Document:

Exhibit 10.1

 

SERVICE AGREEMENT

 

This SERVICE AGREEMENT (the “Agreement”) is made as of this 20th day of May, 2013 (the “Effective Date”), by and between Christopher L. Harris, an individual having an address at 94 Pitts Bay Road, P.O. Box HM 2079, Pembroke HM HX, Bermuda (the “Executive”) and Montpelier Re Holdings Ltd., whose registered office is located at Canon’s Court, 22 Victoria Street, Hamilton HM EX, Bermuda (together with its successors and assigns, the “Company”).

 

W  I  T  N  E  S  S  E  T  H:

 

WHEREAS, pursuant to a Service Agreement, dated as of March 13, 2008 between the Company and the Executive and subsequent amendments (the “Prior Agreement”), the Executive currently serves as the President and Chief Executive Officer (“CEO”) of the Company; and

 

WHEREAS, the Company desires to continue to employ the Executive, in such capacity and as a member of the Board of Directors of the Company (the “Board”), and the Executive desires to continue such employment and service under the terms and conditions of this Agreement;

 

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

 

1.                                      Employment.  The Company hereby shall continue to employ the Executive, and the Executive hereby accepts the continuation of employment as the President and CEO of the Company, under the terms and subject to the conditions set forth herein.  In addition, the

 

 

Company agrees to use best efforts to continue the Executive’s service as a member of the Board by nominating the Executive for election to the Board each time he comes up for re-election and, so long as he is duly elected by the Company’s shareholders and continues to serve in good standing, not taking any action to remove him from the Board.

 

2.                                      Term.  Subject to paragraph 7, the Executive shall be employed hereunder for the period commencing on the Effective Date, and ending December 31, 2017 (the “Term”); provided, however, that commencing on  January 1, 2018 and on each January 1 thereafter, the Term shall be automatically renewed for an additional one-year period unless the Executive delivers to the Company, or the Company delivers to the Executive, written notice at least 90 days in advance of the scheduled expiration of the Term that it shall not be extended or that the notifying party desires to re-negotiate material terms of the Agreement, in which case the Term shall end on the scheduled expiration date and shall not be further extended; provided, however, that, notwithstanding the foregoing, in the event of a Change in Control, if there has been a notice of nonrenewal delivered by the Company to the Executive, whether delivered prior to or after the Change in Control, the Term shall expire on the later of the scheduled expiration date and the second anniversary of such Change in Control (which, for purposes of this Agreement, shall have the meaning set forth in the Company’s 2012 Long-Term Incentive Plan).

 

3.                                      Duties.

 

(a)  During the Term, the Executive shall continue to have all responsibilities commensurate with the positions of President and CEO in a company the size and nature of the Company and shall report directly to the Board.  The Executive shall perform such duties and exercise such powers

 

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in relation to the business of the Company, or of any Group Company (as defined below), as may from time to time be assigned to or vested in him by the Board consistent with his positions and 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 perform such services for any Group Company, including but not limited to Montpelier Reinsurance Ltd. (without further remuneration except as otherwise agreed), and shall accept such offices in any such Group Company as the Board may require consistent with his positions and responsibilities with the Company.  The Executive shall well and faithfully serve the Company and the Group Companies, and shall use his best endeavors to promote, develop and extend their businesses and interests, giving at all times the full benefit of his knowledge, expertise, technical skill and ingenuity.  All other senior officers and executives of the Company and, as applicable, any Group Company, shall, directly or indirectly, report to the Executive.  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 in which the Company owns at least 50% of the issued share capital.

 

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

 

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

 

(c)                                  [Reserved].

 

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

 

(a)                                 Base Salary.  Effective June 1, 2013 and during the Term, the Company shall pay the Executive an annual salary (the “Base Salary”) of seven hundred and fifty thousand dollars ($750,000 U.S.), 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 and Nominating Committee of the Board (the “Compensation Committee”), subject to ratification of the Board, may, in its sole discretion, increase (but not decrease) the Base Salary at any time during the Term.  The Compensation Committee will conduct the first base salary review no later than April 2014 and continue annually thereafter on or before April 1 of the current year.  After any such increase, “Base Salary” for purposes of this Agreement shall mean such increased amount.  The parties agree that the Executive shall not be entitled to any fees or other additional remuneration for his service as a director of the Company or any Group Company.  For the avoidance of doubt, the

 

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payments, benefits and entitlements under this Agreement shall not be deemed to be remuneration paid to the Executive for being a director of the Company or any Group Company for purposes of this paragraph 4(a).

 

(b)                                 Bonuses.  During the Term (including for all of 2013), the Executive shall be entitled to participate in the Company’s annual bonus plan with a target bonus equal to 100% of his Base Salary (the “Target Bonus”).  For 2013, such Target Bonus shall be determined based on a base salary of seven hundred and fifty thousand dollars ($750,000 U.S.).   The Compensation Committee, subject to ratification of the Board, may, in its sole discretion, increase (but not decrease) the Target Bonus at any time during the Term and, after any such increase, “Target Bonus” for purposes of this Agreement shall mean such increased amount.  If the Company’s annual bonus plan is terminated during the Term the Executive shall remain entitled to an annual bonus on the same terms and conditions as were contained in the Company’s annual bonus plan with a target bonus equal to the Target Bonus.  Notwithstanding any provision in the applicable annual bonus plan to the contrary, the annual bonus, if any, earned by the Executive with respect to a fiscal year will be paid to the Executive in cash no later than seventy-four (74) days following the end of such fiscal year.

 

(c)                                  Long-Term Incentive Plan.  Each year during the Term, the Executive shall be entitled to participate in the Company’s Long-Term Incentive Plan (“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) with an annual target value of not less than  $2,448,000 (with respect to grants made in 2014 and thereafter, with

 

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such value to be based on the per share fair market value of the Company’s common shares on the relevant grant date), with a vesting period of, (i) in the case of awards with a value of not less than $120,000, not more than one (1) year and, (ii) in the case of awards with an annual target value of not less than $2,328,000, not more than four (4) years.   Not more than five business days following the Effective Date, the Executive shall be granted the following awards of RSUs:  (x) 5,000 RSUs (“Fixed RSU Award”), which, except as otherwise provided in paragraph 8, shall vest in full on December 15, 2013, subject to the Executive’s continued employment until such date, and upon vesting will be settled no later than sixty (60) days thereafter, and (y) 34,931 performance-based RSUs (at target), which shall be (i) in addition to the 62,069 performance-based RSUs (at target) previously granted to the Executive in March 2013 and (ii) earned and shall vest in a manner no less favorable to the Executive than such performance-based RSUs previously granted to the Executive in March 2013, except as otherwise provided in paragraph 8 of this Agreement.

 

(d)                                 [Reserved].

