Document:

Ex-4.1 2004 Long Term Incentive Plan

 

Exhibit 4.1

TWEETER HOME ENTERTAINMENT GROUP, INC.

2004 LONG TERM INCENTIVE PLAN

SECTION 1.

GENERAL PURPOSE OF THE PLAN; DEFINITIONS

     The name of this plan is the Tweeter Home Entertainment Group, Inc. 2004
Long Term Incentive Plan (the “Plan”). The purpose of the Plan is to encourage
and enable the officers, employees, non-employee Directors and other key
personnel (including independent contractors, consultants and other
non-employees) of Tweeter Home Entertainment Group, Inc. (the “Company”) and
the Company’s subsidiaries, upon whose judgment, initiative and efforts the
Company largely depends for the successful conduct of its business, to acquire
a proprietary interest in the Company. It is anticipated that providing such
persons with a direct stake in the Company’s welfare will result in a closer
alignment of their interests with those of the Company, thereby stimulating
their efforts on the Company’s behalf and strengthening their desire to remain
with the Company. The following terms are defined as set forth below:

     “Exchange Act” means the Securities Exchange Act of 1934, as amended from
time to time.

     “Administrator” is defined in Section 2(a).

     “Award” or “Awards,” except where referring to a particular category of
grant under the Plan, shall include Incentive Stock Options, Non-Qualified
Stock Options, Restricted Stock Awards, Performance Share Awards, Performance
Unit Awards, Deferred Stock Awards, Warrants and Common Stock in Lieu of Cash
Compensation Awards.

     “Board” means the Board of Directors of the Company as constituted from
time to time.

     “Change of Control” is defined in Section 15.

     “Code” means the Internal Revenue Code of 1986, as amended from time to
time, and any successor, along with related rules, regulations and
interpretations.

     “Committee” means the Committee of the Board referred to in Section 2.

     “Common Stock in Lieu of Cash Compensation Award” means an Award granted
pursuant to Section 9B.

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     “Company” means Tweeter Home Entertainment Group, Inc., a Delaware
corporation, and any successor thereto.

     “Deferred Stock Award” means an Award granted pursuant to Section 9.

     “Effective Date” means the later to occur of (i) the date on which the
Plan is initially approved by stockholders as set forth in Section 17 or (ii)
June 2, 2004.

     “Fair Market Value” on any given date means the last sale price at which
Stock was traded on such date or, if no Stock was traded on such date, the next
preceding date on which Stock was traded, as reported by Nasdaq or, if
applicable, the principal stock exchange or, if applicable, any other national
stock exchange on which the Stock is traded or admitted to trading.

     “Incentive Stock Option” means any Stock Option that is intended to
qualify as, and is designated in writing in the related Option Award agreement
as intending to constitute, an “incentive stock option” as defined in Section
422 of the Code.

     “Non-employee Director” means a member of the Board who is not also an
employee of the Company or any Subsidiary.

     “Non-Qualified Stock Option” means any Stock Option that is not an
Incentive Stock Option.

     “Performance Share Award” means an Award granted pursuant to Section 7.

     “Performance Unit Award” means an Award granted pursuant to Section 8.

     “Restricted Stock Award” means an Award granted pursuant to Section 6.

     “Stock” means the Common Stock, $.01 par value, of the Company, subject to
adjustments pursuant to Section 3.

     “Stock Option” means any option to purchase shares of Stock granted
pursuant to Section 5.

     “Subsidiary” means any corporation or other entity (other than the
Company) in any unbroken chain of corporations or other entities beginning with
the Company if each of the corporations or entities (other than the last
corporation or entity in the unbroken chain) owns stock or other interests
possessing 50% or more of the economic interest or the total combined voting
power of all classes of stock or other interests in one of the other
corporations or entities in the chain.

     “Warrant Award” means an Award granted pursuant to Section 9A.

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SECTION 2.

ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT PARTICIPANTS AND

DETERMINE AWARDS

     (a) Committee. The Plan shall be administered by a Committee of not fewer
than two (2) Non-employee Directors (the “Administrator”). Each member of the
Committee shall be a “non-employee director” within the meaning of Rule
16b-3(b)(3)(i) promulgated under the Exchange Act, or any successor definition.
Each member of the Committee shall also be an “outside director” within the
meaning of Section 162(m) of the Code and the regulations (including temporary
and proposed regulations) promulgated thereunder. In addition, each member of
the Committee shall meet the then applicable requirements and criteria of the
Nasdaq Stock Market (or other market on which the Stock then trades) for
qualification as an “independent director.”

     (b) Powers of Administrator. The Administrator shall have the power and
authority to grant Awards consistent with the terms of the Plan, including the
power and authority:

          (i) to select the individuals to whom Awards may from time to time be
granted;

          (ii) to determine the time or times of grant, and the extent, if any, of
Incentive Stock Options, Non-Qualified Stock Options, Restricted Stock Awards,
Deferred Stock Awards, Performance Share Awards, Performance Unit Awards,
Warrants and Common Stock in Lieu of Cash Compensation Awards or any
combination of the foregoing, granted to any one or more participants;

          (iii) to determine the number of shares of Stock to be covered by any
Award;

          (iv) to determine and modify from time to time the terms and conditions,
including restrictions, not inconsistent with the terms of the Plan, of any
Award, which terms and conditions may differ among individual Awards and
participants, and to approve the form of written instruments evidencing the
Awards;

          (v) to accelerate at any time the exercisability or vesting of all or any
portion of any Award;

          (vi) subject to the provisions of Section 5(a)(iii), to extend at any time
the post-termination period in which Stock Options may be exercised;

          (vii) to determine at any time whether, to what extent, and under what
circumstances Stock and other amounts payable with respect to an Award shall be
deferred either automatically or at the election of the participant and whether
and to what extent the Company shall pay or credit amounts constituting deemed
interest (at rates

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determined by the Administrator) or dividends or deemed dividends on such
deferrals; and

          (viii) at any time to adopt, alter and repeal such rules, guidelines and
practices for administration of the Plan and for its own acts and proceedings
as the Administrator shall deem advisable; to interpret the terms and
provisions of the Plan and any Award (including related written instruments);
to make all determinations it deems advisable for the administration of the
Plan; to decide all disputes arising in connection with the Plan; and to
otherwise supervise the administration of the Plan.

     All decisions and interpretations of the Administrator shall be made in
the Administrator’s sole and absolute discretion and shall be final and binding
on all persons, including the Company and Plan participants.

     (c) Delegation of Authority to Grant Awards. The Administrator may
delegate to the Chief Executive Officer and/or the President of the Company
(provided that such officer is a member of the Board of Directors) all or part
of the Administrator’s authority and duties with respect to Awards, including
the granting thereof, to individuals who are not subject to the reporting and
other provisions of Section 16 of the Exchange Act or “covered employees”
within the meaning of Section 162(m) of the Code, provided, however, that the
number of shares of Stock underlying Awards made by the Chief Executive Officer
and the President shall not exceed, in the aggregate, ten percent (10%) of the
number of shares of Stock available for issuance under the Plan.

SECTION 3.

STOCK ISSUABLE UNDER THE PLAN; TERM OF PLAN;

RECAPITALIZATIONS; MERGERS; SUBSTITUTE AWARDS

     (a) Stock Issuable. The maximum number of shares of Stock reserved and
available for issuance under the Plan initially shall be 3,000,000. In
addition, (a) as Awards consisting of Stock Options are exercised, the shares
of Stock underlying such previously outstanding portion of the Award shall be
added back to the Shares available for issuance under the Plan; provided,
however, that this amount shall not exceed 100,000 shares of Stock in any given
year; and (b) if any portion of an Award is forfeited, cancelled, satisfied
without the issuance of Stock or otherwise terminated, the shares of Stock
underlying such portion of the Award shall be added back to the shares of Stock
available for issuance under the Plan. Subject to such overall limitation,
shares of Stock may be issued up to such maximum number pursuant to any type or
types of Award; provided, however, that an individual recipient can receive
Stock Options with respect to no more than 625,000 shares of Stock during any
one calendar year. The shares available for issuance under the Plan may be
authorized but unissued shares of Stock or shares of Stock reacquired by the
Company.

     (b) Term of Plan. No Awards shall be made after June 1, 2009.
Notwithstanding the foregoing, Stock Options granted hereunder may, except as

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otherwise expressly provided herein, be exercisable for up to five years after
the date they become exercisable.

