Document:

Exhibit 10.2

 

 

 

April 1,
2008

 

Kernan
V. Oberting

 

Dear
Kip,

 

We
understand that you wish to resign your current position with effect from May 1,
2008 in order to take up employment as a principal and founder of your own
investment advisory business.  This
Letter Agreement sets out our agreement with respect to the termination of your
full-time employment and any directorships with Montpelier Re Holdings Ltd.,
including any subsidiaries or affiliates thereof (collectively, the “Company”),
in order to allow you to do so.

 

Promptly
upon the execution of this Letter Agreement, the Company and an entity (or
entities) created and owned by you to provide investment advisory/management
services (to be named later but collectively referred to herein as “NewCo”) shall
enter into (i) a Consulting Agreement wherein NewCo shall provide capital
management services to the Company, and (ii) an Investment Management
Agreement wherein NewCo shall provide discretionary investment management
services to a $100 million separate account (the “Separate Account”).

 

Final Employment Date:  Your last day of employment with the Company
shall be April 30, 2008 (your “Final Employment Date”).

 

Salary and Benefits:  You will be paid your current salary and
benefits (including pension and health insurance benefits) in accordance with
your most recent Annual Compensation Letter for 2008, dated December 13,
2007, and your Service Agreement, dated September 8, 2004, and any
agreements ancillary thereto or amendments thereof (collectively the “Service
Agreement”) until your Final Employment Date. 
You will continue to receive your health insurance benefits under COBRA
at the Company’s expense for nine (9) months beginning the day after the
Final Employment Date; thereafter, if you wish to continue receiving such
benefits during the remainder of the COBRA period you will then be responsible
for the cost of such benefits.

 

Vacation & Sick
Leave:  You have waived your rights
for compensation in respect of unused vacation and/or sick days as at your
Final Employment Date.

 

Annual Bonus:  Based on the Company’s performance during
2008, you shall be paid an amount equal to the pro-rated portion of your 2008
bonus that otherwise would have been payable to you under the Company’s Annual
Bonus Plan for the period January 1, 

 

 

 

 

2008 to April 30, 2008.  Such payment shall be made as soon as
practicable following the announcement of the Company’s 2008 results.

 

Long-Term Incentive Program
(LTIP):  Before and after the Final
Employment Date you shall continue to vest, receive dividend payments and enjoy
any and all other rights as if you were still employed by the company in
respect of any vested and unvested (in-force) LTIP Awards (as that term is
defined in the Montpelier Re Holdings Ltd. LTIP and any Award Agreements made
pursuant thereto) previously granted to you by the Company in respect of your
employment in 2006 and 2007.  After the
Final Employment Date, you will be treated the same way for tax purposes as a current
employee who receives an LTIP Award and therefore you will be responsible for
the same taxes that any current employee would be responsible for resulting
from the vesting of any of your LTIP Awards.

 

Final
Settlement Payments and Continuing Obligations:  Except as provided herein with respect to any
awards under the LTIP, in full and final settlement of any and all claims and
rights of action (if any) however so arising whether contractual, common law,
statutory or otherwise in any jurisdiction in the world and whether
contemplated or not which you have or may have against the Company or its/their
respective shareholders, officers or employees arising out of or in connection
with your employment  or
directorships or the termination thereof, the parties hereby agree that:

 

(1)                                  The Company will,
subject to your complying with the terms of this Letter Agreement, pay and you
will accept a payment of $0.00 in respect of any accrued vacation &
sick leave.

 

(2)                                  The Company
shall provide you with (i) reimbursement for tax advisory services
pursuant to clause 5.4 of your September 8, 2004 Service Agreement in
respect of 2007 and prior tax years, (ii) funds for a tax gross up on
Bermuda housing benefit for portion of 2007 year and tax gross up on relocation
(back to US), and (iii) reimbursement for any travel or other business
expenses incurred by you prior to your Final Employment Date, subject to
presentation of satisfactory invoices.

 

(3)                                  The Company
shall reimburse you for reasonable legal fees and expenses incurred by you
and/or NewCo with respect to this Separation Agreement, the Consulting
Agreement and the Investment Management Agreement.

 

(4)                                  You hereby
confirm that except as set out in this Letter Agreement, no other amounts are
due to you from the Company.

 

(5)                                  You will resign
each and every directorship or office in the Company, including any subsidiary
and affiliated company, on or before the Final Employment Date.

 

(6)                                  Except as
mutually agreed by you and the Company, you will comply with the terms of
clause 7.2 of your September 8, 2004 Service Agreement, and return all
other Company property within fourteen (14) days of your Final Employment Date.

