Wind River Insurance
Company, Ltd.
Canon’s Court
22 Victoria Street
Hamilton, Bermuda
October 6, 2005
Seth D. Freudberg
16 Hidden Cove
Hamilton, Bermuda
Dear Seth:
Set forth below are the terms and
conditions of our agreement (“Agreement”), which is
intended to be legally binding, regarding your separation of
employment from Wind River Insurance Company, Ltd. (the
“Company”) and its affiliates and your resignation from
various directorships and related positions. Reference is made to
the Second Amended and Restated Employment Agreement dated as of
May 4, 2004 between you and Wind River Insurance Company
(Bermuda), Ltd. (now Wind River Insurance Company, Ltd.) (the
“Prior Agreement”).
Resignations: You will resign your position as President
and Chief Executive Officer of the Company and as a Director of the
Company and any other officer or director positions you hold with
affiliates of the Company effective January 1, 2006 at
12:01 a.m.; provided, however, that the Company may assign you
to another senior executive position prior to such time. You agree
to cooperate fully with the Company and its affiliates to implement
the foregoing resignations. Attached as Annexes A-1, A-2 and A-3
are general forms of resignation letter to be delivered by you upon
the Company’s request. The Company will issue a press release
regarding your resignation that states the following: “Seth
Freudberg has retired from the Company to pursue other interests.
We thank Seth for his years of faithful service to the
Company.” Such statements will be made on the same day that a
public announcement is made regarding the appointment of a new
Chief Executive Officer for United America Indemnity, Ltd.
(“UAI”).
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Transition: Effective immediately and
continuing through to January 1, 2006 at 12:01 a.m., and
subject to your execution and non-revocation of this Agreement,
(the period from the execution of this Agreement through
January 1, 2006 is referred to as the “Transition
Period,” and January 1, 2006 is referred to as the
“Separation Date”), you shall remain an employee of the
Company or its affiliates. The Company shall continue to pay you,
on the Company’s regular monthly pay days, your current base
salary and health insurance and related insurance benefits, through
the end of the Transition Period. Upon the termination of the
Transition Period, the Company shall pay your then accrued but
unused vacation pay, any base pay and covered benefits still
remaining to be paid in respect of the Transition Period, and you
shall not be entitled to any bonus or other payments, benefits or
compensation other than those otherwise set forth in this
Agreement. As of the date hereof, you have eleven (11) unused
and accrued vacation days and you shall not accrue any additional
vacation, sick or personal days during the Transition Period.
During the Transition Period, you shall assist the Company and its
affiliates in the transition of all matters for which you had
responsibility while employed by the Company or any affiliate.
During the Transition Period, you shall perform such transition
duties as reasonably requested by the Board of Directors of the
Company (the “Board”) or the Chief Executive Officer or
General Counsel of UAI, and you will deliver any requested
documentation with respect to your resignation from offices and
directorships held by you with respect to the Company and its
affiliates. You agree that at all times during the Transition
Period and thereafter, you shall consult with, and provide all
reasonable assistance to, the auditors and counsel of the Company
and its affiliates (including United National Group of companies
(“UNG”)) with respect to (a) any matters involving
the Company or its affiliates (including UNG) that may arise in the
future that relate in any manner to your responsibilities and/or
positions while you are/were employed by the Company or its
affiliates (including UNG) and (b) the investigation, defense,
institution, prosecution and/or maintenance of potential and/or
existing claims and/or litigations (including United National
Insurance Company et al. v. Aon Limited et al. , U.S. District
Court, E.D. Pa., Civil Action No. 04-CV-539 (LHP) (the
“Aon Case”)) related to matters in which you were
involved or involving other executives or employees (and/or former
executives or employees) of the Company or its affiliates
(including UNG), or of which you had knowledge, during your
employment with the Company or its affiliates (including UNG)
(collectively, “Assistance”); such Assistance includes,
but is not limited to, your being represented by counsel for UNG
with respect to the Aon Case, and your being available upon
reasonable notice and upon the Company’s agreement to pay or
reimburse your properly documented and reasonable travel expenses
to attend (i) meetings with counsel and other representatives
of the Company and its affiliates (including UNG),
(ii) depositions and (iii) court hearings and related
matters (including your giving testimony at court proceedings in
which the Company or its affiliates (including UNG) may not
themselves be parties). The Company agrees that it shall compensate
you as an independent contractor at a rate of $275 per hour for
(I) Assistance requested with respect to the Aon Case that you
perform after the Transition Period and (II) after you have
performed twenty (20) hours of non-Aon Case Assistance,
Assistance relating to all other matters.
