Exhibit 10.1

 

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

 

 

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT is dated as of August 1, 2004
(the “Effective Date”), and is entered into between Max Re Capital Ltd.,
formerly known as Maximus Capital Holdings, Ltd. (the “Company”) and Robert
Cooney (“Executive”).

 

WHEREAS, the Company employs Executive as its President and Chief Executive
Officer and Chairman of its Board of Directors (the “Board”) pursuant to the
terms of an Employment Agreement between the Company and Executive dated August
1, 1999 (the “Prior Agreement”); and

 

WHEREAS, the Company desires to continue to retain the services of Executive and
Executive desires to continue to work for and be employed by the Company in the
capacity set forth above; and

 

WHEREAS, the parties now desire to enter into this Amended and Restated
Employment Agreement (the “Agreement”) setting forth the terms and conditions of
the employment relationship of Executive with the Company;

 

NOW, THEREFORE, in consideration of the mutual premises, covenants and
agreements set forth below, it is hereby agreed as follows:

 

ARTICLE I.

 

EMPLOYMENT, DUTIES AND RESPONSIBILITIES

 

  1.1 Employment.

 

(a) The Company shall continue to employ Executive as President and Chief
Executive Officer of the Company. Executive agrees to devote his full business
time, efforts and energies to the performance of his duties hereunder. Executive
agrees to continue to serve as the Chairman of the Board and/or on the board of
any affiliate as a director and/or to serve as an officer of any affiliate at a
level commensurate with his position as may be reasonably requested by the Board
without additional compensation. Executive further agrees to serve as the
principal representative of any Bermuda insurance or reinsurance subsidiary of
the Company, for the purposes of the Bermuda Insurance Act 1978 (as amended).
Executive’s principal office location and the executive offices of the Company
shall be in Bermuda. Notwithstanding the foregoing, to the extent the following
do not materially interfere with the performance of Executive’s duties
hereunder, Executive shall be permitted to (i) manage his personal affairs; (ii)
be involved with charitable and professional activities and (iii) with the

 

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consent of the Board, which consent shall not be unreasonably withheld,
conditioned or delayed, serve on the board of directors of non-charitable
entities.

 

(b) Executive agrees that, so long as he is employed by the Company, he will not
own, directly or indirectly, any controlling or substantial stock or other
beneficial interest in any business enterprise which is engaged in, or
competitive with, any business engaged in by the Company. Notwithstanding the
foregoing, Executive (i) shall be permitted to maintain his equity holdings in
his prior employer and (ii) may own, directly or indirectly, up to one percent
(1%) of the outstanding capital stock or debt of any business having a class of
capital stock that is traded on any national stock exchange or on the
over-the-counter market and upon approval of the Board or as otherwise set forth
on Exhibit B attached hereto on the Effective Date, may be a passive investor in
investment entities so long as his interest therein is less than one percent
(1%).

 

1.2 Duties and Responsibilities. Executive shall have such authority, duties and
responsibilities as are customary and consistent with his position and such
other duties and responsibilities as are determined from time to time by the
Board and commensurate with his position. During the Term, Executive shall
report solely and directly to the Board.

 

ARTICLE II.

 

TERM

 

2.1 Term. The term of employment under this Agreement (the “Initial Term”) shall
commence on August 1, 2004 (the “Commencement Date”) and subject to earlier
termination under Article V, continue for a period of five (5) years; provided,
that, commencing on the fifth anniversary of the Commencement Date, the Initial
Term shall automatically renew for successive one year periods (the “Additional
Term”), subject to earlier termination under Section 5, unless either party
provides written notice of non-renewal to the other at least ninety (90) days
prior to the end of the Initial Term or the then Additional Term. The Initial
Term and any Additional Term shall be referred to under this Agreement as the
“Term”. Upon termination of the Term or as soon thereafter as possible,
howsoever terminated, Executive shall deliver to the Company and each affiliate
of the Company, if applicable, letters of resignation from directorships,
officerships and any appointment as principal representative (referred to in
Section 1.1 above). This obligation shall survive termination of the Executive’s
employment.

 

ARTICLE III.

 

COMPENSATION

 

3.1 Salary, Bonuses and Benefits. As compensation and consideration for the
performance by Executive of his obligations under this Agreement, Executive
shall be entitled to the following (subject, in each case, to the provisions of
Article V hereof):

 

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(a) The Company shall pay Executive a base salary during the Term, payable in
accordance with the normal payment procedures of the Company as they may exist
from time to time and subject to such withholdings and other normal employee
deductions as may be required by law, at the rate of $675,000 (U.S.) per annum.
The Company agrees to review such compensation not less frequently than annually
during the Term commencing in January, 2006. Once increased, the base salary
shall not be reduced. The base salary as increased from time to time shall be
referred to herein as “Base Salary”.

