This
EMPLOYMENT AGREEMENT is made and entered into as of this 27th day
of June 2008 by and between Darwin Professional Underwriters,
Inc., a Delaware corporation (the “ Company ”),
and John Sennott (“ Employee ”).
WHEREAS,
in connection with the transactions contemplated by the Merger
Agreement, the Company desires to employ Employee and to enter into
an agreement embodying the terms of such employment (this “
Agreement ”), and Employee desires to enter into this
Agreement and to accept such employment, subject to the terms and
provisions of this Agreement.
NOW,
THEREFORE, in consideration of the promises and mutual covenants
contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are mutually acknowledged, the
Company and Employee hereby agree as follows:
(a)
“ Accrued Obligations ” shall mean (i) all
accrued but unpaid Base Salary through the date of termination of
Employee’s employment; (ii) any unpaid or unreimbursed
expenses incurred in accordance with Company policy, including
amounts due under Section 7 hereof to the extent incurred
prior to termination of employment; (iii) any benefits
provided under the Company’s employee benefit plans upon a
termination of employment, in accordance with the terms therein,
including rights to equity in Holdings pursuant to any plan or
grant; and (iv) rights to indemnification by virtue of
Employee’s position as an employee.
(b)
“ Agreement ” shall have the meaning set forth
in the recitals hereto.
(c)
“ Annual Bonus ” shall have the meaning set
forth in Section 4(b) below.
(d)
“ Base Salary ” shall mean the salary provided
for in Section 4(a) or any increased salary granted to Employee
pursuant to Section 4(a) below.
(e)
“ Board ” shall mean the Board of Directors of
the Company.
(f)
“ Cause ” shall mean (i) Employee’s
willful failure (except where due to physical or mental
incapacity), willful neglect or willful refusal to substantially
perform his duties; (ii) any willful or intentional act of Employee
with regard to any member of the Company Group that has the effect
of injuring the reputation or business of any member of the Company
Group in a material manner; (iii) Employee’s conviction
of, or plea of guilty or nolo contendere to, the commission
of a criminal act that would constitute a felony in the United
States; (iv) the commission by Employee of an act of fraud,
embezzlement or material dishonesty against any member of the
Company Group (other than a good faith expense account dispute); or
(v) Employee’s breach of any material provision of this
Agreement.
(g)
“ Change in Control ” shall mean and be deemed
to occur if (i) any “person” (as such term is
defined in Section 3(a)(9) and as used in Sections 13(d) and
14(d) of the Exchange Act), excluding any member of the Company
Group, a trustee or any fiduciary holding securities under an
employee benefit plan of any member of the Company Group, an
underwriter temporarily holding Holdings’ securities pursuant
to an offering of such securities or a corporation owned, directly
or indirectly, by shareholders of Holdings in substantially the
same proportion as their ownership of Holdings, is or becomes the
“beneficial owner” as defined in Rule 13d-3 under
the Exchange Act, directly or indirectly, of securities of Holdings
representing 50% or more of the combined voting power of
Holdings’ then outstanding securities (“ Voting
Securities ”); (ii) during any period of not more than
two years, individuals who constitute the Board of Directors of
Holdings as of the beginning of the period and any new director
(other than a director designated by a person who has entered into
an agreement with Holdings to effect a transaction described in
clause (i) or (iii) of this sentence) whose election by
the Board of Directors of Holdings or nomination for election by
Holdings’ shareholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either
were directors at such time or whose election or nomination for
election was previously so approved, cease for any reason to
constitute a majority thereof; (iii) the shareholders of
Holdings approve a merger, consolidation, amalgamation or
reorganization or a court of competent jurisdiction approves a
scheme of arrangement of Holdings, other than a merger,
consolidation, amalgamation, reorganization or scheme of
arrangement which would result in the Voting Securities of Holdings
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into Voting
Securities of the surviving entity) at least 50% of the combined
voting power of the Voting Securities of Holdings or such surviving
entity outstanding immediately after such merger, consolidation,
amalgamation, reorganization or scheme of arrangement; or
(iv) the shareholders of Holdings approve a plan of complete
liquidation of Holdings or any agreement for the sale or
disposition by Holdings of all or substantially all of its
assets.