 

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

 

(f)                                   Paid Holiday.  In addition to the usual public holidays, the Executive shall be entitled to receive twenty-five (25) paid business days holiday each year.  The Executive may schedule the holiday days as he elects, subject to the reasonable disapproval of the Board.  Any entitlement to

 

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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.

 

(g)                                  Currency.  The Executive’s Base Salary, annual bonuses 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.                                      Reimbursement.  The Executive shall be reimbursed for all documented business related expenses.  The Executive shall be entitled to be reimbursed for first-class air fare and the expenses of appropriate hotel accommodations for business travel.  The Executive shall be reimbursed for the cost of business-class air fare for personal travel for the Executive and his household for up to eight (8) trips per year.  The Executive shall be reimbursed for reasonable tax advisory services and reasonable attorney’s fees incurred in the review and negotiation of this Agreement and related documentation.  All amounts payable under this paragraph 5 shall be subject to paragraph 15(m)(iii) hereof and the Executive’s presentment to the Company of appropriate documentation.  The Executive may not travel by motor scooter (or similar transport) and, when in Bermuda, shall travel by car or taxi service at Company expense.

 

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6.                                      Confidentiality

 

(a)                                 The Executive shall not, either during the continuance of his employment hereunder (otherwise than in the proper performance of his duties hereunder) or at any time after the termination thereof, divulge to any person whomsoever and shall use his reasonable endeavors to prevent the publication or disclosure of any trade secret or other confidential information concerning the business, finances, accounts, dealings, transactions or affairs of the Company or any Group Company or of any of their respective clients entrusted to him or arising or coming to his knowledge during the course of his employment hereunder or otherwise; provided that the foregoing shall not prevent or limit the Executive from (x) complying with any applicable law or with the directive of any court, governmental, regulatory or administrative body or agency having the legal authority to compel testimony from or the production of documents by the Executive or (y) disclosing confidential information to an attorney, an arbitrator or a court, in each case, to the extent necessary to enforce his rights under this Agreement or any other agreement between the Executive and the Company or any Group Company, provided that, in the event of any disclosure to an attorney pursuant to this clause (y), the Executive will instruct such attorney to comply with the confidentiality requirements of this paragraph 6(a).  The provisions of this paragraph 6(a) shall not apply to any information which is or becomes publicly known other than as a result of the Executive’s breach of this agreement.

 

(b)                                 The Executive shall upon the termination of his employment hereunder immediately deliver up to the Company all fee schedules, lists of clients, correspondence and other documents, papers and property belonging to the Company or any Group Company or related to

 

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any of the matters referred to in paragraph (a) above which may have been prepared by him or have come into his possession in the course of his employment hereunder and shall not retain any copies thereof.

 

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

 

(a)                                 the Executive’s death; or

 

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

 

(c)                                  the termination of the Executive’s employment by the Company for “Cause”.  For purposes of this Agreement, “Cause” shall mean: (i) conviction of an offense (other than a road traffic offense or other non-material offense not subject to a custodial sentence); or (ii) willful gross negligence or willful gross misconduct by the Executive in connection with his

 

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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; or

 

(d)                                 the resignation of the Executive for “Good Reason”.  For purposes of this Agreement “Good Reason” shall mean any of the following without the Executive’s prior written consent: (i) a decrease in the Executive’s Base Salary, Target Bonus or annual target LTIP opportunity; (ii) a material diminution in the authority, duties or responsibilities of the Executive’s position with the result that the Executive makes a determination in good faith that he cannot continue to carry out his job in substantially the same manner as it was intended to be carried out immediately before such diminution, including, without limitation, removal as President or CEO, failure to continue the Executive’s service as a member of the Board (to the extent provided in paragraph 1), or failure to report directly and solely to the Board; (iii) a relocation of the Company’s executive offices from Bermuda without the Executive’s consent as long as the Executive is CEO of the Company; or (iv) a material breach by the Company of the terms of this Agreement or of any award under the LTIP, including, without limitation, that failure of a successor to all or substantially all of the Company’s assets to expressly assume the Company’s obligations under this Agreement as of the closing of such transaction, either contractually or by operation of law.  Notwithstanding the foregoing, Good Reason shall not exist until and unless the Executive shall have provided written notice to the Company (attention of at least two (2) members of the Board other than the Executive), setting forth the alleged Good Reason within ninety (90) days following the later of (i) occurrence of such event or (ii) the date the Executive learns of, or would reasonably be expected to learn of, such event.  The Company shall have thirty (30) days (or such shorter period as determined by the Company, provided that the

 

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Company notifies the Executive in writing of the date such shorter period will end), from the receipt of such notice within which to cure (the “Cure Period”).  If, during the Cure Period, such event is remedied, then the Executive shall not be permitted to resign for Good Reason as a result of such event.  If, at the end of the Cure Period, the event that constitutes Good Reason has not been remedied, the Executive shall be entitled to resign for Good Reason during the ninety (90) day period after the end of the Cure Period.

 

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

 

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

 

The definition of “Cause” in this Agreement shall be deemed to be the definition of “Cause” for purposes of any other plan, policy, program or agreement, including, without limitation, the LTIP and any applicable award agreement, as it applies to the Executive.  The definition of “Good Reason” in this Agreement shall be deemed to be the definition of “Good Reason” (or similar term, such as “Constructive Termination”) for purposes of any other plan, policy, program or agreement, including, without limitation, the LTIP and any applicable award agreement, as it applies to the Executive.  The Executive hereby agrees that unless otherwise agreed by the Company in writing, upon termination of his employment with the Company for any reason during the Term, he will immediately resign from the Board and from any board of directors of any Group Company on which he serves at the time of termination.

 

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8.                                      Termination Payments and Benefits.

 

(a)                                 If the Executive’s employment is terminated by the Company for Cause pursuant to paragraph 7(c), then in full satisfaction of the Company’s obligations under this Agreement (other than his rights under paragraph 12 or 15(b)), the Executive, his beneficiaries or estate, as appropriate, shall be entitled to receive, no later than seventy-four (74) days following such termination, (A) the Base Salary provided for herein up to and including the effective date of termination, prorated on a daily basis; (B) payment for any accrued, but unused paid holiday as of the effective date of termination; and (C) any reimbursements to which he may be entitled under paragraph 5 of this Agreement.