 

 

 

 

(7)                                  The Company
will waive the restrictive covenant contained in section 11.1.1 of your September 8,
2004 Service Agreement insofar as it relates to NewCo providing investment
advisory/management services to its clients. 
You will abide by that restrictive covenant as it relates to all other
entities and all other restrictive covenants contained in your contract of
employment with the Company, in particular those relating to the use of
confidential information, except as otherwise allowed pursuant to the
Consulting Agreement or Investment Management Agreement.

 

(8)                                  You agree that during the period of
twelve (12) months following your Final Employment Date you shall not either on
your own account or for any other person, firm or company, including your new
investment advisory business and any of its affiliates, solicit the services of
or endeavour to entice away from the Company any employee or consultant of the
Company (whether or not such person would commit any breach of his or her
contract of employment or engagement by leaving the service of the Company) nor
shall you knowingly solicit, employ or aid or assist in or procure the
employment by any other person, firm or company of any such person.

 

(9)                                  Except as
expressly varied by this Letter Agreement, your duties and obligations under
the Service Agreement shall remain in full force and effect (both before and
after your Final Employment Date), and you hereby agree to comply with the
same.

 

Please sign to acknowledge your agreement to
these terms.

 

Signed on behalf of the Company

 

	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Anthony Taylor

  	
   

  
	
   

  	
  Name: Anthony Taylor

  	
   

  
	
   

  	
  Title: Chief Executive
  Officer

  	
   

  
	
   

  	
   

  
	
  Signed
  and agreed

  	
   

  
	
   

  	
   

  
	
  /s/
  Kernan V. Oberting

  	
   

  
	
  Kernan
  V. ObertingExhibit
10.2

MONTPELIER RE
HOLDINGS LTD.

94 Pitts Bay Road

Pembroke HM 08

Bermuda

 

KVO Capital Management,
LLC

44 South Main Street

Box 17

Hanover, NH 03755

 

As of April 1, 2008

 

This letter agreement (this “Agreement”) is to confirm the
understanding between Montpelier Re Holdings Ltd. (the “Company”) and
KVO Capital Management, LLC (“NewCo”) with respect to consulting
services that the Company wishes to obtain from NewCo and NewCo wishes to
provide to the Company.  In consideration
of the mutual covenants and agreements set forth herein, NewCo and the Company
hereby agree as follows:

 

1.             Duties; Responsibilities.  The Company hereby appoints and engages NewCo
to perform, and NewCo hereby agrees to perform, capital management advisory
services and such other services as may be reasonably requested from time to
time by the Company (collectively, the “Services”), all on the terms and
subject to the conditions of this Agreement. 
NewCo shall make available personnel acceptable to the Company as
necessary to provide the Services.  The
delivery by NewCo of the Services hereunder shall be at such times and at such
places as the interests, needs, businesses or opportunities of the Company
shall reasonably require. 
Notwithstanding the foregoing, the Company acknowledges that until NewCo
is registered as an investment adviser with either the Securities and Exchange
Commission or the State of New Hampshire, NewCo will not provide the Company
with (i) any advice relating to the valuation of securities or other
investments, or as to the advisability of investing in, purchasing or selling
securities, or as to the advisability of making other investments; (ii) reports
concerning securities or other investments; and (iii) financial planning
services.

 

2.             Exclusivity. 
During the Consultation Period (defined below), Kernan V. Oberting shall
not provide, directly or indirectly, any Competitive Business Activities to any
Competitive Business without the prior written approval of the Company.  Notwithstanding the foregoing, in no event
shall NewCo or its affiliates be precluded from entering into discretionary
investment management agreements with, or accepting investments in
NewCo-sponsored investment funds from, any person (including any Competitive
Business).

 

“Competitive
Business Activities” shall mean (i) being employed by or acting as a paid
consultant to or (ii) participating in the management of any Competitive
Business.  Competitive Business
Activities shall not include the beneficial ownership by NewCo of any person
that is directly or indirectly engaged in a Competitive Business

 

 

 

 

“Competitive
Business” shall mean any person or entity engaged in the business of insurance
and/or reinsurance.  For the
avoidance of doubt, the Company agrees that the provision of capital management
advisory, investment management, or asset allocation services by Kernan V.
Oberting, NewCo or either of their affiliates to a natural person, on a
personal basis, who is engaged in the business of insurance and/or reinsurance,
shall not constitute a Competitive Business.