     (c) Recapitalizations. Subject to the provisions of Section 15, if,
through or as a result of any merger, consolidation, sale of all or
substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar transaction, the outstanding shares of Stock are
increased or decreased or are exchanged for a different number or kind of
shares or other securities of the Company, or additional shares or new or
different shares or other securities of the Company or other non-cash assets
are distributed with respect to such shares of Stock or other securities, the
Administrator may make an appropriate or proportionate adjustment in (i) the
maximum number of shares reserved for issuance under the Plan, (ii) the number
of Stock Options that can be granted to any one individual participant, (iii)
the number and kind of shares or other securities subject to any then
outstanding Awards under the Plan, and (iv) the price for each share subject to
any then outstanding Stock Options under the Plan, without changing the
aggregate exercise price (i.e., the exercise price multiplied by the total
number of Stock Options) as to which such Stock Options remain exercisable.
The adjustment by the Administrator shall be final, binding and conclusive. No
fractional shares of Stock shall be issued under the Plan resulting from any
such adjustment, but the Administrator in its discretion may make a cash
payment in lieu of fractional shares.

     (d) Substitute Awards. The Administrator may grant Awards under the Plan
in substitution for stock and stock based awards held by employees of another
corporation who become employees of the Company or a Subsidiary as the result
of a merger or consolidation of the employing corporation with the Company or a
Subsidiary or the acquisition by the Company or a Subsidiary of property or
stock of the employing corporation. The Administrator may direct that the
substitute awards be granted on such terms and conditions as the Administrator
considers appropriate in the circumstances.

SECTION 4.

ELIGIBILITY

     Participants in the Plan will be such full or part-time officers and other
employees, Non-employee Directors and key personnel (including independent
contractors, consultants and other non-employees) of the Company and the
Company’s Subsidiaries who are responsible for or contribute to the management,
growth or profitability of the Company and the Company’s Subsidiaries as are
selected from time to time by the Administrator in its sole discretion.

SECTION 5.

STOCK OPTIONS

     Any Stock Option granted under the Plan shall be in such form as the
Administrator may from time to time approve. Stock Options granted under the
Plan may

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be either Incentive Stock Options or Non-Qualified Stock Options. Incentive
Stock Options may be granted only to employees of the Company or any Subsidiary
that is a “subsidiary corporation” within the meaning of Section 424(f) of the
Code. To the extent that any Option does not qualify as an Incentive Stock
Option, it shall be a Non-Qualified Stock Option.

     (a) Stock Options Granted to Employees and Key Personnel. The
Administrator in its discretion may grant Stock Options to eligible employees
and key personnel of the Company or any Subsidiary. Stock Options granted
pursuant to this Section 5(a) shall be subject to the following terms and
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Administrator shall deem
desirable. If the Administrator so determines, Stock Options may be granted in
lieu of cash compensation at the participant’s election, subject to such terms
and conditions as the Administrator may establish, as well as in addition to
other compensation.

          (i) Exercise Price. The exercise price per share for the Stock covered by
a Stock Option granted pursuant to this Section 5(a) shall be determined by the
Administrator at the time of grant but shall not be less than 100% of the Fair
Market Value on the date of grant. If an employee owns or is deemed to own (by
reason of the attribution rules of Section 424(d) of the Code) more than 10% of
the combined voting power of all classes of stock of the Company or any parent
or subsidiary corporation and an Incentive Stock Option is granted to such
employee, the option price of such Incentive Stock Option shall be not less
than 110% of the Fair Market Value on the grant date. In no event shall the
exercise price per share for the Stock covered by a Stock Option be lowered
through the technique commonly referred to as “repricing.”

          (ii) Option Term. The term of each Stock Option shall be fixed by the
Administrator, but no Incentive Stock Option shall be exercisable more than ten
years after the date the option is granted. If an employee owns or is deemed
to own (by reason of the attribution rules of Section 424(d) of the Code) more
than 10% of the combined voting power of all classes of stock of the Company or
any parent or subsidiary corporation and an Incentive Stock Option is granted
to such employee, the term of such option shall be no more than five years from
the date of grant.

          (iii) Exercisability; Rights of a Stockholder. Stock Options shall become
exercisable at such time or times, whether or not in installments, as shall be
determined by the Administrator at or after the grant date; provided, however,
that (A) Stock Options granted in lieu of compensation shall be exercisable in
full as of the grant date unless the Administrator otherwise provides in the
Award agreement, and (B) all Stock Options must be exercised within five (5)
years of the date they become exercisable or they shall automatically expire,
and provided further that (1) no holder of a Stock Option may exercise any
Stock Options during any period in which such person is in breach of any
noncompetition agreement or covenant such person has with the Company, and (2)
if any such holder fails to cure any such breach within thirty (30) days of
written

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notice thereof, all Stock Options held by such person shall thereupon be
forfeited. The Administrator may at any time accelerate the exercisability of
all or any portion of any Stock Option. An optionee shall have the rights of a
stockholder only as to shares acquired upon the exercise of a Stock Option and
not as to unexercised Stock Options.

          (iv) Method of Exercise. Stock Options may be exercised in whole or in
part, by giving written notice of exercise to the Company, specifying the
number of shares to be purchased. Payment of the purchase price may be made by
one or more of the following methods to the extent provided in the Option Award
agreement:

               (A) In cash, by certified or bank check or other instrument acceptable to
the Administrator;

               (B) In the form of shares of Stock that are not then subject to
restrictions under any Company plan and that have been beneficially owned by
the optionee for at least six months, if permitted by the Administrator in its
discretion. Such surrendered shares shall be valued at Fair Market Value on
the exercise date; or

               (C) By the optionee delivering to the Company a properly executed exercise
notice together with irrevocable instructions to a broker to promptly deliver
to the Company cash or a check payable and acceptable to the Company to pay the
purchase price; provided that the payment method described in this Section
5(a)(iv)(C) shall not be available to an optionee who is subject to the
reporting and other provisions of Section 16 of the Exchange Act unless the
Company has obtained the written advice of legal counsel that use of such
procedure does not violate the loan prohibitions of the Sarbanes-Oxley Act of
2002; and provided further, that in the event the optionee chooses to pay the
purchase price as so authorized, the optionee and the broker shall comply with
such procedures and enter into such agreements of indemnity and other
agreements as the Administrator shall prescribe as a condition of such payment
procedure.

The actual or constructive delivery of certificates representing the shares of
Stock to be purchased pursuant to the exercise of a Stock Option will be
contingent upon receipt from the optionee (or a purchaser acting in his stead
in accordance with the provisions of the Stock Option) by the Company of the
full purchase price for such shares and the fulfillment of any other
requirements contained in the Stock Option or applicable provisions of laws.

     (b) Annual Limit on Incentive Stock Options. To the extent required for
“incentive stock option” treatment under Section 422 of the Code, the aggregate
Fair Market Value (determined as of the time of grant) of the shares of Stock
with respect to which Incentive Stock Options granted under this Plan and any
other plan of the Company or its parent and subsidiary corporations become
exercisable for the first time by an optionee during any calendar year shall
not exceed $100,000. To the extent that any Stock Option exceeds this limit,
it shall constitute a Non-Qualified Stock Option.

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     (c) Non-transferability of Options. Except as otherwise set forth in the
following sentence, no Stock Option shall be transferable by the optionee other
than by will or by the laws of descent and distribution and all Stock Options
shall be exercisable, during the optionee’s lifetime, only by the optionee.
Notwithstanding the foregoing, an optionee may transfer his Non-Qualified Stock
Options, without consideration for the transfer, to members of his family, to
trusts for the benefit of such family members, or to partnerships in which such
family members are the only partners, provided that the transferee agrees in
writing with the Company to be bound by all of the terms and conditions of this
Plan and the applicable Option agreement.

(d) Termination. Except as may otherwise be provided by the Administrator
either in the Award agreement or, subject to Section 13 below, in writing after
the Award agreement is issued, an optionee’s rights in all Stock Options shall
automatically terminate sixty (60) days following optionee’s termination of
employment (or cessation of business relationship) with the Company and its
Subsidiaries for any reason. Notwithstanding the foregoing, if an Incentive
Stock Option optionee ceases to be employed by the Company and the Company’s
Subsidiaries by reason of his death, or if the employee dies within the thirty
(30) day period after the employee ceases to be employed by the Company and the
Company’s Subsidiaries, any Incentive Stock Options of his may be exercised, to
the extent of the number of shares with respect to which he could have
exercised it on the date of his death, by his estate, personal representative
or beneficiary who has acquired the Incentive Stock Options by will or by the
laws of descent and distribution, at any time prior to the earlier of the
specified expiration date of the Incentive Stock Options or one hundred and
eighty (180) days from the date of such optionee’s death. Additionally, if an
Incentive Stock Option optionee ceases to be employed by the Company and the
Company’s Subsidiaries by reason of his disability, he shall have the right to
exercise any Incentive Stock Options held by him on the date of termination of
employment, to the extent of the number of shares with respect to which he
could have exercised it on that date, at any time prior to the earlier of the
specified expiration date of the Incentive Stock Options or one (1) year from
the date of the termination of the optionee’s employment. For the purposes of
the Plan, the term “disability” shall mean “permanent and total disability” as
defined in Section 22(e)(3) of the Code or successor statute.

