Exhibit 10.4
EXECUTION COPY
FOURTH 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 JAMES P. GERRY (the “
Executive ”).
WHEREAS, Holding, the Company
and the Executive (collectively referred to as the “
Parties ”) previously entered into an Employment
Agreement dated as of February 11, 1998 (“ Prior
Agreement ”); and
WHEREAS, the Parties entered
into an Amended and Restated Employment Agreement effective May 10,
2001 (the “ Amended and Restated Employment Agreement
”) pursuant to which the Executive’s employment was
extended through February 11, 2003; and
WHEREAS, the Parties entered
into the Second Amended and Restated Employment Agreement effective
February 11, 2003 (the “ Second Amended and Restated
Employment Agreement ”) pursuant to which the
Executive’s employment was extended through February 11,
2006; and
WHEREAS, the Parties entered
into the Third Amended and Restated Employment Agreement effective
April 26, 2006 (the “ Third Amended and Restated
Employment Agreement ”) pursuant to which the
Executive’s employment was extended through March 11, 2008;
and
WHEREAS, the Parties wish to
continue the employment relationship under this Agreement on the
terms and conditions hereinafter set forth, as amended 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 this
Agreement shall supersede and replace in its entirety the terms of
the Prior Agreement, the Amended and Restated Employment Agreement,
the Second Amended and Restated Employment Agreement, the Third
Amended and Restated Employment Agreement and any related extension
entered into by 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)
“ Common
Shares ” means the non-voting Class A common shares, par
value $1.00 per share, of RAM Holdings II Ltd.
(g)
“ Cost
of Living Allowance ” means the amount paid to the
Executive under Section 8(e).
(h)
“
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.
(i)
“
Effective Date ” means April 26, 2006.
(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
2
removal of the Executive from
his position as Managing Director, Municipal & Infrastructure
Finance of each 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 Managing Director, Municipal &
Infrastructure Finance 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 Managing
Director, Municipal & Infrastructure Finance 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 Holding 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 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)
“
Restriction Period ” means the Term of Employment
plus, if applicable, any further period during which the Executive
is being paid Base Salary by the Company following termination
under Section 10(d).
(p)
“
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.
(q)
“ Share
Option Plan ” means the RAM Reinsurance Company Ltd.
Stock Option Plan for Management Employees as Amended and Restated
Effective August 10, 2005, as may be amended from time to time, or
any successor plan, including but not limited to the RAM Holdings
Ltd. 2006 Equity Plan.
(r)
“
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,
3
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, Holdings and its 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.
(s)
“ 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 March 11, 2008 (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 10.
(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.
Section 3.
Positions;
Duties; Responsibilities; and Place of Employment
. (a) During the
Term of Employment, the Executive shall be employed as the Managing
Director, Municipal & Infrastructure Finance 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;
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 Managing
Director, Municipal & Infrastructure Finance of Holding and the
Company or violate Section 14of this Agreement.
Section 4.
Base
Salary . Commencing as of February
11, 2006, the Company shall pay the Executive an annualized Base
Salary of $260,000 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
4
Section 10). 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 100% of his
annualized Base Salary for such year. 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 fifteen (15) days after receipt by the Boards of
the audited consolidated financial statements of Holding and the
Company and, if applicable, their Subsidiaries, for the fiscal year
for which the bonus is payable and in no event later than the last
day of the calendar year following the calendar year for which the
bonus is payable.
Section 6.
Long Term
Incentive Plan; Share Option Award . During the Term of
Employment, the Executive shall participate in the Share Option
Plan. Subject to the terms of the Share Option Plan and any
applicable share option agreement, the number of shares subject to
the option 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 Share
Option Plan and/or any applicable share option 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.
Notwithstanding anything herein to the contrary, the option grant
provided for in Section 3(c) of the Second Amended and Restated
Employment Agreement shall be subject to the terms and conditions
of Section 3(c) of the Second Amended and Restated Employment
Agreement.
Section 7.
Opportunity to
Purchase Common Shares . As provided in Section 3(d)
of the Second Amended and Restated Agreement, the Executive has
previously purchased 2,000 Common Shares (such number determined
prior to the 2006 stock split), having an aggregate purchase price
equal to U.S.$200,000, at a purchase price per share equal to the
purchase price per share of Common Shares paid by the investors
upon their initial purchase of such Common Shares. As a condition
to the purchase of the Common Shares, the Executive was required to
execute and deliver the Shareholders Agreement of Holding, which
agreement contains the terms and conditions of the
Executive’s purchase, holding and sale or other transfer of
the Common Shares.
If the Executive’s
employment with Holding and the Company is terminated for any
reason whatsoever, at the election of the Executive delivered in
writing to Holding or the Company within thirty (30) days following
the date of the Executive’s termination of employment,
Holding or the Company shall purchase all (but not less than all)
of the Common Shares then held by the Executive for an aggregate
purchase price equal to the product of (i) the number of Common
Shares to be purchased multiplied by (ii) 110% of the book value
per Common Share as of the last day of the calendar quarter ending
coincident with or immediately preceding the effective date of the
Executive’s termination of employment (the “
Buy-Back Option ”). Holding and the Company shall
purchase the Common Shares within ten (10) business days of the
date Holding and the Company receive the Executive’s written
notice of exercising the Buy-Back Option. The Executive agrees that
the Company shall be entitled to apply any
5
amounts to be paid by it to
repurchase the Common Shares pursuant to this Section 7 to
discharge any indebtedness of the Executive to Holding or the
Company or indebtedness that is guaranteed by Holding or the
Company, including, but not limited to, any indebtedness of the
Executive incurred to purchase the Common Shares. If the Executive
fails to exercise the Buy-Back option within the 30-day period
following the date of the Executive’s termination of
employment, Holding and the Company shall have an option to
purchase all or a portion of the Common Shares then held by the
Executive for an aggregate purchase price equal to the product of
(i) the number of Common Shares to be purchased multiplied by (ii)
110% of the book value per Common Share as of the last day of the
calendar quarter ending coincident with or immediately preceding
the effective date of the Executive’s termination of
employment (the “ Purchase Option ”);
provided , however , that in no event shall the
purchase price per share be less than the par value per share.
Holding and the Company shall have sixty (60) days from the date of
the expiration of the 30-day Buy-Back Option during which to give
notice in writing to the Executive of its election to exercise or
not to exercise its Purchase Option. For purposes of this Section
7, book value shall be determined by the Boards on the basis of the
consolidated financial statements of Holding and its subsidiaries,
prepared on a basis consistent with its audited financial
statements, and on a primary share basis.
Section 8.
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 Company.
The Executive shall also receive such additional fringe benefits
and pe
