Employee Benefits & Compensation Matters Agreement

EXHIBIT 10.25


EXECUTION COPY


FORM OF EMPLOYEE BENEFITS AND COMPENSATION


MATTERS AGREEMENT


AGREEMENT, dated as of November 1, 2002 (the "Agreement"), by and between The St. Paul Companies, Inc. ("St. Paul"), a Minnesota corporation, and Platinum Underwriters Reinsurance, Inc. ("Platinum US").


WHEREAS, St. Paul intends, contingent upon the closing of an initial public offering (the "Public Offering") of the Company's common shares, par value $0.01 per share and the transactions contemplated in the Formation and Separation Agreement between St. Paul and Company (the "Formation Agreement"), to transfer to Company the majority of its St. Paul Re division's reinsurance business; and


WHEREAS, St. Paul and Platinum US wish to provide for the allocation of assets and liabilities and certain other matters with respect to employee benefit plans, executive compensation plans and certain other employee plans and arrangements in connection with the Public Offering.


NOW, THEREFORE, in consideration of the covenants and agreements set forth herein, the parties hereto hereby agree as follows:


ARTICLE I


DEFINITIONS


Unless otherwise defined in this Agreement, capitalized terms shall have the meaning as defined in the Formation Agreement. As used in this Agreement, the following terms shall have the following meanings:


1.1 "Affiliate" of any person or entity means any corporation, partnership, proprietorship or business entity which, directly or indirectly, owns or controls, is under common ownership or control with, or is owned or controlled by, such person or entity.


1.2 "Business Employee" means each employee of St. Paul Re, Inc. and any other employee or independent contractor of St. Paul or its Affiliates who is dedicated to the conduct of the Business, but excluding any employees or independent contractors based in the United Kingdom.


1.3 "Closing" shall be as defined in the Formation Agreement.


1.4 "Closing Date" shall be as defined in the Formation Agreement.


1.5 "Code" means the Internal Revenue Code of 1986, as amended.


1.6 "Company" means Platinum Underwriters Holdings, Ltd.


1.7 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended.


1.8 "Existing Retention Obligations" means those retention obligations of St. Paul that have arisen from letter agreements between St. Paul Companies, Inc. and Platinum US Transfer Employees listed on Schedule 1.8.


1.9 "Prorated Retention Obligations" means those retention obligations of St. Paul and Platinum US that have arisen from letter agreements between Platinum US and Platinum US Transfer Employees listed on Schedule 1.9 and that shall be prorated between St. Paul and Platinum US in accordance with Section 6.7(b).


1.10 "Public Offering Date" means the date of the closing of the Public Offering.


1.11 "St. Paul Cash Balance Plan" means the portion of the St. Paul Pension Plan that provides for benefit accrual based on the cash balance formula.


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1.12 "St. Paul Employee" means each employee of St. Paul or any of its Affiliates, including but not limited to the Business Employees.


1.13 "St. Paul Enhanced Severance Program" means the St. Paul Companies, Inc. Enhanced Severance Program.


1.14 "St. Paul Executive Retirement Plan" means the portion of the St. Paul SERP that provides benefits which would have been provided under the St. Paul Pension Plan if not for limitations imposed by the Code.


1.15 "St. Paul Executive Savings Plan" means the portion of the St. Paul SERP that provides benefits which would have been provided under the St. Paul 401(k) Plan and the St. Paul Stock Ownership Plan if not for limitations imposed by the Code.


1.16 "St. Paul 401(k) Plan" means the St. Paul Companies, Inc. Savings Plus Plan.


1.17 "St. Paul Global Stock Option Plan" means the St. Paul Companies Inc. Global Stock Option Plan.


1.18 "St. Paul Pension Plan" means the St. Paul Companies, Inc. Employees' Retirement Plan.


1.19 "St. Paul Restricted Shares" means restricted stock granted under the St. Paul Stock Incentive Plan.


1.20 "St. Paul Retiree Health Plan" means the St. Paul Companies, Inc. Retiree Health Plan.