(e) Notice to Company of Disqualifying Disposition. Each employee who receives
an ISO must agree to notify the Company in writing immediately after the
employee makes a Disqualifying Disposition of any Stock acquired pursuant to
the exercise of an ISO. A “Disqualifying Disposition” is any disposition
(including any sale) of such Stock before the later of:

          (i) two years after the date the employee was granted the ISO, or

          (ii) one year after the date the employee acquired Stock by exercising the
ISO. If the employee has died before such stock is sold, these holding period
requirements do not apply and no Disqualifying Disposition can occur
thereafter.

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SECTION 6.

RESTRICTED STOCK AWARDS

     (a) Nature of Restricted Stock Awards. A Restricted Stock Award is an
Award entitling the recipient to acquire, at par value or such other higher
purchase price determined by the Administrator, shares of Stock subject to such
restrictions and conditions as the Administrator may determine at the time of
grant (“Restricted Stock”). Conditions may be based on continuing employment
(or other business relationship) and/or achievement of pre-established
performance goals and objectives. The grant of a Restricted Stock Award is
contingent on the participant executing the Restricted Stock Award agreement.
The terms and conditions of each such agreement shall be determined by the
Administrator, and such terms and conditions may differ among individual Awards
and participants.

     (b) Rights as a Stockholder. Upon execution of the Restricted Stock Award
agreement and paying any applicable purchase price, a participant shall have
the rights of a stockholder with respect to the voting of the Restricted Stock,
subject to such terms and conditions as may be contained in the Restricted
Stock Award agreement. Unless the Administrator shall otherwise determine,
certificates evidencing the Restricted Stock shall remain in the possession of
the Company until such Restricted Stock is vested as provided in Section 6(d)
below, and the participant shall be required, as a condition of the grant, to
deliver to the Company a stock power endorsed in blank.

     (c) Restrictions. Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided herein or in the Restricted Stock Award agreement. Except
as may otherwise be provided by the Administrator either in the Award agreement
or, subject to Section 13 below, in writing after the Award agreement is
issued, if a participant’s employment (or other business relationship) with the
Company and its Subsidiaries terminates for any reason, the Company shall have
the right to repurchase Restricted Stock that has not vested at the time of
termination at its original purchase price (which may be zero), from the
participant or the participant’s legal representative.

     (d) Vesting of Restricted Stock. The Administrator at the time of grant
shall specify the date or dates and/or the attainment of pre-established
performance goals, objectives and other conditions on which the
non-transferability of the Restricted Stock and the Company’s right of
repurchase or forfeiture shall lapse, provided, however, that any Awards of
Restricted Stock that vest solely on the basis of continuing employment (or
other business relationship) shall be subject to a five (5) year period of
vesting, in equal installments, subject, however, at the Administrator’s
discretion, to accelerated vesting upon the achievement of specified
performance goals. Subsequent to such date or dates and/or the attainment of
such pre-established performance goals, objectives and other conditions, the
shares on which all restrictions have lapsed shall no longer be Restricted
Stock and shall be deemed “vested.” Except as may otherwise be provided by

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the Administrator either in the Award agreement or, subject to Section 13
below, in writing after the Award agreement is issued, a participant’s rights
in any shares of Restricted Stock that have not vested shall automatically
terminate upon the participant’s termination of employment (or other business
relationship) with the Company and its Subsidiaries and such shares shall be
subject to the Company’s right of repurchase as provided in Section 6(c) above.

     (e) Waiver, Deferral and Reinvestment of Dividends. The Restricted Stock
Award agreement may require or permit the immediate payment, waiver, deferral
or reinvestment (in the form of additional Restricted Stock) of dividends paid
on the Restricted Stock.

     (f) Limit on Restricted Stock Awards. No more than 500,000 of the shares
of Stock initially reserved for issuance under the Plan may be used for
Restricted Stock Awards. In addition, to the extent that shares of Stock are
used for Deferred Stock Awards, they shall reduce (on a share-for-share basis)
such number of shares available for Restricted Stock Awards.

SECTION 7.

PERFORMANCE SHARE AWARDS

     (a) Nature of Performance Share Awards. A Performance Share Award is an
Award entitling the recipient to acquire shares of Stock upon the attainment of
specified long-term performance goals over a specified period of three to five
years. The Administrator may make Performance Share Awards independent of or
in connection with the granting of any other Award under the Plan. The
Administrator in its sole discretion shall determine whether and to whom
Performance Share Awards shall be made, the performance goals applicable under
each such Award, the periods during which performance is to be measured, and
all other limitations and conditions applicable to the awarded Performance
Shares; provided, however, that the Administrator may rely on the performance
goals and other standards applicable to other performance unit plans of the
Company in setting the standards for Performance Share Awards under the Plan.

     (b) Rights as a Stockholder. A participant receiving a Performance Share
Award shall have the rights of a stockholder only as to shares actually
received by the participant under the Plan and not with respect to shares
subject to the Award but not actually received by the participant. A
participant shall be entitled to receive a stock certificate evidencing the
acquisition of shares of Stock under a Performance Share Award only upon
satisfaction of all conditions specified in the written instrument evidencing
the Performance Share Award (or in a performance plan adopted by the
Administrator).

     (c) Termination. Except as may otherwise be provided by the Administrator
either in the Award agreement or, subject to Section 13 below, in writing after
the Award agreement is issued, a participant’s rights in all Performance Share
Awards shall

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automatically terminate upon the participant’s termination of employment (or
cessation of business relationship) with the Company and its Subsidiaries for
any reason.

     (d) Acceleration, Waiver, Etc. At any time prior to the participant’s
termination of employment (or other business relationship) by the Company and
its Subsidiaries, the Administrator may in its sole discretion accelerate,
waive or, subject to Section 13, amend any or all of the goals, restrictions or
conditions imposed under any Performance Share Award.

     (e) Limit on Performance Share Awards. No more than 200,000 of the shares
of Stock initially reserved for issuance under the Plan may be used for
Performance Share Awards.

SECTION 8.

PERFORMANCE UNIT AWARDS

     (a) Nature of Performance Unit Awards. A Performance Unit Award is an
Award of units with a specified dollar value, the payment of which shall be
contingent upon the recipient’s attainment of specified long-term performance
goals over a specified period of three to five years. Payment of the Awards
may be in the form of cash compensation or shares of Stock. The Administrator
may make Performance Unit Awards independent of or in connection with the
granting of any other Award under the Plan. The Administrator in its sole
discretion shall determine whether and to whom Performance Unit Awards shall be
made, the performance goals applicable under each such Award, the periods
during which performance is to be measured, and all other limitations and
conditions applicable to the awarded Performance Units; provided, however, that
the Administrator may rely on the performance goals and other standards
applicable to other performance unit plans of the Company in setting the
standards for Performance Unit Awards under the Plan.

     (b) Rights as a Stockholder. A participant receiving a Performance Unit
Award payable in shares of Stock shall have the rights of a stockholder only as
to shares actually received by the participant under the Plan and not with
respect to shares subject to the Award but not actually received by the
participant. A participant shall be entitled to receive a stock certificate
evidencing the acquisition of shares of Stock under a Performance Unit Award
only upon satisfaction of all conditions specified in the written instrument
evidencing the Performance Unit Award (or in a performance plan adopted by the
Administrator).

     (c) Termination. Except as may otherwise be provided by the Administrator
either in the Award agreement or, subject to Section 13 below, in writing after
the Award agreement is issued, a participant’s rights in all Performance Unit
Awards shall automatically terminate upon the participant’s termination of
employment (or cessation of business relationship) with the Company and its
Subsidiaries for any reason.

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     (d) Acceleration, Waiver, Etc. At any time prior to the participant’s
termination of employment (or other business relationship) by the Company and
its Subsidiaries, the Administrator may in its sole discretion accelerate,
waive or, subject to Section 13, amend any or all of the goals, restrictions or
conditions imposed under any Performance Unit Award.

     (e) Limit on Performance Unit Awards. No more than 550,000 of the shares
of Stock initially reserved for issuance under the Plan may be used for
Performance Unit Awards.

SECTION 9.

DEFERRED STOCK AWARDS

     (a) Nature of Deferred Stock Awards. A Deferred Stock Award is an Award
of a right to receive shares of Stock at the end of a specified deferral
period. The Administrator in its sole discretion shall determine the persons to
whom and the time or times at which Deferred Stock Awards will be made, the
number of shares of Stock covered by any Deferred Stock Award, the duration of
the period (the “Deferral Period”) prior to which the Stock will be delivered,
and the restrictions and other conditions under which receipt of the Stock will
be deferred and any other terms and conditions of the Deferred Stock Awards.
The Administrator may condition a Deferred Stock Award upon the attainment of
specified performance goals by the participant or by the Company or a
Subsidiary, including a division or department of the Company or a Subsidiary
for or within which the participant is primarily employed, or upon such other
factors or criteria as the Administrator shall determine. The provisions of
Deferred Stock Awards need not be the same with respect to any participant.
The Administrator may make Deferred Stock Awards independent of or in
connection with the granting of any other Award under the Plan.