 

(b)                                 If the Executive’s employment is terminated by reason of the Executive’s death or disability then in full satisfaction of the Company’s obligations under this Agreement, the Executive, his beneficiaries or estate, as appropriate, shall be entitled to receive, no later than seventy-four (74) days following such termination for clauses (A) — (D) and (F), (A) the Base Salary provided for herein up to and including the effective date of termination, prorated on a daily basis, and an amount equal to the bonuses and any RSUs or other LTIP awards fully earned and vested but not previously paid through the date of termination, including, without limitation, any annual bonus that the Company has determined is payable to the Executive for performance periods which have ended prior to the date of termination; (B) payment for any accrued, but unused paid holiday as of the effective date of termination; (C) any reimbursements to which he may be entitled under paragraph 5 of this Agreement; (D) repatriation expenses equal to six (6) months of Base Salary; (E) any other applicable benefits or entitlements pursuant to paragraph

 

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12 and 15(b) of this Agreement or any other benefits that are accrued and vested as of the date of termination under any applicable plan, policy or program of, or other agreement with, the Company or any Group Company (payable in accordance with the applicable plan, policy, program or agreement); and (F) the unvested portion of the Fixed RSU Award (and any similar RSU award), any performance-based RSUs and any other unvested LTIP or other long-term incentive compensation awards, in each case, that are outstanding as of the date of such termination shall be deemed vested in full as of the date of termination, provided that in the case of performance-based RSUs and other performance-based awards, the foregoing treatment shall only apply to the RSUs and other awards that have been “earned” as of the date of termination but which remain subject to time-based vesting.

 

(c)                                  If the Executive’s employment is terminated by the Executive without Good Reason pursuant to paragraph 7(f), then in full satisfaction of the Company’s obligations under this Agreement, the Executive, his beneficiaries or estate, as appropriate, shall be entitled to receive, (A) the Base Salary provided for herein up to and including the effective date of termination, prorated on a daily basis, and an amount equal to the bonuses and any RSUs or other LTIP awards fully earned and vested but not previously paid through the date of termination, including, without limitation, any annual bonus that the Company has determined is payable to the Executive for performance periods which have ended prior to the date of termination; (B) an amount equal to the Base Salary provided for herein, payable in equal monthly installments in arrears for twelve (12) months following the date of termination, prorated on a daily basis, subject at all times to the option by the Company to release the Executive’s obligations under paragraph 10 of this Agreement prior to the end of such 12-month period thereby terminating

 

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such payments with immediate effect as of the date Company so releases such obligations; (C) payment for any accrued, but unused paid holiday as of the effective date of termination; (D) any reimbursements to which he may be entitled under paragraph 5 of this Agreement as of the effective date of termination; (E) subject to paragraph 15(n), medical benefits continuation under the Company’s medical plan for the Executive and his household for a period of twelve (12) months following termination, subject at all times to the option by the Company to release the Executive’s obligations under paragraph 10 of this Agreement prior to the end of such 12-month period thereby terminating such benefits continuation with immediate effect;  and (F) any other applicable benefits or entitlements pursuant to paragraphs 12 and 15(b) of this Agreement or any other benefits that are accrued and vested as of the date of termination under any applicable plan, policy or program of, or other agreement with, the Company or any Group Company (payable in accordance with the applicable plan, policy, program or agreement).  Payment of the benefits upon termination under clauses (A), (C) and (D) of this paragraph 8(c) shall be made no later than seventy-four (74) days following termination of employment.  In addition, the Executive’s unvested RSUs or other long-term incentive compensation awarded to the Executive under any LTIP or award or similar agreement (including, pursuant to paragraph 4(c) above) shall continue to vest for twelve (12) months following the Executive’s termination from the Company without Good Reason, subject at all times to the option by the Company to release the Executive’s obligations under paragraph 10 of this Agreement prior to the end of such 12-month period in which case, the unvested portion of the Fixed RSU Award (and any similar RSU award), any performance-based RSUs and any other unvested LTIP or other long-term incentive compensation awards, in each case, that are scheduled to vest on or before the end of such 12-

 

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month period shall be deemed vested on a pro-rata basis as of the date the Company releases such obligations, provided that in the case of the performance-based RSUs and other performance-based awards, the foregoing treatment shall only apply to RSUs and other awards that have been “earned” as of the date the Company releases such obligations but which remain subject to time-based vesting. For the purposes of this paragraph 8(c), if and only to the extent any awards are eligible for proration, the portion of any such awards that shall vest upon the Company’s release of the Executive’s obligations pursuant to this paragraph 8(c) shall be calculated by multiplying the number of awards that would otherwise have vested on or before the end of such 12-month period by a fraction, (1) the numerator of which shall be the number of days that have elapsed between the Vesting Commencement Date (as defined below) and the date the Company releases the Executive’s obligations and (2) the denominator of which shall be the total number of days during the period that begins on the Vesting Commencement Date and ends on the next vesting date following the date the Company releases such obligations.  “Vesting Commencement Date” means, in the case of each award that is eligible for proration in accordance with this paragraph 8(c), (A) the vesting date immediately preceding the date the Company releases the Executive of his obligations or (B) if the Company releases such obligations before the first vesting date with respect to such award has occurred, the grant date.  Any awards that become vested in accordance with this paragraph 8(c) (whether on a pro-rata basis or otherwise) shall be paid to the Executive before the last day of the applicable “short-term deferral” period (within the meaning of Section 409A (as defined in paragraph 15(m)).

 

(d)                                 If the Executive’s employment is terminated by: (i) the Company without Cause pursuant to paragraph 7(e), or (ii) the Executive for Good Reason pursuant to paragraph 7(d), then in full

 

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satisfaction of the Company’s obligations under this Agreement, the Executive, his beneficiaries or estate, as appropriate, shall be entitled to receive:  (A) an amount equal to the Base Salary, bonuses and any RSUs or other LTIP awards fully earned and vested but not previously paid through the date of termination, including, without limitation, any annual bonus that the Company has determined is payable to the Executive for performance periods which have ended prior to the date of termination; (B) payment for any accrued but unused paid holiday as of the effective date of termination; (C) any reimbursements to which the Executive may be entitled under paragraph 5 of this Agreement; (D) an amount equal to the sum of the Base Salary then in effect and the annual Target Bonus for the year during which the termination occurs, multiplied by 2.0, (E) subject to paragraph 15(n), medical benefit continuation under the Company’s medical plan for the Executive and his household for a period of three (3) years following the termination of the Executive’s employment at the Company’s expense and thereafter, subject to the Company’s ability to continue such coverage under its existing medical plan or any successor medical plan and subject to all applicable laws, rules and regulations governing such plans, at the Executive’s expense; (F) any other applicable benefits or entitlements pursuant to paragraphs 12 and 15(b) of this Agreement or any other benefits that are accrued and vested as of the date of termination under any applicable plan, policy or program of, or other agreement with, the Company or any Group Company (payable in accordance with the applicable plan, policy, program or agreement);  (G) full vesting as of the date of termination to 100% (i.e., at the target level) of any unvested RSUs or other long-term incentive compensation awarded to the Executive under any LTIP or award or similar agreement (including, pursuant to paragraph 4(c) above) for which the performance targets have not yet been achieved as of the date of

 