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House Rental/On-Island Travel/Moving Expenses: The
Company shall (i) continue to pay you until the period ending
December 31, 2005, (x) monthly payments of $12,500 as a
housing and living allowance and (y) monthly payments of
$1,000 as a travel allowance, and (ii) pay you up to $15,000
to be applied towards your documented reasonable moving costs to
transport your personal property back to the Philadelphia,
Pennsylvania area. The foregoing payments shall be subject to taxes
and withholding.
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Equity: Provided that this Agreement is
effective and subject to your non-revocation thereof:
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(i) Purchased Shares :
You purchased 50,000 Class A common shares of UAI (the
“Class A Shares”) pursuant to the Restricted Share
Purchase Agreement dated as of September 5, 2003 between you
and Vigilant International, Ltd. (now UAI and hereinafter referred
to as such) (the “Share Agreement”). The Class A
Shares are currently registered in book-entry form with the
Company’s stock transfer agent. Effective as of the dates
specified below, the Share Agreement shall not be applicable such
Class A Shares and consequently such Class A Shares shall
not be subject to any of the provisions of the MSA, including
without limitation the transfer restrictions of Article II and
the limited call and put rights of Article IV of the MSA;
accordingly, the shares that become released from restrictions
contained in the Share Agreement shall, as of the dates of the
release of such restrictions, be marketable, transferable and free
and clear of all restrictions on sale or transfer, subject only to
any applicable securities laws and regulations. The Share Agreement
shall become inapplicable to (x) 25,000 of the Class A
Shares beginning on November 7, 2005 and (y) 5,000 of the
remaining the Class A Shares beginning on each Monday
thereafter such that, as of December 12, 2005, (I) all of
the Class A Shares you own will be marketable, transferable
and free and clear of the restrictions which had been imposed by
the Share Agreement and the MSA and any other document or
agreement, subject only to applicable securities laws and
regulations and (II) the Share Agreement shall be void and
without force or effect.
(ii) Time Vesting and
Performance Vesting Options : You were granted 75,000
options to purchase Class A common shares of UAI at $10 per
share pursuant to the Time Vesting Stock Option Agreement dated as
of September 5, 2003 between you and UAI (the “Time
Vesting Stock Option Agreement”). The Company is in physical
possession of these Time Vesting Options. Effective as of
January 1, 2006, the Time Vesting Stock Option Agreement shall
not be applicable to the 15,000 options to purchase Class A
common shares of UAI in which you are vested as of the date
hereof (the “Time Vesting Options”). Furthermore, as of
such date, the 15,000 Time Vesting Options you will then own (and
any shares acquired upon exercise thereof) shall be free and clear
of any restrictions otherwise imposed under the Time Vesting Stock
Option Agreement or the MSA, including without limitation the
transfer restrictions of Article II and the limited call and
put rights of Article IV of the MSA. Such Time Vesting Options
may be exercised by you by payment to the Company (as provided in
subclause (vii) below) of the aggregate exercise price for the
Time Vesting Options. You hereby agree that (i) you are not vested
in any other options originally granted to you pursuant to the Time
Vesting Stock Option Agreement and the Performance Vesting Stock
Option Agreement between you and UAI dated as of September 5,
2003 (the “Performance Vesting Stock Option
Agreement”), (ii) all such unvested options shall be
cancelled as of the date hereof and (iii) the Time Vesting
Stock Option Agreement and the Performance Vesting Stock Option
Agreement shall be void and without force or effect as of
January 1, 2006. All UAI shares that you purchase after
January 1, 2006 as a result of your exercise of these 15,000
Time Vesting Options shall be marketable, transferable and free and
clear of all restrictions on sale or transfer, subject only to any
applicable securities laws and regulations.
(iii) Tranche A Options
: You were granted 200,000 “Tranche A Options” (as
defined in the MSA) ( i.e. , options to purchase
Class A common shares of UAI at $6.50/share) pursuant to the
Share Option Agreement dated as of September 5, 2003 between
yourself and UAI (the “Tranche A Option Agreement”).
The Company is in physical possession of these Tranche A Options.