     (b) Terms and Conditions. Deferred Stock Awards shall be subject to the
following terms and conditions:

     (1) Limitations on Transferability. Except as otherwise provided in
an agreement with a participant, Deferred Stock Awards, or any interest
therein, may not be sold, assigned, transferred, pledged or otherwise
encumbered during the Deferral Period. At the expiration of the Deferral
Period (or Elective Deferral Period as defined in Section 9(b)(4), where
applicable), the Administrator shall deliver Stock to the participant for
the shares of Stock covered by the Deferred Stock Award.

     (2) Rights. Unless otherwise determined by the Administrator and
the applicable agreement with a participant, cash dividends on the Stock
that is the subject of the Deferred Stock Award shall be automatically
deferred and reinvested in an additional Deferred Stock Award with
respect to the same class as the Stock on which such dividend was
payable, and dividends on the Stock that

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is the subject of the Deferred Stock Award payable in Stock shall be
awarded in the form of a Deferred Stock Award with respect to the same
class as the Stock on which such dividend was payable.

     (3) Acceleration and Waiver. Based on such factors or criteria as
the Administrator may determine, the Administrator may provide for the
lapse of restrictions, conditions or deferral limitations in installments
and may accelerate the vesting of all or any part of any Deferred Stock
Award and waive such remaining restrictions, conditions or deferral
limitations for all or any part of such Deferred Stock Award.

     (4) Election. A participant may elect further to defer receipt of
the shares of Stock payable under a Deferred Stock Award (or an
installment thereof) for a specified period or until a specified event
(an “Elective Deferral Period), subject in each case to the
Administrator’s approval and to such terms as are determined by the
Administrator. Subject to any exceptions adopted by the Administrator,
such election must be made at least one (1) year prior to completion of
the Deferral Period for the Deferred Stock Award (or of the applicable
installment thereof).

     (c) Rights as a Stockholder. A participant receiving a Deferred Stock
Award shall have the rights of a stockholder only as to shares actually
received by the participant under the Plan and not with respect to shares
subject to the Award but not actually received by the participant. A
participant shall be entitled to receive a stock certificate evidencing the
acquisition of shares of Stock under a Deferred Stock Award only upon
satisfaction of all conditions specified in the written instrument evidencing
the Deferred Stock Award.

     (d) Termination. Except as may otherwise be provided by the Administrator
either in the Deferred Stock Award agreement or, subject to Section 13 below,
in writing after the Deferred Stock Award agreement is issued, a participant’s
rights in all Deferred Stock Awards shall automatically terminate upon the
participant’s termination of employment (or cessation of business relationship)
with the Company and its Subsidiaries for any reason.

     (e) Limit on Deferred Stock Awards. No more than 500,000 of the shares of
Stock initially reserved for issuance under the Plan may be used for Deferred
Stock Awards. In addition, to the extent that shares of Stock are used for
Restricted Stock Awards, they shall reduce (on a share-for-share basis) such
number of shares available for Deferred Stock Awards.

-13-

 

SECTION 9A.

WARRANTS

     (a) Nature of Warrants. A “Warrant” is an Award entitling the recipient
to acquire shares of Stock upon exercise of the Warrant for a specific purchase
price per share. The Administrator may make Warrant Awards independent of or
in connection with the granting of any other Award under the Plan. The
Administrator in its sole discretion shall determine whether and to whom
Warrant Awards shall be made, the exercisability and method of exercise
applicable to each such Warrant Award, and all other limitations and conditions
applicable to the awarded Warrants.

     (b) Rights as a Stockholder. A participant receiving a Warrant Award
shall have the rights of a stockholder only as to shares actually received by
the participant under the Plan and not with respect to shares subject to the
Award but not actually received by the participant. A participant shall be
entitled to receive a stock certificate evidencing the acquisition of shares of
Stock under a Warrant Award only upon satisfaction of all conditions specified
in the written instrument evidencing the Warrant Award.

     (c) Termination. Except as may otherwise be provided by the Administrator
either in the Award agreement or, subject to Section 13 below, in writing after
the Award agreement is issued, a participant’s rights in all Warrant Awards
shall automatically terminate upon the participant’s termination of employment
(or cessation of business relationship) with the Company and its Subsidiaries
for any reason.

     (d) Acceleration, Waiver, Etc. At any time prior to the participant’s
termination of employment (or other business relationship) by the Company and
its Subsidiaries, the Administrator may in its sole discretion accelerate,
waive or, subject to Section 13, amend any or all of the restrictions or
conditions imposed under any Warrant Award.

     (e) Limit on Warrant Awards. No more than 100,000 of the shares of Stock
initially reserved for issuance under the Plan may be used for Warrant Awards.

SECTION 9B.

COMMON STOCK IN LIEU OF CASH COMPENSATION AWARDS

     (a) Grants of Common Stock Payable in Lieu of Cash. The Administrator may
grant shares of Stock available for issuance under the Plan to an eligible
participant in lieu of cash compensation earned by the participant under a
short- or long-term incentive plan of the Company (an “Other Incentive Plan”),
provided, however, that the award made under the Other Incentive Plan allows
for satisfaction of such award by payment of Stock in lieu of cash
compensation. In the event of a grant of shares of Stock in lieu of cash
compensation, such grant shall be conditioned upon the participant’s
irrevocable election to waive receipt of all or a portion of the cash
compensation

-14-

 

otherwise payable, which waiver shall constitute payment in full by such
participant for the shares of Stock granted in lieu of such cash compensation.
All shares of Stock granted under this Section 9B shall be without restriction
other than any restrictions imposed by applicable federal and state securities
laws.

     (b) Date of Grant. Stock granted in lieu of cash compensation shall be
granted to each participant on the date the waived cash compensation would
otherwise by paid.

     (c) Number of Shares. The number of shares of Stock granted in lieu of
cash compensation shall be determined by dividing the amount of the waived cash
compensation by the Fair Market Value of the Stock on the date the Stock is
granted. Such Stock shall be granted for the whole number of shares so
determined; the value of any fractional share shall be paid in cash.

SECTION 10.

NON-EMPLOYEE DIRECTOR STOCK OPTION PROGRAM

     Each person who is elected as a Non-employee Director shall be granted, on
the date of his or her initial election and annually thereafter, a
Non-Qualified Stock Option to acquire such number of shares of Stock as may be
determined by the Administrator with an exercise price per share for the Stock
covered by such Stock Option at least equal to the Fair Market Value on the
date as of which the Stock Option is granted. Such Stock Options shall become
exercisable as may be determined by the Administrator, provided that all Stock
Options granted under this Section 10 shall expire if not exercised within five
(5) years after they become exercisable. Stock Options granted under this
Section 10 may be exercised only by written notice to the Company specifying
the number of shares to be purchased. Payment of the full purchase price of
the shares to be purchased may be made by one or more of the methods specified
in Section 5(a)(iv). An optionee shall have the rights of a stockholder only
as to shares acquired upon the exercise of a Stock Option and not as to
unexercised Stock Options.

SECTION 11.

TAX WITHHOLDING

     (a) Payment by Participant. Each participant shall, no later than the
date as of which the value of an Award or of any Stock or other amounts
received thereunder first becomes includable in the gross income of the
participant for Federal income tax purposes, pay to the Company, or make
arrangements satisfactory to the Administrator regarding payment of, any
Federal, state, or local taxes of any kind required by law to be withheld with
respect to such income. The Company and its Subsidiaries shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment of
any kind otherwise due to the participant. The Company’s obligation to deliver
stock certificates to any participant is subject to and conditioned on tax
obligations being satisfied by the participant.

-15-

 

     (b) Payment in Stock. Subject to approval by the Administrator, a
participant may elect to have such tax withholding obligation satisfied, in
whole or in part, by (i) authorizing the Company to withhold from shares of
Stock to be issued pursuant to any Award a number of shares with an aggregate
Fair Market Value (as of the date the withholding is effected) that would
satisfy the required statutory minimum (but no more than such required minimum)
with respect to the Company’s withholding obligation, or (ii) transferring to
the Company shares of Stock owned by the participant with an aggregate Fair
Market Value (as of the date the withholding is effected) that would satisfy
the required statutory minimum (but no more than such required minimum) with
respect to the Company’s withholding obligation.

SECTION 12.

TRANSFER, LEAVE OF ABSENCE, ETC.

     For purposes of the Plan, the following events shall not be deemed a
termination of employment:

     (a) a transfer to the employment of the Company from a Subsidiary or from
the Company to a Subsidiary, or from one Subsidiary to another; or

     (b) an approved leave of absence for military service or sickness, or for
any other purpose approved by the Company, if the employee’s right to
re-employment is guaranteed either by a statute or by contract or under the
written policy pursuant to which the leave of absence was granted or if the
Administrator otherwise so provides in writing.

