Document:

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                     NATIONAL ATLANTIC HOLDINGS CORPORATION

                          2004 STOCK AND INCENTIVE PLAN

1.       PURPOSE

                  National Atlantic Holdings Corporation, a New Jersey
corporation (together with its affiliates and subsidiaries, the "Company"),
hereby establishes a stock incentive plan to be known as The National Atlantic
Holdings Corporation 2004 Stock and Incentive Plan (the "Plan"), as set forth in
this document. The objectives of the Plan are (i) to provide a vehicle for
compensating the Company's key personnel by giving them the opportunity to
acquire a proprietary interest in the Common Stock by receiving equity-based
incentive compensation; (ii) to provide management with an equity ownership in
the Company commensurate with Company performance, as reflected in increased
stockholder value; (iii) to attract, motivate and retain key employees,
non-employee directors and other service providers by maintaining competitive
compensation levels; and (iv) to provide an incentive to management for
continuous employment with or service to the Company.

2.       DEFINITIONS

                  Wherever the following capitalized terms are used in this
Plan, they shall have the meanings specified below:

                  (a) "Award" means an award of an Option, Stock Appreciation
Right, Restricted Stock Award, Stock Unit Award or Stock Award granted under the
Plan.

                  (b) "Award Agreement" means an agreement entered into between
the Company and a Participant setting forth the terms and conditions of an Award
granted to a Participant.

                  (c) "Board" means the Board of Directors of the Company.

                  (d) "Change in Control" shall have the meaning set forth in
Section 12.2 hereof.

                  (e) "Code" means the Internal Revenue Code of 1986, as
amended.

                  (f) "Common Stock" means the Company's Common Stock, no par
value per share.

                  (g) "Committee" means the Compensation Committee of the Board,
or any other committee of the Board appointed by the Board to administer the
Plan from time to time.

                  (h) "Company" means National Atlantic Holdings Corporation, a
New Jersey corporation.
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                  (i) "Date of Grant" means the date on which an Award under the
Plan is made by the Committee, or such later date as the Committee may specify
to be the effective date of the Award.

                  (j) "Disability" means a permanent and total disability
(within the meaning of Section 22(e)(3) of the Code).

                  (k) "Eligible Person" means any person who is an employee,
officer, director, consultant or insurance agent of the Company or any
Subsidiary, as determined by the Committee, or any person who is determined by
the Committee to be a prospective employee, officer, director, consultant or
insurance agent of the Company or any Subsidiary.

                  (l) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.

                  (m) "Fair Market Value" of a share of Common Stock as of a
given date shall be the closing price of a share of Common Stock on the Nasdaq
Stock Market on the first trading day immediately preceding the date as of which
the Fair Market Value is to be determined or, in the absence of any reported
sales of shares of Common Stock on such date, on the first preceding date on
which any such sale shall have been reported. If Common Stock is not listed on
the Nasdaq Stock Market on the date as of which Fair Market Value is to be
determined, the Committee shall determine in good faith the Fair Market Value in
whatever manner it considers appropriate.

                  (n) "Incentive Stock Option" means an Option to purchase
shares of Common Stock granted under Section 6 hereof that is intended to meet
the requirements of Section 422 of the Code and the regulations promulgated
thereunder.

                  (o) "Nonqualified Stock Option" means an Option to purchase
shares of Common Stock granted under Section 6 hereof that is not an Incentive
Stock Option.

                  (p) "Option" means an Incentive Stock Option or a Nonqualified
Stock Option granted under the Plan.

                  (q) "Participant" means any Eligible Person who holds an
outstanding Award under the Plan.

                  (r) "Plan" means the National Atlantic Holdings Corporation
2004 Stock and Incentive Plan as set forth herein, as amended from time to time.

                  (s) "Restricted Stock Award" means an Award under Section 8
hereof entitling a Participant to shares of Common Stock that are
nontransferable and subject to forfeiture until specific conditions established
by the Committee are satisfied.

                  (t) "Section 162(m) Award" means any Award that is intended to
qualify for the performance-based compensation exception under Section 162(m) of
the Code and the regulations promulgated thereunder.

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                  (u) "Stock Award" means an Award under Section 10 hereof
entitling a Participant to shares of Common Stock that are free of transfer
restrictions and forfeiture conditions.

                  (v) "Stock Appreciation Right" means an Award under Section 7
hereof entitling a Participant to receive a payment, representing the difference
between the base price per share of the right and the Fair Market Value of a
share of Common Stock on the date of exercise.

                  (w) "Stock Unit Award" means an Award under Section 9 hereof
entitling a Participant to a payment of a unit value based on the Fair Market
Value of a share of Common Stock.

                  (x) "Subsidiary" means an entity (whether or not a
corporation) that is wholly or majority owned or controlled, directly or
indirectly, by the Company, or any other affiliate of the Company that is so
designated, from time to time, by the Committee; provided, however, that with
respect to Incentive Stock Options, the term "Subsidiary" shall include only an
entity that qualifies under Section 424(f) of the Code as a "subsidiary
corporation" with respect to the Company.

3.       ADMINISTRATION

                  Section 3.1 Committee Members. The Plan shall be administered
by a Committee comprised of no fewer than two members of the Board. Solely to
the extent deemed necessary or advisable by the Board, each Committee member
shall satisfy the requirements for (i) an "independent director" under rules
adopted by the Nasdaq Stock Market, (ii) a "nonemployee director" for purposes
of such Rule 16b-3 under the Exchange Act and (iii) an "outside director" under
Section 162(m) of the Code. The Committee shall have such powers and authority
as may be necessary or appropriate for the Committee to carry out its functions
as described in the Plan. No member of the Committee shall be liable for any
action or determination made in good faith by the Committee with respect to the
Plan or any Award thereunder.

