EXHIBIT 10.36
EMPLOYMENT AGREEMENT
(As amended and restated effective as of October 1, 2009)
     This Amended and Restated Employment Agreement (the “Agreement”) is made
and entered into as of October 1, 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”).
WITNESSETH
     WHEREAS, Executive is the Chief Financial Officer of the Employer;
     WHEREAS, Employer and Executive originally entered into the Agreement
effective as of August 15, 2006;
     WHEREAS, the Agreement has been amended from time to time, the most recent
amendment being effective as of July 31, 2009; 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:
ARTICLE I
EMPLOYMENT AND DUTIES; COMPENSATION
Section 1: Duties.
     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

2

--------------------------------------------------------------------------------

 

may, by mutual written agreement, extend Executive’s employment under the terms
of this Agreement for such additional periods as they may agree.
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):
(a) Base Salary:
     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.
(b) Bonus Pool:
     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

3

--------------------------------------------------------------------------------

 

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 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

4

--------------------------------------------------------------------------------

 

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.
     (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

5

--------------------------------------------------------------------------------

 

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 (i) as
a result of Employer having made 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 or (ii) following the consummation of a transaction or series of
transactions which results in Fairfax Financial Holdings Limited (“Fairfax”) or
any of its subsidiaries acquiring direct or indirect beneficial ownership of all
or substantially all of the outstanding common stock of Employer.
     (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

6

--------------------------------------------------------------------------------

 

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.
(e) Living Allowance:
     (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

7

--------------------------------------------------------------------------------

 

Executive in connection with Executive and Executive’s family moving from their
residence; and (c) such other expenses reasonably related to Executive’s move.
(f) Additional Benefits:
     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

8

--------------------------------------------------------------------------------

 

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.
     (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, and its subsidiaries,
since April 15, 1999.
ARTICLE II
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:
(a) Base Salary:
     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

9

--------------------------------------------------------------------------------

 

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.
(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.
(c) Restricted Stock:
     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

10

--------------------------------------------------------------------------------

 

to commence process to terminate Executive’s employment under this Agreement on
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

11

--------------------------------------------------------------------------------

 

terminated on account of disability, Executive’s rights to compensation and
benefits shall be as follows:
(a) Base Salary:
     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.
(c) Restricted Stock:
     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).
(d) Living Allowance:

12

--------------------------------------------------------------------------------

 

     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.
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.

13

--------------------------------------------------------------------------------

 

     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:
     Within thirty (30) days of the date of Executive’s Termination for Cause,
Executive shall be paid his pro rated Base Salary, as determined in accordance
with the terms of Section 3(a) of Article I, and his Living Allowance, if
applicable, as determined in accordance with the terms of Article I,
Section 3(d), through the date of termination of employment.
(b) Payment from Bonus Pool:
     Executive shall forfeit all rights to payments from the Bonus Pool.
Section 4: Termination without Cause; Constructive Termination.
     Notwithstanding anything in this Agreement to the contrary, Executive’s
employment hereunder may be terminated by Employer without Cause, and Executive
may terminate his employment hereunder in the case of a Constructive Termination
as defined in this Section 4, provided, however, that in the event that
Executive’s employment is terminated in accordance with the terms of this
Section 4, Executive shall be entitled to receive the following:

14

--------------------------------------------------------------------------------

 

(a) Base Salary and Living Allowance:
     Within thirty (30) days of his termination of employment, Employer shall
pay to Executive a lump sum payment equal to:
     (i) his Base Salary, as determined in accordance with the terms of Section
3(a) of Article I, for the month in which termination occurs, and for the period
incepting the first day of the month immediately following the month in which
termination occurs to the end of the Term, or any extension thereto, inclusive
(but in no event for less than one (1) year); and
     (ii) his Living Allowance, if then applicable, as determined in accordance
with the terms of Section 3(e) of Article I, through the date of termination of
employment (or, if longer, the end of the lease term for his temporary living
quarters in the New York Metropolitan area; provided, however, that Executive
shall use reasonable efforts to sublease the premises or assign the lease
agreement, and in such event the Living Allowance shall not be paid to the
extent Executive’s obligations under the lease are relieved).
(b) Payment from Bonus Pool:
     Employer shall pay to Executive, within thirty (30) days following
termination of employment, (i) all amounts accrued in the Bonus Pool by
Executive with respect to years preceding the year in which termination of
employment of Executive occurs and (ii) the pro-rated bonus determined under the
Bonus Pool with respect to the year in which termination of employment of
Executive occurs.
(c) Restricted Stock:

15

--------------------------------------------------------------------------------

 

     (i) The restricted period applicable to all Restricted Stock previously
awarded to Executive shall terminate and the Executive shall become fully vested
in all Restricted Stock previously awarded to Executive, including, without
limitation, Restricted Stock awarded pursuant to this Agreement. Executive
shall, upon such termination, have the option to take cash in lieu of Restricted
Stock with respect to all, or any portion, of the shares of Restricted Stock
that vest as a result of this subparagraph, based on a share price for such
Restricted Stock that is the greater of (a) the share price of Employer stock as
of the close of business on the business day next preceding the date of
termination of employment and (b) the share price of Employer stock ten
(10) business days prior to the date determined under paragraph (a) above (or
the closing price of the next preceding business day, if such date does not fall
on a business day). 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. In
addition, all other equity awards shall vest (and, with respect to stock options
and stock appreciation rights, if any, shall become fully exercisable).
     (ii) Executive shall give Employer written notice within ten (10) business
days following termination of employment under this Section 4 specifying the
number of shares of Restricted Stock with respect to which Executive has elected
to take cash in lieu of shares of Restricted Stock. Employer shall within thirty
(30) days of receipt of such notice deliver to Executive a check in payment of
the value of the shares of Restricted Stock as determined in the immediately
preceding sentence and share certificates evidencing the remaining shares of
Restricted Stock that have vested as a result of

16

--------------------------------------------------------------------------------

 

termination of employment under this Section 4 and with respect to which
Executive has not exercised his election to take cash in lieu of shares.
(d) Health Coverage.
     Executive’s medical and dental coverage shall cease upon the termination of
the Executive’s employment. In the event of such termination in accordance with
the terms of this Section 4, Employer shall provide Executive with notice and
enrollment materials confirming Executive’s right to continue medical and dental
insurance coverage to the extent permitted under COBRA; provided, however, that
Executive shall only be required to pay the premiums charged to
similarly-situated active employees during the entire COBRA continuation period,
and Employer shall pay the remaining cost of coverage.
     For purposes of this Agreement, “Constructive Termination” shall mean the
termination of employment by Executive following written notice to Employer for
any of the following reasons:
     (i) without Executive’s express written consent, the loss of Executive’s
position described in Article I, Section 1 or a material alteration in
Executive’s position or responsibility as so described;
     (ii) without Executive’s express written consent, a breach by Employer of
any of its material obligations set forth in this Agreement;
     (iii) any failure by a successor to Employer to assume Employer’s
obligations under this Agreement, either expressly or by operation of law, or,
if Employer sells all or substantially all of its assets, or as a result of a
sale by Employer’s majority stockholder, Fairfax of all of its holdings of
Employer or a controlling interest in Employer, and in

17

--------------------------------------------------------------------------------

 

either case, as a result thereof, any failure by the purchaser to assume
Employer’s obligations under this Agreement; or
     (iv) without Executive’s express written consent, relocation of Executive’s
work situs to a location that is not in the New York Metropolitan area.
     Executive must give written notice to Employer within ninety (90) days
following the initial existence of one or more of the reasons listed above if
Executive intends to terminate Executive’s employment because of the occurrence
of one of the circumstances constituting Constructive Termination under this
Section 4. Such written notice shall specify the particular act or failure to
act constituting the basis of Executive’s claim that Constructive Termination
has occurred. Employer shall be given the opportunity, within thirty (30) days
of the receipt of such notice, to fully cure any such act or failure to act.
     Notwithstanding any provision of this Agreement to the contrary, if, at the
time of Executive’s termination of employment with the Employer, Executive is a
“specified employee” as defined in Section 409A of the Code, and one or more of
the payments or benefits received or to be received by Executive pursuant to
this Agreement would constitute deferred compensation subject to Section 409A,
no such payment or benefit will be provided under this Agreement until the
earliest of (A) the date which is six (6) months after his “separation from
service” for any reason, or (B) death. If any payment is delayed pursuant to the
above sentence, the first payment after such delay expires shall include all
amounts not previously paid as a result of such delay. The determination of
whether Section 409A of the Code requires any such delay shall be made by
Employer, after consultation with Executive’s tax counsel. The provisions of
this paragraph shall only apply to the extent required to avoid Executive’s
incurrence of any penalty tax or