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termination; and (H) full vesting as of the date of termination of all other outstanding and unvested RSUs or other long-term incentive compensation awarded to the Executive under any LTIP or award or similar agreement (including, pursuant to paragraph 4(c) above).  In addition, if the Executive’s employment is terminated without Cause or for Good Reason on or within 24 months of a Change in Control, the Executive shall be entitled to Group A Benefits under the Montpelier Re Holdings Severance Plan (“Severance Plan”), even if such Severance Plan is no longer in effect, payable as set forth in the Severance Plan, with such amount to be applied against and shall reduce the benefits payable under clause (D) of this paragraph 8(d).  Payment of benefits upon termination under clauses (A), (B), (C), (D), (G) and (H) of this paragraph 8(d) shall be made no later than seventy-four (74) days following such termination, subject to and conditioned upon the Executive’s execution, within sixty (60) days following such termination, of a Separation Agreement and General Release (such General Release having become effective and irrevocable in accordance with its terms), provided that such Separation Agreement and General Release shall not contain restrictive covenants other than those expressly set forth in this Agreement and shall not require the Executive to waive his rights under this Agreement, his rights as a shareholder, any rights to vested benefits accrued through the date of termination, any rights under the Company’s directors’ and officers’ liability insurance policies, as in effect from time to time, or any rights to indemnification under the Company’s bye-laws or otherwise.

 

(e)                                  Dividend Equivalents; Other Distributions.  In the event that, pursuant to this paragraph 8 or paragraph 9 of this Agreement, the Executive becomes entitled to any portion of the Fixed RSU Award (or any similar RSU award), any performance-based RSUs or any other unvested LTIP or other long-term incentive compensation awards, then the Executive shall also receive

 

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any unpaid distributions with respect thereto, whether in the form of cash, shares, other securities or other property, to the same extent, and at the same time, that the Executive is entitled to receive the underlying awards.

 

9.                                      Non-Renewal of Agreement.  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 then such service as a Board member shall be considered continued employment for purposes of determining the vesting of RSUs and any other form of long-term incentive compensation, and, subject to paragraph 15(n), while on the Board, the Executive shall remain entitled to continuing health coverage for himself and his household at the Company’s expense.  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 involuntarily (other than for Cause) or is not reelected to the Board (despite his willingness to remain an active member of the Board), then upon the Executive’s removal from the Board, (i) the Executive’s unvested RSUs and any other form of long-term incentive compensation shall become vested to the same extent as set forth in clauses (G) and (H) of paragraph 8(d) and (ii) the Executive shall receive an amount equal to the sum of the Base Salary then in effect as of the date of non-renewal plus the highest Annual Bonus paid in the three (3) years prior to the date of non-renewal in consideration of the restrictions imposed within paragraph 10.  Payment of the benefits upon removal from the Board under clauses (i) (solely with respect to RSUs or other compensation that is intended to be exempt from Section 409A

 

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under Treas. Reg. §1.409A-1(b)(4)) and (ii) of this paragraph 9 shall be made no later than seventy-four (74) days following removal from the Board.

 

10.                               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 more than 5% of any class of stock, shares or debentures in any company (other than the Company, in which case, such limit shall not apply) whose stock, shares or debentures are listed or dealt in on an appointed stock exchange (as defined in the Companies Act).

 

(b)                                 Since the Executive has obtained in the course of his employment prior to the date hereof and is likely to obtain in the course of his employment hereunder knowledge of the trade secrets and also other confidential information in regard to the business of the Company and of any Group Company with which he becomes associated, the Executive hereby agrees with the Company that in addition to the restrictions contained in paragraph (a) above, he will not in Bermuda, the United Kingdom, the United States or Switzerland:

 

(i)                                     During the period of twelve (12) months following the termination of his employment (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

 

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undertaking which is engaged in or carries on in Bermuda, the United Kingdom, the United States or Switzerland any insurance or re-insurance business which competes or seeks to compete with the insurance or re-insurance business carried on by the Company or any other Group Company at the date of termination (any such business, a “Competitive Business”).  Notwithstanding the foregoing, the Executive shall be permitted to (1) hold or own equity that he is permitted to hold or own during the Term under paragraph 10(a) above or (2) provide services to, and retain compensation from, a division, subsidiary or affiliate of an entity that owns a Competitive Business or a private equity or hedge fund which holds investments in, or manages, a Competitive Business, in each case as long as the Executive’s services to such division, subsidiary, affiliate, private equity fund or hedge fund do not relate to such Competitive Business.

 

(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 for a Competitive Business any person, firm or company who at the date of termination aforesaid or who in the period of twelve (12) months immediately prior to such date was a customer or client of or in the habit of dealing with the Company or any Group Company or who at such date was to his knowledge negotiating with the Company or any Group Company in relation to all or part of its business.

 

(iii)                               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

 

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services of or endeavor to entice away from the Company or any Group Company any director, employee or individual consultant of the Company or any Group Company or who in the twelve (12) months immediately prior to such date was a director, employee or individual consultant of the Company or any Group Company (whether or not such person would commit any breach of  his or her contract of employment or engagement by reason of leaving the service of such company) nor shall the Executive knowingly employ or aid or assist in or procure the employment by any other person, firm or company of any such person.

 

(c)                                  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 the terms of such restrictions and provisions will not be more onerous than the restrictions and provisions of this Agreement.

 

21

 

11.                               Successors.  The Executive’s performance hereunder is personal to the Executive and shall not be assignable by the Executive.  The Company may assign this Agreement to any successor to all or substantially all of the business and/or assets of the Company, whether directly or indirectly, by purchase, merger, consolidation, acquisition of stock, or otherwise, provided, however, that any such successor, and the Company remain jointly liable to the Executive for performance of this Agreement.  This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns and the Executive and his heirs.  If the Executive shall die while any payment or entitlement is due to him under this Agreement or otherwise, such payment or entitlement shall be paid to his designated beneficiary or, if there is no such designated beneficiary, to his estate.

 

12.                               Legal Expenses.  Subject to paragraph 15(m)(iii) hereof, 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 Executive will pay or reimburse the Company for all costs and expenses (including court costs and attorney’s fees) incurred by Company as a result of any claim, action or proceeding arising out of, or challenging the validity, or enforceability of, this Agreement or any provision hereof or any benefit or award contemplated herein, but only if the Company is the prevailing party, in whole or in significant part, with respect to such claim, action or proceeding.  The obligations of the Company and the Executive to reimburse the other party for costs and expenses described in this paragraph 12

 

22

 

shall only apply to costs and expenses incurred during the Executive’s lifetime and prior to the tenth (10th) anniversary of the date of the Executive’s death.