Such Tranche A Options shall be treated as follows:
(x) effective as of the dates specified below, 106,175 of such
Tranche A Options may be exercised by you at any time beginning on
the dates set forth below by payment to the Company (as provided in
clause (vii) below) of the aggregate exercise price for those
Tranche A Options subject to exercise, and (y) effective as of
the date hereof, the remaining 93,825 Tranche A Options shall be
cancelled upon the execution of this Agreement and the payment to
you by the Company or an affiliate of $328,388, subject to
applicable taxes and withholding. Class A Shares acquired upon
the timely exercise of the Tranche A options referenced in
subclause (x) above (the “Exercisable Tranche A
Options”) shall no longer be subject to any of the provisions
of the MSA, including without limitation the transfer restrictions
of Article II and the limited call and put rights of
Article IV of the MSA. With respect to the 106,175 Exercisable
Tranche A Options, the Tranche A Option Agreement and the MSA shall
not apply to (I) 46,000 of such Exercisable Tranche A Options
(or shares acquired upon the exercise thereof) on November 7,
2005 and (II) 4,800 Exercisable Tranche A Options (or
shares acquired upon the exercise thereof) on each Monday
thereafter until December 12, 2005 as the last such Monday;
provided that as of January 1, 2006, (i) the Tranche A
Option Agreement and MSA shall not apply to any of the Exercisable
Tranche A Options (or shares acquired upon the exercise thereof)
and (ii) the Tranche A Option Agreement shall be void and
without force or effect and therefore, any Tranche A Options (or
shares acquired upon the exercise thereof) then owned by you
shall be free and clear of any restrictions otherwise imposed by
such Agreement or the MSA. All UAI shares that you purchase as a
result of your exercise of these Exercisable Tranche A Options upon
the release of restrictions on such Exercisable Tranche A Options
according to the above schedule, shall be marketable, transferable
and free and clear of all restrictions on sale or transfer.
(iv) MSA : For purposes
of this Agreement, “MSA” shall mean the Management
Shareholders’ Agreement, dated as of September 5, 2003,
by and among UAI, you and various management investors.
(v) Insider Trading
Policy : For so long as you are an employee of the Company,
UAI’s Insider Trading Policy shall apply to you with respect
to prospective sales of shares or exercises of options described
above. Accordingly, no shares shall be sold nor shall any options
be exercised prior to November 7, 2005 or between
December 15, 2005 and January 1, 2006.
(vi) Expiration : Any
unexercised Time Vesting Options and Exercisable Tranche A Options
as of April 1, 2006 shall be cancelled and expire immediately
on that date.
(vii) Logistics : You
have advised the Company that you have made arrangements with your
broker (as specified below) so that he will be able to freely sell
the Class A Shares on your behalf beginning no later than
twenty-four hours after the release of the restrictions contained
in the Share Agreement and the MSA (as provided for above). After
the release of the applicable restrictions in the MSA, the Tranche
A Option Agreement and/or the Time Vesting Option Agreement (as
provided for above) and upon the Company’s receiving a
request to exercise any then-unrestricted Time Vesting Options or
Tranche A Options from your broker along with the applicable
aggregate exercise price, the Company shall ensure that its stock
transfer agent delivers to your broker the then-unrestricted shares
applicable to such exercise by the end of the second business day
following the Company’s receipt of the exercise request and
applicable aggregate exercise price. With respect to the exercise
of the Time Vesting Options and the Tranche A Options, the
applicable minimum statutory withholding obligations may be settled
in shares otherwise due you as a result of such exercise or by
timely payment by you of the applicable withholding amounts or a
combination thereof, at your option; provided that you shall give
notice of your election when you request to exercise such options
and if no notice is provided, the Company shall elect the manner of
withholding; provided further that any fractional shares to be
withheld shall be settled in cash. You have indicated that your
broker is Mr. Thomas P. Duffin, Wachovia Securities, LLC, 2
Tower Bridge, Suite 200, Conshohocken, PA 19428, Phone Number:
610-832-7641, Email address: thomas.duffin@wachoviasec.com. You
acknowledge that your sales of shares of UAI and exercises of Time
Vesting Options and Tranche A Options may necessitate certain
securities filings, and you hereby agree to cooperate with UAI with
respect to any such filings as reasonably requested.
Post-Termination Covenants:
PROTECTION OF COMPANY INFORMATION. During the period of your
employment, or at any later time following the termination of your
employment, you shall hold in a fiduciary capacity for the benefit
of the Company and its
