(As amended and restated
effective as of July 31, 2009)
This Amended and
Restated Employment Agreement (the “Agreement”) is
effective as of July 31, 2009 (the Effective Date”) by
and between ODYSSEY RE HOLDINGS CORP. (“Employer”), a
holding company, incorporated in the State of Delaware, that owns
all of the shares of the entities comprising the group of
reinsurance and insurance companies constituted by Odyssey America
Reinsurance Corporation and its subsidiaries, and Richard Scott
Donovan (“Executive”).
WHEREAS, Executive
is the Chief Financial Officer of the Employer;
WHEREAS, Executive
entered into the Agreement effective as of August 15, 2006;
and
WHEREAS, the
parties desire to amend and restate the Agreement as of the date
hereof so as to contain the terms and conditions set forth below
and to govern the employment of Executive in the capacity described
in the first recital above.
NOW
THEREFORE, IT IS AGREED AS FOLLOWS:
EMPLOYMENT AND DUTIES;
COMPENSATION
During the term of
this Agreement, Executive shall be employed by and shall serve
Employer in the capacity of Executive Vice President and Chief
Financial Officer, and shall be employed by and/or shall serve such
subsidiaries of Employer in such capacities as Employer shall from
time to time designate and as are consistent with Executive’s
position as Executive Vice President and Chief Financial Officer of
Employer. Executive shall devote substantially all of his business
time to the business and affairs of Employer and shall use his best
efforts, skills, and energy to promote Employer’s interests,
provided that it shall not be a violation of the foregoing for
Executive to act or serve as a director, trustee or committee
member of any civic or charitable organization, as long as such
activities are disclosed to Employer and Employer, in the exercise
of its reasonable judgment, agrees that such activities do not
present any conflict of interest with the Employer.
Section 2: Term of
Employment.
The term of
employment, hereunder, of Executive by Employer commenced as of
August 15, 2006 (the “Commencement Date”) and
shall continue until August 15, 2012 (the “Term”).
At any time prior to the expiration of the Term, Employer and
Executive may, by mutual written agreement, extend
Executive’s employment under the terms of this Agreement for
such additional periods as they may agree.
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Section 3: Salary, Benefits and
Additional Compensation.
As compensation
and consideration for the performance by Executive of his duties
and responsibilities pursuant to this Agreement, Employer agrees to
pay, and/or to cause one or more of its subsidiaries to pay
Executive, and Executive agrees to accept the following amounts and
benefits (all Dollar amounts referred to herein are in United
States Dollars):
During the term
hereof, Executive shall receive an annual base salary (“Base
Salary”) of Six Hundred Thousand Dollars ($600,000), as it
may be increased from time to time at the discretion of the
Employer’s Board of Directors (the “Board of
Directors”), upon advice and consent of the Compensation
Committee of the Board of Directors (the “Compensation
Committee”), pro rated for any calendar year within the Term
for which employment does not extend for the entire calendar year.
The Base Salary shall be paid to Executive in equal bi-weekly
installments.
Executive shall
participate in the bonus pool (the “Bonus Pool”)
created with respect to each accident underwriting year, consisting
of that portion of the underwriting profit for such year designated
by the Board of Directors, and the Board of Directors shall
establish performance criteria upon which Executive’s bonus
shall be determined. During Executive’s employment under this
Agreement, Executive shall be eligible to receive a target bonus of
100% of Base Salary, although it is agreed that actual bonus awards
may exceed, match or be less than the target bonus, as
Executive’s performance or Employer’s performance
warrant. The form of payment and other terms and
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conditions of
such bonus shall be determined by Employer, upon advice and consent
of the Compensation Committee. Notwithstanding the foregoing, to
the extent Executive is a “covered employee” within the
meaning of Section 162(m) of the Internal Revenue Code of 1986, as
amended (the “Code”), the annual bonus may be
implemented and administered in a manner intended to insure the
treatment of such bonus as “performance-based
compensation” within the meaning of Section 162(m) of the
Code (including, without limitation, by having the relevant
performance goals established by the Compensation Committee of the
Board of Directors and having the Compensation Committee certify
the achievement of such goals before the annual bonus is
paid).
Bonuses will be
paid on or about March 15 of the year following the related
accident underwriting year (and in no event later than
April 15 of the year following the related accident
underwriting year).