                  Section 3.2 Committee Authority. Subject to the express
limitations of the Plan, the Committee shall have authority in its discretion to
determine the Eligible Persons to whom, and the time or times at which, Awards
may be granted, the number of shares, units or other rights subject to each
Award, the exercise, base or purchase price of an Award (if any), the time or
times at which an Award will become vested, exercisable or payable, the
performance criteria, performance goals and other conditions of an Award, the
duration of the Award, and all other terms of the Award. Subject to the terms of
the Plan, the Committee shall have the authority to amend the terms of an Award
in any manner that is permitted by the Plan for the grant of an Award, provided
that no such action shall adversely affect the rights of a Participant with
respect to an outstanding Award without the Participant's consent. The Committee
shall also have discretionary authority to interpret the Plan, to make all
factual determinations under the Plan, and to make all other determinations
necessary or advisable for Plan administration. The Committee may prescribe,
amend, and rescind rules and regulations relating to the Plan. All
interpretations, determinations, and actions by the Committee shall be final,
conclusive, and

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binding upon all parties. In administering the Plan, the Committee shall act in
accordance with its authority under the Charter of the Compensation Committee,
as in effect from time to time.

                  Section 3.3 Delegation of Authority. The Committee shall have
the right, from time to time, to delegate to one or more officers of the
Corporation the authority of the Committee to grant and determine the terms and
conditions of Awards granted under the Plan, subject to the requirements of
applicable law and such other limitations as the Committee shall determine. In
no event shall such authority be delegated with respect to Awards to any members
of the Board or any Participant who the Committee determines may be subject to
Rule 16b-3 under the Exchange Act or Section 162(m) of the Code. In the event
that authority is delegated to an officer or officers in accordance with the
foregoing, all provisions of the Plan relating to the Committee shall be
interpreted in a manner consistent with the foregoing by treating any such
reference as a reference to such officer or officers for such purpose.

                  Section 3.4 Grants to Committee Members. Any Awards under the
Plan made to members of the Committee shall be approved by the Board. With
respect to awards to such directors, all rights, powers and authorities vested
in the Committee under the Plan shall instead be exercised by the Board, and all
provisions of the Plan relating to the Committee shall be interpreted in a
manner consistent with the foregoing by treating any such reference as a
reference to the Board for such purpose.

4.       SHARES SUBJECT TO THE PLAN

                  Section 4.1 Share Limitations. Subject to adjustment pursuant
to Section 4.2 hereof, the maximum aggregate number of shares of Common Stock
which may be issued and sold hereunder shall be 1,000,000 shares. Shares of
Common Stock issued and sold under the Plan may be either authorized but
unissued shares or shares held in the Company's treasury. To the extent that any
Award payable in shares of Common Stock is forfeited, cancelled, returned to the
Company for failure to satisfy vesting requirements or upon the occurrence of
other forfeiture events, or otherwise terminates without payment being made
thereunder, the shares of Common Stock covered thereby will no longer be charged
against the foregoing maximum share limitation and may again be made subject to
Awards under the Plan pursuant to such limitations. In addition, any shares of
Common Stock exchanged by a Participant or withheld from a Participant as full
or partial payment to the Company of the exercise price or tax withholding upon
exercise or payment of an Award shall be added to the number of shares of Common
Stock available for issuance under the Plan from time to time. Any Awards
settled in cash shall not be counted against the share limitations set forth in
this Section 4.1.

                  Section 4.2 Adjustments. If there shall occur any
recapitalization, reclassification, stock dividend, extraordinary dividend,
stock split, reverse stock split, or other distribution with respect to the
shares of Common Stock, or any merger, reorganization, consolidation or other
change in corporate structure affecting the Common Stock, the Committee may, in
the manner and to the extent that it deems appropriate and equitable to the
Participants and consistent with the terms of this Plan, cause an adjustment to
be made in (i) the maximum number and kind of shares provided in Section 4.1
hereof, (ii) the maximum number and kind of shares or units set forth in
Sections 6.1, 7.1, 8.1, 9.1 and 10.1 hereof, (iii) the number and kind of shares
of Common Stock, units, or other rights subject to then outstanding Awards, (iv)
the price

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for each share or unit or other right subject to then outstanding Awards, (v)
the performance measures or goals relating to an Award and (v) any other terms
of an Award that are affected by the event. Notwithstanding the foregoing, in
the case of Incentive Stock Options, any such adjustments shall be made in a
manner consistent with the requirements of Section 424(a) of the Code.

5.       ELIGIBILITY AND AWARDS

                  All Eligible Persons are eligible to be designated by the
Committee to receive an Award under the Plan. The Committee has the authority,
in its sole discretion, to determine and designate from time to time those
Eligible Persons who are to be granted Awards, the types of Awards to be granted
and the number of shares or units subject to the Awards that are granted under
the Plan. To the extent deemed necessary by the Committee, an Award will be
evidenced by an Award Agreement as described in Section 13.1 hereof.

6.       STOCK OPTIONS

                  Section 6.1 Grant of Option. An Option may be granted to any
Eligible Person selected by the Committee. Subject to the provisions of Section
6.6 hereof and Section 422 of the Code, each Option shall be designated, in the
discretion of the Committee, as an Incentive Stock Option or a Nonqualified
Stock Option. The maximum number of shares of Common Stock that may be subject
to Options granted to any Participant during any calendar year shall be limited
to 250,000 shares (subject to adjustment as provided in Section 4.2 hereof).

                  Section 6.2 Exercise Price. The exercise price under any
Option shall be determined by the Committee; provided, however, that the
exercise price per share under an Option shall not be less than 100 percent of
the Fair Market Value per share of the Common Stock on the Date of Grant.

                  Section 6.3 Vesting; Term of Option. The Committee, in its
sole discretion, shall prescribe the time or times at which, or the conditions
upon which, an Option or portion thereof shall become vested and/or exercisable,
and may accelerate the exercisability of any Option at any time. The period
during which a vested Option may be exercised shall be ten years from the Date
of Grant, unless a shorter exercise period is specified by the Committee in an
Award Agreement. An Option may be earlier terminated as specified by the
Committee and set forth in an Award Agreement upon or following the termination
of a Participant's employment or other service with the Company or any
Subsidiary, including by reason of voluntary resignation, death, Disability,
termination for cause or any other reason.

