
accounting record GLAIC will establish under this Policy as described in Section 1.2.

 

“Accumulation
Fund Schedule” is
attached to this Policy and establishes the terms of the Accumulation Fund.

 

“Business
Day” is any day,
other than Saturday or Sunday, that is neither a legal holiday nor a day on
which commercial banks are authorized or required by law, regulation or
executive order to close, or are otherwise closed, in each Business Day City
specified in the Accumulation Fund Schedule.

 

“Call
Date” is the day
or days prior to the Stated Maturity Date, if any, specified in the
Accumulation Fund Schedule attached to this Policy, on which GLAIC may elect to
pay the Policyholder all or any part of the Fund Balance.  If no Call Date is indicated in an
Accumulation Fund Schedule, GLAIC will pay to the Policyholder the Fund Balance
prior to the Stated Maturity Date only to the extent provided in Section 3.2.

 

“Deposit
Amount” is the
amount GLAIC credits to the Accumulation Fund on the Deposit Date as set forth
in the Accumulation Fund Schedule.

 

“Deposit
Date” is the
date, specified in the Accumulation Fund Schedule, on which GLAIC receives the
Net Deposit Amount.

 

“Event
of Default” has
the meaning described in Section 3.3.

 

“Fund
Balance” is the
value of the Accumulation Fund, determined pursuant to Section 1.4.

 

“Guaranteed
Rate” is the
interest rate, if any, applied to the Accumulation Fund, as stated in the
Accumulation Fund Schedule.

 

“Indenture” is that certain indenture agreement,
made between the Policyholder and the Indenture Trustee related to the notes to
be supported by this Policy as such agreement may be amended, supplemented or
replaced from time to time.

 

5

 

“Indenture
Trustee” is the
party specified as trustee under the Indenture, or its successor.

 

“Maturity
Date” is the
earlier of (i) the Stated Maturity Date and (ii) each date on which
the Fund Balance is payable in full to the Policyholder pursuant to an Event of
Default, Optional Repayment, Optional Redemption or otherwise.  Unless otherwise indicated in the
Accumulation Fund Schedule, if any of the foregoing dates is not a Business
Day, the Maturity Date is the next following Business Day.  Interest accrues during such delay only if
specified in the Accumulation Fund Schedule.

 

“Net
Deposit Amount”
is the amount GLAIC receives from the Policyholder on the Deposit Date as set
forth in the Accumulation Fund Schedule.

 

“Program” is the Genworth Global Funding program,
as described in the prospectus relating thereto, including the applicable
prospectus supplement or pricing supplement or in any amendment thereto.

 

“Stated
Maturity Date” is
the date, as set forth on the Accumulation Fund Schedule, when the Fund Balance
is originally due and payable to the Policyholder.

 

“Tax
Event” has the
meaning described in Section 3.4.

 

5.2                               OTHER DEFINITIONS. 
Other capitalized terms appearing in this Policy have the meanings indicated
on the Policy’s face page or in the Accumulation Fund Schedule.

 

6

 

GLAIC

Accumulation
Fund Schedule — Fixed Rate

 

Policy
Number: GS-R6028

 

	
  Deposit
  Date:

  	
   

  	
  April 3, 2008 or
  the date the deposit is actually received by GLAIC

  
	
   

  	
   

  	
   

  
	
  Specified
  Currency:

  	
   

  	
  United
  States Dollars

  
	
   

  	
   

  	
   

  
	
  Deposit
  Amount:

  	
   

  	
  $11,209,000.00

  
	
   

  	
   

  	
   

  
	
  Net
  Deposit Amount:

  	
   

  	
  $10,928,775.00

  
	
   

  	
   

  	
   

  
	
  Stated
  Maturity Date:

  	
   

  	
  April 15, 2033

  
	
   

  	
   

  	
   

  
	
  Guaranteed
  Rate:

  	
   

  	
  6.05%

  
	
   

  	
   

  	
   

  
	
  Crediting
  Period:

  	
   

  	
  The first Crediting Period shall be a long period
  commencing on the Deposit Date to but excluding October 15, 2008. Each
  subsequent Crediting Period shall be the semi-annual period occurring between
  the 15th of each April and October thereafter. The final
  Crediting Period will be the period from and including October 15, 2032,
  to but excluding April 15, 2033.