1.21 "St. Paul SERP" means the St. Paul Companies, Inc. Benefit Equalization Plan, as amended.


1.22 "St. Paul Stock Incentive Plan" means the St. Paul Companies, Inc., Amended and Restated 1994 Stock Incentive Plan.


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1.23 "St. Paul Stock Ownership Plan" means the St. Paul Companies, Inc. Stock Ownership Plan.


1.24 "St. Paul Traditional Plan" means the means the portion of the St. Paul Pension Plan that provides for benefit accrual based on the original defined benefit formula provided under the St. Paul Pension Plan.


1.25 "St. Paul Stock Options" means stock options granted under the St. Paul Stock Incentive Plan and the St. Paul Global Stock Option Plan.


1.26 "Transfer Date" shall be defined in Article II hereof.


1.27 "Platinum US 401(k) Plan" shall have the meaning set forth in Section 3.1 hereof.


1.28 "Platinum US Transfer Employee" means each Business Employee who becomes an employee of Platinum US in accordance with Article II hereof.


ARTICLE II


EMPLOYMENT


St. Paul and Platinum US shall use their reasonable best efforts so that, effective on the day immediately following the Closing Date (the "Transfer Date"), the Business Employees listed on Schedule 2 become employees of Platinum US.


ARTICLE III


RETIREMENT PLANS


3.1 Platinum US 401(k) Plan.


(a) In General. As soon as practicable on or after the Transfer Date, Platinum US shall establish a defined contribution plan that includes a qualified cash or deferred arrangement within the meaning of Section 401(k) of the Code (the "Platinum US 401(k) Plan") for the benefit of the Platinum US Transfer Employees and shall take, or cause to be taken, all


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necessary and appropriate action to allow each eligible Platinum US Transfer Employee to participate in the Platinum US 401(k) Plan.


(b) Service Credit. The employment of each Platinum US Transfer Employee with St. Paul or any of its Affiliates shall be treated as employment with Platinum US for purposes of eligibility and vesting under the Platinum US 401(k) Plan to the extent such employees were credited with such employment under the St. Paul 401(k) Plan.


(c) Rollover. Provided that the parties are reasonably satisfied, consistent with the regulations under Section 401(a)(31) of the Code, that the other party's applicable plan meets the requirements for qualification under Section 401(a) of the Code, Platinum US shall cause the Platinum US 401(k) Plan to accept the rollover of "eligible rollover distributions" (as defined in Section 401(a)(31) of the Code) (including outstanding Platinum US Transfer Employee loans, but excluding distributions of St. Paul common stock) from the St. Paul 401(k) Plan and the St. Paul Stock Ownership Plan with respect to Platinum US Transfer Employees in accordance with Platinum US's rollover procedures. St. Paul shall have no liability with respect to the St. Paul 401(k) Plan or the St. Paul Stock Ownership Plan account balances of Platinum US Transfer Employees that are rolled over to the Platinum US 401(k) Plan, other than any liabilities that arise out of any act or omission of St. Paul or any of its Affiliates prior to the rollover.


3.2 St. Paul 401(k) Plan.


(a) In General. St. Paul has previously established the St. Paul 401(k) Plan and the St. Paul Stock Ownership Plan for the benefit of the St. Paul Employees.


(b) Matching Contributions. St. Paul shall contribute or credit (as applicable) to the St. Paul 401(k) Plan, the St. Paul Executive Savings Plan and St. Paul Stock