 

(b) Executive shall participate during the Term in such pension, life insurance,
health, disability and major medical insurance plans, and in such other employee
benefit plans and programs and fringes and perquisites, for the benefit of the
employees of the Company, as may be maintained from time to time during the
Term, in each case to the extent and in the manner available to other senior
executives or officers of the Company and subject to the terms and provisions of
such plans or programs. In addition, Executive shall receive an automobile
allowance of up to $46,000 every 4 years for a car purchase, the payment of
country club dues not to exceed $10,000 (U.S.) annually, and the payment of a
housing allowance not to exceed $10,000 (U.S.) per month, or, if more favorable
to Executive in the aggregate, as otherwise provided by the Company for senior
executive officers of the Company. Notwithstanding the foregoing, Executive’s
housing allowance shall be no less than any other executive officer of the
Company.

 

(c) For each calendar year beginning with 2004 (the “Bonus Year”), the Company
shall pay a bonus to Executive based on pre-established performance goals
established by the Board with a target bonus of 100% of Base Salary and a range
from 0% to 250% of Base Salary (the “Bonus”).

 

(d) Executive shall be entitled to six weeks of paid vacation in accordance with
the Company policy as it may exist from time to time (but not necessarily
consecutive vacation weeks) during each year of the Term.

 

(e) As soon as practicable following the Effective Date, the Company shall grant
Executive 100,000 restricted common shares (the “Restricted Stock”) pursuant to
the Company’s stock incentive plan and consistent with the terms set forth in
this paragraph (e).

 

(i) 33-1/3% of the Restricted Stock shall vest on December 31, 2005 if the book
value of the underlying common shares measured as of December 31, 2004 is at
least 10% greater on December 31, 2005 (such number which is exactly 10% more
than the book value on December 31, 2004 to be referred to as “Baseline 1”);
provided, that, Executive is still employed by the Company on the vesting date
(“Tranche l”);

 

(ii) 33-1/3% of the Restricted Stock shall vest on the December 31, 2006 if the
book value of the underlying common shares is at least 10% greater than Baseline
1 on December 31, 2006 (such number which is exactly 10% more

 

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than Baseline 1 to be referred to as “Baseline 2”); provided, that, Executive is
still employed by the Company on the vesting date (“Tranche 2”). If Tranche 1
does not vest on December 31, 2005, but Baseline 2 is achieved as of December
31, 2006, then Tranche 1 shall vest as of such date; provided, that, Executive
is still employed by the Company on the vesting date.

 

(iii) 33-1/3% of the Restricted Stock shall vest on December 31, 2007 if the
book value of the underlying common shares is at least 10% greater than Baseline
2 on December 31, 2007 (such number which is exactly 10% more than Baseline 2 to
be referred to as “Baseline 3”); provided, that, Executive is still employed by
the Company on the vesting date. If Tranche 1 and/or Tranche 2 are not vested on
December 31, 2005 and/or December 31, 2006, as the case may be, but Baseline 3
is achieved as of December 31, 2007, then both such tranches shall vest as of
such date; provided, that, Executive is still employed by the Company on the
vesting date.

 

Example: Assume the book value of a common share is $100 on December 31, 2004.
Therefore, Baseline 1 is $110, Baseline 2 is $121 and Baseline 3 is $133.1. As
such, as long as the book value is at least $133.1 by December 31, 2007, 100% of
the Restricted Stock shall vest if Executive is employed as of the relevant
vesting date(s).

 

(iv) Notwithstanding the foregoing, if Executive’s employment is terminated by
the Company without Cause (as defined below) or Executive’s employment is
terminated by the Executive for Good Reason (as defined below) on or following a
Change in Control (as defined below) or in the event of Executive’s retirement
at the end of the Term, all unvested Restricted Stock granted in accordance with
this paragraph (e) and any future equity awards granted to Executive by the
Company shall become immediately vested in full upon such termination.

 

(v) In the event Executive dies or Executive’s employment is terminated by the
Company for Disability (as defined below) at any time during the Term, all
unvested Restricted Stock granted under this paragraph (e) shall become
immediately vested upon such termination.