                  Section 6.4 Option Exercise; Tax Withholding. Subject to
applicable law and such terms and conditions as shall be specified in an Award,
an Option may be exercised in whole or in part at any time during the term
thereof by notice in the form required by the Company, together with payment of
the aggregate exercise price therefor. Payment of the exercise price shall be
made in the manner set forth in the Award Agreement, unless otherwise provided
by the Committee: (i) in cash or by cash equivalent acceptable to the Committee,
(ii) by payment in shares of Common Stock that have been held by the Participant
for at least six months (or such other period as the Committee may deem
appropriate for purposes of applicable

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accounting rules), valued at the Fair Market Value of such shares on the date of
exercise, (iii) through an open-market broker-assisted transaction, (iv) by a
combination of the methods described above, or (v) by such other method as may
be approved by the Committee and set forth in the Award Agreement. In addition
to and at the time of payment of the exercise price, the Participant shall pay
to the Company the full amount of any and all applicable income tax and
employment tax amounts required to be withheld in connection with such exercise,
payable under such of the methods described above for the payment of the
exercise price of the Options as may be approved by the Committee and set forth
in the Award Agreement.

                  Section 6.5 Limited Transferability of Nonqualified Options.
All Options shall be nontransferable except (i) upon the Participant's death, by
the Participant's will or the laws of descent and distribution or (ii) in the
case Nonqualified Stock Options only, on a case-by-case basis as may be approved
by the Committee in its discretion, in accordance with the terms provided below.
An award for a Nonqualified Stock Option may provide that the Participant shall
be permitted to, during his or her lifetime and subject to the prior approval of
the Committee at the time of proposed transfer, transfer all or part of the
Option to the Participant's family member (as defined in the Award Agreement in
a manner consistent with the requirements for the Form S-8 registration
statement under the Securities Act of 1933.) The transfer of a Nonqualified
Stock Option may be subject to such other terms and conditions as the Committee
may in its discretion impose from time to time. Subsequent transfers of an
Option shall be prohibited other than by will or the laws of descent and
distribution upon the death of the transferee.

                  Section 6.6 Additional Rules for Incentive Stock Options.

                  (i) Eligibility. An Incentive Stock Option may only be granted
to an Eligible Person who is considered an employee of the Company or any
Subsidiary for purposes of Treasury RegulationSection 1.421-7(h).

                  (ii) Annual Limits. No Incentive Stock Option shall be granted
to a Participant as a result of which the aggregate Fair Market Value
(determined as of the Date of Grant) of the stock with respect to which
Incentive Stock Options are exercisable for the first time in any calendar year
under the Plan and any other stock option plans of the Company, any Subsidiary,
or any parent corporation, would exceed $100,000, determined in accordance with
Section 422(d) of the Code. This limitation shall be applied by taking Options
into account in the order in which granted.

                  (iii) Ten Percent Stockholders. If an Option granted under the
Plan is intended to be an Incentive Stock Option, and if the Participant, at the
time of grant, owns stock possessing ten percent or more of the total combined
voting power of all classes of Common Stock of the Participant's employer
corporation or of its parent or Subsidiary, then (a) the Option exercise price
per share shall in no event be less than 110 percent of the Fair Market Value of
the Common Stock on the date of such grant and (b) such Option shall not be
exercisable after the expiration of five years following the date such Option is
granted.

                  (iv) Termination of Employment. An Award of an Incentive Stock
Option may provide that such Option may be exercised not later than 3 months
following termination of

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employment of the Participant with the Company and all Subsidiaries, or not
later than one year following death or Disability, as and to the extent
determined by the Committee to comply with the requirements of Section 422 of
the Code.

                  (v) Other Terms and Conditions; Nontransferability. Any
Incentive Stock Option granted hereunder shall contain such additional terms and
conditions, not inconsistent with the terms of this Plan, as are deemed
necessary or desirable by the Committee, which terms, together with the terms of
this Plan, shall be intended and interpreted to cause such Incentive Stock
Option to qualify as an "incentive stock option" under Section 422 of the Code.
An Award Agreement for an Incentive Stock Option may provide that such Option
shall be treated as a Nonqualified Stock Option to the extent that certain
requirements applicable to "incentive stock options" under the Code shall not be
satisfied. An Incentive Stock Option shall by its terms be nontransferable other
than by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of a Participant only by such Participant.

                  (vi) Disqualifying Dispositions. If shares of Common Stock
acquired by exercise of an Incentive Stock Option are disposed of within two
years following the Date of Grant or one year following the issuance of such
shares to the Participant upon exercise, the Participant shall, promptly
following such disposition, notify the Company in writing of the date and terms
of such disposition and provide such other information regarding the disposition
as the Company may reasonably require.

                  Section 6.7 Repricing of Stock Options Prohibited. Neither the
Committee nor the Board shall cause the cancellation, substitution or amendment
of an Option that would have the effect of reducing the exercise price of an
Option previously granted under the Plan, or otherwise approve any modification
to an Option that would be treated as a "repricing" under the then applicable
rules, regulations or listing requirements adopted by the Nasdaq Stock Market,
except in accordance with an adjustment permitted under Section 4.2 hereof.

7.       STOCK APPRECIATION RIGHTS

                  Section 7.1 Grant of Stock Appreciation Rights. A Stock
Appreciation Right may be granted to any Eligible Person selected by the
Committee. A Stock Appreciation Right granted to an Eligible Person is an Award
in the form of a right to receive, upon surrender of the right but without other
payment, an amount based on appreciation in the Fair Market Value of shares of
Common Stock over a base price established for the Award, exercisable at such
time or times and upon conditions as may be approved by the Committee, provided
that the Committee may accelerate the exercisability of a Stock Appreciation
Right at any time. The maximum number of shares of Common Stock that may be
subject to Stock Appreciation Rights granted to any Participant during any
calendar year shall be limited to 250,000 shares (subject to adjustment as
provided in Section 4.2 hereof).

                  Section 7.2 Freestanding Stock Appreciation Rights. A Stock
Appreciation Right may be granted without any related Option, and in such case,
will be exercisable as determined by the Committee, but in no event after 10
years from the Date of Grant. The base price of a Stock Appreciation Right
granted without any related Option shall be determined by the Committee in its
sole discretion; provided, however, that the base price per share of any such

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freestanding Stock Appreciation Right shall not be less than 100 percent of the
Fair Market Value of the shares of Common Stock on the Date of Grant.