18

--------------------------------------------------------------------------------

 

interest under Section 409A of the Code or any regulations or Treasury guidance
promulgated thereunder. In addition, if any provision of this Agreement would
cause Executive to incur any penalty tax or interest under Section 409A of the
Code or any regulations or Treasury guidance promulgated thereunder, Employer
shall reform such provision to maintain to the maximum extent practicable the
original intent of the applicable provision without violating the provisions of
Section 409A of the Code.
Section 5: Non-Extension of Employment.
     Employer shall provide Executive written notice (“Notice”) of its intention
not to extend Executive’s employment under the terms of this Agreement
(“Non-Extension of Employment”) at least ninety (90) days prior to the end of
the Term, and in such event, Executive’s employment with Employer shall
terminate upon the completion of the final day of the Term. In the event of
Non-Extension of Employment in accordance with the terms of this Section 5,
Executive shall be entitled to receive the following:(a) Base Salary; Health
Coverage:
     Employer shall continue to pay Executive the Base Salary (at the rate in
effect at the end of the Term) for twelve (12) months following Executive’s
termination of employment at such intervals as the same would have been paid to
Executive had Executive remained in the active service of Employer. Executive’s
medical and dental coverage shall cease upon the termination of Executive’s
employment. In the event of such termination in accordance with the terms of
this Section 5, Employer shall provide Executive with notice and enrollment
materials confirming Executive’s right to continue medical and dental insurance
coverage to the extent permitted under COBRA; provided, however, that Executive
shall only be required to pay the premiums charged to similarly-

19

--------------------------------------------------------------------------------

 

situated active employees during the entire COBRA continuation period, and
Employer shall pay the remainder of the cost of coverage.
(b) Payment from Bonus Pool:
     Employer shall pay to Executive, thirty (30) days following the end of the
Term, (i) all amounts accrued in the Bonus Pool by Executive with respect to
years preceding the year in which Non-Extension of Employment occurs and
(ii) the pro-rated bonus payable with respect to the year in which Non-Extension
of Employment occurs.
(c) Restricted Stock:
     (i) The restricted period applicable 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. Executive
shall, upon such termination, have the option to take cash in lieu of Restricted
Stock with respect to all, or any portion, of the shares of Restricted Stock
that vest as a result of this subparagraph, based on a share price for such
stock which is the greater of (a) the share price of Employer as of the close of
business on the business day next preceding the date of termination of
employment and (b) the share price ten (10) business days prior to the date
determined under paragraph (a) above (or the closing price of the next preceding
business day, if such date does not fall on a business day). 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

20

--------------------------------------------------------------------------------

 

employment, or (B) death. In addition, all other equity awards, if any, shall
vest (and, with respect to stock options and stock appreciation rights, shall
become fully exercisable).
     (ii) Executive shall give Employer written notice within ten (10) business
days following termination of employment under this Section 5 specifying the
number of shares of Restricted Stock with respect to which Executive has elected
to take cash in lieu of shares of Restricted Stock. Employer shall within thirty
(30) days of receipt of such notice deliver to Executive a check in payment of
the value of the shares of Restricted Stock as determined in the immediately
preceding subsection and share certificates evidencing the remaining shares of
Restricted Stock that have vested as a result of termination of employment under
this Section 5 and with respect to which Executive has not exercised his
election to take cash in lieu of shares.
     Notwithstanding any provision of this Agreement to the contrary, if, at the
time of Executive’s termination of employment with Employer, Executive is a
“specified employee” as defined in Section 409A of the Code, and one or more of
the payments or benefits received or to be received by Executive pursuant to
this Agreement would constitute deferred compensation subject to Section 409A,
no such payment or benefit will be provided under this Agreement until the
earliest of (A) the date which is six (6) months after Employee’s “separation
from service” for any reason or (B) death. If any payment is delayed pursuant to
the above sentence, the first payment after such delay expires shall include all
amounts not previously paid as a result of such delay. The determination of
whether Section 409A of the Code requires any such delay shall be made by
Employer, after consultation with Executive’s tax counsel. The provisions of