 

For purposes of this Agreement, a Change in Control shall mean (i) any sale,
lease, exchange or other transfer (in one or a series of related transactions)
of all or substantially all of the assets of the Company or Max Re Ltd.; (ii)
any “person” as such term is used in Section 13(d) and Section 14(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) is or becomes,
directly or indirectly, the “beneficial owner” as defined in Rule 13d-3 under
the Exchange Act of securities of the Company that represent 51% or more of the
combined voting power of the Company’s then outstanding voting securities; or
(iii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board (together with any new directors
whose election by the Board whose nomination by the shareholders of the Company
was approved by a vote of the Board then still in office who are either
directors at the beginning of such period or whose election or nomination for
election was so previously approved) cease for any reason to constitute a
majority of the Board then in office.

 

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3.2 Prior Loans. The terms and conditions of any loans previously made by the
Company to Executive shall be unaffected by this Agreement and shall continue to
be governed by the Prior Agreement and any loan documents previously executed by
Executive.

 

3.3 Expenses. The Company will reimburse Executive for reasonable
business-related expenses incurred by him in connection with the performance of
his duties hereunder during the Term in accordance with the Company’s policies
relating to business-related expenses as in effect from time to time during the
Term.

 

ARTICLE IV.

 

EXCLUSIVITY, ETC.

 

  4.1 Restrictive Covenants.

 

(a) Return of Property and Nondisclosure. Upon termination or expiration of his
employment, Executive will promptly deliver to the Company all data, lists,
information, memoranda, documents and all other property belonging to the
Company or containing “Confidential Information” (as defined below), including,
among other things, that which relates to services performed by Executive for
the Company or any affiliate, or was created or obtained by Executive while
performing services for the Company or any affiliate or by virtue of Executive’s
relationship with the Company or any affiliate, except that Executive shall have
no obligation to deliver to the Company his rolodex, calendars and any documents
containing Executive’s personal contacts or information. Except (i) as required
in order to perform his obligations under this Agreement, (ii) as may otherwise
be required by law or any legal process, or (iii) as is necessary in connection
with any adversarial proceeding against the Company (in which case Executive
shall use his reasonable best efforts in cooperating with the Company in
obtaining a protective order against disclosure by a court of competent
jurisdiction), Executive shall not, without the express prior written consent of
the Company, disclose or divulge to any other person or entity, or use or modify
for use, directly or indirectly, in any way, for any person or entity, any of
the Company’s or any affiliate’s Confidential Information at any time (during or
after Executive’s employment). For purposes of this Agreement, “Confidential
Information” of the Company shall mean any valuable, competitively sensitive
data and information related to the Company’s or any affiliate’s business
including, without limitation Trade Secrets (as defined below) that are not
generally known by or readily available to the Company’s or any affiliate’s
competitors other than as a result of an improper disclosure directly or
indirectly by Executive. “Trade Secrets” shall mean information or data of the
Company or any affiliates including, but not limited to, technical or
non-technical data, financial information, programs, devices, methods,
techniques, drawings, processes, financial plans, product plans, or lists of
actual or potential customers or suppliers, that: (A) derive economic value,
actual or potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value
from

 

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their disclosure or use; and (B) are the subject of efforts that are reasonable
under the circumstances to maintain their secrecy.

 

(b) Post-Employment Property. Executive agrees that any and all intellectual
property that Executive invents, discovers, originates, makes, conceives,
creates or authors either solely or jointly with others and that is the result
of or is substantially derived from Confidential Information shall be the sole
and exclusive property of the Company unless in the public domain. Executive
shall promptly and fully disclose all such property to the Company, shall
provide the Company with any information that it may reasonably request about
such property and shall execute such agreements, assignments or other
instruments as may be reasonably requested by the Company to reflect such
ownership by the Company.

 

(c) Protection of the Business; Nonsolicitation. During the Term and until the
second anniversary of Executive’s Date of Termination (as defined below) for any
reason, Executive will not anywhere within the geographical areas in which the
Company or any subsidiary (the “Designated Entities”) are conducting their
business operations or providing services as of the Date of Termination, pursue
any Company or subsidiary project known to Executive and which the Designated
Entities are actively pursuing, developing or attempting to develop as of the
Date of Termination (or within six (6) months prior to the Date of Termination)
while the Company is (or is contemplating actively) pursuing such project
directly or indirectly, alone, in association with or as a shareholder,
principal, agent, partner, officer, director, employee or consultant of any
other organization. During the Term and until the second anniversary of
Executive’s Date of Termination, Executive shall not solicit any officer,
employee (other than secretarial staff) or consultant of any of the Designated
Entities to leave the employ of any of the Designated Entities.