(h)
“ Closing Date ” shall have the meaning set
forth in the Merger Agreement.
(i)
“ Code ” shall mean the United States Internal
Revenue Code of 1986, as amended.
(j)
“ Company ” shall have the meaning set forth in
the preamble hereto.
(k)
“ Company Group ” means Holdings together with
any direct or indirect subsidiary.
(l)
“ Competitive Activities ” shall mean any
business activities in which any member of the Company Group is
engaged, or has committed plans to engage, during the Term of
Employment.
(m)
“ Confidential Information ” shall have the
meaning set forth in Section 9(a) below.
(n)
“ Delay Period ” shall have the meaning set
forth in Section 16.
(o)
“ Developments ” shall have the meaning set
forth in Section 9(e) below.
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(p)
“ Disability ” shall mean any physical or mental
disability or infirmity that has prevented the performance of
Employee’s duties in all material respects for a period of
one hundred eighty (180) consecutive calendar days.
(q)
“ Employee ” shall have the meaning set forth in
the preamble hereto.
(r)
“ Good Reason ” shall mean, without
Employee’s written consent, (i) a material diminution in
Employee’s employment duties or responsibilities, or the
assignment to Employee of duties that are materially inconsistent
with his position; (ii) any reduction in Base Salary or an
established Annual Bonus (if any); (iii) a change in
Employee’s principal place of employment beyond a 35 mile
radius from the location in Section 3(c),
(iv) Holdings’ failure to offer to Employee prior to the
first anniversary of the Closing Date the position of Chief
Operating Officer of Holdings’ United States operations; or
(v) any breach by the Company of any material provision of
this Agreement.
(s)
“ Holdings ” shall mean Allied World Assurance
Company Holdings, Ltd, a Bermuda corporation and the
Company’s ultimate parent.
(t)
“ Interfering Activities ” shall mean
(i) encouraging, soliciting or inducing, or in any manner
attempting to encourage, solicit or induce, any Person employed by,
as agent of, or a service provider to, any member of the Company
Group, to terminate (or, in the case of an agent or service
provider, reduce) such Person’s employment, agency or
service, as the case may be, with any member of the Company Group;
provided, that the foregoing shall not be violated by general
advertising not targeted at employees of any member of the Company
Group nor by serving as a reference upon an employee’s
request with regard to an entity with which Employee is not
affiliated; or (ii) encouraging, soliciting or inducing, or in
any manner attempting to encourage, solicit or induce any customer,
supplier (including insurance brokers), licensee or other business
relation of any member of the Company Group to cease doing business
with or reduce the amount of business conducted with any member of
the Company Group, or in any way interfere with the relationship
between any such customer, supplier (including insurance brokers),
licensee or business relation and any member of the Company
Group.
(u)
“ Merger Agreement ” shall mean that certain
Agreement and Plan of Merger, dated as of June [ • ],
2008, by and among Darwin, Holdings, and [MergerCo].
(v)
“ Non-Interference Period ” shall mean the
period commencing on the Closing Date and ending on the twelve
(12) month anniversary of the date of such
termination.