 

13.                               Parachute Payment Cut-Back.  Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment under this Agreement would, when combined with all other payments the Executive receives from the Company or any successor or parent or subsidiary thereof, but for this paragraph 13, be considered an “excess parachute payment” under Section 280G of the Internal Revenue Code and any regulations or Treasury guidance promulgated thereunder (the “Code”), then such payments shall be reduced (with cash payments being reduced before equity-based compensation or other non-cash compensation or benefits, in each case, in reverse order beginning with payments or benefits that are to be paid the furthest in time from consummation of the transaction that is subject to Section 280G of the Code, provided that, in the case of all of the foregoing payments, compensation and benefits, all amounts that are not subject to calculation under Treas. Reg. §1.280G-1, Q&A-24(b) or (c) shall be reduced before any amounts that are subject to calculation under Treas. Reg. §1.280G-1, Q&A-24(b) or (c)) as would result in no portion of the payments being considered “excess parachute payments” under Section 280G of the Code; but only to the extent such reduction does not result in the Executive receiving on a net basis after all taxes, including excise taxes, less than the Executive would have received net after all taxes, including excise taxes, without regard to the reduction.  If such reduction would result in the Executive receiving less on a net basis, then his payment shall not be reduced in excess of an amount that would net him at least as much as he would have received on a net basis without regard to the reduction.  Any determinations that are made pursuant to this paragraph 13 shall be made by a nationally

 

23

 

recognized certified public accounting firm that shall be selected by the Company (and paid by the Company) prior to any transaction that is subject to Section 280G of the Code and reasonably acceptable to the Executive (the “Accountant”), which determination shall be certified by the Accountant and set forth in a certificate delivered to the Executive setting forth in reasonable detail the basis of the Accountant’s determinations.

 

14.                               Survival of Operative Sections.  The expiration or termination of the Term 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.

 

15.                               Miscellaneous.

 

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

 

(b)                                 Indemnification/D&O Liability Insurance.  In the event of a Change in Control, regardless of whether the Executive’s employment has terminated prior to the Change in Control, the Company agrees that, following such Change in Control, it and any Group Company will to the fullest extent permitted by the Company’s or any Group Company’s corporate governance documents, as applicable, or if greater, by applicable law to indemnify, defend (and advance

 

24

 

expenses to the Executive, subject to paragraph 15(m)(iii)) and hold harmless against all costs, expenses, liabilities and losses (including any costs to enforce his rights under this paragraph 15(b)) if the Executive is made a party to, is threatened to be made a party to, receives any legal process in, or receives any discovery request or request for information in connection with, any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), by reason of the fact that he is or was a director, officer, employee, consultant or agent of the Company or any Group Company or was serving at their request, or on their behalf, for any other entity or venture, including service with respect to employee benefit plans.  The Company agrees that, following a Change in Control, regardless of whether the Executive’s employment has terminated prior to the Change in Control, it shall continue and maintain directors’ and officers’ liability insurance policies covering the Executive at a level, and on terms and conditions, no less favorable to him than the coverage the Company provides to its directors or other senior executives until such time as suits against the Executive are no longer permitted by applicable law.

 

(c)                                  No Mitigation/No Offset.  The Executive shall have no duty to mitigate damages by seeking other employment and there shall be no offset or recoupment against any payments, benefits or entitlements due to the Executive under this Agreement or otherwise on account of any remuneration received by the Executive from subsequent employment.

 

(d)                                 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.

 

25

 

(e)                                  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.

 

(f)                                   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.

 

(g)                                  Integration.  To the extent that any provision of this Agreement conflicts or is inconsistent with the terms of any LTIP, any annual bonus plan or agreement, any LTIP award agreement (including, without limitation, any RSU award agreement), the Severance Plan or any other compensation plan, benefit plan, award, or similar agreement, it is hereby acknowledged and agreed that, except as otherwise set forth in this paragraph 15(g), the terms most favorable to the Executive shall control; provided that the determination as to whether any such conflict or inconsistency exists shall be made by the Compensation Committee in its reasonable discretion.  Notwithstanding the foregoing, in no event shall any provisions of this Agreement supersede or override the provisions of the policy adopted by the Company relating to the recovery of compensation granted, paid, delivered, awarded or otherwise provided to the Executive by the Company or any Group Company as such policy is in effect on the date of this Agreement or, to the extent necessary to address the requirements of applicable law (including, without limitation, Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as codified in Section 10D of the Securities Exchange Act of 1934, Section 304 of the Sarbanes-Oxley Act of 2002 or any other applicable law), as may be amended from time to time.  No

 

26

 

agreements, plans, or representations, oral or otherwise, express or implied, unless specifically referred to herein (which reference includes the plans and agreements described in the preceding sentence of this paragraph 15(g)), with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement.  Notwithstanding any provision of the LTIP, any performance-based RSU agreement or any other performance-based long-term incentive award agreement that allows the Company or the Compensation Committee to exercise “negative discretion” to reduce or eliminate amounts that are payable to the Executive thereunder, the Company hereby agrees that it will not apply such negative discretion in a manner that targets the Executive individually.

 

(h)                                 Interpretation; Counterparts.  

 

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

 

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

 

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

 

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

 

27

 

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

 

(iv)  The term “or” is not exclusive.

 

(i)                                     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.  Signatures delivered by facsimile or electronic means (including by “pdf”) shall be deemed effective for all purposes.

 

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

 

(k)                                 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:
    	
 
    	
Christopher L. Harris
    
	
 
    	
 
    	
Montpelier House
    
	
 
    	
 
    	
94 Pitts Bay Road
    
	
 
    	
 
    	
Pembroke, Bermuda HM08
    
	
 
    	
 
    	
Fax No.:    441-296-4358
    
	
 
    	
 
    	
 
    
	
If to the Company:
    	
 
    	
Montpelier Re Holdings Ltd.
    
	
 
    	
 
    	
Montpelier House
    

 

28

 

	
 
    	
 
    	
94 Pitts Bay Road
    
	
 
    	
 
    	
Pembroke, Bermuda HM08
    
	
 
    	
 
    	
Attn. General Counsel
    
	
 
    	
 
    	
Fax No.:  441-296-5551
    

 

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

 

(l)                                     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.

 

(m)                             Sections 409A and 457A.  It is intended that the provisions of this Agreement and the benefits provided hereunder comply with or are exempt from Section 409A of the Code (“Section 409A”) and Section 457A of the Code (“Section 457A”), and all provisions of this Agreement shall be construed and interpreted in a manner consistent with the requirements for avoiding taxes or penalties under Sections 409A and 457A.

 

(i)                                     Neither the Executive nor any of his creditors or beneficiaries shall have the right to subject any deferred compensation (within the meaning of Sections 409A and 457A) payable under this Agreement or under any other plan, policy, arrangement or agreement of or with the Company or any Group Company (this Agreement and such other plans, policies, arrangements 

 

29

 

and agreements, the “Company Plans”) to any anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment.  Except as permitted under Sections 409A and 457A, any deferred compensation (within the meaning of Sections 409A and 457A) payable to the Executive or for the Executive’s benefit under any Company Plan may not be reduced by, or offset against, any amount owing by the Executive to the Company or any of its affiliates.