 

(d) Non-Disparage. The parties acknowledge and agree that they will not defame
or publicly criticize the services, business, integrity, veracity or personal or
professional reputation of the other party, and in the case of the Company, its
officers, directors, partners, employees, affiliates, or agents thereof in
either a professional or personal manner, except that the foregoing shall not
limit normal competitive activities.

 

(e) Blue Pencil. If, at any time, the provisions of this Section 4.1 shall be
determined to be invalid or unenforceable under any applicable law, by reason of
being vague or unreasonable as to area, duration or scope of activity, this
Section 4.1 shall be considered divisible and shall become and be immediately
amended to only such area, duration and scope of activity as shall be determined
to be reasonable and enforceable by the court or other body having jurisdiction
over the matter; and Executive and the Company agree that this Section 4.1 as so
amended shall be valid and binding as though any invalid or unenforceable
provision had not been included herein.

 

4.2 Remedies. Executive acknowledges that the Company’s remedy at law for a
breach by him of the provisions of this Article IV will be inadequate.
Accordingly, in the event of a breach or threatened breach by Executive of any
provision of this Article IV, the Company shall be entitled to seek injunctive
relief in Bermuda or elsewhere in

 

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addition to any other remedy it may have. If any of the provisions of, or
covenants contained in, this Article IV are hereafter construed to be invalid or
unenforceable in any jurisdiction, the same shall not affect the remainder of
the provisions or the enforceability thereof in any other jurisdiction, which
shall be given full effect, without regard to the invalidity or unenforceability
in such other jurisdiction. If any of the provisions of, or covenants contained
in, this Article IV are held to be unenforceable in any jurisdiction because of
the duration or geographical scope thereof, the parties agree that the court
making such determination shall have the power to reduce the duration or
geographical scope of such provision or covenant and, in its reduced form, such
provision or covenant shall be enforceable; provided, however, that the
determination of such court shall not affect the enforceability of this Article
IV in any other jurisdiction.

 

ARTICLE V.

 

TERMINATION

 

5.1 Termination by the Company with Cause. The Company shall have the right to
terminate Executive’s employment at any time with “Cause” by providing a Notice
of Termination to Executive not more than thirty (30) days after the Board’s
actual knowledge of the Cause event, and such termination shall not be deemed to
be a breach of this Agreement. For purposes of this Agreement, “Cause” shall
mean (i) habitual drug or alcohol use which impairs the ability of Executive to
perform his duties hereunder; (ii) Executive’s conviction during the Term by a
court of competent jurisdiction, or a pleading of “no contest” or guilty to a
felony or the equivalent if outside the United States; (iii) Executive’s
engaging in fraud, embezzlement or any other illegal conduct with respect to the
Company which acts are materially harmful to, either financially, or to the
business reputation of, the Company; (iv) Executive’s willful violation of
Article IV hereof; (v) Executive’s willful failure or refusal to perform his
duties hereunder (other than such failure caused by Executive’s Disability or
while on vacation), after a written demand for performance is delivered to
Executive by the Board that specifically identifies the manner in which the
Board believes that Executive has failed or refused to perform his duties, or
(vi) Executive otherwise breaches any material provision of this Agreement which
is not cured, if curable, within 30 days after written notice thereof. Executive
will be given the opportunity within five (5) calendar days of receipt of such
notice to meet with the Board to defend such act or acts or failure to act. No
act or failure to act by Executive shall be deemed “willful” unless done, or
omitted to be done, (i) by Executive not in good faith and (ii) without a
reasonable belief that his action or omission was in the best interest of the
Company. However, acts or failures to act will not be deemed to be “willful” if
Executive is specifically directed to take (or not take) such action by the
Board, unless Executive in good faith believes such directives are illegal and
Executive promptly notifies the Board thereof.

 

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5.2. Death. In the event Executive dies during the Term, his employment shall
automatically terminate effective on the date of his death and such termination
shall not be deemed to be a breach of this Agreement.

 

5.3. Disability. In the event that Executive shall suffer a mental or physical
disability which shall have prevented him from performing his material duties
hereunder for a period of at least one-hundred eighty (180) consecutive days or
one-hundred eighty (180) non-consecutive days within any 365 day period, the
Company shall have the right to terminate Executive’s employment for
“Disability,” such termination to be effective upon the giving of notice thereof
to Executive in accordance with Section 6.3 hereof and such termination shall
not be deemed to be a breach of this Agreement. In such event, Executive’s
employment hereunder shall terminate effective on the 30th day after receipt of
such notice by the Executive (the “Disability Effective Date”); provided, that,
Executive shall not have returned to full-time performance of his duties
hereunder within thirty (30) days following receipt of such notice.