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Ownership Plan, for the account of each Platinum US Transfer Employee who is a participant in the St. Paul 401(k) Plan, the St. Paul Executive Savings Plan or the St. Paul Stock Ownership Plan immediately prior to the Transfer Date, employer matching contributions or credits (as applicable) under the St. Paul 401(k) Plan, the St. Paul Executive Savings Plan and the St. Paul Stock Ownership Plan through the Transfer Date based on such Platinum US Transfer Employee's contribution through the Transfer Date. St. Paul shall make such employer matching contributions and credits at the same time it makes such contributions and credits under the terms of the applicable plan or such earlier date as determined by St. Paul. St. Paul agrees that to the extent the terms of the St. Paul 401(k) Plan, the St. Paul Executive Savings Plan or St. Paul Stock Ownership Plan require a participant to be employed with St. Paul on the applicable matching contribution date, each Platinum US Transfer Employee shall be deemed to be in the employ of St. Paul as of such date. The account balances for matching contributions of all Platinum US Transfer Employees under the St. Paul 401(k) Plan, the St. Paul Executive Savings Plan and the St. Paul Stock Ownership Plan will fully vest upon the Transfer Date.


(c) Performance Shares. Performance Shares held for the account of each Platinum US Transfer Employee who is a participant in the St. Paul Stock Ownership Plan immediately prior to the Transfer Date will fully vest upon the Transfer Date. Platinum US Transfer Employees will not be eligible to receive Performance Share allocations under the St. Paul Stock Ownership Plan for 2002.


3.3 St. Paul Pension Plan.


(a) In General. St. Paul has previously established the St. Paul Pension Plan for the benefit of the St. Paul Employees.


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(b) Platinum US Transfer Employees' Accrued Benefits. Each Platinum US Transfer Employee who is a participant in the St. Paul Pension Plan as of the Transfer Date and who is (i) within two years of satisfying the minimum retirement eligibility requirements of the St. Paul Pension Plan (i.e. being 55 years of age and having 10 years of service or being 62 years of age with one year of service credit) or (ii) is at least 50 years old and has a minimum of 20 years of credited service under the St. Paul Pension Plan, shall receive additional age and service credit under the St. Paul Pension Plan for service provided to Platinum US and its Affiliates following the Transfer Date as if such service had been with St. Paul in an amount equal to only the amount of additional age and service credit each such Platinum US Transfer Employee needs to meet the minimum retirement eligibility requirements under the St. Paul Pension Plan. Provided that the parties are reasonably satisfied, consistent with the regulations under Section 401(a)(31) of the Code, that the other party's applicable plan meets the requirements for qualification under Section 401(a) of the Code, Platinum US shall cause the Platinum US 401(k) Plan to accept the rollover of "eligible rollover distributions" (as defined in Section 401(a)(31) of the Code), including amounts credited for retiree medical under the St. Paul Cash Balance Plan, from the St. Paul Pension Plan with respect to Platinum US Transfer Employees in accordance with Platinum US's rollover procedures.


3.4 St. Paul Retiree Health Plan. Each Platinum US Transfer Employee who is (i) within two years of satisfying the minimum eligibility requirements for retiree health or life insurance benefits in accordance of the terms of the St. Paul Retiree Health Plan, or (ii) is at least 50 years old and has a minimum of 20 years of credited service under the St. Retiree Health Plan shall receive additional age and service credit under the St. Paul Retiree Health Plan for service provided to Platinum US and its Affiliates following the Transfer Date as if such service had


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been with St. Paul in an amount equal to only the amount of additional age and service credit each such Platinum US Transfer Employee needs to meet the minimum eligibility requirements under the St. Paul Retiree Health Plan. Upon retirement from Platinum US and its Affiliates, each such Platinum US Transfer Employee who is eligible to receive retiree health and life insurance benefits under the St. Paul Retiree Health Plan shall receive such benefits, if any, in accordance with the terms of the St. Paul Retiree Health Plan as in effect for St. Paul Employees as of the date of such employee's retirement from Platinum US and its Affiliates. Nothing in this Section 3.4 shall limit the ability of St. Paul to amend, suspends or terminate the St. Paul Retiree Health Plan.


ARTICLE IV


SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS


4.1 St. Paul SERP.


(a) In General. St. Paul has previously established the St. Paul SERP for the benefit of certain employees of St. Paul.


