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Exhibit 10.5
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (hereinafter the "Agreement") amended and
restated effective ______________, 2006 by and among RAM Holdings
Ltd., a
Bermuda exempted company ("Holdings"), RAM Holdings II Ltd., a
Bermuda company
("Holdings II" and, together with Holdings, "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, Holding, the Company and the Executive each desire to
enter
into this Amended and Restated Employment Agreement embodying the
terms of such
employment (the "Agreement"); and
WHEREAS, the Parties agree that, except as otherwise specified
herein,
the terms of the Agreement contained herein shall supersede and
replace in its
entirety the terms of the Prior Agreement and any related extension
entered into
by the Parties; and
WHEREAS, the Executive and the Company 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:
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
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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" means the date of this Agreement.
(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
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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
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) "Holdings Board" means the Board of Directors of Holdings.
(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 Holdings and Holdings II,
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 Holdings and/or Holdings II, or one or
more of the
other Subsidiaries of Holdings and/or Holdings II, 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
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or controlled, directly or indirectly, by Holdings and/or Holdings
II, or one or
more of the other Subsidiaries of Holdings and/or Holdings II, or a
combination
thereof. For purposes hereof, Holdings, Holdings II 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
Holdings, Holdings
II 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.
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.
(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.
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
Holdings 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
Holdings 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
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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.
4.
Base Salary. Commencing as of the Effective Date, the Company shall
pay
the Executive an annualized Base Salary of $275,000 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 Holdings 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.
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.
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 Holdings
Board (or a committee of the Holdings 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.
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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
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
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Base Salary and Cost of Living Allowance payable hereunder
immediately prior to
the effective date of any such amendment to the Code.
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 policie
