Exhibit 10.2
AMENDED AND
RESTATED
EMPLOYMENT
AGREEMENT
EMPLOYMENT AGREEMENT
(hereinafter the “ Agreement ”) amended and
restated effective November 11, 2008 by and among RAM HOLDINGS
LTD., a Bermuda exempted company (“ Holding ”),
RAM REINSURANCE COMPANY LTD., a Bermuda company (the “
Company ”), and EDWARD U. GILPIN (the “
Executive ”).
WHEREAS, Holding, the Company
and the Executive (collectively referred to as the “
Parties ”) previously entered into an Employment
Agreement dated January 28, 2008 (“ Prior Agreement
”); and
WHEREAS, the Parties wish to
amend and restate the Prior Agreement on the terms and conditions
hereinafter set forth, to comply with the requirements of Section
409A of the Internal Revenue Code of 1986, as amended;
and
WHEREAS, the Parties agree
that, except as otherwise specified herein, the terms of the
Agreement contained herein shall constitute the terms of the
employment relationship between the Parties; and
WHEREAS, the Company and the
Executive each hereby acknowledge that a valid work permit for the
Executive has been obtained from the Bermuda Department of
Immigration permitting him to perform his obligations
herein;
NOW, THEREFORE, in
consideration of the premises and mutual covenants contained herein
and for other good and valuable consideration, the receipt and
adequacy of which are mutually acknowledged, Holding, the Company
and the Executive agree as follows:
Section 1.
Definitions
. For purposes of
this Agreement, the following terms shall have the following
meanings:
(a)
“ Base
Salary ” means the salary provided for in Section 4 or
any increased salary granted to the Executive pursuant to Section
4.
(b)
“
Boards ” means the Boards of Directors of Holding and
the Company.
(c)
“
Cause ” means (i) the Executive’s commission of
any felony; (ii) the Executive’s gross negligence, willful
malfeasance or gross misconduct in connection with his employment
hereunder; (iii) a substantial and continual refusal by the
Executive in breach of this Agreement to perform the duties,
responsibilities or obligations assigned to the Executive pursuant
to the terms hereof; (iv) the Executive’s failure to fully
cooperate with a regulatory investigation involving Holding, the
Company or any of its Subsidiaries or affiliates; or (v) any one or
more acts by the Executive of dishonesty, theft, larceny,
embezzlement or fraud from or with respect to Holding, the Company
or any Subsidiary. By way of example, termination from employment
necessitated by the Executive’s inability to maintain a valid
work permit from the applicable Bermuda governmental authorities
after the Executive has used his best efforts to maintain such
permit or in connection with a Change in Control does not
constitute termination for Cause. Notwithstanding the foregoing, a
termination shall not be treated as a termination for Cause unless
Holding or the Company shall have delivered a written notice to the
Executive within thirty (30) days of the actual knowledge of the
Chief Executive Officer of either Holding or the Company of the
occurrence of one or more of such events that may give rise to a
termination of employment for Cause and, for an event described in
item (iii) above, if capable of being cured, shall not have been
cured
by the Executive within thirty
(30) days of the receipt of such notice and, for an event described
in item (iv) above, shall not have been cured by the Executive
immediately after receipt of such notice. If Holding or the Company
has provided the notice described in the preceding sentence to the
Executive on at least two separate occasions which involved
substantially similar behavior, Holding or the Company may
immediately terminate the Executive’s employment for Cause
upon the occurrence of a third similar event without regard to the
notice and cure period described in the preceding
sentence.
(d)
“ Change
in Control ” means (i) the acquisition by any person,
entity or “group” (as defined in Section 13(d) of the
Securities Exchange Act of 1934, as amended), other than by The PMI
Group, Inc., of fifty percent (50%) or more of the combined voting
power of the then outstanding voting securities of Holding or the
Company; (ii) the merger, amalgamation, reorganization, or
consolidation of, or share exchange involving Holding or the
Company, as a result of which the shareholders of Holding or the
Company immediately before such transaction do not, immediately
thereafter, own, directly or indirectly, more than fifty percent
(50%) of the combined voting power entitled to vote generally in
the election of directors of the merged or consolidated company;
(iii) a sale of all or substantially all of Holding’s or the
Company’s assets; and (iv) approval by Holding or the Company
of the liquidation or dissolution of Holding or the Company, other
than a liquidation of the Company into Holding.
(e)
“
Code ” means the Internal Revenue Code of 1986, as
amended.
(f)
“ Cost
of Living Allowance ” means the amount paid to the
Executive under Section 7(e).