(c) Restricted Stock
Grant:
(i) As
consideration for entering into this Agreement, Executive shall
receive an award of that number of restricted shares (the
“Restricted Shares”) of Employer, consisting of its
Common Stock, par value $.01 per share, which when multiplied by
the simple average of the closing prices of such common stock on
the New York Stock Exchange on the twenty (20) business days
next preceding July 31, 2009, yields the aggregate sum of One
Million Dollars ($1,000,000), and, subject to subparagraphs
(ii) and (iii) below, the foregoing grant shall be
subject to the terms of Employer’s Restricted Share Plan (the
“Restricted Share Plan”). Executive shall become vested
in the shares granted pursuant to the foregoing sentence, and all
restrictions shall lapse, on August 15, 2012.
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(ii) An
award document evidencing the foregoing Restricted Share grant (the
“Award Document”) shall be provided to Executive by
Employer within 30 days of the date of execution hereof. The
Award Document shall provide that (a) upon Executive’s
Termination of Employment as a result of death, disability,
reaching retirement age, Change in Control (as defined in
Article II, Section 7 below), termination by Executive as
a result of a Constructive Termination (as defined in
Article II, Section 4 below), or termination by Employer
for reasons other than For Cause (as defined in Article II,
Section 3 below) the restricted period applicable to any
Restricted Shares granted to Executive thereunder (an
“Award”) shall terminate and Executive shall become
fully vested in such Award; and (b) if the stock of Employer
at any time during the restricted period ceases to be publicly
traded, then Executive shall have the option to receive a cash
payment, payable by Employer within ten (10) days following
written notice from Executive no later than thirty (30) days
following the delisting of Employer stock from the exchange, equal
to the number of shares of Restricted Stock of Employer granted
under the Award Document and held by Executive as of the delisting
of the stock times the greater of (i) the share price of
Employer stock as of the close of business forty-five
(45) trading days prior to its delisting and (ii) the
average share price of Employer stock (based on end of business day
values) over the forty-five (45) trading day period prior to
delisting. To the extent the cash payment exceeds the fair market
value of the stock at the time of payment and Executive is a
“specified employee” as defined in Section 409A of
the Code, the excess amount shall be paid the earlier of
(A) six (6) months following termination of employment,
or (B) death. The foregoing subparagraph (b) shall not
apply if the stock of Employer ceases to be publicly traded as a
result of Employer having made
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a general
assignment for the benefit of creditors, been adjudicated as
bankrupt or insolvent, or having filed a voluntary petition in
bankruptcy, a petition or answer seeking an arrangement with
creditors or to take advantage of any insolvency law or having
filed an answer admitting the material allegations of a petition
filed against Employer in bankruptcy.
(iii) Employer
will take whatever action necessary, including, without limitation,
amendment of the Restricted Share Plan, to ensure that the issuance
of Restricted Shares by Employer to Executive pursuant to the Award
Document does not exceed the maximum number of shares available for
such purpose.
(d) Previously Awarded
Restricted Stock:
As consideration
for entering Executive’s employment with Employer, effective
as of August 15, 2006, Executive was granted 36,621 Restricted
Shares (the “2006 Award”) of Employer’s common
stock pursuant to Employer’s Restricted Share Plan. Pursuant
to the terms of the grant, the 2006 Award was originally scheduled
to vest with respect to twenty percent (20%) of the Restricted
Shares on August 15, 2007, and on each anniversary thereafter
with respect to an additional twenty percent (20%), such that on
August 15, 2011, all restrictions would have lapsed on the
36,621 Restricted Shares comprising the 2006 Award. Upon the
execution of this Agreement, the remaining 21,972 outstanding and
unvested Employer Restricted Shares granted to Executive under the
2006 Award shall fully vest and all restrictions shall
lapse.
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(i) During
the term of this Agreement, for such time as Executive’s
principal residence is in the State of Texas, Executive shall be
entitled to a bi-weekly living allowance (“Living
Allowance”) of $3,000. Each bi-weekly payment of the Living
Allowance shall be “grossed up” such that after all
federal, state, local and other withholdings and similar taxes and
payments required by applicable law have been deducted, Executive
will receive the amount stated in the previous sentence. This
Section 3(e)(i) shall no longer apply upon Executive’s
relocation as described in Section 3(e)(ii) below.