(w)
“ Non-Compete Period ” shall mean the period
commencing on the Closing Date and:
(i)
in the case of Employee’s termination of employment hereunder
by the Company for Cause, ending on the date of such
termination;
(ii)
in the case of Employee’s termination of employment hereunder
by the Company without Cause or by Employee for Good Reason, ending
on the twelve (12) month anniversary of the date of such
termination; or
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(iii)
in the case of Employee’s termination of employment hereunder
by the Employee without Good Reason or as a result of his
Disability, ending on the date of such termination; provided,
however , that the Company may elect to extend the Non-Compete
Period up to an additional twelve (12) months following the
date of such termination by providing Employee written notice of
such election within five (5) business days following such
termination specifying the applicable period of extension, in which
case, the Company shall be required to continue, through the end of
the Non-Compete Period, as so extended, (A) to pay Employee
his Base Salary, in accordance with the Company’s regular
payroll practices, and (B) to provide participation under the
Company’s health and other insurance plans, or if such
continued participation in is not permissible, provide Employee
with coverage that is economically equivalent to Employee through
alternative arrangements, or the cash value of such coverage, in a
manner that places the Employee in a net economic position that is
at least equivalent to the position in which the Employee would
have been had such alternative arrangements not been used by the
Company.
(x)
“ Person ” shall mean any individual,
corporation, partnership, limited liability company, joint venture,
association, joint-stock company, trust (charitable or
non-charitable), unincorporated organization or other form of
business entity.
(y)
“ Release Expiration Date ” shall have the
meaning set forth in Section 8(g) below.
(z)
“ Severance Term ” shall mean the twelve
(12) month period immediately following Employee’s
termination by the Company without Cause or by Employee with Good
Reason.
(aa)
“ Term of Employment ” shall mean the period
specified in Section 2 below.
(bb)
“ Voting Securities ” shall have the meaning set
forth in Section 1(g)
Section 2.
Acceptance and Term of Employment .
The
Company agrees to employ Employee and Employee agrees to serve the
Company on the terms and conditions set forth herein. The Term of
Employment shall commence on the Closing Date and shall continue
until Employee is terminated as provided in Section 8
hereof.
Section 3.
Position, Duties and Responsibilities; Place of Performance
.
(a) During
the Term of Employment, Employee shall be employed and serve as the
Chief Operating Officer of the Company (together with such other
position or positions consistent with Employee’s title as the
Board or the officer of the Company Group to which Employee reports
shall specify from time to time) and shall have such duties
typically associated with such title. In the event the position of
Chief Operating Officer of Holdings’ United States operations
becomes available, Employee shall be offered such position and
shall have such duties typically associated with such additional
title. Subject to the foregoing, Employee also
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agrees to serve
as an officer and/or director of any other member of the Company
Group, in each case without additional compensation.
(b) Subject
to the terms and conditions set forth in this Agreement, Employee
shall devote his full business time, attention and efforts to the
performance of his duties under this Agreement and shall not engage
in any other business or occupation during the Term of Employment,
including, without limitation, any activity that (x) conflicts
with the interests of any member of the Company Group,
(y) interferes with the proper and efficient performance of
his duties for the Company or (z) interferes with the exercise
of his judgment in the Company’s best interests.
Notwithstanding the foregoing, nothing herein shall preclude
Employee from (i) serving, with the prior written consent of
the Company, as a member of the board of directors or advisory
boards (or their equivalents in the case of a non-corporate entity)
of non-competing businesses and charitable organizations,
(ii) engaging in charitable activities and community affairs,
and (iii) subject to the terms and conditions set forth in
Section 9 hereof, managing his personal investments and
affairs; provided, however , that the activities set out in
clauses (i), (ii) and (iii) shall be limited by Employee
so as not to materially interfere, individually or in the
aggregate, with the performance of his duties and responsibilities
hereunder.
(c) Employee’s
principal place of employment shall be at the Company’s
Farmington, Connecticut, office, although Employee understands and
agrees that he may be required to travel from time to time for
business reasons.
Section 4.
Compensation .
During
the Term of Employment, Employee shall be entitled to the following
compensation:
(a)
Base Salary . Employee shall be paid an annualized Base
Salary, payable in accordance with the regular payroll practices of
the Company, of not less than $273,181, subject to increase, if
any, as may be approved in writing by the Company, but not to
decrease from the then current Base Salary.