 

(ii)                                  Notwithstanding any other provision of this Agreement, a termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits that are considered nonqualified deferred compensation under Section 409A that are payable upon or following a termination of employment, unless such termination is also a “separation from service” within the meaning of Section 409A and the payment thereof prior to a “separation from service” would violate Section 409A.  For purposes of any such provision of this Agreement relating to any such payments or benefits, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.”  Notwithstanding any other provision of this Agreement, if at the time of termination of the Executive’s employment he is a “specified employee” (as defined in Section 409A) and any payments upon such termination under paragraph 8 above or otherwise will result in additional tax or interest to the Executive, he will not be entitled to such payments until the earlier of (A) the date that is six (6) months after such termination of employment or (B) any earlier date that does not result in any additional tax or interest to the Executive under Section 409A.  In addition, if any provision of this Agreement would subject the Executive to any additional tax or interest under Section 409A, then the Company shall reform such provision with the Executive’s written consent; provided that the Company shall (x) 

 

30

 

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

 

(iii)                               Except as specifically permitted by Section 409A or as otherwise specifically set forth in this Agreement, the benefits and reimbursements provided to the Executive under this Agreement and any Company Plans during any calendar year shall not affect the benefits and reimbursements to be provided to the Executive under the relevant section of this Agreement or any Company Plan in any other calendar year, and the right to such benefits and reimbursements cannot be liquidated or exchanged for any other benefit and shall be provided in accordance with Treas. Reg. Section 1.409A-3(i)(1)(iv) or any successor thereto.  Further, in the case of reimbursement payments, reimbursement payments shall be made to the Executive as soon as practicable following the date that the applicable expense is incurred, but in no event later than the last day of the calendar year following the calendar year in which the underlying expense is incurred.

 

(iv)                              For purposes of Section 409A, each payment hereunder (including each separate payment under paragraph 8(c)(B)) will be deemed to be a separate payment for purposes of Section 409A and Treasury Regulation Section 1.409A-2(b)(2)(iii).

 

(v)                                 Notwithstanding any provision of this Agreement or any Company Plan to the contrary, in light of the uncertainty with respect to the proper application of Sections 409A and 457A, the Company reserves the right to make amendments to any Company Plan (other than this Agreement) as the Company deems necessary or desirable to avoid the imposition of taxes 

 

31

 

or penalties on the Executive under either Section 409A or Section 457A.  In any case, the Executive is solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on the Executive or for the Executive’s account in connection with this Agreement (including any taxes and penalties under either Section 409A or Section 457A), and neither the Company nor any affiliate shall have any obligation to indemnify or otherwise hold the Executive harmless from any or all of such taxes or penalties.

 

(n)                                 Section 105.  Notwithstanding any provision of this Agreement to the contrary, unless the medical benefits that would otherwise be provided to the Executive and his household pursuant to this Agreement following termination of the Executive’s employment with the Company can be provided in a manner such that such benefits are not includible in the Executive’s income pursuant to Section 105 of the Code, the parties shall negotiate in good faith, taking into account the requirements of Sections 409A and 457A, in order to determine the manner in which such benefits will be provided.

 

(o)                                 Entire Agreement.  This Agreement constitutes the entire agreement and understanding of the parties and, with respect to the transactions contemplated hereby and subject matter hereof, supersedes and replaces any and all prior agreements, understandings, statements, representations and warranties, written or oral, express or implied and/or whenever and howsoever made, directly or indirectly relating to the subject matter hereof, including, without limitation, the Prior Agreement, which shall terminate immediately upon the Effective Date; provided, however, that any RSU award agreements entered into between the Company and the 

 

32

 

Executive on or prior to the Effective Date (as modified by this Agreement) shall remain in full force and effect from and after the Effective Date without regard to this paragraph 15(o).

 

33

 

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
    	
 
    	
/s/   Christopher L. Harris
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
     Anthony   Taylor, Board Chairman
    	
 
    	
                       Christopher   L. Harris
    

 

34Exhibit 4.1

 

0.700% NOTES DUE 2016

 

MERCK & CO., INC.

 

Officers’ Certificate

 

Peter N. Kellogg, Executive Vice President and Chief Financial Officer, and Mark E. McDonough, Vice President and Treasurer, as Authorized Officers pursuant to the resolutions of the Board of Directors of Merck & Co., Inc. (the “Company”) adopted at a meeting duly called and held on November 27, 2012, at which a quorum was present and acting throughout, and the resolutions of the Board of Directors of the Company adopted at a meeting duly called and held on March 26, 2013, at which a quorum was present and acting throughout (collectively, the “Resolutions”), which authorized the Company to issue and sell its debt securities, and empowered the Authorized Officers (as defined in the Resolutions) to approve the form and terms of such debt securities, each hereby approves and establishes under the Indenture, dated as of January 6, 2010 (the “Indenture”), between the Company and U.S. Bank Trust National Association, as Trustee, a series of debt securities the terms of which are as follows:

 

1.                                      The title of the debt securities of such series shall be 0.700% Notes due 2016 (the “2016 Fixed Rate Notes”).

 

2.                                      The aggregate principal amount of the 2016 Fixed Rate Notes which may be authenticated and delivered under the Indenture is initially limited to $1,000,000,000 (provided that the Company may increase such aggregate principal amount at any time on or after the date hereof), except for 2016 Fixed Rate Notes authenticated and delivered upon registration or transfer of, or in exchange for, or in lieu of, other 2016 Fixed Rate Notes of the series pursuant to Section 304, 305, 306, 906 or 1107 of the Indenture and except for any 2016 Fixed Rate Notes which, pursuant to Section 303 of the Indenture, are deemed never to have been authenticated and delivered under the Indenture.  Any election by the Company to so increase such aggregate principal amount shall be evidenced by a certificate of the Authorized Officers.

 

3.                                      The 2016 Fixed Rate Notes shall be issued in denominations of $2,000 and integral multiples of $1,000 in excess thereof.

 

 

4.                                      The proceeds to the Company (after deducting the underwriting discounts and commissions but before deducting certain expenses payable by the Company) shall be 99.723% of the aggregate principal amount of the 2016 Fixed Rate Notes.

 

5.                                      The maturity date on which the principal of each of the 2016 Fixed Rate Notes is payable shall be May 18, 2016.

 

6.                                      The 2016 Fixed Rate Notes shall bear interest at the rate of 0.700% per annum from May 20, 2013.

 

7.                                      The Interest Payment Dates for the 2016 Fixed Rate Notes shall be May 18 and November 18 of each year, commencing on November 18, 2013, and the Regular Record Dates for the 2016 Fixed Rate Notes shall be the preceding May 3 or November 3, as the case may be.