(ii) In
the event that Executive relocates his principal residence to the
New York Metropolitan Area, Executive shall be eligible to
participate in such benefits and perquisites as are now generally
available to executive officers of Employer that transfer from an
affiliate company, including, without limitation, the prompt
payment, or reimbursement to Executive upon presentation of
appropriate substantiation, the following relocation expenses:
(a) packing, moving, storage and travel expenses reasonably
incurred by Executive in connection with moving Executive,
Executive’s immediate family, and their possessions;
(b) home sale and purchase closing costs, including loan
origination fees, brokers’ fees and commissions, home
appraisal and inspection fees, title costs, attorney and escrow
office fees, recording fees, and state and local recording,
transfer and real property gains taxes, etc., reasonably incurred
by Executive in connection with Executive and Executive’s
family moving from their residence; and (c) such other
expenses reasonably related to Executive’s move.
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During the term of
this Agreement, Executive shall be entitled to the following fringe
benefits:
(i) Executive
Benefits: Executive shall be eligible to participate in such
benefits and perquisites as are now generally available or later
made generally available to executive officers of Employer or its
subsidiaries.
(ii) Vacation:
Executive shall be entitled to vacation time consistent with his
position as Executive Vice President and Chief Financial Officer of
Employer.
(iii) Life
Insurance: Executive shall be eligible to participate in any life
insurance program available to executive officers of Employer or
its subsidiaries on terms at least as favorable as those generally
made available to such executive officers.
(iv) Disability
Insurance: Executive shall be eligible to participate in any
disability insurance program available to executive officers of
Employer or its subsidiaries on terms at least as favorable as
those generally made available to such executive
officers.
(v) Reimbursement
for Expenses: Employer shall reimburse Executive for reasonable and
properly documented out-of-pocket business and/or entertainment
expenses incurred by Executive in connection with his duties under
this Agreement, consistent with Employer’s Travel and
Entertainment Policy.
(vi) Reimbursement
of Attorney’s Fees: Employer shall pay all reasonable
attorney’s fees and disbursements incurred by Executive in
drafting and negotiating this Agreement; payment shall be made
either to Executive upon submission of paid invoices for such legal
work or directly to the Attorney chosen by Executive.
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(vii) Retirement
Plans and Related Arrangements: Executive shall continue to
participate in all retirement plans and arrangements made available
to Employer’s executives, and for purposes of all such plans
and arrangements, Employer shall credit Executive’s vesting
service with Employer and any of its affiliates, including its
majority stockholder, Fairfax Financial Holdings Limited
(“Fairfax”) and its subsidiaries, since April 15,
1999.
TERMINATION OF
EMPLOYMENT
Subject to
Section 8 of this Article II, Employer shall provide
Executive with the following payments and benefits upon termination
of employment:
Section 1: Termination Due to
Death.
The employment of
Executive under this Agreement shall terminate upon
Executive’s death. In the event of Executive’s death
during Executive’s employment hereunder, the estate or other
legal representative of Executive shall be entitled to receive the
following:
Employer shall pay
to Executive’s estate or other legal representative of
Executive, Executive’s Base Salary and Living Allowance, if
then applicable, for the period ending one year following the month
in which Executive dies. Such an amount and all other amounts
payable under this Section 1 of Article II shall be paid
by Employer in a lump sum within thirty (30) days of the date
of death, provided , however , that the amounts due
with respect to the Bonus Pool shall be paid when such amounts
would ordinarily be paid.
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(b) Payment from Bonus
Pool:
Employer shall pay
to the estate or other legal representative of Executive,
(i) all amounts accrued in the Bonus Pool by Executive with
respect to years preceding the year in which the death of Executive
occurs and (ii) the pro-rated bonus payable with respect to
the year in which the death of Executive occurs.
Upon the death of
Executive, the restricted period with respect to all Restricted
Stock previously awarded to Executive including, without
limitation, Restricted Stock of Employer awarded pursuant to this
Agreement, shall terminate and the Executive’s estate or
other legal representative shall become fully vested in all
Restricted Stock previously awarded to Executive. In addition, upon
the death of Executive, all other equity awards, if any, shall vest
(and, with respect to stock options and stock appreciation rights,
if any, shall become fully exercisable).
Section 2: Termination by Reason of
Disability.