 

3.             Compensation.  In consideration for providing the Services,
NewCo shall receive the following:

 

                                                (a) The Company
will pay NewCo a monthly fee (the “Consulting Fee”) equal to 0.25 basis
points of the Company’s total consolidated cash and investments (including, but
not limited to, cash, cash equivalents, restricted cash, securities lending
collateral and other similar line items listed on the Company’s balance sheet,
and inclusive of all present and future subsidiaries, affiliates, parent
companies, and each of their successors and assigns, all as determined in
accordance with generally accepted accounting principals) (the “Company
Asset Base”).  The Consulting Fee
shall be payable within ten (10) days after the last day of each month
based on the value of the Company Asset Base as of the last day of the
immediately preceding month.

 

                                                (b) In the event
the net annualized rate of return of the Company Asset Base (the “Company’s
Performance”) is in the top quartile of such performance relative to a
group of peer companies over the period beginning May 1, 2008 and ending December 31,
2010 (the “Benchmark”), the Company will pay NewCo a one-time
performance fee of $250,000 (the “Performance Fee”).  The Performance Fee will be paid to NewCo by
the Company no later than March 1, 2011. 
The Company, in its sole discretion and in good faith, shall select the
peer companies that will be utilized to determine whether the Company’s
Performance meets the Benchmark.

 

4.             Term.  This Agreement shall continue in force for
the period beginning on May 1, 2008 and ending on December 31, 2010,
subject to automatic renewal for additional successive one-year periods (the “Consultation
Period”).  Either party may (a) upon
at least forty-five (45) days’ prior written notice, terminate this Agreement
as of December 31, 2010 and annually thereafter or (b) immediately
terminate this Agreement in the event (i) of a winding-up of, or the
appointment of an administrator, examiner or receiver to either party or upon
the happening of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction (except a voluntary liquidation for
the purposes of a reconstruction, amalgamation or merger), (ii) that NewCo
ceases to be permitted to act as a consultant under any law, rule or
regulation, (iii) of a conviction of, or plea of guilty or no contest to,
a felony under federal,  state or foreign
securities laws by Kernan V. Oberting, (iv) of a formal investigation of
or a formal proceeding involving NewCo or Kernan V. Oberting initiated by a
state, federal or foreign governmental agency in connection with the provision
of investment advisory services, or (v) either party is in material breach
of the Agreement, and has not cured such breach within thirty (30) days of
receiving notice of such breach by the other party.  In addition, the Company may terminate this
Agreement by written notice to NewCo (x) following the death of Kip
Oberting or if he ceases to be affiliated with NewCo (or any permitted
assignee); or (y) upon the consummation of a reconstruction, amalgamation
or merger of the Company, provided that the 

 

 

2

 

 

Company provides written notice to NewCo of its intent to terminate the
Agreement promptly after the Company’s Board of Directors makes a formal
recommendation to the Company’s shareholder’s regarding such reconstruction,
amalgamation or merger.  If the Company
terminates this Agreement for any reason, then, subject to the Company’s
Performance meeting the Benchmark as of the date of termination, the
Performance Fee, pro rated through the termination date (a “Pro-Rated
Performance Fee”) shall be payable to NewCo within thirty (30) days after
the termination date.  If the Company
terminates this Agreement due to the reconstruction, amalgamation or merger of
the Company, then (i) in addition to the Pro-Rated Performance Fee, the
Company shall pay NewCo a one-time fee (the “Termination Fee”) in an
amount equal to the product of (A) 0.25 basis points, (B) the number
of months in the period beginning with the month in which the termination
occurs through and including December 2010, and (C) the average
quarterly value of the Company Asset Base calculated from the date hereof and
ending on the last day of the quarter prior to the termination date; and (ii) no
further Consulting Fees will be paid to Newco by the Company, any successor or
assign.  The Termination Fee shall be
paid by the Company at the same time it pays the Pro-Rated Performance Fee.

 