 

8.                                      The 2016 Fixed Rate Notes will be redeemable in whole at any time or in part from time to time, at the Company’s option, at a Redemption Price equal to the greater of (i) 100% of the principal amount of the 2016 Fixed Rate Notes to be redeemed or (ii) the sum of the present values of the Remaining Scheduled Payments (as defined below) discounted to the Redemption Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at a rate equal to the Treasury Rate (as defined below) plus 5 basis points, plus, in each case, any interest accrued but not paid to the date of redemption; provided that the principal amount of a 2016 Fixed Rate Note remaining outstanding after a redemption in part shall be $2,000 or an integral multiple of $1,000 in excess thereof.

 

“Treasury Rate” means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity or interpolated maturity (on a day count basis) of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date.

 

“Comparable Treasury Issue” means the United States Treasury security or securities selected by an Independent Investment Banker as having an actual or interpolated maturity comparable to the remaining term of the 2016 Fixed Rate Notes to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such 2016 Fixed Rate Notes.

 

“Independent Investment Banker” means one of the Reference Treasury Dealers appointed by the Trustee after consultation with the Company.

 

“Comparable Treasury Price” means, with respect to any Redemption Date for the 2016 Fixed Rate Notes, (i) the average of the Reference Treasury Dealer Quotations for such Redemption Date after excluding the highest and lowest of such Reference Treasury Dealer Quotations, or (ii) if the Trustee obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such quotations.

 

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“Reference Treasury Dealer” means BNP Paribas Securities Corp., Deutsche Bank Securities Inc., J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC, their respective successors and any additional primary U.S. governmental securities dealers selected by the Trustee after consultation with the Company; provided, however, that if any of the foregoing shall cease to be a primary U.S. government securities dealer in the United States (a “Primary Treasury Dealer”), the Company will substitute another Primary Treasury Dealer for such dealer.

 

“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any Redemption Date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 3:30 p.m. (New York City time) on the third business day preceding such Redemption Date.

 

“Remaining Scheduled Payments” means, with respect to each 2016 Fixed Rate Note to be redeemed, the remaining scheduled payments of principal of and interest on the 2016 Fixed Rate Note that would be due after the related Redemption Date but for the redemption. If that Redemption Date is not an Interest Payment Date with respect to a 2016 Fixed Rate Note, the amount of the next succeeding scheduled interest payment on the 2016 Fixed Rate Note will be reduced by the amount of interest accrued on the 2016 Fixed Rate Note to the Redemption Date.

 

Holders of 2016 Fixed Rate Notes to be redeemed will receive notice thereof by first-class mail at least 30 and not more than 60 days before the date fixed for redemption. If fewer than all of the 2016 Fixed Rate Notes are to be redeemed, the Trustee will select the particular 2016 Fixed Rate Notes or portions thereof for redemption from the outstanding 2016 Fixed Rate Notes not previously called, pro rata or by lot, or in such other manner as the Company shall direct.

 

Unless the Company defaults in payment of the Redemption Price, on and after the Redemption Date interest will cease to accrue on the 2016 Fixed Rate Notes or portions thereof called for redemption.

 

9.                                      Payment of the principal and interest on the 2016 Fixed Rate Notes will be made at the office or agency of the Company maintained for that purpose in New York, New York (initially, the Corporate Trust Office of the Trustee), provided that at the option of the Company payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register.

 

10.                               The provisions on defeasance and covenant defeasance in Article Thirteen of the Indenture shall apply to the 2016 Fixed Rate Notes.

 

11.                               The 2016 Fixed Rate Notes shall be issued in the form of one or more Book-Entry Securities and the Depository for such Book-Entry Securities shall be The Depository Trust Company, Clearstream Banking societé anonyme and Euroclear Bank S.A./N.V.

 

3

 

12.                               The form of the 2016 Fixed Rate Notes attached hereto as Annex A is hereby approved.

 

Capitalized terms used herein and not otherwise defined herein have the meanings specified in the Indenture.

 

4

 

IN WITNESS WHEREOF, we have hereunto signed our names this 20th day of May, 2013.

 

 

	
 
    	
By:
    	
/s/   Peter N. Kellogg
    
	
 
    	
 
    	
Peter   N. Kellogg
    
	
 
    	
 
    	
Executive   Vice President and Chief
    
	
 
    	
 
    	
Financial   Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Mark E. McDonough
    
	
 
    	
 
    	
Mark   E. McDonough
    
	
 
    	
 
    	
Vice   President and Treasurer
    

 

 

Annex A

 

	
REGISTERED
    	
REGISTERED
    
	
No. R-1
    	
PRINCIPAL   AMOUNT: $500,000,000*
    
	
CUSIP   NO.: 58933Y AD7
    	
 
    

 

MERCK & CO., INC.

 

0.700% NOTES DUE 2016

 

This Security is a Book-Entry Security within the meaning of the Indenture referred to on the reverse hereof and is registered in the name of a Depository or a nominee of a Depository.  This Security is exchangeable for Securities registered in the name of a Person other than the Depository or its nominee only in the limited circumstances described in the Indenture and this Security may not be transferred except as a whole by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository.

 

Unless this Certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation (“DTC”), to the Company or its agent for registration of transfer, exchange or payment, and any Certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment hereon is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.

 

*                                         On May 20, 2013, the 2016 Fixed Rate Notes will be issued in the form of two (2) Book-Entry Securities in the amounts of $500,000,000 and $500,000,000.

 

 

Merck & Co., Inc., a New Jersey corporation (hereinafter called the “Company”, which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to Cede & Co., as nominee for The Depository Trust Company, or registered assigns, the principal sum of Five Hundred Million Dollars ($500,000,000) on May 18, 2016, and to pay interest thereon from and including May 20, 2013 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually in arrears on May 18 and November 18 in each year and at Maturity, commencing on November 18, 2013, at a rate per annum of 0.700%, until the principal hereof is paid or made available for payment, and (to the extent that the payment of such interest shall be legally enforceable) at the interest rate specified above on any overdue principal and premium and on any overdue installment of interest.  The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the May 3 or November 3 (whether or not a Business Day in New York City), as the case may be, next preceding such Interest Payment Date.  Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture.

 

The Company will at all times appoint and maintain a Paying Agent (which may be the Trustee) authorized by the Company to pay the principal of (and premium, if any) or interest on any Securities of this series on behalf of the Company and having an office or agency (the “Paying Agent Office”) in The City of New York, where Securities of this series may be presented or surrendered for payment and where notices, designations or requests in respect of payments with respect to Securities of this series may be served.  The Company has initially appointed U.S. Bank Trust National Association as such Paying Agent, with the Paying Agent Office currently at 100 Wall Street, New York, New York 10005.  The Company will give prompt written notice to the Trustee of any change in such appointment.

 

Payment of the principal of (and premium, if any) and interest on this Security will be made in immediately available funds upon surrender of such Security at the Corporate Trust Office of U.S. Bank Trust National Association, in the Borough of Manhattan, The City of New York in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.  Payments of interest on any Security of this series (other than at the Maturity of such Security) will be made by check mailed to the address of the Person entitled thereto as it appears in the Security Register or by wire transfer to such account as may have been appropriately designated in writing no later than the relevant Regular Record Date to the Paying Agent by such Person.