 

5.4. Good Reason. Executive may terminate his employment with the Company for
“Good Reason” within thirty (30) days after Executive has knowledge of the
occurrence, without Executive’s written consent, of one of the following events
that has not been cured, if curable, within thirty (30) days after a Notice of
Termination has been given by Executive to the Company and such termination
shall not be deemed to be a breach of this Agreement. For purposes of this
Agreement, “Good Reason” shall mean: (i) any material and adverse change to
Executive’s duties or authority which is inconsistent with his title and
position set forth herein, (ii) a diminution of Executive’s title or position;
(iii) the relocation of Executive’s office outside of Bermuda; (iv) a reduction
of Executive’s Base Salary; (v) a material reduction of Executive’s benefits
provided under Section 3.1 other than a reduction permitted under terms and
conditions of the applicable Company policy or benefit plan; or (vi) a failure
by the Company to comply with any other material provisions of this Agreement.

 

5.5. Without Good Reason. Executive may terminate his employment with the
Company without Good Reason by giving written notice to the Company as provided
in Section 6.3. Such notice must be provided to the Company at least thirty (30)
days prior to such termination. Such termination shall not be deemed to be a
breach of this Agreement.

 

5.6. Without Cause. The Company shall have the right to terminate Executive’s
employment hereunder without Cause by providing Executive with written notice of
termination as provided in Section 6.3, and such termination shall not in and of
itself be, nor shall it be deemed to be, a breach of this Agreement.

 

5.7. Expiration of the Term. Executive’s employment shall terminate upon the
expiration of the Term, and such termination shall not in and of itself be, nor
shall it be deemed to be, a breach of this Agreement. Notwithstanding the
foregoing, in the event such termination is a result of the Company providing a
notice of non-renewal of the

 

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Term under Section 2.1 of this Agreement, Executive shall be entitled to the
benefits set forth in Section 5.10(c).

 

5.8. Notice of Termination. Any termination of Executive’s employment by the
Company for Cause, or by Executive for Good Reason, shall be communicated by
Notice of Termination to the other party hereto given in accordance with Section
6.3 of this Agreement. For purposes of this Agreement, a “Notice of Termination”
means a written notice which (i) indicates the specific termination provision in
this Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive’s employment under the provision so indicated and (iii)
if the Date of Termination (as defined below) is other than the date of receipt
of such notice, specifies the termination date. The failure by Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
Executive or the Company, respectively, hereunder or preclude Executive or the
Company, respectively, from asserting such fact or circumstance in enforcing
Executive’s or the Company’s rights hereunder.

 

5.9. Date of Termination. “Date of Termination means (i) if Executive’s
employment is terminated by the Company for Cause or by Executive for Good
Reason, the date of receipt of the Notice of Termination or any later date
specified therein (but not more than thirty (30) days), as the case may be
(although such Date of Termination shall retroactively cease to apply if the
circumstances providing the basis of termination for Cause or Good Reason are
cured in accordance with Section 5.1 or 5.4 of this Agreement, respectively),
(ii) if Executive’s employment is terminated by the Company other than for
Cause, the Date of Termination shall be the date set forth in the Notice of
Termination (iii) if Executive’s employment is terminated by Executive without
Good Reason, the Date of Termination shall be the date set forth in the Notice
of Termination, but no sooner than thirty (30) days after such Notice of
Termination is received by the Company and (iv) if Executive’s employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of Executive’s death or the Disability Effective Date, as the case may
be.

 

5.10. Compensation upon Termination. In the event of the termination of
Executive’s employment during or at the end of the Term, the Company shall
provide Executive with the payments and benefits set forth below. Executive
acknowledges and agrees that the payments set forth in this Section 5.10
constitute liquidated damages for any claim of breach of contract under this
Agreement as it relates to termination of his employment during the Term.
Notwithstanding the foregoing, if Executive is entitled to the payments set
forth in Section 5.10(b), Section 5.10(c) or Section 5.10(d) of this Agreement,
Executive shall execute and agree to be bound by an agreement relating to the
waiver and general release of any and all claims (other than claims for the
compensation and benefits payable under Section 5.10(b), Section 5.10(c) or
Section 5.10(d), as the case may be) arising out of or relating to Executive’s
employment and termination of employment (the “Release”). Such Release shall be
made substantially in the form attached hereto as Exhibit A, subject to such
changes as may be required to preserve the intent thereof for changes in
applicable law.