5.             Nondisclosure. 
The parties hereto agree that during the course of the provision of the
Services by NewCo to the Company, NewCo will have access to, and will gain
knowledge with respect to, the Company’s Confidential Information and the Company
will have access to, and will gain knowledge with respect to NewCo’s
Confidential Information (as defined below). 
The parties acknowledge that unauthorized disclosure or misuse of such
Confidential Information would cause irreparable damage to the other
party.  Accordingly, each party agrees to
the covenants in this Section 5. 
Each party agrees that it, its affiliates and employees shall not
(except as may be required by law), without the prior written consent of the
other party, use or disclose (other than in connection with providing Services
hereunder), or knowingly permit any other person to use, disclose or gain
access to, any Confidential Information. 
In addition, upon termination of this Agreement for any reason, each
party shall return to the other party the original and all copies of all
documents, correspondence and other data (in whatever form maintained) or
property in its possession relating to the business of the other party or any
of its affiliates, including but not limited to all Confidential Information,
and shall not be entitled to any lien or right of retention in respect
thereof.  “Confidential Information”
shall mean all information (whether or not in written form) that relates to the
business activities of a party, any of its affiliates or their respective
operations, products or services, and which is not known to the public
generally, including but not limited to technical information or reports; trade
secrets; unwritten knowledge and “know-how”; business strategies and philosophies;
information relating to business opportunities; vendor, supplier, employee,
client or consumer lists and information; client service records or consumer
product records; premium volume records; investment records; investment and
risk management strategies; product development, marketing and sales
strategies; market surveys; marketing plans; profitability analyses; long-range
plans; information relating to premiums, fees, competitive strategies and new
product or service development; information relating to any forms of
compensation and other personnel-related information; contracts; and
underwriter or trading partners lists. 
Notwithstanding the foregoing, NewCo shall own and be permitted to use
its investment track record, and shall be permitted to retain copies of all
documentation necessary to support the investment track record, including
documents generated pursuant to the Investment Management Agreement between the
Company and NewCo dated as of April 1, 2008.

 

 

3

 

 

6.             Independent
Contractor Status.  NewCo shall
perform all services under this Agreement as an “independent contractor” and
not as an agent of the Company.  NewCo
and its principals and employees are not authorized to assume or create any obligation
or responsibility, express or implied, on behalf of, or in the name of, the
Company or to bind the Company in any manner in connection with their
performance of the Services.  NewCo and
its principals and employees shall not hold themselves out to any party as an
agent or employee of the Company or its affiliates in connection with their
performance of the Services.  NewCo shall
bear full responsibility for all taxes (including interest and penalties, if
any) owing on the compensation payable hereunder, and NewCo acknowledges that
the Company shall not withhold any taxes on such compensation unless otherwise
required by laws applicable to consulting relationships.

 

7.             Miscellaneous. 
This Agreement constitutes the entire agreement between the parties and
supersedes all prior agreements and understandings, whether written or oral,
relating to the subject matter hereof and thereof.  This Agreement may be amended or modified
only by a written instrument executed by both the Company and NewCo.  This Agreement shall be construed,
interpreted and enforced in accordance with the laws of the State of New
York.  NewCo agrees that a breach of any
of the restrictions set forth in this Agreement would cause the Company irreparable
injury and damage, and that, in the event of any breach or threatened breach,
the Company, in addition to all other rights and remedies at law or in equity,
shall have the right to enforce the specific performance of such restrictions
and to apply for injunctive relief against their violation.  The invalidity or unenforceability of any
provision hereof (or portion thereof) shall not affect the validity or
enforceability of any other provision hereof, and if any such provision (or
portion thereof) is so broad as to be unenforceable, it shall be interpreted to
be only as broad as is enforceable.  This
Agreement shall be binding upon, and inure to the benefit of, both parties and
their respective successors and assigns, including any corporation with which,
or into which, the Company may be merged or which may succeed to its assets or
business; provided, however, that the obligations of NewCo are
personal and shall not be assigned by it other than to (i) another company
controlled by Kernan V. Oberting or (ii) a company in which Kernan V. Oberting
has a controlling interest, either of which has the capability to perform the
Services.  Any notice or other
communication hereunder to either party shall be in writing and shall be deemed
to have been duly given when delivered personally or by reputable overnight
courier service, addressed to the party as its respective address appears in
this Agreement.  This Agreement may be
executed in counterparts, each of which will be deemed to be an original, but
each of which together will constitute one and the same agreement.

 

 

 

4

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year set forth above.

 

	
   

  	
  MONTPELIER
  RE HOLDINGS LTD.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  /s/
  Anthony Taylor

  
	
   

  	
   

  	
  Name:
  Anthony Taylor

  
	
   

  	
   

  	
  Title:
  Chief Executive Officer

  

 

	
   

  	
  KVO
  CAPITAL MANAGEMENT, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  /s/
  Kernan V. Oberting

  
	
   

  	
   

  	
  Name:
  Kernan V. Oberting

  
	
   

  	
   

  	
  Title:
  Managing Member

  
	
   

  	
   

  	
   

  

 

	
   

  	
  As to Section 2 above:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  KERNAN
  V. OBERTING

  
	
   

  
	
   

  	
  /s/
  Kernan V. Oberting

  
	
   

  	
  Kernan
  V. Oberting

  
			

 

 

5

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