SECTION 13.

AMENDMENTS AND TERMINATION

     The Board may, at any time, amend or discontinue the Plan, and the
Administrator may, at any time, amend or cancel any outstanding Award for the
purpose of satisfying changes in law or for any other lawful purpose, but no
such action shall adversely affect rights under any outstanding Award without
the holder’s written consent. The Administrator may provide substitute Awards
at the same or reduced exercise or purchase price or with no exercise or
purchase price in a manner not inconsistent with the terms of the Plan, but
such price, if any, must satisfy the requirements which would apply to the
substitute or amended Award if it were then initially granted under this Plan,
but no such action shall adversely affect rights under any outstanding Award
without the holder’s written consent. If and to the extent determined by the
Administrator to be required by (a) the Code to ensure that Incentive Stock
Options granted under the Plan are qualified under Section 422 of the Code or
ensure that compensation earned under Stock Options granted under the Plan
qualifies as performance-based compensation under Section 162(m) of the Code,
if and to the extent intended to so qualify, or (b) the rules of the Nasdaq
Stock Market, Plan amendments shall be subject to approval by the Company’s
stockholders entitled to vote at a meeting of stockholders. Nothing in this
Section 13

-16-

 

shall limit the Board’s authority to take any action permitted pursuant to
Section 3(c) or 3(d).

SECTION 14.

STATUS OF PLAN

     Unless the Administrator shall otherwise expressly determine in writing,
with respect to the portion of any Award which has not been exercised and any
payments in cash, Stock or other consideration not received by a participant, a
participant shall have no rights greater than those of a general creditor of
the Company. In its sole discretion, the Administrator may authorize the
creation of trusts or other arrangements to meet the Company’s obligations to
deliver Stock or make payments with respect to Awards hereunder, provided that
the existence of such trusts or other arrangements is consistent with the
foregoing sentence.

SECTION 15.

CHANGE OF CONTROL AND MERGER PROVISIONS

     (a) In contemplation of and subject to the consummation of a consolidation
or merger or sale of all or substantially all of the assets of the Company in
which outstanding shares of Stock are exchanged for securities, cash or other
property of an unrelated corporation or business entity or in the event of a
liquidation or dissolution of the Company or in the event of a corporate
reorganization of the Company (in each case, a “Transaction”), the Board, or
the Board of Directors of any corporation or other entity assuming the
obligations of the Company, may, in its discretion, take any one or more of the
following actions, as to outstanding Awards: (i) provide that such Awards
shall be assumed or equivalent awards shall be substituted, by the acquiring or
succeeding corporation or other entity (or an affiliate thereof), and/or (ii)
upon written notice to the participants, provide that all Awards will terminate
immediately prior to the consummation of the Transaction. In the event that,
pursuant to clause (ii) above, Awards will terminate immediately prior to the
consummation of the Transaction, all vested Awards, other than Options, shall
be fully settled in cash or in kind at such appropriate consideration as
determined by the Administrator in its sole discretion after taking into
account any and all consideration payable per share of Stock pursuant to the
Transaction (the “Transaction Price”) and all Stock Options shall be fully
settled, in cash or in kind, in an amount equal to the difference between (A)
the Transaction Price times the number of shares of Stock subject to such
outstanding Stock Options (to the extent then exercisable at prices not in
excess of the Transaction Price) and (B) the aggregate exercise price of all
such outstanding Stock Options. In addition, the Board, or the Board of
Directors of any corporation or other entity assuming the obligations of the
Company, may, in its discretion, permit a participant, within a specified
period determined by the Board prior to the consummation of the Transaction, to
exercise all outstanding Stock Options, including those that are not then
exercisable, subject to the consummation of the Transaction.

-17-

 

     (b) Upon the occurrence of a Change of Control as defined in Section 15(c)
below, unless otherwise specified in the Award instrument or unless otherwise
determined by the Board in office immediately prior to such Change of Control
or specified in the Plan Award instrument, each Award outstanding shall be
accelerated, such that all Stock Options and Warrants shall become fully
exercisable and the restricted period on all shares of Restricted Stock,
Deferred Share Awards, Performance Shares Awards and Performance Unit Awards
shall terminate immediately.

     (c) “Change of Control” shall mean the occurrence of any one of the
following events:

     (i) any “person,” as such term is used in Sections 13(d) and 14(d)
of the Exchange Act (other than the Company, any of its Subsidiaries, any
“affiliate” or “associate” (as such terms are defined in Rule 12b-2 under
the Exchange Act) of the foregoing persons, or any trustee, fiduciary or
other person or entity holding securities under any employee benefit plan
or trust of the Company or any of its Subsidiaries), together with all
“affiliates” and “associates” (as such terms are defined in Rule 12b-2
under the Exchange Act) of such person, shall become the “beneficial
owner” (as such term is defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 25% or
more of the combined voting power of the Company’s then outstanding
securities having the right to vote in an election of the Company’s Board
of Directors (“Voting Securities”) (other than as a result of an
acquisition of securities directly from the Company); or

     (ii) persons who, as of the Effective Date, constitute the Board
(the “Incumbent Directors”) cease for any reason, including, without
limitation, as a result of a tender offer, proxy contest, merger or
similar transaction, to constitute at least a majority of the Board,
provided that any person becoming a director of the Company subsequent to
such date shall be considered an Incumbent Director if such person’s
election was approved by or such person was nominated for election by
either (A) a vote of at least two-thirds of the Incumbent Directors or
(B) a vote of at least a majority of the Incumbent Directors who are
members of a Nominating Committee composed, in the majority, of Incumbent
Directors.

     Notwithstanding the foregoing, a “Change of Control” shall not be deemed to
have occurred for purposes of the foregoing clause (i) solely as the result of
an acquisition of securities by the Company which, by reducing the number of
shares of Voting Securities outstanding, increases the proportionate number of
shares of Voting Securities beneficially owned by any person (as defined in the
foregoing clause (i)) to 25% or more of the combined voting power of all then
outstanding Voting Securities; provided, however, that if such person shall
thereafter become the beneficial owner of any additional shares of Voting
Securities (other than pursuant to a stock split, stock dividend, or similar
transaction or as a result of an acquisition of securities directly from the

-18-

 

Company), then a “Change of Control” shall be deemed to have occurred for
purposes of the foregoing clause (i).

SECTION 16.

GENERAL PROVISIONS

     (a) No Distribution; Compliance with Legal Requirements. The
Administrator may require each person acquiring Stock pursuant to an Award to
represent to and agree with the Company in writing that such person is
acquiring the shares without a view to distribution thereof. No shares of
Stock shall be issued pursuant to an Award until all applicable securities law
and other legal, Nasdaq and stock exchange or similar requirements have been
satisfied. The Administrator may require the placing of such stop-orders and
restrictive legends on certificates for Stock and Awards as it deems
appropriate.

     (b) Delivery of Stock Certificates. To the extent the Company uses
certificates to represent shares of Stock, certificates to be delivered to
participants under this Plan shall be deemed delivered for all purposes when
the Company or a stock transfer agent of the Company shall have mailed such
certificates in the United States mail, addressed to the participant, at the
participant’s last known address on file with the Company. Any reference in
this Section 16(b) or elsewhere in the Plan to actual stock certificates and/or
the delivery of actual stock certificates shall be deemed satisfied by the
electronic record-keeping and electronic delivery of shares of Stock or other
mechanism then utilized by the Company and its agents for reflecting ownership
of such shares.

     (c) Other Compensation Arrangements; No Employment Rights. Nothing
contained in this Plan shall prevent the Board from adopting other or
additional compensation arrangements, including trusts, and such arrangements
may be either generally applicable or applicable only in specific cases. The
adoption of this Plan and the grant of Awards shall not confer upon any
individual any right to continued employment (or other business relationship)
with the Company or any Subsidiary and shall not interfere in any way with the
right of the Company or any Subsidiary to terminate the employment (or other
business relationship) of any of its employees at any time.

     (d) Trading Policy Restrictions. Option exercises and other Awards under
the Plan shall be subject to such Company insider-trading-policy-related
restrictions, terms and conditions as may be established by the Administrator,
or in accordance with policies set by the Administrator, from time to time.

     (e) Section 162(m). Notwithstanding anything herein to the contrary, no
Award shall become exercisable, vested or realizable if such Award is granted
to an employee that is a “covered employee” as defined in Section 162(m) of the
Code and the Administrator has determined that such Award should be structured
so that it is not “applicable employee remuneration” under such Section 162(m)
unless and until the

-19-

 

terms of this Plan, including any amendment hereto, have been approved by the
Company’s stockholders in the manner and to the extent required under such
Section 162(m).

SECTION 17.