(b)
Annual Bonus . Employee shall be eligible for an annual
incentive bonus award determined by the Company in respect of each
fiscal year during the Term of Employment (the “ Annual
Bonus ”). The Annual Bonus shall be earned and payable in
accordance with the policies of the Company as in effect from time
to time.
(c)
Equity Plan Participation . During the Term of Employment,
Employee shall be eligible to participate in the equity incentive
plans maintained by Holdings.
(d)
Change in Control Acceleration . Notwithstanding any
contrary terms of any Holdings equity plan or other agreement
pursuant to which equity-based awards have been granted to
Employee, upon the occurrence of a Change in Control, all such
equity-based awards shall fully vest immediately prior to such
Change in Control.
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Section 5.
Employee Benefits .
During
the Term of Employment, Employee shall be entitled to participate
in health, insurance, retirement and other perquisites and benefits
generally provided to other similarly situated employees of the
Company that are made available and as are in effect from time to
time. Employee shall also be entitled to the same number of
holidays, vacation and sick days as are generally allowed to
similarly situated employees of the Company in accordance with the
Company policy in effect from time to time.
Section 6.
“Key-Man” Insurance .
At
any time during the Term of Employment, the Company shall have the
right to insure the life of Employee for the sole benefit of the
Company, in such amounts, and with such terms, as it may determine.
All premiums payable thereon shall be the obligation of the
Company. Employee shall have no interest in any such policy, but
agrees to reasonably cooperate with the Company in taking out such
insurance by submitting to physical examinations, supplying all
information reasonably required by the insurance company, and
executing all necessary documents, provided that no financial
obligation or liability is imposed on Employee by any such
documents.
Section 7.
Reimbursement of Business Expenses .
Employee
is authorized to incur reasonable business expenses in carrying out
his duties and responsibilities under this Agreement and the
Company shall promptly reimburse him for all such reasonable
business expenses incurred in connection with carrying out the
business of the Company, subject to documentation in accordance
with the Company’s policy, as in effect from time to
time.
Section 8.
Termination of Employment .
(a)
General . The Term of Employment shall terminate upon the
earliest to occur of (i) Employee’s death, (ii) a
termination by reason of a Disability, (iii) a termination by
the Company with or without Cause, and (iv) a termination by
Employee with or without Good Reason. Upon any termination of
Employee’s employment for any reason, except as may otherwise
be requested by the Company in writing and agreed upon in writing
by Employee, Employee shall resign from any and all directorships,
committee memberships or any other positions Employee holds with
any member of the Company Group. Notwithstanding anything herein to
the contrary, the payment (or commencement of a series of payments)
hereunder of any nonqualified deferred compensation (within the
meaning of Section 409A of the Code) upon a termination of
employment shall be delayed until such time as Employee has also
undergone a “separation from service” as defined in
Treas. Reg. 1.409A-1(h), at which time such nonqualified
deferred compensation (calculated as of the date of
Employee’s termination of employment hereunder) shall be paid
(or commence to be paid) to Employee on the schedule set forth in
this Section 8 as if Employee had undergone such termination
of employment (under the same circumstances) on the date of his
ultimate “separation from service.”
(b)
Termination due to Death or Disability . Employee’s
employment shall terminate automatically upon his death. The
Company may terminate Employee’s employment
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immediately
upon the occurrence of a Disability, such termination to be
effective upon Employee’s receipt of written notice of such
termination. In the event Employee’s employment is terminated
due to his death or Disability, Employee or his estate or his
beneficiaries, as the case may be, shall be entitled to:
(i)
The Accrued Obligations;
(ii)
Any unpaid Annual Bonus in respect to any completed fiscal year
which has ended prior to the date of such termination, such amount
to be paid at the same time it would otherwise be paid to Employee
had no such termination occurred, but in no event later than the
last day of the Company’s fiscal year in which such
termination occurs;
(iii)
A pro rata Annual Bonus (determined using any target Annual Bonus
if such termination occurs during the fiscal year in which the
Closing Date falls, and using the highest Annual Bonus paid or
payable for the two imm
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