Exhibit 10.3
EXECUTION COPY
SECOND 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 DAVID K. STEEL (the “
Executive ”).
WHEREAS, Holding, the Company
and the Executive (collectively referred to as the “
Parties ”) previously entered into an Employment
Agreement dated as of June 30, 2005 (“ Prior Agreement
”); and
WHEREAS, the Parties entered
into an Amended and Restated Employment Agreement effective April
26, 2006 (the “ Amended and Restated Employment
Agreement ”) pursuant to which the Executive’s
employment was extended through August 1, 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
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 Section
4 or any increased salary granted to the Executive pursuant to
Section 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 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 ” means April 26, 2006.
(i)
“ 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 Risk Manager 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 Risk Manager 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 Risk Manager 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
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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.
(j)
“
Holding Board ” means the Board of Directors of
Holding.
(k)
“
Party ” or “ Parties ” means
Holding, the Company and/or the Executive.
(l)
“
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.
(m)
“
Proceeding ” means any threatened or actual action,
suit or proceeding, whether civil, criminal, administrative,
investigative, appellate or other.
(n)
“
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 9(d).
(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)
“ 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.
(q)
“
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, 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 Holdings 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.
(r)
“ 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 August 1, 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 9.
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(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 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 Chief Risk
Manager 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 Chief Risk Manager or
violate Section 13 of this Agreement.
Section 4.
Base
Salary . The Company shall pay the
Executive an annualized Base Salary of $300,000 effective from
August 16, 2006 through the remainder of 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 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.
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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 6 of the Prior Agreement shall be subject
to the terms and conditions of Section 6 of the Prior
Agreement.
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 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 any dependent 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 dependent
children.
(e)
Cost of Living
Allowance . During the Term of
Employment, the Company shall pay the Executive a monthly cost of
living allowance of $10,000.
(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
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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 Business and Other Expenses . (a) The Executive is
authorized to incur reasonable expenses in carrying out his duties
and responsibilities under this Agreement and the Company shall
promptly reimburse the Executive for all such expenses, subject to
documentation in accordance with reasonable policies of Holding and
the Company.
(b)
Upon presentation
of appropriate vouchers or other expense statements, during the
Term of Employment, the Company shall pay for personal tax advice
and/or tax return preparation for the Executive (up to a maximum of
$7,500 per year).
(c)
The Company shall
be responsible for 100% of any Bermuda payroll taxes applicable to
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