  
	
   

  	
   

  	
   

  
	
  Interest
  Crediting:

  	
   

  	
  Interest is credited based upon a 30/360 basis, applied to the Fund Balance each
  day.

  
	
   

  	
   

  	
   

  
	
  Periodic
  Payouts:

  	
   

  	
  On the 15th of
  each April and October, GLAIC will pay the Policyholder all accrued and
  unpaid interest (if such date is not a Business Day, the Periodic Payout will
  be made on the next following Business Day, and in such cases the amount of
  interest shall not be adjusted for non-Business Days) (each, an “Interest
  Payment Date”); provided, however,
  that the final Periodic Payout shall be on the Maturity Date, on which date
  all accrued and unpaid interest will be paid.

  
	
   

  	
   

  	
   

  
	
  Optional
  Repayment:

  	
   

  	
  Optional Repayments under Section 2.2 of the
  Policy may be made solely with respect to the “Survivor’s Option” described
  in Pricing Supplement No. 017 dated March 24, 2008 to the
  Prospectus Supplement dated December 9, 2005 related to the Program.

  

 

 

	
  Call
  Terms:

  	
   

  	
  Under Section 2.3 of the Policy, GLAIC may
  elect to pay the Policyholder all of the Fund Balance on April 15, 2013,
  or as of any date thereafter when a Periodic Payout is due (the “Call
  Dates”).

  
	
   

  	
   

  	
   

  
	
  Maturity
  Payout:

  	
   

  	
  On the Maturity Date, GLAIC will pay to the
  Policyholder the Fund Balance. If such date is not a Business Day, the
  Maturity Payout will be made on the next following Business Day; provided, however, that
  interest shall not accrue beyond the Maturity Date.

  
	
   

  	
   

  	
   

  
	
  Business
  Day City(s):

  	
   

  	
  New York, New York

  
	
   

  	
   

  	
   

  
	
  Other
  Terms:

  	
   

  	
  None

  

 

*********************

 

The calculation of the Guaranteed Rate and all
other payment terms of this Policy will be determined in the manner described
in the “Description of the Notes” section in the Prospectus Supplement.

 

*********************

 

	
  GENWORTH LIFE AND
  ANNUITY

  	
   

  	
  GENWORTH GLOBAL FUNDING
  TRUST 2008-12

  	
   

  
	
  INSURANCE
  COMPANY

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Pamela C. Asbury

  	
   

  	
  By*:

  	
  /s/ Patricia M. Child

  	
   

  
	
  Pamela C. Asbury

  	
   

  	
  Patricia M. Child

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Official Title: Vice
  President

  	
   

  	
  Official Title: Vice
  President

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Date: April 1,
  2008

  	
   

  	
  Date: April 1,
  2008

  	
   

  
						

 

* It is expressly
understood and agreed that (a) this Policy is executed and delivered by
U.S. Bank National Association (“USB”) not individually or personally, but
solely as Trustee of the Genworth Global Funding Trust 2008-12 in the exercise
of powers and authority conferred and vested in it (b) each of the
representations, undertakings and agreements herein made on the part of the
Trust is made and intended not as personal representations, undertakings and
agreements by USB but is made and intended for the purpose of binding only the
Trust, (c) nothing herein contained shall be construed as creating any
liability on USB individually or personally, to perform any covenant either
express or implied contained herein, all such liability, if any being expressly
waived by the parties hereto and by any person claiming by, through or under
the parties hereto and (d) under no circumstances shall USB be personally
liable for the payment of any indebtedness or expenses of the Trust or be
liable for the breach or failure of any obligation, representation, warrant or
covenant made or undertaken by the Trust under this Policy or any other related
documents.