 

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(a) In the event of termination of Executive’s employment by the Company for
Cause or by Executive without Good Reason, or by reason of expiration of the
Term in accordance with Executive’s notice of non-renewal of the term to the
Company under Section 2.1 of this Agreement, the Company shall pay Executive his
accrued, but unpaid Base Salary and unpaid business expenses through the Date of
Termination. To the extent required by law or as otherwise provided by Company
policy, Executive shall also be paid his accrued, but unpaid vacation pay
through the Date of Termination.

 

(b) In the event of Executive’s death or the termination of his employment due
to Disability, the Company shall pay to Executive (or his beneficiary(ies) or
estate, as the case may be) an amount equal to the sum of (i) his accrued, but
unpaid Base Salary through the date of termination of employment, (ii) earned,
but unpaid Bonus for the year prior to the year of termination, (iii) a pro-rata
portion of his Bonus for the year of death or termination for Disability, as
determined in the good faith opinion of the Board based on the relative
achievement of performance targets through the Date of Termination, (iv) accrued
vacation pay through the Date of Termination (the sum of the amounts in clauses
(i) through (iv) hereof referred to as “Accrued Amounts”), as soon as
practicable following the Date of Termination. Executive shall be entitled to
any other rights, compensation and/or benefits as may be due to Executive in
accordance with the terms and provisions of any agreements, plans or programs of
the Company.

 

(c) In the event Executive’s employment is terminated pursuant to Section 5.4 or
Section 5.6 or if the Company delivers notice of non-renewal of the Term under
Section 2.1 effective at the end of the Term, the Company shall pay Executive,
the Accrued Amounts and a cash payment equal to a pro-rata amount, calculated on
a daily basis, between $675,000 (U.S.) and $1,850,000 (U.S.) (the “Severance
Amount”), with $1,850,000 (U.S.) corresponding to a termination on the
Commencement Date and $675,000 (U.S.) corresponding to a termination on the
fifth anniversary thereof. If the Term is renewed in accordance with Section 2.1
and this clause (c) becomes applicable thereafter, the Severance Amount shall be
equal to $675,000 (U.S.) for any such termination following the fifth
anniversary of the Commencement Date. Notwithstanding the foregoing, if such
termination should occur following a Change in Control, in lieu of the Severance
Amount, Executive shall receive a lump sum payment equal to three times his then
current Base Salary and last paid Bonus, if any.

 

(d) (i) Anything in this Agreement to the contrary notwithstanding, in the event
that any payment, award, benefit or distribution (or any acceleration of any
payment, award, benefit or distribution) by the Company or any entity which
effectuates a change in ownership or effective control of the Company or a
change in the ownership of a substantial portion of the assets of the Company,
in either case, within the meaning of Section 280G(b)(2)(A)(i) of the Internal
Revenue Code of 1986, as amended (the “Code”) and the regulations promulgated
thereunder (a “Change in Ownership”), to or for the benefit of Executive (the
“Payments”) is subject to the excise

 

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tax imposed by Section 4999 of the Code, or any interest or penalties are
incurred by Executive with respect to such excise tax (such excise tax, together
with any such interest and penalties, are hereinafter collectively referred to
as the “Excise Tax”), then, the Company shall pay to Executive an additional
payment (a “Gross-Up Payment”) in an amount such that after payment by Executive
of all taxes (including any Excise Tax) imposed upon the Gross-Up Payment,
Executive retains an amount of the Gross-Up Payment equal to the sum of (x) the
Excise Tax imposed upon the Payments and (y) the product of any deductions
disallowed because of the inclusion of the Gross-Up Payment in Executive’s
adjusted gross income and the highest applicable marginal rate of federal income
taxation for the calendar year in which the Gross-Up Payment is to be made. For
purposes of determining the amount of the Gross-Up Payment, Executive shall be
deemed to (A) pay federal income taxes at the highest marginal rates of federal
income taxes at the highest marginal rate of taxation for the calendar year in
which the Gross-Up Payment is to be made, (B) pay applicable state and local
income taxes at the highest marginal rate of taxation for the calendar year in
which the Gross-Up Payment is to be made, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state and
local taxes and (C) have otherwise allowable deductions for federal income tax
purposes at least equal to those which could be disallowed because of the
inclusion of the Gross-Up Payment in Executive’s adjusted gross income.
Notwithstanding the foregoing provisions of this Section 5.10(d)(i), if it shall
be determined that Executive is entitled to a Gross-Up Payment, but that the
Payments would not be subject to the Excise Tax if the Payments were reduced by
an amount that is less than $50,000 (U.S.), then the amounts payable to
Executive under this Agreement shall be reduced (but not below zero) to the
maximum amount that could be paid to Executive without giving rise to the Excise
Tax (the “Safe Harbor Cap”), and no Gross-Up Payment shall be made to Executive.
The reduction of the amounts payable hereunder, if applicable, shall be made by
reducing first the payments under Section 5.10(c), unless an alternative method
of reduction is elected by Executive. For purposes of reducing the Payments to
the Safe Harbor Cap, only amounts payable under this Agreement (and no other
Payments) shall be reduced. If the reduction of the amounts payable hereunder
would not result in a reduction of the Payments to the Safe Harbor Cap, no
amounts payable under this Agreement shall be reduced pursuant to this
provision.