(g)
“
Disability ” means the Executive’s inability to
substantially fulfill the positions, duties, responsibilities and
obligations set forth in this Agreement because of physical, mental
or emotional incapacity that entitles the Executive to long-term
disability benefits under the Company’s disability plan or
policy.
(h)
“
Effective Date ” January 28, 2008.
(i)
“ Equity
Plan ” means the RAM Holdings Ltd. 2006 Equity Plan, as
may be amended from time to time, or any successor plan.
(j)
“ Good
Reason ” means a termination of the Executive’s
employment by the Executive for one or more of the following
reasons: (i) a reduction in the Executive’s Base Salary, Cost
of Living Allowance or the target bonus opportunity described in
Section 5, (ii) Holding’s or the Company’s removal of
the Executive from his position as Chief Financial Officer of
Holding and the Company, (iii) a material breach of this Agreement
by Holding or the Company, (iv) a material diminution in the
Executive’s duties or the assignment to the Executive of
duties that are not materially consistent with those customarily
assigned to the Chief Financial Officer of a company of the size
and nature of Holding or the Company or which do, or would be
reasonably expected to, materially impair his ability to function
as the Chief Financial Officer of Holding and the Company, (v) a
relocation of the corporate headquarters away from Bermuda, (vi)
the refusal of a purchaser of all or substantially all of the
assets of Holding or the Company to continue the Executive’s
employment with substantially the same position, title and
responsibilities and at least the same compensation as described
herein, or (vii) the Executive’s inability to maintain a
valid work permit from the applicable Bermuda governmental
authorities after the Executive has used his best efforts to
maintain such permit. Notwithstanding the foregoing, a termination
shall not be treated as a termination for Good Reason (i) if the
Executive shall have consented in writing to the occurrence of the
event giving rise to the claim of termination for Good Reason, or
(ii) unless the Executive shall have delivered a written notice to
the Holdings Board within ninety (90) days of his having actual
knowledge of the occurrence of one or more of such events stating
that he intends to
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terminate his employment for
Good Reason and specifying the factual basis for such termination,
and such event, if capable of being cured, shall not have been
cured by Holding or the Company within thirty (30) days of the
receipt of such notice.
(k) “
Holding Board ” means the Board of Directors of
Holding.
(l) “
Party ” or “ Parties ” means
Holding, the Company and/or the Executive.
(m) “
Person ” means any individual, corporation,
partnership, limited liability company, joint venture, trust,
estate, board, committee, agency, body, employee benefit plan or
other person or entity.
(n) “
Proceeding ” means any threatened or actual action,
suit or proceeding, whether civil, criminal, administrative,
investigative, appellate or other.
(o) “
Standard Benefit ” means any amounts earned, accrued
or owing to the Executive but not yet paid, and receipt of other
benefits, if any, in accordance with applicable plans and programs
of Holding, the Company or a Subsidiary, provided ,
however , that in no event shall the Standard Benefit be
deemed to include any bonus payments.
(p) “
Subsidiary ” means, with respect to Holding, any
corporation, partnership, limited liability company or other entity
of which (a) if a corporation, fifty percent (50%) or more of the
total voting power of shares of stock entitled (without regard to
the occurrence of any contingency) to vote in the election of
directors thereof is at the time owned or controlled, directly or
indirectly, by Holding, or one or more of the other Subsidiaries of
Holding, or a combination thereof, or (b) if a partnership, limited
liability company or other entity, fifty percent (50%) or more of
the partnership, membership or other similar equity ownership
interest thereof is at the time owned or controlled, directly or
indirectly, by Holding, or one or more of the other Subsidiaries of
Holding, or a combination thereof. For purposes hereof, Holding and
their Subsidiaries will be deemed to have fifty percent (50%) or
more ownership interest in a partnership, limited liability company
or business entity if Holding and/or a Subsidiary is/are allocated
fifty percent (50%) or more of partnership, limited liability
company or other entity gains or losses or control(s) the general
partner, managing member or similar managing body of such
partnership, limited liability company or other entity.
(q) “
Term of Employment ” means the period specified in
Section 2.
Section 2. Term
of Employment . (a) Holding and the Company agree to continue
to employ the Executive under this Agreement, and the Executive
accepts such employment, for the period commencing on the Effective
Date and ending on January 28, 2010 (the “ Expiration
Date ”). Notwithstanding the foregoing, the Term of
Employment shall be earlier terminated upon the termination of the
Executive’s employment, but only in strict accordance with
the provisions of Section 9.