 

*********************Exhibit 10.1

 

SERVICE AGREEMENT

 

This SERVICE
AGREEMENT (the “Agreement”) is made as of this April 3, 2008, by and
between Thomas George Story Busher, an individual (the “Executive”) and
Montpelier Re Holdings Ltd (“MRH”) , whose registered office is located at
Clarendon House, 2 Church Street, Hamilton, Bermuda (the “Company”).

 

1.          Employment

 

The Company hereby shall employ
the Executive as Director, Deputy Chairman of the Board of Directors of the
Company (the “Board”), Chief Operating Officer (“COO”) and Executive
Vice-President of the Company under the terms and subject to the conditions set
forth herein.

 

The Executive’s continuous
employment with the Company began on 1 January 2002.

 

2.                               Term

 

Subject to paragraph 12, the
Executive shall be employed hereunder for the period commencing on 1 July 2008
and ending 30 June 2011 (and renewable thereafter by agreement between the
parties) (the “Term”) unless his employment is terminated by the Company giving
to the Executive not less than twelve (12) months’ notice in writing or the
Executive giving to the Company not less than six (6) months’ notice in
writing, subject always to Clauses 12, 13 and 14.

 

3.                               Duties

 

(a)                                  The
Executive shall have all responsibilities commensurate with his position and
the Executive shall perform such duties, exercise such powers and accept such
offices in relation to the business of the Company, or of any Group Company
consistent with his 

 

 

primary
duties at the time and as are appropriate to his position as may from time to
time reasonably be assigned to or vested in him by the Board and agreed between
the parties (without further remuneration except as otherwise agreed).  The Executive shall give to the Board such
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 Board.

 

The
Executive shall well and faithfully serve the Company and any Group Company,
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 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 a company in which the
Company owns at least 50% of the issued share capital.

 

(b)                                 Subject
to the paragraph below, the Executive agrees that he will devote substantially
all of his time and attention to the affairs of the Company and any Group
Company and that he will not engage, directly or indirectly, in any other
business or occupation, except that the Executive may:

 

(i)                                     serve on corporate, civic or charitable
boards or committees and otherwise engage in charitable and civic activities,
and

 

2

 

(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 any Group Company and such time and
attention is appropriate to his duties as Director, Deputy Chairman, Executive
Vice President and COO.

 

(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
always that the Company shall continue to pay the Executive’s Base Salary and
contractual benefits and bonus or if higher such other bonus amounts payable to
the Company’s Annual Bonus Plan Group A participants as approved by the
Compensation and Nominating Committee of the Board (the “Compensation Committee”)
and the Executive continues to receive benefits due under the MRH Long Term
Incentive Plan (“LTIP”) (or any replacement compensation) for such period.  This paragraph 3(c) shall not affect the
general right of the Company to suspend the Executive for Cause (as defined in
paragraph 12(b), below).

 

4.                               Mobility

 

The Executive’s normal place of
work shall be the Company’s offices in Bermuda and as part of his duties he may
be required to travel internationally on business from time to time as may be
agreed.

 

5.                               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 paragraph 6 of this Agreement:

 

3

 

(a)           Base Salary  The Company shall pay the Executive a salary
at the annual rate of six- hundred fifty thousand ($650,000) (the “Base Salary”).  The Base Salary shall be less applicable
withholding and other deductions, payable 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 month.

 

The
Compensation Committee, 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 Executive’s Base Salary be
decreased at any time during the Term below the rate set forth in paragraph 5(a) above.

