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Exhibit 10.7
THIRD 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 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, Holding and the Company each desire to secure the services
of
the Executive for an additional term and to enter into this Third
Amended and
Restated Employment Agreement embodying the terms of such
employment (the
"Agreement"); and
WHEREAS, the Executive desires to accept such employment and
enter
into such 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, the Amended and Restated
Employment
Agreement and the Second Amended and Restated Employment 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.
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(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 Holdings II.
(g) "Cost of Living Allowance" means the amount paid to the
Executive
under Section 8(e).
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(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 the date of this Agreement.
(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
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 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.
(k) "Holdings Board" means the Board of Directors of Holdings.
(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).
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(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 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 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.
(s) "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 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.
3.
Positions; Duties; Responsibilities; and Place of Employment.
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(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 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 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 14 of this
Agreement.
4.
Base Salary. Commencing as of the Effective Date, 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 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 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.
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
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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 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.
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 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
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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.
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 term