                  Section 7.3 Tandem Stock Appreciation Rights. A Stock
Appreciation Right may be granted in connection with an Option, either at the
time of grant or at any time thereafter during the term of the Option. A Stock
Appreciation Right granted in connection with an Option will entitle the holder,
upon exercise, to surrender such Option or any portion thereof to the extent
unexercised, with respect to the number of shares as to which such Stock
Appreciation Right is exercised, and to receive payment of an amount computed as
described in Section 7.4 hereof. Such Option will, to the extent and when
surrendered, cease to be exercisable. A Stock Appreciation Right granted in
connection with an Option hereunder will have a base price per share equal to
the per share exercise price of the Option, will be exercisable at such time or
times, and only to the extent, that a related Option is exercisable, and will
expire no later than the related Option expires.

                  Section 7.4 Payment of Stock Appreciation Rights. A Stock
Appreciation Right will entitle the holder, upon exercise of the Stock
Appreciation Right, to receive payment of an amount determined by multiplying:
(i) the excess of the Fair Market Value of a share of Common Stock on the date
of exercise of the Stock Appreciation Right over the base price of such Stock
Appreciation Right, by (ii) the number of shares as to which such Stock
Appreciation Right is exercised. Payment of the amount determined under the
foregoing may be made, as approved by the Committee and set forth in the Award
Agreement, in cash, in shares of Common Stock valued at their Fair Market Value
on the date of exercise, or in a combination of cash and shares of Common Stock,
subject to applicable tax withholding requirements.

                  Section 7.5 Repricing of Stock Appreciation Rights Prohibited.
Neither the Committee nor the Board shall cause the cancellation, substitution
or amendment of a Stock Appreciation Right that would have the effect of
reducing the base price of a Stock Appreciation Right previously granted under
the Plan, or otherwise approve any modification to a Stock Appreciation Right
that would be treated as a "repricing" under the then applicable rules,
regulations or listing requirements adopted by the Nasdaq Stock Market, except
in accordance with an adjustment permitted under Section 4.2 hereof.

8.       RESTRICTED STOCK AWARDS

                  Section 8.1 Grant of Restricted Stock Awards. A Restricted
Stock Award may be granted to any Eligible Person selected by the Committee. A
Restricted Stock Award granted to an Eligible Person represents shares of Common
Stock that are issued subject to such vesting and transfer restrictions as the
Committee shall determine and set forth in an Award Agreement. The Committee
may, in connection with any Restricted Stock Award, require the payment of a
specified purchase price. The Committee may grant Restricted Stock Awards that
are Section 162(m) Awards, as well as Restricted Stock Awards that are not
Section 162(m) Awards. The maximum number of shares of Common Stock that may be
subject to Restricted Stock Awards granted to a Participant during any one
calendar year shall be limited to 250,000 shares (subject to adjustment as
provided in Section 4.2 hereof).

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                  Section 8.2 Vesting Requirements. The restrictions imposed on
shares granted under a Restricted Stock Award shall lapse in accordance with the
vesting requirements specified by the Committee in the Award Agreement, provided
that the Committee may accelerate the vesting of a Restricted Stock Award at any
time. Such vesting requirements may be based on the continued employment of the
Participant with the Company or its Subsidiaries for a specified time period or
periods. Such vesting requirements may also be based on the attainment of
specified performance goals or measures established by the Committee in its sole
discretion. In the case of any Restricted Stock Award that is a Section 162(m)
Award, any such performance-based vesting requirements shall be based upon the
performance criteria identified in Section 11.2 hereof, and the terms of the
Award shall otherwise comply with the requirements described in Section 11.3
hereof. If the vesting requirements of a Restricted Stock Award shall not be
satisfied, the Award shall be forfeited and returned to the Company, with any
purchase price paid by the Participant to be refunded, unless otherwise provided
by the Committee.

                  Section 8.3 Restrictions. Shares granted under any Restricted
Stock Award may not be transferred, assigned or subject to any encumbrance,
pledge, or charge until all applicable restrictions are removed or have expired,
unless otherwise allowed by the Committee. Failure to satisfy any applicable
restrictions shall result in the subject shares of the Restricted Stock Award
being forfeited and returned to the Company, with any purchase price paid by the
Participant to be refunded, unless otherwise provided by the Committee. The
Committee may require in an Award Agreement that certificates representing the
shares granted under a Restricted Stock Award bear a legend making appropriate
reference to the restrictions imposed, and that certificates representing the
shares granted or sold under a Restricted Stock Award will remain in the
physical custody of an escrow holder until all restrictions are removed or have
expired.

                  Section 8.4 Rights as Stockholder. Subject to the foregoing
provisions of this Section 8 and the applicable Award Agreement, the Participant
will have all rights of a stockholder with respect to the shares granted to him
under a Restricted Stock Award, including the right to vote the shares and
receive all dividends and other distributions paid or made with respect thereto,
unless the Committee determines otherwise at the time the Restricted Stock Award
is granted.

                  Section 8.5 Section 83(b) Election. If a Participant makes an
election pursuant to Section 83(b) of the Code with respect to a Restricted
Stock Award, the Participant shall be required to file, within 30 days following
the Date of Grant, a copy of such election with the Company and with the
Internal Revenue Service, in accordance with the regulations under Section 83 of
the Code. The Committee may provide in an Award Agreement that the Restricted
Stock Award is conditioned upon the Participant's refraining from making an
election with respect to the Award under Section 83(b) of the Code.

9.       STOCK UNIT AWARDS

                  Section 9.1 Grant of Stock Unit Awards. A Stock Unit Award may
be granted to any Eligible Person selected by the Committee. A Stock Unit Award
is an Award to an Eligible Person of a number of hypothetical share units with
respect to shares of Common Stock that are granted subject to such vesting and
transfer restrictions and conditions of payment as the

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Committee shall determine and set forth in an Award Agreement. The value of each
unit under a Stock Unit Award is equal to the Fair Market Value of the Common
Stock on any applicable date of determination. The Committee may grant Stock
Unit Awards that are Section 162(m) Awards, as well as a Stock Unit Awards that
are not Section 162(m) Awards. The maximum number of units that may be subject
to Stock Unit Awards granted to a Participant during any one calendar year shall
be separately limited to 250,000 units (subject to adjustment as provided in
Section 4.2 hereof). A Stock Unit Award shall be subject to such restrictions
and conditions as the Committee shall determine. A Stock Unit Award may be
granted, at the discretion of the Committee, together with a dividend equivalent
right with respect to the same number of shares of Common Stock.