 

The
Base Salary shall be inclusive of any director’s fees or other fees or
remuneration payable to the Executive by the Company or any Group Company (but
excluding benefits paid under the Executive’s service agreement with Montpelier
Marketing Services (UK) Limited (the “Benefits”) which shall continue to be due
to the Executive) 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 (excluding Benefits) or his Base Salary shall be reduced by the
amount of such fees or remuneration (excluding Benefits).

 

(b)           Bonuses  The Executive shall be entitled to
participate in the Company’s annual bonus plan with a maximum bonus payment equal
to up to 200% of his Base Salary and a target bonus payment equal to 100% of
his Base Salary (the “Target Bonus”), the Base Salary to be the amount in
effect at the end of the year in which this agreement becomes effective. If the
Company’s annual bonus plan is terminated during the term of this Agreement the
Executive shall remain entitled to an annual bonus on the same terms and
conditions as were contained in the Company’s annual bonus plan with a target
bonus equal to the Target Bonus.

 

4

 

(c)           Long-Term Incentive Plan

 

The
Executive shall be entitled to participate in the LTIP, as in effect from
time-to-time, or shall be entitled to comparable long-term incentives outside
of the LTIP, if the LTIP is terminated and the Company does not adopt any
comparable replacement plan.

 

(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, long term disability insurance, dental, life insurance and deferred
compensation plans.

 

(e)           Paid Holiday

 

In
addition to the usual public holidays, the Executive shall be entitled to receive
twenty-five (25) paid days’ holiday each year. 
The Company’s holiday year runs from 1 January to 31 December.  The Executive may schedule the
holiday days as he elects, subject to the reasonable disapproval of the
Board.  Any entitlement to holiday remaining
at the end of a year may be carried to the next succeeding year but no
further.  Entitlement to holiday (and on
termination, holiday pay in lieu of holiday) accrues pro rata throughout each
year, provided that fractions of days shall be disregarded in calculating
entitlement to vacation or payment in lieu thereof.

 

(f)            Currency

 

The
Executive’s Base Salary, annual bonuses, cash settlement, if any, or
performance shares under the LTIP (or their equivalent) and any other cash
remuneration or reimbursement payable by the Company to the Executive shall be
denominated in U.S. dollars.  All such
payments and reimbursements, whether fixed (e.g. Base Salary,) or variable
(annual bonuses, LTIPs, etc.) shall be paid in U.S. dollars, unless the
Executive consents, in writing, to use of another currency.

 

5

 

6.                               Expenses/Reimbursement

 

The Company shall bear all
travel related costs of the Executive in accordance with the terms of the
Company’s Travel Policy from time to time in place and the Executive shall be
reimbursed for all documented business related expenses.

 

The Executive shall be entitled
to first-class air travel and the expenses of appropriate hotel accommodations
for business travel.  The Executive shall
be provided with two first-class return tickets for personal travel between
Bermuda and Europe for the Executive and his partner each year.  All amounts payable under this paragraph 6
shall be subject to the Executive’s presentment to the Company of appropriate
documentation.

 

7.                               Sick
Leave

 

The provisions of the Employee
Handbook applicable to Sick Leave, as amended from time to time, are
incorporated into this Agreement

 

8.                               Relocation
Allowance

 

The Company will reimburse the
Executive’s reasonable relocation expenses (to include, but not limited to
first-class flights, storage costs, removal costs and rental/hotel expenses)
from Bermuda to the UK, upon termination of his employment for whatever reason.

 

9.                               Tax
Advisory Service

 

The Company will pay directly to
the relevant tax advisors, professional fees incurred in advising the Executive
on his taxation obligations and status and preparing and filing his annual tax
returns in all of the jurisdictions in which the Executive is obliged to
prepare and submit a tax return and dealing with any resulting tax authority
queries and demands.

 

6

 

10.                         Housing
Allowance

 

The Company shall pay to the
Executive a housing allowance in an amount no less than the maximum amount
payable pursuant to the Company’s Housing Allowance Policy applicable from time
to time whilst employed in Bermuda.