 

(ii) Subject to the provisions of Section 5.10(d)(i), all determinations
required to be made under this Section 5.10(d), including whether and when a
Gross-Up Payment is required, the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determinations, shall be made by
the public accounting firm that is retained by the Company as of the date
immediately prior to the Change in Ownership (the “Accounting Firm”) which shall
provide detailed supporting calculations both to the Company and Executive
within fifteen (15) business days of the receipt of notice from the Company or
Executive that there has been a Payment, or such earlier time as is requested by
the Company (collectively, the “Determination”). In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting the Change in Ownership, Executive may appoint another U.S.
nationally recognized public accounting firm to make the determinations required

 

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hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company and the Company shall enter into any agreement requested
by the Accounting Firm in connection with the performance of the services
hereunder. The Gross-Up Payment under this Section 5.10(d) with respect to any
Payments made to Executive shall be made no later than thirty (30) days
following such Payment. If the Accounting Firm determines that no Excise Tax is
payable by Executive, it shall furnish Executive with a written opinion to such
effect, and to the effect that failure to report the Excise Tax, if any, on
Executive’s applicable federal income tax return should not result in the
imposition of a negligence or similar penalty. In the event the Accounting Firm
determines that the Payments shall be reduced to the Safe Harbor Cap, it shall
furnish Executive with a written opinion to such effect. The Determination by
the Accounting Firm shall be binding upon the Company and Executive.

 

(iii) As a result of the uncertainty in the application of Section 4999 of the
Code at the time of the Determination, it is possible that Gross-Up Payments
which will not have been made by the Company should have been made
(“Underpayment”) or Gross-Up Payments are made by the Company which should not
have been made (“Overpayment”), consistent with the calculations required to be
made hereunder. In the event that Executive thereafter is required to make
payment of any Excise Tax or additional Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of
Executive. In the event the amount of the Gross-Up Payment exceeds the amount
necessary to reimburse Executive for his Excise Tax, the Accounting Firm shall
determine the amount of the Overpayment that has been made and any such
Overpayment shall be promptly paid by Executive (to the extent he has received a
refund if the applicable Excise Tax has been paid to the Internal Revenue
Service) to or for the benefit of the Company. Executive shall cooperate, to the
extent his expenses are reimbursed by the Company, with any reasonable requests
by the Company in connection with any contest or disputes with the Internal
Revenue Service in connection with the Excise Tax.

 

(e) Except as provided in this Agreement, Executive’s rights upon termination of
employment with respect to incentive awards shall be governed by the terms and
conditions of the plan and any agreements or as established by the Company with
respect to such awards.

 

(f) Except as provided in this Section 5.10, Executive shall not be entitled to
compensation as a result of any termination of his employment with the Company.

 

ARTICLE VI.

 

MISCELLANEOUS

 

6.1 Mitigation; Offset. Except as specifically provided hereunder, Executive
shall not be required to mitigate damages resulting from his termination of
employment

 

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and the amounts payable to Executive pursuant to this Agreement shall not be
offset or reduced by any other compensation earned by Executive other than with
respect to any loans between the Company and Executive.