                  Section 9.2 Vesting of Stock Unit Awards. On the Date of
Grant, the Committee shall determine, in its sole discretion, any vesting
requirements with respect to a Stock Unit Award, which shall be set forth in the
Award Agreement, provided that the Committee may accelerate the vesting of a
Stock Unit Award at any time. Vesting requirements may be based on the continued
employment of the Participant with the Company or its Subsidiaries for a
specified time period or periods. Vesting requirements may also be based on the
attainment of specified performance goals or measures established by the
Committee in its sole discretion. In the case of any Stock Unit Award that is a
Section 162(m) Award, any such performance-based vesting requirements shall be
based upon the performance criteria identified in Section 11.2 hereof, and the
terms of the Award shall otherwise comply with the requirements described in
Section 11.3 hereof. A Stock Unit Award may also be granted on a fully vested
basis, with a deferred payment date.

                  Section 9.3 Payment of Stock Unit Awards. A Stock Unit Award
shall become payable to a Participant at the time or times determined by the
Committee and set forth in the Award Agreement, which may be upon or following
the vesting of the Award. The payment with respect to each share unit under a
Stock Unit Award shall be determined by reference to the Fair Market Value of
one share of Common Stock on each applicable payment date. Payment may be made,
at the discretion of the Committee, in cash or in shares of Common Stock, or in
a combination thereof, subject to applicable tax withholding requirements. In
accordance with Section 13.4 hereof, the Committee may permit a Participant to
defer the receipt of payment under a Stock Unit Award until such date or event
as may be elected by the Participant in accordance with rules established by the
Committee.

                  Section 9.4 No Rights as Stockholder. The Participant shall
not have any rights as a stockholder with respect to the shares subject to a
Stock Unit Award until such time as shares of Common Stock are delivered to the
Participant pursuant to the terms of the Award.

10.      STOCK AWARDS

                  Section 10.1 Grant of Stock Awards. A Stock Award may be
granted to any Eligible Person selected by the Committee. A Stock Award may be
granted for past services, in lieu of bonus or other cash compensation,
directors' fees or for any other valid purpose as determined by the Committee. A
Stock Award granted to an Eligible Person represents shares of Common Stock that
are issued free of restrictions on transfer and other incidents of ownership and
free of forfeiture conditions, except as otherwise provided in the Plan and the
Award

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Agreement. The Committee may, in connection with any Stock Award, require the
payment of a specified purchase price. The Committee may grant Stock Awards that
are Section 162(m) Awards, as well as Stock Awards that are not Section 162(m)
Awards. The maximum number of shares of Common Stock that may be subject to a
Stock Awards granted to a Participant during any one calendar year shall be
limited to 250,000 shares (subject to adjustment as provided in Section 4.2
hereof).

                  Section 10.2 Rights as Stockholder. Subject to the foregoing
provisions of this Section 10 and the applicable Award Agreement, the
Participant will have all rights of a stockholder with respect to the shares
granted to the Participant under a Stock Award, including the right to vote the
shares and receive all dividends and other distributions paid or made with
respect thereto.

11.      SECTION 162(M) AWARDS

                  Section 11.1 Awards. Awards of Options and Stock Appreciation
Rights granted under the Plan are intended by their terms to qualify as Section
162(m) Awards. Restricted Stock Awards, Stock Unit Awards and Stock Awards
granted under the Plan may qualify as Section 162(m) Awards if the Awards are
granted or become payable or vested based upon pre-established performance goals
in accordance with this Section 11.

                  Section 11.2 Performance Criteria. In the case of a Restricted
Stock Award, Stock Unit Award or Stock Award that is intended to be a Section
162(m) Award, the performance criteria upon which the grant, payment or vesting
may be based shall be limited to one or more of the following performance
measures, which may be applied with respect to the Company, any Subsidiary or
any business unit: net income, earnings per share, operating income, earnings
before interest, taxes, depreciation and amortization, loss ratio, combined
ratio, book value per share, return on equity, stock price performance, cash
flow, or underwriting gain or loss. The foregoing performance criteria shall
have any reasonable definitions that the Committee may specify, which may
include or exclude any items specified by the Committee, including but not
limited to, any or all of the following items: charges for restructurings,
discontinued operations, extraordinary items and other unusual or non-recurring
items, the cumulative effects of accounting changes and realized capital gains.
The foregoing performance measures may be determined on an absolute basis or
relative to internal goals or relative to levels attained in prior years, or
related to other companies or indices, or as ratios expressing relationships
between two or more performance measures. In the case of Awards that are not
Section 162(m) Awards, the Committee may designate performance criteria from
among the foregoing or such other performance criteria as it shall determine in
its sole discretion.

                  Section 11.3 Section 162(m) Requirements. In the case of a
Restricted Stock Award, Stock Unit Award or Stock Award that is intended to be a
Section 162(m) Award, the Committee shall make such determinations with respect
to an Award as required by Section 162(m) of the Code within 90 days after the
beginning of the performance period (or such other time period as is required
under Section 162(m) of the Code). As and to the extent required by Section
162(m) of the Code, the terms of an Award that is a Section 162(m) Award must
state, in terms of an objective formula or standard, the method of computing the
amount of compensation payable under the Award, and must preclude discretion to
increase the amount of compensation

                                       11
<PAGE>
payable under the terms of the Award (but may give the Committee discretion to
decrease the amount of compensation payable).

12.      CHANGE IN CONTROL

                  Section 12.1 Effect of Change in Control. The Committee may,
at the time of the grant of an Award and as set forth in an Award Agreement,
provide for the effect of a "Change in Control" (as defined below) on an Award.
Such provisions may include any one or more of the following: (i) the
acceleration or extension of time periods for purposes of exercising, vesting
in, or realizing gain from any Award, (ii) the elimination or modification of
performance or other conditions related to the payment or other rights under an
Award, (iii) provision for the cash settlement of an Award for an equivalent
cash value, as determined by the Committee, or (iv) such other modification or
adjustment to an Award as the Committee deems appropriate to maintain and
protect the rights and interests of Participants upon or following a Change in
Control. Unless otherwise provided by the Committee and set forth in the Award
Agreement, upon a Change in Control, (i) each outstanding Option and Stock
Appreciation Right, to the extent that it shall not otherwise have become vested
and exercisable, shall automatically become fully and immediately vested and
exercisable, without regard to any otherwise applicable vesting requirement,
(ii) each Restricted Stock Award shall become fully and immediately vested and
all forfeiture and transfer restrictions shall lapse, and (iii) each outstanding
Stock Unit Award and Stock Award shall become immediately and fully vested and
payable.