 

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Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.

 

3

 

Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

 

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal.

 

	
Dated:   May 20, 2013
    	
 
    	
 
    
	
 
    	
 
    	
MERCK &   CO., INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
Name:
    	
Mark   E. McDonough
    
	
 
    	
 
    	
 
    	
Title:
    	
Vice   President and Treasurer
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Attest:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    

 

CERTIFICATE OF AUTHENTICATION

 

This is one of the Securities of the series designated herein referred to in the within-mentioned Indenture.

 

	
U.S.   BANK TRUST NATIONAL ASSOCIATION,
    	
 
    	
 
    
	
As Trustee
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
 
    
	
 
    	
Authorized Officer
    	
 
    	
 
    

 

4

 

[REVERSE OF SECURITY]

 

MERCK & CO., INC.

 

0.700% NOTES DUE 2016

 

This Security is one of a duly authorized issue of securities of the Company (herein called the “Securities”), issued and to be issued in one or more series under an Indenture, dated as of January 6, 2010, as amended and supplemented (herein called the “Indenture”), between the Company and U.S. Bank Trust National Association, as Trustee (herein called the “Trustee”, which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered.  This Security is one of the series designated on the face hereof.  The aggregate principal amount of such series is $1,000,000,000, provided that the Company may increase such aggregate principal amount at any time.

 

Payments of interest hereon with respect to any Interest Payment Date will include interest accrued to but excluding such Interest Payment Date.  Interest hereon shall be computed on the basis of a 360-day year consisting of twelve 30-day months.

 

This Security is not subject to any sinking fund.

 

The Securities will be redeemable in whole at any time or in part from time to time, at the Company’s option, at a Redemption Price equal to the greater of (i) 100% of the principal amount of the Securities to be redeemed or (ii) the sum of the present values of the Remaining Scheduled Payments (as defined below) discounted to the Redemption Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at a rate equal to the Treasury Rate (as defined below) plus 5 basis points, plus, in each case, any interest accrued but not paid to the date of redemption; provided that the principal amount of a Security remaining outstanding after a redemption in part shall be $2,000 or an integral multiple of $1,000 in excess thereof.

 

“Treasury Rate” means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity or interpolated maturity (on a day count basis) of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date.

 

“Comparable Treasury Issue” means the United States Treasury security or securities selected by an Independent Investment Banker as having an actual or interpolated maturity comparable to the remaining term of the Securities to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of such Securities.

 

 

“Independent Investment Banker” means one of the Reference Treasury Dealers appointed by the Trustee after consultation with the Company.

 

“Comparable Treasury Price” means, with respect to any Redemption Date for the Securities, (i) the average of the Reference Treasury Dealer Quotations for such Redemption Date after excluding the highest and lowest of such Reference Treasury Dealer Quotations, or (ii) if the Trustee obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such quotations.

 

“Reference Treasury Dealer” means BNP Paribas Securities Corp., Deutsche Bank Securities Inc., J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC, their respective successors and any additional primary U.S. governmental securities dealers selected by the Trustee after consultation with the Company; provided, however, that if any of the foregoing shall cease to be a primary U.S. government securities dealer in the United States (a “Primary Treasury Dealer”), the Company will substitute another Primary Treasury Dealer for such dealer.

 

“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any Redemption Date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 3:30 p.m. (New York City time) on the third business day preceding such Redemption Date.

 

“Remaining Scheduled Payments” means, with respect to each Security to be redeemed, the remaining scheduled payments of principal of and interest on the Security that would be due after the related Redemption Date but for the redemption. If that Redemption Date is not an Interest Payment Date with respect to a Security, the amount of the next succeeding scheduled interest payment on the Security will be reduced by the amount of interest accrued on the Security to the Redemption Date.

 

Holders of Securities to be redeemed will receive notice thereof by first-class mail at least 30 and not more than 60 days before the date fixed for redemption. If fewer than all of the Securities are to be redeemed, the Trustee will select the particular Securities or portions thereof for redemption from the outstanding Securities not previously called, pro rata or by lot, or in such other manner as the Company shall direct.

 

Unless the Company defaults in payment of the Redemption Price, on and after the Redemption Date interest will cease to accrue on the Securities or portions thereof called for redemption.

 

If an Event of Default with respect to the Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture.

 

The Indenture contains provisions for defeasance at any time of (i) the entire indebtedness of this Security or (ii) certain restrictive covenants and Events of Default with respect to this Security, in each case upon compliance with certain conditions set forth therein.

 

2

 

The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in principal amount of the Securities at the time Outstanding of each series to be affected.  The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences.  Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange thereof or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.

 

No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and any premium and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed.

 

As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in any place where the principal of (and premium, if any) and interest on this Security are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.

 

The Securities of this series are issuable only in registered form without coupons in denominations of $2,000 and integral multiples of $1,000 in excess thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same.

 

No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

 

Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.

 

All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.

 

3

 

ABBREVIATIONS

 

The following abbreviations, when used in the inscription on the face of the within Security, shall be construed as though they were written out in full according to applicable laws or regulations.

 

	
TEN   COM
    	
 
    	
-
    	
 
    	
as   tenants in common
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
TEN   ENT
    	
 
    	
-
    	
 
    	
as   tenants by the entireties
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
JT   TEN
    	
 
    	
-
    	
 
    	
as   joint tenants with right of survivorship and not as tenants in common
    

 

	
UNIF   GIFT MIN ACT -
    	
                      Custodian                       
    
	
 
    	
(Cust)                                     (Minor)
    

 

	
 
    	
under   Uniform Gifts to Minors Act
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
(State)
    
	
 
    	
 
    
	
 
    	
Additional abbreviations may also be used
   though not in the above list.
    
	
 
    	
 
    

 

4

 

ASSIGNMENT

 

FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto                                                                                                                                                                          

 

PLEASE INSERT SOCIAL SECURITY OR OTHER
 IDENTIFYING NUMBER OF ASSIGNEE

 

 

 

(Please Print or Typewrite Name and Address, Including Postal Zip Code, of Assignee)

 

 

the within Security and all rights thereunder, and hereby irrevocably constitutes and  appoints

 

 

to transfer said Security on the books of the Company, with full power of substitution in the premises.

 

	
Dated:
    	
 
    	
 
    
	
 
    	
 
    
	
Signature   Guaranteed
    	
 
    

 

 

	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
NOTICE:   Signature must be guaranteed by a member firm of the New York Stock Exchange   or a commercial bank or trust company.
    	
 
    	
NOTICE:   The signature to this assignment must correspond with the name as written   upon the face of the within Security in every particular, without alteration   or enlargement or any change whatever.
    

 

5

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