 

6.2 Benefit of Agreement; Assignment; Beneficiary.

 

(a) This Agreement shall inure to the benefit of and be binding upon the Company
and its successors, including, without limitation, any assignment to a
corporation or person which may acquire all or substantially all of the
Company’s assets or business, or with or into which the Company may be
consolidated or merged. This Agreement shall also inure to the benefit of, and
be enforceable by, Executive and his personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If Executive should die while any amount would still be payable to
Executive hereunder if he had continued to live, all such amounts shall be paid
in accordance with the terms of this Agreement to Executive’s beneficiary,
devisee, legatee or other designee, or if there is no such designee, to
Executive’s estate.

 

(b) The Company shall require any successor (whether direct or indirect, by
operation of law, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place.

 

6.3 Notices. Any notice required or permitted hereunder shall be in writing and
shall be sufficiently given if personally delivered or if sent by registered or
certified mail, postage prepaid, with return receipt requested, addressed: (a)
in the case of the Company to its principal executive offices, Attention:
Corporate Secretary, or to such other address and/or to the attention of such
other person as the Company shall designate by written notice to Executive; and
(b) in the case of Executive, to the Company’s address or to such other address
as Executive shall designate by written notice to the Company. Any notice given
hereunder shall be deemed to have been given at the time of receipt thereof by
the person to whom such notice is given, if in person, or two (2) days following
depositing such notice in the mail or its equivalent.

 

6.4 Entire Agreement; Amendment. This Agreement contains the entire agreement of
the parties hereto with respect to the terms and conditions of Executive’s
employment during the Term and except as otherwise provided herein, supersedes
any and all prior agreements and understandings, including, without limitation,
the Prior Agreement, whether written or oral, between the parties hereto with
respect to compensation due for services rendered hereunder. This Agreement may
not be changed or modified except by an instrument in writing signed by both of
the parties hereto.

 

6.5 Waiver. The waiver by either party of a breach of any provision of this
Agreement shall not operate or be construed as a continuing waiver or as a
consent to or waiver of any subsequent breach hereof.

 

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6.6 Headings. The Article and Section headings herein are for convenience of
reference only, do not constitute a part of this Agreement and shall not be
deemed to limit or affect any of the provisions hereof.

 

6.7 Governing Law. This Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York without
reference to the principles of conflict of laws.

 

6.8. Agreement to Take Actions. Each party hereto shall execute and deliver such
documents, certificates, agreements and other instruments, and shall take such
other actions, as may be reasonably necessary or desirable in order to perform
his or its obligations under this Agreement or to effectuate the purposes
hereof.

 

6.9. Survivorship. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations,
including, but not limited to, Article IV.

 

6.10. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision or provisions of this Agreement which shall remain in full
force and effect.

 

6.11. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.

 

6.12. Indemnification. The Company will indemnify and hold Executive harmless
both during and after the Term to the fullest extent permitted by law with
regard to actions or inactions in relation to the Executive’s duties as a
director and officer of the Company and will, during and after the Term,
maintain adequate directors and officers insurance for Executive to cover any
such liability (but in no event less than that maintained for any other director
or officer of the Company).

 

6.13. Arbitration. Except as otherwise provided in Article IV of this Agreement,
if any contest or dispute arises between the parties with respect to this
Agreement, such contest or dispute shall be submitted to binding arbitration for
resolution in Bermuda in accordance with the rules and procedures of the
American Arbitration Association then in effect. The decision of the arbitrator
shall be final and binding on both parties, and any court of competent
jurisdiction may enter judgment upon the award. Each party shall pay its own
legal fees and expenses incurred in connection therewith. Notwithstanding the
foregoing, following a Change in Control, the Company shall reimburse Executive
for his reasonable legal fees and expenses incurred in any such dispute if the
arbitrator so decides and Executive is successful on any material claims raised
in such dispute.

 

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6.14. Withholding. All payments hereunder shall be subject to any required
withholding of Federal, state and local taxes pursuant to any applicable law or
regulation.

 

6.15. Representation. Executive represents and warrants to the Company that (i)
to the best of his knowledge, neither the execution and delivery of this
Agreement nor the performance of his duties hereunder violates or will violate
the provisions of any other agreement to which he is a party or by which he is
bound other than potential confidentiality issues under Bermuda law and (ii) he
has Bermuda status under the meaning of Bermuda law.

 

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IN WITNESS WHEREOF, each of the parties hereto has duly executed this Agreement
effective as of the date first above written.

 

 

MAX RE CAPITAL LTD.

By:     

 

/s/    Keith S. Hynes

   

Name:  Keith S. Hynes

Title:    Executive Vice President and

   Chief Financial Officer

 

Executive:  

/S/    ROBERT J. COONEY

   

Name: Robert J. Cooney

 

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