(b) The Term of
Employment shall be extended automatically for one additional year
beginning on the Expiration Date (the “ Extension Date
”) unless and until, not later than six (6) months prior to
the Extension Date either Holding or the Company, on the one hand,
or the Executive, on the other hand, gives written notice to the
other Party that the Term of Employment shall not be so extended. A
termination of the Executive’s employment that results from
the expiration of the Term of Employment shall not be treated as a
termination of employment for any purposes under this Agreement
except as specifically noted herein.
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Section 3.
Positions;
Duties; Responsibilities; and Place of Employment
. (a) During the
Term of Employment, the Executive shall be employed as Chief
Financial Officer of Holding and the Company and shall be employed
in such other position or positions with Holding and the Company as
the Holding Board shall from time to time specify. The Executive,
in carrying out his executive duties under this Agreement, shall
report to the President and Chief Executive Officer of Holding and
the Company. While employed by Holding and the Company hereunder,
the Executive shall perform his duties at the Company’s
offices in Bermuda and shall be resident in Bermuda;
provided , however , that the Executive shall be
required to travel as reasonably necessary in carrying out his
duties and obligations hereunder. The Executive is required to work
the hours and days necessary to fulfill his executive duties under
this Agreement.
(b) Notwithstanding anything
herein to the contrary, nothing shall preclude the Executive from
(i) serving on the boards of directors of a reasonable number of
other corporations, subject to prior approval by the Holding Board
(which shall not be unreasonably withheld), or the boards of a
reasonable number of trade associations and/or charitable
organizations, (ii) engaging in charitable activities and community
affairs, including political activities, and (iii) managing his
personal investments and affairs, provided that such
activities do not materially interfere with the proper performance
of his duties and responsibilities as the Chief Financial Officer
or violate Section 13 of this Agreement.
Section 4.
Base
Salary . Commencing as of the
Effective Date, the Company shall pay the Executive an annualized
Base Salary of $350,000 during the Term of Employment. Such Base
Salary shall be payable at intervals in accordance with the regular
payroll practices of the Company applicable to executives, but no
less frequently than monthly. The Holding Board shall review the
Base Salary no less frequently than annually during the Term of
Employment; provided , however , that the Base Salary
shall not be decreased during the Term of Employment below the
amount set forth above without the Executive’s consent
(including, without limitation, for the purpose of determining
benefits due under Section 9). The Executive is a professional or
managerial employee whose Base Salary has been calculated to
reflect the fact that his regular duties are likely to require him
to work on occasion more than forty (40) hours a week. Accordingly,
no overtime shall be payable.
Section 5.
Annual
Incentive Awards . The Executive shall be
eligible for a combined annual incentive bonus award from Holding
and the Company in respect of each calendar year during the Term of
Employment. The Executive’s target annual incentive bonus
amount for each such year shall be an amount equal to 110% of his
annualized Base Salary for such year (the “ Target
Amount ”). The Executive’s actual annual incentive
bonus amount for each such year may be less than or greater than
the Target Amount depending upon the degree of attainment of
criteria, which shall be established by the Boards (or committees
of the Boards) in advance of each such year. The Boards (or
committees of the Boards) shall determine following the end of each
such year whether the criteria for such year have been attained.
The Company shall pay the Executive his annual incentive award
payment in respect of any year at the same time as bonuses are paid
to other executive officers of the Company, but in no event later
than March 15th of the calendar year following the calendar year
for which the bonus is payable. Notwithstanding the foregoing, with
respect to the annual incentive bonus award for 2008 payable by
March 15, 2009, the Company shall pay to Executive at least the
Target Amount of $385,000. The Target Amount shall be payable 75%
in cash and 25% in Restricted Share Units in accordance with
Holding’s Key Executive Bonus Policy, subject to the
amendment of that policy from time to time in the discretion of the
Compensation Committee.
Section 6.
Long Term
Incentive Plan; Share Option Award . During the Term of
Employment, the Executive shall participate in the Equity Plan. In
connection with the commencement of the Executive’s
employment, Executive shall receive a one time award consisting of
the following:
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(a)
A one-time grant
of 15,000 Restricted Share Units and 50,000 Share Options under the
Equity Plan on the start date of Executive’s employment, each
vesting over four years in equal annual installments and otherwise
on the terms set forth in Holding’s form of Restricted Share
Unit Award and Form of Share Option Award for executive officers,
subject to approval of the Board of Directors of
Holding;
(b)
A one time
payment of $75,000 on the start date of Executive’s
employment (the “ Start Date Cash Award ”);
and
(c)
On or prior to
March 31, 2009, a one-time grant of Share Options under the Equity
Plan, subject to approval of the Board of Directors of Holding,
with a value of up to $130,000 (the “ Additional Award
”). The value of any portion of the Additional Award granted
as Share Options shall be determined as of the applicable date of
grant based on the Black-Scholes method applied on a basis
consistent with Holding’s financial statements. The balance
of the Additional Award, if any, not granted as Share Options on or
prior to March 31, 2009 shall be paid in cash (the “
Additional Cash Award ”).