                  Section 12.2 Definition of Change in Control. For purposes of
this Agreement, a "Change in Control" shall be deemed to have occurred upon:

                  (i) any Person (other than James V. Gorman, a member of his
         immediate family or any trust or other entity that is controlled by
         James V. Gorman or a member of his immediate family) becoming a
         beneficial owner, directly or indirectly, of securities of the Company
         representing 30% or more of the combined voting power of the Company's
         then outstanding securities;

                  (ii) the merger or consolidation of the Company with or into
         another entity (or other similar reorganization), whether or not the
         Company is the surviving corporation, in which the stockholders of the
         Company immediately prior to the effective date of such transaction own
         less than 50% of the voting power in the surviving entity;

                  (iii) during any period of two consecutive years, individuals
         who at the beginning of such period constitute the Board cease for any
         reason to constitute at least a two-thirds majority of such Board,
         unless the nomination for the election by the Company's stockholders of
         each new director was approved by a vote of at least one-half of the
         persons who were directors at the beginning of the two-year period; or

                  (iv) the sale or other disposition of all or substantially all
         of the assets of the Company, or a complete liquidation or dissolution
         of the Company.

                  For purposes of this Section 12.2, "Person" shall mean any
individual, firm, company, partnership, other entity or group, but excluding the
Company, its affiliates, any

                                       12
<PAGE>
employee benefit plan maintained by the Company, or an underwriter temporarily
holding securities pursuant to an offering of such securities. For purposes of
this Section 12.2, a Person shall be deemed the "beneficial owner" of any
securities (i) which such Person or any of its Affiliates or Associates
beneficially owns, directly or indirectly; or (ii) which such Person or any of
its Affiliates or Associates, has directly or indirectly, (1) the right to
acquire (whether such right is exercisable immediately or only after the passage
of time), pursuant to any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise, or (2) the right to vote pursuant to any agreement, arrangement or
understanding; or (iii) which are beneficially owned, directly or indirectly, by
any other Person with which such Person or any of its Affiliates or Associates
has any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing or any securities.

                  For purposes of this Section 12.2, "Affiliate" or "Associate"
shall have the respective meaning ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations promulgated by the Securities and Exchange
Commission under the Exchange Act.

13.      GENERAL PROVISIONS

                  Section 13.1 Form of Agreement. To the extent deemed necessary
by the Committee, an Award under this Plan shall be evidenced by an Award
Agreement in a form approved by the Committee setting forth the number of shares
of Common Stock or units subject to the Award, the exercise price, base price,
or purchase price of the Award, the time or times at which an Award will become
vested, exercisable or payable and the term of the Award. The Award Agreement
shall also set forth the effect on an Award of termination of employment under
certain circumstances. The Award Agreement may also set forth other terms and
conditions applicable to the Award as determined by the Committee consistent
with the limitations of this Plan. Award Agreements evidencing Incentive Stock
Options shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 422 of the Code.

                  Section 13.2 Forfeiture Events. The Committee may specify in
an Award Agreement at the time of the Award that the Participant's rights,
payments and benefits with respect to an Award shall be subject to reduction,
cancellation, forfeiture or recoupment upon the occurrence of certain specified
events, in addition to any otherwise applicable vesting or performance
conditions of an Award. Such events shall include, but shall not be limited to,
termination of employment for cause, violation of material Company policies,
breach of noncompetition, confidentiality or other restrictive covenants that
may apply to the Participant, or other conduct by the Participant that is
detrimental to the business or reputation of the Company.

                  Section 13.3 No Assignment or Transfer; Beneficiaries. Except
as provided in Section 6.5, Awards under the Plan shall not be assignable or
transferable, except by will or by the laws of descent and distribution, and
during the lifetime of a Participant, an Award shall be exercised only by such
Participant or by his or her guardian or legal representative. Notwithstanding
the foregoing, the Committee may provide in the terms of an Award Agreement that
the Participant shall have the right to designate a beneficiary or beneficiaries
who shall be

                                       13
<PAGE>
entitled to any rights, payments or other benefits specified under an Award
following the Participant's death.

                  Section 13.4 Deferrals of Payment. The Committee may permit a
Participant to defer the receipt of payment of cash or delivery of shares of
Common Stock that would otherwise be due to the Participant by virtue of the
exercise of a right or the satisfaction of vesting or other conditions with
respect to an Award. If any such deferral is to be permitted by the Committee,
the Committee shall establish the rules and procedures relating to such
deferral, including, without limitation, the period of time in advance of
payment when an election to defer may be made, the time period of the deferral
and the events that would result in payment of the deferred amount, the interest
or other earnings attributable to the deferral and the method of funding, if
any, attributable to the deferred amount.

                  Section 13.5 Rights as Stockholder. A Participant shall have
no rights as a holder of shares of Common Stock with respect to any unissued
securities covered by an Award until the date the Participant becomes the holder
of record of such securities. Except as provided in Section 4.2, no adjustment
or other provision shall be made for dividends or other stockholder rights,
except to the extent that the Award Agreement provides for dividend payments or
dividend equivalent rights.

                  Section 13.6 Employment or Service. Nothing in the Plan, in
the grant of any Award or in any Award Agreement shall confer upon any Eligible
Person the right to continue in the capacity in which he is employed by, or
otherwise serves, the Company or any Subsidiary.

                  Section 13.7 Securities Laws. No shares of Common Stock will
be issued or transferred pursuant to an Award unless and until all then
applicable requirements imposed by Federal and state securities and other laws,
rules and regulations and by any regulatory agencies having jurisdiction, and by
any exchanges upon which the shares of Common Stock may be listed, have been
fully met. As a condition precedent to the issuance of shares pursuant to the
grant or exercise of an Award, the Company may require the Participant to take
any reasonable action to meet such requirements. The Committee may impose such
conditions on any shares of Common Stock issuable under the Plan as it may deem
advisable, including, without limitation, restrictions under the Securities Act
of 1933, as amended, under the requirements of any exchange upon which such
shares of the same class are then listed, and under any blue sky or other
securities laws applicable to such shares.