EFFECTIVE DATE OF PLAN

     This Plan shall become effective upon the later to occur of (i) approval
by the holders of a majority of the votes cast at a meeting of stockholders at
which a quorum is present or by a majority written consent of stockholders, or
(ii) June 2, 2004. Subject to such approval by the stockholders and to the
requirement that no Stock may be issued hereunder prior to such approval, Stock
Options and other Awards may be granted hereunder on and after adoption of this
Plan by the Board.

SECTION 18.

GOVERNING LAW

     This Plan and all Awards and actions taken thereunder shall be governed
by, and construed in accordance with, the laws of the State of Delaware,
applied without regard to conflict of law principles.

-20-EXHIBIT
10.16

EMPLOYMENT AGREEMENT

THIS AGREEMENT (the
"Agreement"), dated as of June 21, 2003, is
by and between Aspen Insurance U.S. Services Inc., a Delaware
corporation, (the "Company"), and Peter
Coghlan (the "Executive").

WITNESSETH
THAT

WHEREAS, the Executive and the Company wish to enter into
a written agreement setting forth the terms and conditions of the
Executive's employment with the Company; and

WHEREAS, this
Agreement is the entire agreement between the parties concerning the
subject matter hereof and supersedes all prior agreements concerning
the same subject.

NOW, THEREFORE, in consideration of the
premises and the mutual covenants contained herein, the Company and the
Executive hereby agree as follows:

		
	1. 	Term.

(a)
Term of Employment.    (i) The Company shall employ the
Executive, and the Executive shall serve the Company, on the terms and
subject to the conditions set forth in this Agreement, commencing on
June 21, 2003 (the "Effective Date") and,
unless sooner terminated pursuant to paragraph 4, continuing until the
date that is the two-year anniversary of the Effective Date or such
later date as provided in subparagraph (ii) of this subparagraph 1(a)
(the "Term of Employment").

(ii) The Term of Employment shall be extended
automatically for one additional year on the last day before the first
annual anniversary of the Effective Date and for one additional year on
each annual anniversary thereafter unless and until either party gives
written notice not to extend this Agreement prior to 12 months before
such extension would be effectuated.

(b)
Term of the Agreement.    This Agreement shall become
effective on the Effective Date and shall continue in effect throughout
the Term of Employment; provided, however, the restrictive covenants
contained in paragraph 9 of this Agreement and, as applicable, the
Company's and the Executive's obligations under the other
provisions of this Agreement shall survive the Term of Employment and
shall continue in effect through the periods provided therein and/or
until the Company's and/or the Executive's obligations, as
applicable, thereunder are satisfied.

		
	2. 	Position and Duties.

(a) Positions, Duties, and
Responsibilities.    The Executive shall serve as the President
and Chief Executive Officer of the Company with such duties and
responsibilities as are customarily assigned to the Chief Executive
Officer, and such other duties and responsibilities not inconsistent
therewith as may from time to time be assigned to him by the Chief
Executive Officer ("CEO") of Aspen Insurance
Holdings Limited ("Aspen Insurance"). The
Executive shall report to the CEO or such other senior executive
officer of Aspen Insurance as may be designated by the CEO. If
requested by the CEO, the Executive shall also serve, with no
additional compensation, on the board of directors of the Company (the
"Board"). The Executive agrees to resign from
the Board, if applicable, and from the boards of any affiliate, as
applicable, upon termination of employment with the Company upon
written request of the CEO.

(b) Time and
Attention.    Excluding any periods of vacation and sick leave
to which the Executive is entitled, the Executive shall devote
substantially all of his attention and time during normal working hours
to the business and affairs of the Company and its affiliates. It shall
not be considered a violation of the foregoing, however, for the
Executive to (i) serve on boards and committees of, and otherwise
participate in, corporate, industry, educational, religious, civic, or
charitable activities or (ii) make and attend to passive personal
investments in such form as will 

not require any material time or attention to
the operations thereof during normal working time and will not violate
the provisions of paragraph 9 hereof, so long as such activities in
clauses (i) and (ii) do not materially interfere with the performance
of the Executive's responsibilities as an employee of the Company
in accordance with this Agreement or violate paragraph 9 of this
Agreement.

(c) Office.    The Company
shall provide the Executive with a private office at the headquarters
office of the Company reasonably appropriate to his status as President
of the Company and shall provide the Executive with all office
services, including secretarial and clerical services, and office
equipment that are reasonably necessary and appropriate to facilitate
the performance of the Executive's duties and responsibilities
hereunder.

(d) Location.    The
Executive's principal place of employment shall be at the
headquarters office of the Company in the Boston, Massachusetts
metropolitan area (such metropolitan area not to exceed 50 miles from
Boston, Massachusetts) or such other location as the Company and the
Executive mutually designate. The Executive shall travel as reasonably
necessary for the performance of his duties.

3.    Compensation.    Except as otherwise expressly
set forth below, the Executive's compensation shall be determined
by, and in the sole discretion of, the Board.

(a) Annual Base Salary.    The Executive
shall receive an annual base salary of not less than $400,000 during
the Term of Employment (the annual base salary in effect from time to
time, "Annual Base Salary"). The Annual Base
Salary shall be payable in accordance with the Company's regular
payroll practice for its senior officers, as in effect from time to
time. The Annual Base Salary shall be reviewed from time to time, but
not less frequently than annually, and, in the sole discretion of the
Board, may be adjusted but not decreased below the amount set forth in
the first sentence of this subparagraph 3(a). To the extent Annual Base
Salary is adjusted, then such adjusted salary shall be the
Executive's Annual Base Salary for all purposes of this
Agreement.

(b) Annual Bonus
Plan.    The Company shall establish an annual bonus plan
pursuant to which the Executive will be eligible to receive awards
based on the Company's performance (the "Annual
Bonus"). The target level of award under the annual bonus
plan for the Annual Bonus shall be valued at 65% assuming the
Company achieves a 20% return on equity, it being understood
that actual benefits will be paid based on actual performance, and,
thus, the actual benefits would be a range of 0% to a percentage
higher than the target. An outline of the proposed terms of the bonus
plan is attached hereto as Exhibit A.

(c)
Stock Options.    As promptly as practicable following the
adoption by Aspen Insurance of a share incentive plan (the
"Share Incentive Plan"), and subject to
approval of the grant by the Compensation Committee of Aspen Insurance,
the Executive shall be granted an option to purchase 8,000 ordinary
shares of Aspen Insurance pursuant to the Share Incentive Plan as the
same may be amended from time to time. All other terms and conditions
shall be provided in the Share Incentive Plan and the award
agreement.

(d) Employee Benefits; Fringe
Benefits.    In addition to the foregoing, during the Term of
Employment,

(i) to the extent not duplicative of
the specific benefits provided herein, the Executive shall be eligible
to participate in all incentive compensation, retirement, supplemental
retirement, and deferred compensation plans, policies and arrangements
that are provided generally to other senior officers of the Company at
a level (in terms of the amount and types of benefits and incentive
compensation that the Executive has the opportunity to receive and the
terms thereof) determined in the sole discretion of the Board;

(ii) the Company shall establish a supplemental
executive retirement plan for the benefit of the Executive;

2

(iii) the Executive and, as
applicable, the Executive's covered dependents shall be eligible
to participate in all of the Company's health and welfare benefit
plans (within the meaning of Section 3(1) of the Employee Retirement
Income Security Act of 1974, as amended);

(iv)
the Executive shall be entitled to receive fringe benefits and to
participate in all employee benefit plans provided for senior
executives of the Company, and shall be entitled to avail himself of
paid holidays, as determined from time to time by the Company.

(e) Vacation.    The Executive shall be
entitled to not less than four weeks of paid vacation per calendar
year. Vacation days not used within the year shall be either carried
forward to subsequent years or paid out in cash, as determined by the
Company. The maximum accrual of vacation shall be two weeks.

(f) Expenses.    The Executive shall be
reimbursed by the Company for reasonable business expenses actually
incurred in rendering to the Company the services provided for
hereunder, payable in accordance with customary Company practice, after
the Executive presents written expense statements or such other
supporting information as the Company may customarily require of its
executives for reimbursement of such expenses.

		
	4. 	Termination of Employment.

(a) Death or Disability.    The Term of
Employment shall terminate upon the Executive's death. The
Company shall be entitled to terminate the Executive's employment
and, accordingly, the Term of Employment, because of the
Executive's Disability. For purposes of this Agreement, the
Executive shall be deemed to have a Disability if the Executive is
entitled to long-term disability benefits under the Company's
long-term disability plan or policy, as the case may be, as in effect
on the Date of Termination (as that term is defined in subparagraph
4(d)(ii) below).

(b) By the
Company.

(i) The Company may terminate the
Executive's employment and, accordingly, the Term of Employment,
without Cause by delivering to the Executive written Notice of
Termination (as that term is defined in subparagraph 4(d)(i) below), or
for Cause by delivering to the Executive not less than 30 days prior
written Notice of Termination and by affording the Executive the due
process rights set forth in subparagraph 4(b)(iii) below.