 

11.                         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 provisions of this paragraph 11(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 or prevent the Executive
from making a protected disclosure in accordance with the Employment Rights Act
1996.

 

(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 paragraph 11(a) above
which may have been 

 

7

 

prepared by him or have come into his possession in the
course of his employment hereunder and shall not retain any copies thereof.

 

12.        Termination

 

The Company and the Executive shall be
entitled in writing to terminate the Executive’s employment under this
agreement upon:

 

(a)           the Executive’s
death;

 

(b)                                 the
termination forthwith of the Executive’s employment by the Company for “Cause”.  For purposes of this Agreement, “Cause” shall
mean:

 

(i)            conviction of a criminal offence (other than a road
traffic offence or other non-material offence 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.

 

(c)           the resignation
of the Executive for “Good Reason”. For purposes of this Agreement “Good Reason”
shall mean:

 

(i)            a
material decrease in the Executive’s Base Salary or benefits (except as
authorized under paragraph 5 (a)) or any material decrease in bonus
opportunity; and/or

 

(ii)           a
material diminution in the authority, duties or responsibilities of the Executive’s
position with the Company or any Group Company 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; and/or

 

8

 

(iii)          a
relocation of the Company’s executive offices from Bermuda without the
Executive’s consent as long as the Executive is COO and Deputy Chairman of the
Company; and/or

 

(iv)          a material
breach by the Company of the terms of this Agreement or of any award under the
LTIP (or any replacement compensation); provided that the Executive shall have
provided written notice to the Company (to the attention of at least two
members of the Board other than the Executive), setting forth the alleged Good
Reason within 120 days of the event, and the breach shall not have been cured
within thirty (30) days of receipt of the notice.

 

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

 

(e)           the resignation
of the Executive without Good Reason.

 

For
the avoidance of doubt, except in the circumstances outlined in 12 (a) and
(b) above the Company shall not terminate the Executive’s employment where
he is in receipt of benefits under any permanent health insurance scheme or
absent due to sickness as a result of which it is reasonably foreseeable that the
Executive may receive such benefits if, by doing so, the Executive shall be
deprived of the benefit of any permanent health insurance scheme provided by
the Company to which he would have otherwise have been entitled.

 

13.        Termination
Payments and Benefits

 

(a)           If
the Executive’s employment is terminated during the Term by:

 

(i)            reason
of the Executive’s death as provided by paragraph 12(a);

 

(ii)           the Company for
Cause pursuant to paragraph 12(b),

 

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 the following:

 

9

 

(A) the
Base Salary provided for herein up to and including the effective date of
termination, prorated on a daily basis; and

 

(B) payment
for any accrued, but unused paid holiday as at the effective date of
termination; and

 

(C) any
reimbursements to which he may be entitled under paragraph 6 of this Agreement.

 

(iii)          the Executive without Good Reason
pursuant to paragraph 12(c),

 

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 the
following:

 

(A) an amount equal
to the Base Salary, bonuses and any performance shares or other LTIP Awards
earned or vested but not previously paid through the date of termination: and

 

(B) payment
for any accrued but unused paid holiday as at the effective date of
termination; and

 

(C) any
reimbursements to which he may be entitled under paragraph 6 of this Agreement.

 

(b)           If the Executive’s employment is
terminated during the Term by:

 

(i)            the Company without Cause pursuant to
paragraph 12(d), or

 

(ii)           the Executive
for Good Reason pursuant to paragraph 12(c)

 

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 the following:

 

10

 

(A) an
amount equal to the Base Salary, bonuses and any performance shares or other
LTIP Awards earned but not previously paid through the date of termination; and

 

(B) payment
for any accrued but unused paid holiday as at the effective date of termination;
and

 

(C) any
reimbursements to which he may be entitled under paragraph 6 of this Agreement;
and

 

(D) an
amount equal to the sum of the annual Base Salary then in effect and the annual
Target Bonus (as determined under paragraph 5(b)) for the year during which the
termination occurs, multiplied by the greater of