                  Section 13.8 Tax Withholding. The Participant shall be
responsible for payment of any taxes or similar charges required by law to be
withheld from an Award or an amount paid in satisfaction of an Award, which
shall be paid by the Participant on or prior to the payment or other event that
results in taxable income in respect of an Award. The Award Agreement shall
specify the manner in which the withholding obligation shall be satisfied with
respect to the particular type of Award.

                  Section 13.9 Unfunded Plan. The adoption of this Plan and any
setting aside of cash amounts or shares of Common Stock by the Company with
which to discharge its obligations hereunder shall not be deemed to create a
trust or other funded arrangement. The benefits provided under this Plan shall
be a general, unsecured obligation of the Company

                                       14
<PAGE>
payable solely from the general assets of the Company, and neither a Participant
nor the Participant's permitted transferees or estate shall have any interest in
any assets of the Company by virtue of this Plan, except as a general unsecured
creditor of the Company. Notwithstanding the foregoing, the Company shall have
the right to implement or set aside funds in a grantor trust, subject to the
claims of the Company's creditors, to discharge its obligations under the Plan.

                  Section 13.10 Other Compensation and Benefit Plans. The
adoption of the Plan shall not affect any other share incentive or other
compensation plans in effect for the Company or any Subsidiary, nor shall the
Plan preclude the Company from establishing any other forms of share incentive
or other compensation for employees of the Company or any Subsidiary. The amount
of any compensation deemed to be received by a Participant pursuant to an Award
shall not constitute compensation with respect to which any other employee
benefits of such Participant are determined, including, without limitation,
benefits under any bonus, pension, profit sharing, life insurance or salary
continuation plan, except as otherwise specifically provided by the terms of any
such plan.

                  Section 13.11 Plan Binding on Transferees. The Plan shall be
binding upon the Company, its transferees and assigns, and the Participant, his
or her executor, administrator and permitted transferees and beneficiaries.

                  Section 13.12 Construction and Interpretation. Whenever used
herein, nouns in the singular shall include the plural, and the masculine
pronoun shall include the feminine gender. Headings of Sections hereof are
inserted for convenience and reference and constitute no part of the Plan.

                  Section 13.13 Severability. If any provision of the Plan or
any Award Agreement shall be determined to be illegal or unenforceable by any
court of law in any jurisdiction, the remaining provisions hereof and thereof
shall be severable and enforceable in accordance with their terms, and all
provisions shall remain enforceable in any other jurisdiction.

                  Section 13.14 Foreign Jurisdictions. The Committee may adopt,
amend and terminate such arrangements and grant such Awards, not inconsistent
with the intent of the Plan, as it may deem necessary or desirable to comply
with any tax, securities, regulatory or other laws of other jurisdictions with
respect to Awards that may be subject to such laws. The terms and conditions of
such Awards may vary from the terms and conditions that would otherwise be
required by the Plan solely to the extent the Committee deems necessary for such
purpose.

                  Section 13.15 Governing Law. The Plan and all rights hereunder
shall be subject to and interpreted in accordance with the laws of the State of
New Jersey, without reference to the principles of conflicts of laws, and to
applicable Federal securities laws.

14.      EFFECTIVE DATE, AMENDMENT AND TERMINATION

                  Section 14.1 Effective Date. The Plan shall become effective
upon the effective date of the Company's initial public offering, following
adoption of the Plan by the Board and approval of the Plan by the Company's
stockholders. The term of the Plan shall be 10 years from the date of such
adoption by the Board, subject to Section 14.3 hereof.

                                       15
<PAGE>
                  Section 14.2 Amendment. The Board may at any time and from
time to time and in any respect, amend or modify the Plan; provided, however,
that the Board may seek the approval of any amendment or modification by the
Company's stockholders to the extent it deems necessary or advisable in its sole
discretion for purposes of compliance with Section 162(m) or Section 422 of the
Code, the listing requirements of the Nasdaq Stock Market or other exchange or
securities market or for any other purpose. No amendment or modification of the
Plan shall adversely affect any Award theretofore granted without the consent of
the Participant or the permitted transferee of the Award.

                  Section 14.3 Termination. The Plan shall terminate on the date
immediately preceding the tenth anniversary of the date it becomes effective in
accordance with Section 14.1 hereof. The Board may, in its sole discretion and
at any earlier date, terminate the Plan. Notwithstanding the foregoing, no
termination of the Plan shall adversely affect any Award theretofore granted
without the consent of the Participant or the permitted transferee of the Award.

                                          NATIONAL ATLANTIC HOLDINGS CORPORATION

                                       16<PAGE>
                     NATIONAL ATLANTIC HOLDINGS CORPORATION

                                ANNUAL BONUS PLAN

SECTION 1.   PURPOSE

         The purpose of this National Atlantic Holdings Corporation Annual Bonus
Plan is to promote the interests of the Company and its shareholders by
motivating superior performance by executive officers and other key personnel
with annual bonus opportunities based upon corporate and individual performance.

SECTION 2.   DEFINITIONS

         The following capitalized words as used herein shall have the following
meanings:

         (a) "Award" means an award granted to a Participant under the Plan
subject to such terms and conditions as the Plan Administrator may establish
under the terms of the Plan.

         (b) "Board" means the Board of Directors of the Company.

         (c) "Change in Control" shall have the meaning set forth in the
Company's 2004 Stock and Incentive Plan, as in effect on the relevant date of
determination.

         (d) "Company" means National Atlantic Holdings Corporation and its
subsidiaries.

         (e) "Participant" means an employee of the Company who has been granted
an Award under the Plan.

         (f) "Performance Criteria" shall have the meaning set forth in Section
5(b) hereof.

         (g) "Performance Goals" shall have the meaning set forth in Section
5(c) hereof.

         (h) "Plan" means this National Atlantic Holdings Corporation Annual
Bonus Plan, as it may be amended and restated from time to time.

         (i) "Plan Administrator" means (i) the Compensation Committee of the
Board, or such other committee of the Board that the Board shall designate from
time to time to administer the Plan with respect to Awards to executive officers
and (ii) the Chief Executive Officer with respect to Awards to all other
employees.

         (j) "Plan Year" means each calendar year in which the Plan shall be in
effect.