The Start Date Cash Award
shall be subject to forfeiture and shall be repaid by the Executive
if the Executive voluntarily terminates his employment in
accordance with Section 9(e) hereof as follows: $75,000 if such
termination occurs prior to January 28, 2009 and $37,500 if such
termination occurs after January 28, 2009 but prior to January 28,
2010. The Additional Cash Award, if any, shall be subject to
forfeiture and shall be repaid by the Executive in full if the
Executive voluntarily terminates his employment in accordance with
Section 9(e) hereof prior to March 31, 2010. Subject to the terms
of the Equity Plan and any applicable equity award agreement, the
number of shares subject to the option or other equity award and
the exercise price per share may be adjusted in the event of a
stock split, reverse stock split, reorganization, recapitalization,
or other similar event described in the Equity Plan and/or any
applicable equity award agreement. The Executive shall be eligible
for other or additional long-term incentives in the discretion of
the Holding Board (or a committee of the Holding Board). Such other
or additional incentive award(s) shall be on a level, and on terms
and conditions, that are commensurate with his positions and
responsibilities at Holding and the Company and are appropriate in
light of corresponding incentive awards to other executives of
Holding and the Company.
Section 7.
Other
Benefits .
(a)
Employee
Benefits . During the Term of
Employment, the Executive shall be eligible to participate in all
employee benefit plans, programs and arrangements made available
generally to Holding’s and the Company’s executives in
accordance with the terms and subject to the conditions of such
plans, programs and arrangements, including, without limitation,
share option, profit-sharing, savings (qualified and non-qualified)
and other defined contribution retirement plans or programs,
medical, dental, hospitalization, vision, short-term and long-term
disability and life insurance plans or programs, accidental death
and dismemberment protection, travel accident insurance and any
other employee welfare benefit plans or programs that may, from
time to time, be sponsored by Holding, the Company or by a
Subsidiary for the benefit of the Holding’s or the
Company’s employees, including any plans or programs that
supplement the above-listed types of plans or programs, whether
funded or unfunded; provided , however , that nothing
in this Agreement shall be construed to require Holding, the
Company or a Subsidiary to establish or maintain any such plans,
programs or arrangements, or to prevent Holding, the Company or a
Subsidiary from terminating any such plan, program or arrangement
in accordance with its terms, except as required by Bermuda
law.
(b)
Perquisites
. During the Term
of Employment, the Executive shall participate in all fringe
benefits and perquisites available to executives of Holding and the
Company at levels and on terms and conditions that are commensurate
with his position and responsibilities at Holding and
the
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Company. The Executive shall
also receive such additional fringe benefits and perquisites as
Holding and the Company may, in their discretion, from time to time
elect to provide.
(c)
Vacation,
Holidays, and Leave . During the Term of
Employment, the Executive shall be entitled to vacation, holidays,
and leave in accordance with the reasonable practices of Holding
and the Company and as required by Bermuda law.
(d)
Annual
Travel . Each year during the Term
of Employment, the Executive, his spouse and children shall each be
provided one round-trip ticket between Bermuda and the east coast
of the U.S., such tickets to be paid for by the Company and used by
the Executive, his spouse and children.
(e)
Cost of Living
Allowance . During the Term of
Employment, the Company shall pay the Executive a monthly cost of
living allowance of $14,000.
(f)
Tax
Treatment . In the event that, during
the Term of Employment, there is an amendment to the Code governing
the taxation of income earned by, and/or cost of living/housing
allowances paid to, a United States citizen resident in Bermuda
that results in both the inclusion in the Executive’s income
subject to U.S. taxation of amounts paid by the Company and not
previously subject to such taxation and a decrease in the combined
net after-tax Base Salary and Cost of Living Allowance of the
Executive, the Company shall increase the amount payable hereunder
to the Executive as Base Salary and/or Cost of Living Allowance, as
applicable, by an amount such that, with such increase, the
combined net after-tax Base Salary and Cost of Living Allowance
payable hereunder equals the Executive’s combined net
after-tax Base Salary and Cost of Living Allowance payable
hereunder immediately prior to the effective date of any such
amendment to the Code.
Section 8.
Reimbursement
of Bus