(b) Additional Age and Service Credit. Each Platinum US Transfer Employee who is a participant in the St. Paul Executive Retirement Plan as of the Transfer Date and who is (i) within two years of satisfying the minimum retirement eligibility requirements of the St. Paul SERP or (ii) is at least 50 years old and has a minimum of 20 years of credited service under the St. Paul SERP shall receive additional age and service credit under the St. Paul Executive Retirement Plan for service provided to Platinum US and its Affiliates following the Transfer Date as if such service had been with St. Paul in an amount equal to only the amount of additional age and service credit each such Platinum US Transfer Employee needs to meet the minimum retirement eligibility requirements under the St. Paul Executive Retirement Plan.


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(c) Platinum US Transfer Employees' Vested Benefits. Each Platinum US Transfer Employee who is a participant in the St. Paul SERP as of the Transfer Date shall receive a payout of such employee's vested St. Paul SERP benefit in accordance with the terms of the St. Paul SERP.


ARTICLE V


ST. PAUL STOCK INCENTIVE PLAN AND ST. PAUL GLOBAL STOCK OPTION PLAN


5.1 Transfer of Employment. For purposes of the St. Paul Stock Incentive Plan and the St. Paul Global Stock Option Plan, transfer of a Platinum US Transfer Employee's employment from St. Paul to Platinum US shall constitute a termination of employment without Cause (as such term is defined in the relevant stock option plan) as of the Transfer Date.


5.2 Stock Options. All St. Paul Stock Options held by Platinum US Transfer Employees that are vested as of the Transfer Date will be exercisable in accordance with their terms and the relevant stock option plan. All St. Paul Stock Options held by Platinum US Transfer Employees that are unvested as of the Transfer Date will terminate as of such date; and each such Platinum US Transfer Employee will be entitled to receive, for each unvested St. Paul Stock Option that otherwise would have vested during the period from the Transfer Date through the second anniversary of the Transfer Date, a cash payment on each date such St. Paul Stock Option otherwise would have vested equal to (i) the number of shares subject to such employee's St. Paul Stock Options that otherwise would have vested on such vesting date, multiplied by (ii) the value per share of each such option, determined based on the excess of the closing price of the St. Paul common stock on the New York Stock Exchange on the Transfer Date, over the exercise price of the option, provided such Platinum US Transfer Employee is still employed by Platinum US or one of its Affiliates as of each such vesting date. The foregoing cash payments


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shall be made by Platinum US, and St. Paul shall reimburse Platinum US for the amounts of such payments within thirty (30) days following written notice from Platinum US.


5.3 Restricted Shares. The restrictions on all St. Paul Restricted Shares held by Platinum US Transfer Employees that otherwise would have lapsed during the period from the Transfer Date through the first anniversary of the Transfer Date, shall lapse immediately prior to the Transfer Date. Effective as of the Transfer Date, all St. Paul Restricted Shares held by Platinum US Transfer Employees shall terminate as of such date and shall be of no further force and effect.


ARTICLE VI


OTHER BENEFITS


6.1 Continuation of Coverage. Effective for the period from the Transfer Date through December 31, 2002 (the "Continuation Coverage Period"), each Platinum US Transfer Employee and each other employee of Platinum US hired after the Transfer Date, together with dependents thereof, shall continue to be covered by St. Paul's employee welfare and fringe benefit plans listed on Schedule 6.1 (collectively, "Welfare Plans") on the same basis as if their employment with Platinum US and its Affiliates was continued employment with St. Paul (including for purposes of co-payments and deductibles). Effective January 1, 2003, each Platinum US Transfer Employee, together with dependents thereof, shall cease to be covered by the Welfare Plans and shall be eligible to participate in Platinum US's employee welfare and fringe benefit plans, including but not limited to plans, programs, policies and arrangements which provide medical and dental coverage, life and accident insurance and disability coverage (collectively, " Platinum US Welfare Plans").


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6.2 Cost Allocation of Continuation Coverage. Platinum US shall be responsible for the costs of providing continuation coverage to eligible Platinum US Transfer Employees under the Welfare Plans during the Continuation Coverage Period (including, but not limited to the costs of providing such benefits and certain administrative costs) solely in accordance with the terms of a letter agree ...