                                       1
<PAGE>
SECTION 3.   PLAN ADMINISTRATION

         (a) General. The Plan shall be administered by the Plan Administrator.
The Plan Administrator shall have such powers and authority as may be necessary
or appropriate for the Plan Administrator to carry out its functions as
described in the Plan. No member of the Plan Administrator shall be liable for
any action or determination made in good faith by the Plan Administrator with
respect to the Plan or any Award hereunder. The Plan Administrator may delegate,
to any appropriate officer or employee of the Company, responsibility for
performing certain ministerial functions under this Plan.

         (b) Discretionary Authority. Subject to the express limitations of the
Plan, the Plan Administrator shall have authority in its discretion to determine
the time or times at which Awards may be granted, the recipients of Awards, the
Performance Criteria, the Performance Goals and all other terms of an Award. The
Plan Administrator shall also have discretionary authority to interpret the
Plan, to make all factual determinations under the Plan, and to make all other
determinations necessary or advisable for the administration of the Plan. The
Plan Administrator may prescribe, amend, and rescind rules and regulations
relating to the Plan. All interpretations, determinations, and actions by the
Plan Administrator shall be final, conclusive, and binding upon all parties.

SECTION 4.   ELIGIBILITY AND PARTICIPATION

         Employees of the Company who hold a position as an executive officer of
the Company shall be eligible to participate in the Plan for a Plan Year on such
basis and on such terms and conditions as determined by the Compensation
Committee of the Board. In addition, any other employees of the Company
designated by the Chief Executive Officer of the Company to receive an Award for
a Plan Year shall become a Participant in the Plan with respect to a Plan Year.

SECTION 5.   AWARDS

         (a) Amount of Awards. The Plan Administrator will determine in its
discretion the amount of an Award, the Performance Criteria, the applicable
Performance Goals relating to the Performance Criteria, and the amount and terms
of payment to be made upon achievement of the Performance Goals for each Plan
Year.

         (b) Performance Criteria. For purposes of Awards granted under the
Plan, the "Performance Criteria" for a given Plan Year shall be one or any
combination of the following, for the Company or any identified subsidiary or
business unit, as may be selected by the Plan Administrator in its sole
discretion at the time of an Award: net income, earnings per share, operating
income, earnings before interest, taxes, depreciation and amortization, loss
ratio, combined ratio, book value per share, return on equity, stock price
performance, cash flow, underwriting gain or loss, individual or group
performance levels, or such other Performance Criteria determined to be
appropriate by the Plan Administrator in its sole discretion.

                                       2
<PAGE>
         (c) Performance Goals. For purposes of Awards granted under the Plan,
the "Performance Goals" for a given Plan Year shall be the levels of achievement
relating to the Performance Criteria as may be selected by the Plan
Administrator for the Award. The Plan Administrator may establish such
Performance Goals relative to the applicable Performance Criteria as it
determines in its sole discretion at the time of an Award. The Performance Goals
may be applied on an absolute basis or relative to an identified index or peer
group, as specified by the Plan Administrator. The Performance Goals may be
applied by the Plan Administrator after excluding charges for restructurings,
discontinued operations, extraordinary items and other unusual or non-recurring
items, and the cumulative effects of accounting changes, and without regard to
realized capital gains.

         (d) Payment of Awards. The payment of awards under the Plan shall be
made at such time or times as determined by the Plan Administrator in its sole
discretion. The Plan Administrator may also authorize the elective deferral of
Awards under a deferred compensation program if such program is adopted by the
Company and in effect at the time the deferral is to take effect.

         (e) Form of Payment. Awards under the Plan shall generally be made in
cash. The Plan Administrator may, in its discretion, provide that a Participant
receive all or a portion of an Award in stock units or other equity-based
compensation to be granted under the Company's 2004 Stock and Incentive Plan.

         (f) Tax Withholding. Any payment under this Plan shall be subject to
applicable income and employment taxes and any other amounts that the Company is
required by law to deduct and withhold from such payment.

SECTION 6.   TERMINATION OF EMPLOYMENT

         (a) General Rule. Subject to the provisions of Section 6(b) hereof, the
obligation of the Company to satisfy payment of an Award to a Participant
hereunder is conditioned upon the continued employment of the Participant with
the Company at the time determined by the Plan Administrator for payment of an
Award. If the employment of a Participant with the Company is terminated for any
reason, at any time prior to the time determined by the Plan Administrator for
payment of an Award hereunder, the Award shall be forfeited and automatically be
cancelled without further action of the Company, unless otherwise provided by
the Plan Administrator.

         (b) Exceptions. The Plan Administrator may, in its discretion, provide
for the payment of an Award in the event a Participant's employment with the
Company is terminated for any reason including, but not limited to, a
termination by the Company without cause or as a result of the Participant's
death or disability. Such payment may be made on a pro-rated or accelerated
basis as determined by the Plan Administrator in its sole discretion.

                                       3
<PAGE>
SECTION 7.   CHANGE IN CONTROL

         In the event of a Change in Control of the Company, each Participant
shall receive a prorated Award based on the period of service and the
performance levels achieved by the Company through the date of the Change in
Control, as determined by the Plan Administrator prior to the Change in Control
in its sole discretion.

SECTION 8.   GENERAL PROVISIONS

         (a) Effective Date. The Plan shall be effective with respect to Plan
Years beginning on or after January 1, 2005.

         (b) Amendment and Termination. The Company may, from time to time, by
action of the Board, amend, suspend or terminate any or all of the provisions of
the Plan with respect to the then current Plan Year and any future Plan Year,
without the requirement of obtaining the consent of the affected Participants.

         (c) No Right to Employment. Nothing in the Plan shall be deemed to give
any Participant the right to remain employed by the Company or to limit, in any
way, the right of the Company to terminate, or to change the terms of, a
Participant's employment at any time.

         (d) No Presumption of Bonus Awards. Neither the adoption of the Plan by
the Board nor any of the terms of the Plan shall be deemed to create any rights
of a Participant to the grant of an Award hereunder, nor to obligate the Company
to grant any Awards under the Plan for any Plan Year.

         (e) Governing Law. The Plan shall be governed by and construed in
accordance with the laws of New Jersey, without regard to the choice-of-law
rules thereof.

                                          NATIONAL ATLANTIC HOLDINGS CORPORATION

                                       4

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