If, during the
term of this Agreement, Executive, in the judgment of the Board of
Directors, has failed to perform his duties under this Agreement on
account of illness or physical or mental incapacity, and such
illness or incapacity continues for a period of more than
(i) six (6) consecutive months or (ii) one hundred eighty
three (183) days in any consecutive three hundred sixty-five
(365) day period, Employer shall have the right to commence
process to terminate Executive’s employment under this
Agreement on
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account of
disability. Employer shall send written notice to Executive of
(x) its intention to commence such process, (y) a medical
doctor chosen by Employer to make the determination referred to in
the next sentence, and (z) Executive’s right within ten
(10) days of receipt of the notice to choose a second medical
doctor to make such determination. Termination for disability shall
be based on a determination that Executive is either unable to
engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment that can be
expected to result in death or last for a continuous period of not
less than 12 months; or
by reason of any medically determinable physical or mental
impairment that can be expected to result in death or last for a
continuous period of not less than 12 months, is receiving
income replacement benefits for a period of not less than three
months under an accident and health plan covering employees of the
service provider’s employer. Executive shall fully cooperate
in this process, including by making himself available for and
consenting to all examinations and tests required by any doctor
making the aforesaid determination. The aforesaid determination
shall be made by the medical doctor chosen by Executive, if
Executive exercises his foregoing right to choose a doctor, and the
medical doctor chosen by Employer. If the determination is being
made by two medical doctors and they cannot agree within fifteen
(15) days of their both being chosen, they shall as soon as
reasonably possible select a third medical doctor to make the
determination, who shall make the determination within fifteen
(15) days of being chosen. The determination made by the
foregoing process shall be conclusive. In the event the
Executive’s employment is terminated on account of
disability, Executive’s rights to compensation and benefits
shall be as follows:
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Executive shall be
paid his pro rated Base Salary, as determined in accordance with
the terms of Section 3(a) of Article I for a period of no less
than one year, less any benefits paid to him under disability
insurance policies maintained by Employer, until his termination on
account of disability.
(b) Payment from Bonus
Pool:
Employer shall pay
to Executive, when the same would ordinarily be paid, (i) all
amounts accrued in the Bonus Pool by Executive with respect to
years preceding the year in which termination due to disability of
Executive occurs and (ii) the pro-rated bonus payable with
respect to the year in which termination due to the disability of
Executive occurs.
The restricted
period with respect to all Restricted Stock previously awarded to
Executive shall terminate and Executive shall become fully vested
in all Restricted Stock previously awarded to Executive, including,
without limitation, Restricted Stock awarded pursuant to this
Agreement. In addition, all other equity awards shall vest (and,
with respect to stock options and stock appreciation rights, if
any, shall become fully exercisable).
Executive shall be
paid his pro rated Living Allowance, as determined in accordance
with the terms of Section 3(e) of Article I, until his
termination on account of disability.
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Section 3: Termination for
Cause.
“Termination
for Cause” shall mean termination by Employer of
Executive’s employment by Employer by reason of:
(i) a
willful failure by Executive in bad faith to substantially perform
his duties with Employer resulting in material harm to Employer;
or
(ii) Executive’s
conviction of a felony involving moral turpitude.
Executive must be
given written notice that Employer intends to terminate
Executive’s employment for Cause. Such written notice shall
specify the particular act or failure to act constituting the basis
of the intention to so terminate employment. In the case of a
Termination for Cause under clause (i) above, Executive shall
be given the opportunity, within twenty (20) days of the
receipt of such notice, to meet with the Board of Directors to
refute or explain such act or failure to act. If such act or
failure to act is reasonably determined by the Board of Directors
to be in violation of Section 3, clause (i), Executive shall
be given ten (10) days after such meeting to correct such act
or failure to act, and upon failure of Executive within such ten
(10) day period to correct such act or failure to act to the
reasonable satisfaction of the Board of Directors,
Executive’s employment by Employer shall be terminated. In
the case of Termination for Cause under (ii) above,
Executive’s employment shall be terminated as of the date
such notice is given.
In the event the
Board of Directors shall terminate Executive’s employment for
Cause, Executive shall be entitled to receive the
following:
(a) Base Salary and Living
Allowance:
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Within thirty
(30) days of the date of Executive’s Termination for
Cause, Executive s
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