 

(i)    two (2); or

 

(ii)   the remaining number of years and fractions
thereof (with each full and partial month counting as one-twelfth (1/12th) of a
year) in the Term; and

 

(E) medical
benefit continuation under the Company’s medical plan for a period of three (3) years
following the termination of the Executive’s employment at the Company’s
expense and thereafter at the Executive’s expense; and

 

(F) the
accelerated vesting (to 100% vested) of unvested  share options, Shares Appreciation Rights (“SARs”)
and Restricted Share Units (“RSUs”), if any, awarded to Executive under the
LTIP or otherwise; and

 

(G) payment
with respect to any outstanding Performance Shares previously awarded to the
Executive, with performance measured at the end of the Bonus year in which the
termination occurs and paid by no later than 31 March following the end of
the Bonus year and with the valuation of such Performance Shares (if paid in
cash) based on the average of the last ten (10) trading days of the year
in 

 

11

 

which
the termination occurs, pro rated for the number of months worked from the date
of grant until such termination.

 

(c)                                  In
the event of a Change of Control by the Company as defined in the LTIP, the
Executive shall be entitled to Group A Benefits under the MRH Severance Plan,
as in effect on the date hereof (“Severance Plan”), provided, however, that
such Group A Benefits shall be applied against and shall reduce the benefits
payable under paragraph 13(b).

 

In addition, if
the Executive’s employment is terminated in any of the circumstances covered by
these paragraphs 13(b) and (c), then notwithstanding any provision in any
Company or Group Company share option held by the Executive to the contrary,
the Executive shall be entitled to exercise any Company or Group Company share
options during the two (2) year period beginning on his date of
termination (but not beyond the expiration date of the option).

 

Payment of
benefits upon termination under paragraphs (D), (E), (F), and (G) of
paragraph 13(b) are subject to and conditioned upon the Executive’s
execution of a Separation Agreement and General Release to be agreed between
the parties within the meaning of the Severance Plan.

 

14.                         Non-Renewal
of Agreement

 

(a)                                  If
this Agreement is not renewed at the end of the Term and upon or following such
non-renewal the Executive’s employment with the Company terminates for any
reason, but the Executive remains an active member of the Board in any
capacity, then such service as a Board member shall be considered continued
employment for purposes of determining the vesting of share options, SARs, RSUs
and Performance Shares, and the Executive shall remain entitled to continuing
health coverage for himself at the Company’s expense.

 

12

 

(b)                                 If
this Agreement is not renewed at the end of the Term and upon or following such
non-renewal the Executive’s employment with the Company terminates for any
reason, and the Executive is removed from the Board (other than for Cause), or
if following the end of the Term the Executive is removed from the Board (other
than for Cause) or is not reelected to the Board (despite his willingness to remain
an active member of the Board), then (i) the Executive’s unvested share
options, SARs, RSUs and Performance Shares shall become 100% vested, (ii) the
Executive shall be entitled to payment with respect to outstanding Performance
Shares previously awarded to the Executive with performance measured at the end
of the Bonus year in which his service as a member of the Board ends and paid
by no later than 31 March following the end of the Bonus year and with the
valuation of such Performance Shares (if paid in cash) based on the average of
the last ten (10) trading days of such year, pro rated for the number of
days between the date of grant and the date the Executive’s service as a member
of the Board ends, and (iii) the Executive shall receive an amount equal
to the sum of the Base Salary then in effect plus the highest Annual Bonus paid
in the three (3) years prior to the date of non-renewal.

 

15.        Termination Payments

 

Any payments to
be made to the Executive under clauses 13 and 14 will be payable as a debt
within fourteen (14) days of termination (or in the case of bonus, upon
determination) and there shall be no duty on the Executive to mitigate his
loss.