21

--------------------------------------------------------------------------------

 

this paragraph shall only apply to the extent required to avoid Executive’s
incurrence of any penalty tax or interest under Section 409A of the Code or any
regulations or Treasury guidance promulgated thereunder. In addition, if any
provision of this Agreement would cause Executive to incur any penalty tax or
interest under Section 409A of the Code or any regulations or Treasury guidance
promulgated thereunder, Employer shall reform such provision to maintain to the
maximum extent practicable the original intent of the applicable provision
without violating the provisions of Section 409A of the Code.
     For the avoidance of doubt, this Section 5 shall not apply to the extent
Section 4 above is applicable.
Section 6: Voluntary Termination.
     Executive may terminate his employment under this Agreement voluntarily by
giving no less than sixty (60) days written notice to Employer of his intention
to voluntarily terminate his employment with Employer. “Voluntary Termination”
shall mean termination by Executive of Executive’s employment by Employer other
than (i) Constructive Termination as described in Section 4, (ii) “Termination
Upon a Change in Control,” as described in Section 7, or (iii) termination by
reason of Executive’s death or disability as described in Sections 1 and 2.
     In the event that Executive’s employment is voluntarily terminated by
Executive, Executive’s rights to compensation and benefits shall be identical to
those to which he would be entitled had he been Terminated for Cause, except
that 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 the Voluntary

22

--------------------------------------------------------------------------------

 

Termination of Executive occurs and (ii) the prorated bonus payable with respect
to the year in which termination of Executive occurs.
Section 7: Termination Upon a Change of Control.
     “Termination Upon a Change in Control” shall mean the termination of
Executive’s employment by Employer or the successor company (otherwise than for
Cause as provided in Section 3 of this Article II) or by Executive in a
Constructive Termination, in either case within one year following a Change in
Control.
     In the event that Executive’s employment is Terminated Upon a Change in
Control, Executive’s rights to compensation, Restricted Stock and benefits shall
be identical to those to which he would be entitled had he been terminated by
Employer other than for Cause pursuant to Section 4, provided, however, that the
minimum severance benefit described in Section 4(a)(i) (relating to Base Salary)
shall be no less than two (2) years.
     “Change in Control” shall mean (i) the time that Employer or its ultimate
parent, Fairfax, first determines that any person and all other persons who
constitute a group (within the meaning of Section 13(d)(3) of the Securities
Exchange Act of 1934 (“Exchange Act”)) have, at a time when no other person or
group directly or indirectly beneficially owns securities carrying more than
forty-five percent (45%) of the votes attached to all outstanding securities of
Employer or Fairfax, acquired direct or indirect beneficial ownership (within
the meaning of Rule 13d-3 under the Exchange Act) of outstanding securities of
Employer or Fairfax carrying more than twenty percent (20%) of the votes
attached to all outstanding securities of Employer or Fairfax, unless a majority
of the “Continuing Directors” approves the acquisition not later than ten (10)

23

--------------------------------------------------------------------------------

 

business days after Employer or Fairfax makes that determination, or (ii) the
first day on which a majority of the members of Employer’s or Fairfax’s Board of
Directors are not “Continuing Directors”, or (iii) the time that the Controlling
Shareholder of either Employer or Fairfax no longer is the controlling
shareholder, or (iv) the arm’s length sale of a majority interest in Employer by
Fairfax, or (v) a sale of substantially all of the assets of Employer or
Fairfax. For purposes of (iii) in the preceding sentence, the “Controlling
Shareholder” of Fairfax is one or more of V. Prem Watsa, his family,
corporations controlled by, or trusts whose beneficiaries are, V. Prem Watsa or
his family, the estate of V. Prem Watsa (including the executors and
administrators), and any persons to whom shares are distributed or sold upon the
death or by the estate of V. Preen Watsa or his family.
     “Continuing Directors” shall mean, as of any date of determination, any
member of the Board of Directors of Employer or Fairfax who (i) was a member of
that Board of Directors on the date of this Agreement, (ii) has been a member of
that Board of Directors for the two years immediately preceding such date of
determination, or (iii) was nominated for election or elected to the Board of
Directors by the Controlling Shareholder or with the affirmative vote of all, or
one less than all, of the Continuing Directors who were members of the Board at
the time of such nomination or election.
Section 8: Release.
     In consideration of the payments and benefits to be provided to the
Executive under Sections 2, 4, 5, 6 and 7 of this Agreement, the Executive shall
execute and deliver the Employer’s standard waiver and release.