(ii) For purposes of this Agreement,
"Cause" means: (A) the failure by the
Executive to perform substantially his duties as an employee of the
Company or any of its affiliates after reasonable notice to the
Executive of such failure; (B) the Executive's willful misconduct
that is materially injurious to the Company or any of its affiliates;
(C) the Executive's having been convicted of, or entered a plea
of nolo contendere to, a crime that constitutes a felony; or (D) the
breach by the Executive of any written covenant or agreement with the
Company or any of its affiliates not to disclose any information
pertaining to the Company or any of its affiliates or not to compete or
otherwise interfere with the Company or any of its affiliates. No act
or failure to act directly related to Company action or inaction that
constitutes Good Reason (as defined below) shall constitute Cause under
this Agreement.

(iii) The Executive's
termination for Cause shall be effective when and if a resolution is
duly adopted by an affirmative vote of the entire Board (less the
Executive), stating that, in the good faith opinion of the Board, the
Executive is guilty of the conduct described in the Notice of
Termination (as that term is defined in subparagraph 4(d)(i) below),
and such conduct constitutes Cause under this Agreement; provided,
however, that the Executive shall have been given the opportunity (A)
to cure any act or omission that constitutes Cause if capable of cure
and (B), together with counsel, during the 30-day period following the
receipt by the Executive of the Notice of Termination and prior to the
adoption of the Board's resolution, to be heard by the
Board.

3

(c) By the
Executive.

(i) The Executive may terminate
his employment and, accordingly, the Term of Employment, for Good
Reason; provided, however, that the Executive must give at least 30
days prior written Notice of Termination (as that term is defined in
subparagraph 4(d)(i) below).

(ii) For purposes
of this Agreement, the term "Good Reason"
means the occurrence (without the Executive's express written
consent) of any of the following acts or failures to act by the
Company:

(A) any reduction in the
Executive's Annual Base Salary;

(B) the
material breach by the Company of any of its obligations under this
Agreement; or

(C) the failure of the Company to
obtain the assumption of this Agreement as contemplated in subparagraph
12(b) hereof.

The Executive's continued employment shall
not constitute consent to, or a waiver of rights with respect to, any
act or failure to act constituting Good Reason hereunder; provided,
however, that no such event described above shall constitute Good
Reason unless the Executive has given a Notice of Termination (as that
term in subparagraph 4(d)(i) below) to the Company specifying the
condition or event relied upon for such termination within 90 days from
the Executive's actual knowledge of the occurrence of such event
and, if capable of cure, the Company has failed to cure the condition
or event constituting Good Reason within the 30 day period following
receipt of the Executive's Notice of Termination.

(d) Termination Procedures.

(i) Notice of Termination.    Any
purported termination of the Executive's employment (other than
by reason of death) shall be communicated by written Notice of
Termination from one party hereto to the other party hereto in
accordance with the notice provisions contained in subparagraph 14(b)
hereof. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice that indicates the
specific termination provision in this Agreement relied upon and sets
forth in reasonable detail the facts and circumstances then known to
the Company claimed to provide a basis for termination of employment
under the provision so indicated.

(ii) Date
of Termination.    For purposes of this Agreement,
"Date of Termination" shall mean the date
specified in the Notice of Termination (but in no event shall such date
be earlier than the 30th day following the date the Notice of
Termination is given) or the date of the Executive's death.

(iii) No Waiver.    The failure to set
forth any fact or circumstance in a Notice of Termination, which fact
or circumstance was not known to the Company at the time such Notice of
Termination was given, shall not constitute a waiver of the right to
assert such fact or circumstance in an attempt to enforce any right
under or provision of this Agreement.

		
	5. 	Obligations of the Company upon
Termination.

(a) Post-Employment
Benefits.    If the Executive's employment is terminated
by the Company for any reason other than Cause, death or Disability, or
the Executive terminates his employment for Good Reason:

(i) the Company shall pay or provide to the
Executive, no later than twenty business days after the normal payment
date for each, the Accrued Obligations (as that term is defined in
subparagraph 5(b) below);

(ii) the Company shall
pay to the Executive, no later than twenty business days after the
normal payment date, a prorated Annual Bonus based on the actual Annual
Bonus earned for the year in which the Date of Termination occurs,
prorated based on the fraction of the year the Executive was
employed;

4

(iii) the Company shall pay
to the Executive, within five business days, a lump sum equal to the
Executive's Annual Base Salary (at the same level that was being
paid to the Executive on the Date of Termination (disregarding any
reduction in Annual Base Salary that constitutes Good Reason
hereunder)); provided that if the Date of Termination occurs prior to
the first anniversary of the Effective Date, the Company shall also pay
to the Executive an additional lump sum equal to the prorated portion
of the Executive's Annual Base Salary (at the same level that was
being paid to the Executive on the Date of Termination (disregarding
any reduction in Annual Base Salary that constitutes Good Reason
hereunder)) for the period beginning on the Date of Termination and
ending on the day immediately preceding the first anniversary of the
Effective Date.

(b) Termination by the
Company for Cause.    If the Executive's employment is
terminated by the Company for Cause, the Company shall pay to the
Executive in cash within twenty business days after the normal payment
date for each the following amounts (the "Accrued
Obligations"): (i) any portion of the Executive's
earned but unpaid Annual Base Salary and earned but unpaid prior year
Annual Bonus; (ii) a payment reflecting accrued but unused vacation
days; and (iii) any unreimbursed business expenses under subparagraph
3(g).

(c) Termination due to death or
Disability.    If the Executive's employment is terminated
due to death or Disability, the Company shall pay to the Executive (or
to the Executive's estate or personal representative, in the case
of the Executive's death) in cash (i)  within twenty
business days after the normal payment date for each Accrued Obligation
(as defined above) and (ii) no later than twenty business days after
the normal payment date for a prorated Annual Bonus based on the actual
Annual Bonus earned for the year in which the Date of Termination
occurs, prorated based on the fraction of the year the Executive was
employed. After making such payment(s), the Company shall have no
further obligations under this Agreement.

6.    Release.    Notwithstanding any provision herein
to the contrary, the Company will require that, prior to payment of any
amount or provision of any benefit under paragraph 5 of this Agreement
(other than due to the Executive's death), the Executive shall
have executed a complete release of the Company and its affiliates and
related parties in such form as is reasonably required by the Company,
and any waiting periods contained in such release shall have expired;
and, as a condition of such release being effective, the Company shall
execute a reciprocal release in the same form and substance as required
from the Executive.

7.    Non-Exclusivity of
Rights.    Except as otherwise provided in this Agreement,
nothing in this Agreement shall prevent or limit the Executive's
continuing or future participation in any plan, program, policy or
practice provided by the Company or any of its affiliated companies for
which the Executive may qualify (other than severance policies). Vested
benefits and other amounts that the Executive is otherwise entitled to
receive under any other plan, program, policy, or practice of, or any
contract or agreement with, the Company or any of its affiliated
companies on or after the Date of Termination shall be payable in
accordance with the terms of each such plan, program, policy, practice,
contract, or agreement, as the case may be, except as expressly
modified by this Agreement.

8.    Full
Settlement.    In no event shall the Executive be obligated to
seek other employment or take any other action by way of mitigation of
the amounts payable to the Executive under any of the provisions of
this Agreement and the amount of any payment or benefit provided for in
this Agreement shall not be reduced by any compensation earned by the
Executive as the result of employment by another employer, by
retirement benefits, by offset against any amount claimed to be owed by
the Executive to the Company, or otherwise.

		
	9. 	Non-Competition; Confidential
Information; and Non-Solicitation.

(a)
Non-Competition.    During the Term of Employment and if the
Executive's employment is terminated by the Company for Cause or
the Executive terminates his employment for a reason other than Good
Reason, during the period beginning on the Date of Termination and
ending 12 months thereafter, the Executive shall not, without the prior
written consent of the Company, as a shareholder, officer, director,
partner, consultant, employee or otherwise, engage in 

5

any business or enterprise which is
"in competition" with the Company, its
affiliates, or their successors or assigns (such entities collectively
referred to hereinafter in this paragraph 9 as the
"Company"); provided, however, that the
Executive's ownership of less than five percent of the issued and
outstanding voting securities of a publicly traded company shall not,
in and of itself, be deemed to constitute such competition. A business
or enterprise is deemed to be "in
competition" if it is engaged, in any of the geographical
regions in which the Company conducts substantial business on the Date
of Termination, in any business in which the Company either (A) is
engaged in as of the Date of Termination or (B) as of the Date of
Termination, contemplates engaging in within 12 months following the
Date of Termination.