 

16.                         Non-Competition

 

(a)                                  During
the Term, 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 he may (but without prejudice to paragraph 3) be interested as a holder or
beneficial owner of not 

 

13

 

more than 5% of any class of share, shares or debentures in
any company (other than the Company, in which case, such limit shall not apply)
whose shares, shares or debentures are listed or dealt in on an appointed share
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 paragraph (a) above, he will not
in Bermuda, the United Kingdom or the European Economic Community:

 

(i)               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 directly or indirectly be
engaged in or concerned with any business or undertaking which is engaged in or
carries on in Bermuda, 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.

 

(ii)              During the period of twelve (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 endeavor 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 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 

 

14

 

with the Company or any Group Company in relation to all or part of its
business.

 

(iii)             During the period of twelve (12) months following the
termination aforesaid either on his own account or for any other person, firm or
company 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, fir or company of any such person.

 

(c)           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.

 

(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.

 

15

 

17.        Disciplinary,
Dismissal and Grievance Procedures

 

If the
Executive has any grievance relating to his employment or if he is dissatisfied
with any disciplinary decision affecting him, he should raise this in writing
with the Executive Chairman.

 

18.        Successors

 

The Executive’s
performance hereunder is personal to the Executive and shall not be assignable
by the Executive.

 

19.        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 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 Company
will pay directly to the relevant legal advisors the Executive’s professional
legal fees incurred in respect of entry into this Agreement.

 

20.        Insurance

 

The Company
shall provide directors’ and officers’ liability insurance cover to the
Executive for the duration of the Term (as extended) on the same level of cover
as provided to other directors of the Company from time to time and will keep
such cover in place for as long as reasonably necessary to cover all and any
risk of a claim against the Executive.

 

16

 

21.        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.

 

22.        Miscellaneous

 

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.

 

Governing Law;
Jurisdiction

 

This Agreement
shall be governed by and construed in accordance with the laws of Bermuda and
the parties irrevocably submit to the non-exclusive jurisdiction of the Courts
of Bermuda.

 

Paragraph
Captions

 

Paragraph 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.

 

17

 

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.

 

Integrated
Agreement

 

This Agreement
constitutes the entire understanding and agreement between the parties hereto
with respect to the subject matter hereof, and supersedes all prior agreements,
understandings, memoranda, term sheets, conversations and negotiations.  There are no agreements, understandings,
restrictions, representations or warranties between the parties other than
those set forth herein or herein provided for. In the event of conflict between
the terms of this agreement and any other document purporting to record the
terms of the Executive’s employment by the Company or any Group Company, the
provisions of this Agreement prevail. 
Notwithstanding the foregoing, nothing in this Agreement shall reduce or
diminish the Executive’s rights under any employee benefit plan in which he is
a participant or under any shares option, SAR, RSU, Preferred Share (or similar
compensatory award) granted to the Executive by the Company (or any Group
Company) before, on or after the Effective Date.

 

Interpretation;
Counterparts

 

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

 

(b)                                         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.

 

(c)                                          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 

 

18

 

time to time and shall include references to any provisions
of which they are re-enactments (whether with or without modification).

 

(d)              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.

 

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

 

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.

 

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.

 

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:

 

	
  If to the Executive:

  	
   

  	
  Thomas George Story
  Busher

  

 

19

 

	
  If to the Company:

  	
   

  	
  Company Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Montpelier Re Holdings
  Ltd.

  
	
   

  	
   

  	
  94 Pitts Bay Road

  
	
   

  	
   

  	
  P.O. Box HM 2079

  
	
   

  	
   

  	
  Pembroke HM HX

  
	
   

  	
   

  	
  Bermuda

  

 

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 week day 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.

 

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.

 

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/ Anthony Taylor

  	
   

  	
  By:

  	
  /s/Thomas George Story
  Busher

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Anthony
  Taylor, Chief Executive Officer

  	
  Thomas George Story
  Busher

  
						

 

20

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