24

--------------------------------------------------------------------------------

 

ARTICLE III
MISCELLANEOUS PROVISIONS
Section 1: Payment Obligations.
     The obligation of Employer to pay Executive the compensation and to make
the arrangements provided herein shall be unconditional, and Executive shall
have no obligation whatsoever to mitigate damages hereunder. If litigation after
a Change in Control (otherwise than in connection with a Termination for Cause
which is ultimately upheld in litigation) shall be brought to enforce or
interpret any provision contained herein, Employer, to the extent permitted by
applicable law, hereby indemnifies Executive for Executive’s reasonable
attorney’s fees and disbursements incurred in such litigation.
Section 2: Confidentiality.
     Executive agrees that all confidential and proprietary information relating
to the business of Employer shall be kept and treated as confidential both
during and after the term of this Agreement, except as may be permitted in
writing by the Board of Directors or as such information is within the public
domain or comes within the public domain without any breach of this Agreement.
Section 3: Arbitration.
     Any dispute or controversy arising under or in connection with this
Agreement that cannot be mutually resolved by the parties hereto shall be
settled exclusively by arbitration in New York, New York under the employment
arbitration rules of the American Arbitration Association before a single
arbitrator of exemplary qualifications

25

--------------------------------------------------------------------------------

 

and stature, who shall be selected jointly by Employer and Executive, or, if
Employer and Executive cannot agree on the selection of the arbitrator, shall be
selected by the American Arbitration Association. Judgment may be entered on the
arbitrator’s award in any court having jurisdiction. The parties hereby agree
that the arbitrator shall be empowered to enter an equitable decree mandating
specific enforcement of the terms of this Agreement. The party that prevails in
any arbitration hereunder shall be reimbursed by the other party hereto for any
reasonable legal fees and out of pocket expenses directly attributable to such
arbitration, and such other party shall bear all expenses of the arbitrator.
Section 4: Withholdings.
     Unless otherwise provided herein, all compensation and benefits to
Executive hereunder shall be reduced by all federal, state, local and other
withholdings and similar taxes and payments required by applicable law.
Section 5: Parachute Payments.
     Notwithstanding anything in this Agreement to the contrary, the amount of
any payment or benefit to be received by Executive pursuant to this Agreement or
otherwise which would be subject to the excise tax imposed by Section 4999 of
the Code shall be reduced (but not below zero) by the amount, if any, necessary
to prevent any part of any such payment or benefit received or to be received by
Executive (such foregoing payments or benefits referred to collectively as the
“Total Payments”), from being subject to such excise tax, but only if and to the
extent such reduction will also result in, after taking into account all
applicable state and Federal taxes (computed at the highest applicable marginal
rate), including any taxes payable pursuant to Section 4999 of the

26

--------------------------------------------------------------------------------

 