(b) Confidential
Information.    The Executive shall hold in a fiduciary capacity
for the benefit of the Company all secret or confidential information,
knowledge, trade secrets, methods, know-how or data relating to the
Company and its businesses or acquisition prospects that the Executive
obtained or obtains during the Executive's employment by the
Company and that is not and does not become generally known to the
public (other than as a result of the Executive's violation of
this paragraph  9) ("Confidential
Information"). Except as may be required and appropriate
in connection with carrying out his duties under this Agreement, the
Executive shall not communicate, divulge, or disseminate any material
Confidential Information at any time during or after the
Executive's employment with the Company, except with the prior
written consent of the Company or as otherwise required by law or legal
process; provided, however, that if so required, the Executive will
provide the Company with reasonable notice to contest such
disclosure.

(c) Non-Solicitation of
Employees.    The Executive recognizes that he may possess
confidential information about other employees of the Company relating
to their education, experience, skills, abilities, compensation and
benefits, and inter-personal relationships with suppliers to and
customers of the Company. The Executive recognizes that the information
he will possess about these other employees may not be generally known,
may be of substantial value to the Company in developing its respective
businesses and in securing and retaining customers, and may be acquired
by him because of his business position with the Company. The Executive
agrees that, during the period beginning on the Date of Termination and
ending 12 months thereafter, he will not, directly or indirectly,
initiate any action to solicit or recruit anyone who is then an
employee of the Company for the purpose of being employed by him or by
any business, individual, partnership, firm, corporation or other
entity on whose behalf he is acting as an agent, representative or
employee and that he will not convey any such confidential information
or trade secrets about other employees of the Company to any other
person except within the scope of Executive's duties
hereunder.

(d) Non-Interference with
Customers.    The Executive agrees that, during the period
beginning on the Date of Termination and ending 12 months thereafter,
he will not interfere with any business relationship between the
Company and any of its customers.

(e)
Remedies; Severability.

(i) The
Executive acknowledges that if the Executive shall breach or threaten
to breach any provision of subparagraphs 9(a) through (d), the damages
to the Company may be substantial, although difficult to ascertain, and
money damages will not afford the Company an adequate remedy.
Therefore, if the provisions of subparagraphs 9(a) through (d) are
violated, in whole or in part, the Company shall be entitled to
specific performance and injunctive relief, without prejudice to other
remedies the Company may have at law or in equity.

(ii) If any term or provision of this paragraph 9,
or the application thereof to any person or circumstances shall, to any
extent, be invalid or unenforceable, the remainder of this paragraph 9,
or the application of such term or provision to persons or
circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each term and
provision of this paragraph 9 shall be valid and enforceable to the
fullest extent permitted by law. Moreover, if a court of competent
jurisdiction deems any provision 

6

hereof to be too broad in time, scope, or
area, it is expressly agreed that such provision shall be reformed to
the maximum degree that would not render it unenforceable.

10.    Attorneys' Fees.    The Company and the
Executive each shall pay their own legal fees, court costs, litigation
expenses and/or arbitration expenses (as applicable)
("Dispute Expenses") by each such party
during the course of any litigation or arbitration regarding the
validity or enforceability of or liability under or otherwise
involving, any provision of this Agreement; provided that the
prevailing party in any such litigation or arbitration shall be paid by
the other party the reasonable Dispute Expenses incurred by such
prevailing party. For purposes of determining which party is the
prevailing party, the determination of the trier-of-fact in such
arbitration or litigation shall be binding on all parties.

11.    Indemnification.    The Executive shall be
indemnified by the Company for actions taken in his position as an
officer, director, employee and agent of the Company to the greatest
extent as permitted by applicable law. The Executive shall also be
covered as an insured by a liability insurance policy secured by and
maintained by the Company covering acts of officers and members of the
Board.

12.    Successors.

(a)
Assignment of Agreement.    This Agreement is personal to
the Executive and, without the prior written consent of the Company,
shall not be assignable by the Executive otherwise than by will or the
laws of descent and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Executive's legal
representatives.

(b) Successors of the
Company.    No rights or obligations of the Company under this
Agreement may be assigned or transferred except that the Company will
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken
place. As used in this Agreement, "Company"
shall mean the Company as herein before defined and any successor that
executes and delivers the agreement provided for in this paragraph 12
or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law.

13.    Arbitration.    Except for matters covered under
paragraph 9, in the event of any dispute or difference between the
Company and the Executive with respect to the subject matter of this
Agreement and the enforcement of rights hereunder, either the Executive
or the Company may, by written notice to the other, require such
dispute or difference to be submitted to arbitration. The arbitrator or
arbitrators shall be selected by agreement of the parties or, if they
cannot agree on an arbitrator or arbitrators within 30 days after the
date arbitration is required by either party, then the arbitrator or
arbitrators shall be selected by the American Arbitration Association
(the "AAA") upon the application of the
Executive or the Company. The determination reached in such arbitration
shall be final and binding on both parties without any right of appeal
or further dispute. Execution of the determination by such arbitrator
may be sought in any court of competent jurisdiction. The arbitrators
shall not be bound by judicial formalities and may abstain from
following the strict rules of evidence and shall interpret this
Agreement as an honorable engagement and not merely as a legal
obligation. Unless otherwise agreed by the parties, any such
arbitration shall take place in Boston, Massachusetts.

14.    Miscellaneous.

(a)
Governing Law and Captions.    This Agreement shall be
governed by, and construed in accordance with, the laws of
Massachusetts without reference to principles of conflict of laws. The
captions of this Agreement are not part of the provisions hereof and
shall have no force or effect.

(b)
Notices.    All notices and other communications under this
Agreement shall be in writing and shall be given by hand delivery or by
facsimile (provided confirmation of receipt of such facsimile is
received) to the other party or by registered or certified mail, return
receipt requested, postage prepaid, or by Federal Express or other
nationally-recognized overnight courier that requires signatures of
recipients upon delivery and provides tracking services, addressed as
follows:

7

If to the Executive:

Peter Coghlan
82 West Ford Farm Road
Duxbury, MA
02322

With a copy to:

David A. Bakst,
Esq.
Morrison, Mahoney & Miller, LLP
250 Summer
Street
Boston, MA 02210

If to the Company:

Board of Directors
 c/o the Company's principal
office

With a copy to:

Michael Groll,
Esq.
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th
Street
New York, New York 10019

or to such other
address as either party furnishes to the other in writing in accordance
with this subparagraph 14(b). Notices and communications shall be
effective when actually received by the addressee.

(c) Amendment.    This Agreement may not
be amended or modified except by a written agreement executed by the
parties hereto or their respective successors and legal
representatives.

(d)
Severability.    The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement. If any
provision of this Agreement shall be held invalid or unenforceable in
part, the remaining portion of such provision, together with all other
provisions of this Agreement, shall remain valid and enforceable and
continue in full force and effect to the fullest extent consistent with
law.

(e)
Withholding.    Notwithstanding any other provision of this
Agreement, the Company may withhold from amounts payable under this
Agreement all federal, state, local, and foreign taxes that are
required to be withheld by applicable laws or regulations. All cash
amounts required to be paid hereunder shall be paid in United States
dollars. Except as otherwise specifically provided herein, the
Executive shall be responsible for all federal, state and local taxes
on all compensation and benefits provided hereunder.

(f) Waiver.    The Executive's or
the Company's failure to insist upon strict compliance with any
provision of, or to assert any right under, this Agreement (including,
without limitation, the right of the Executive to terminate employment
for Good Reason) shall not be deemed to be a waiver of such provision
or right or of any other provision of or right under this
Agreement.

(g) Entire
Understanding.    The Executive and the Company acknowledge that
this Agreement supersedes and terminates any other severance and
employment agreements between the Executive and the Company or any
Company affiliates. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, and said
counterparts shall constitute but one and the same instrument.

(h) Rights and Benefits Unsecured.    The
rights and benefits of the Executive under this Agreement may not be
anticipated, assigned, alienated, or subject to attachment,
garnishment, levy, execution, or other legal or equitable process
except as required by law. Any attempts by the Executive to anticipate,
alienate, assign, sell, transfer, pledge or encumber the same shall be
void. Payments hereunder shall not be considered assets of the
Executive in the event of insolvency or bankruptcy.

8

(i)
Noncontravention.    The Company represents that the Company
is not prevented from entering into, or performing this Agreement by
the terms of any law, order, rule or regulation, its by-laws or
declaration of trust, or any agreement to which it is a party, other
than which would not have a material adverse effect on the
Company's ability to enter into or perform this Agreement.

(j) Paragraph and Subparagraph
Headings.    The paragraph and subparagraph headings in this
Agreement are for convenience of reference only; they form no part of
this Agreement and shall not affect its interpretation.

IN
WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization of the Board, the Company has
caused this Agreement to be executed, all as of the day and year first
above written.

		ASPEN INSURANCE U.S. SERVICES
INC.

		By: /s/ JULIAN CUSACK

	
			
	

		EXECUTIVE

		/s/ Peter Coglan

	
			
	

		Peter
Coghlan

9

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