Code, a greater after-tax benefit to Executive than the after-tax benefit to
Executive of the Total Payments computed without regard to any such reduction.
For purposes of the foregoing, (a) no portion of the Total Payments shall be
taken into account which in the opinion of tax counsel selected by Executive
(“Tax Counsel”) does not constitute a “parachute payment” within the meaning of
Section 280G(b)(2) of the Code; (b) any reduction in payments or benefits
pursuant to this Agreement shall be computed by taking into account, in
accordance with Section 280G(b)(4) of the Code, that portion of the Total
Payments which is reasonable compensation, within the meaning of
Section 280G(b)(4) of the Code, in the opinion of Tax Counsel; (c) the value of
any non-cash benefits or of any deferred or accelerated payments or benefits
included in the Total Payments shall be determined by a public accounting firm,
selected by Executive, in accordance with the principles of Section 280G(d)(3)
and (4) of the Code and the Treasury Regulations there; and (d) in the event of
any uncertainty as to whether a reduction in Total Payments to Executive is
required pursuant hereto, the Employer shall initially make all payments
otherwise required to be paid to Executive hereunder, and any amounts so paid
which are ultimately determined not to have been payable hereunder (other than
as a loan to Executive), either (x) upon mutual agreement of Executive and
Employer, or (y) upon Tax Counsel furnishing Executive with its written opinion
setting forth the amount of such payments not to have been so payable (other
than as a loan to Executive under this Section 5), or (z) in the event a portion
of the Total Payments shall be determined by a court or an Internal Revenue
Service proceeding to have otherwise been an “excess parachute payment,” to the
extent permitted by law, the amount so determined in (x), (y) or (z) shall
constitute a loan by Employer to Executive under this

27

--------------------------------------------------------------------------------

 

Section 5, and Executive shall repay to Employer, within ten (10) business days
after the time of such mutual agreement, such opinion is so furnished to
Executive, or of such determination, as applicable, the amount of such loan plus
interest thereon at the rate provided in Section 1274(b)(2)(B) of the Code for
the period from the date of the initial payments to Executive to the date of
such repayment by Executive. All fees and expenses of any Tax Counsel or
accounting firm selected under this Section 4(a) shall be borne solely by
Employer.
     All fees and expenses of any accounting firm selected under this Section
4(b) shall be borne solely by Employer.
Section 6: Indemnification.
     In addition to any rights to indemnification to which Executive is entitled
under Employer’s Articles of Incorporation and Bylaws, Employer shall indemnify
Executive at all times during and after the term of this Agreement to the
maximum extent permitted under the Delaware General Corporation Law and any
successor provision thereof and any other applicable corporate law, and shall
pay Executive’s expenses in defending any civil or criminal action, suit or
proceeding in advance of the final disposition of such action, suit or
proceeding and any appeal thereof, to the maximum extent permitted under such
applicable laws. Employer shall use reasonable efforts to maintain at all times
Directors and Officers Coverage comparable to its existing Directors and
Officers Coverage, if the same can be obtained at a reasonable cost in
comparison to the cost of the then existing coverage, to cover all or a portion
of the foregoing liability.
Section 7: Notices.

28

--------------------------------------------------------------------------------

 

     Any notices permitted or required under this Agreement shall be deemed
given upon the date of personal delivery, addressed to the Employer at:
Odyssey Re Holdings Corp.
300 First Stamford Place
Stamford, Connecticut 06902
and addressed to Executive at the address on file with Employer or at any other
address as either party may, from time to time, designate by notice given in
compliance with this Section.
Section 8: Governing Law.
     This Agreement shall be governed by and construed in accordance with the
substantive laws of the State of New York.
Section 9: Titles and Captions.
     All sections titles or captions contained in this Agreement are for
convenience only and shall not be deemed part of the context nor affect the
interpretation of this Agreement.
Section 10: Entire Agreement.
     This Agreement contains the entire understanding between the parties, and
supersedes any prior understandings and agreements between Executive and
Employer and/or any affiliate of Employer respecting the subject matter of this
Agreement, including, without limitation, any representations contained within
public notices, press releases or regulatory filings previously issued or made
by Employer or Fairfax. No provision in this Agreement may be amended unless
such amendment is set forth in a

29

--------------------------------------------------------------------------------

 

writing that expressly refers to the provision of this Agreement that is being
amended and that is signed by Executive and by a representative of the Employer.
Section 11: Agreement Binding.
     The Agreement shall be binding upon the heirs, executors, administrators,
successors and assigns of the parties hereto.
Section 12: Computation of Time.
     In computing any period of time pursuant to this Agreement, the day of the
act, event or default from which the designated period of time begins to run
shall be included, unless it is a Saturday, Sunday or a legal holiday, in which
event the period shall begin to run on the next day which is not a Saturday,
Sunday or legal holiday, and if the period ends on a Saturday, Sunday or legal
holiday, the period shall run until the end of the next day thereafter which is
not a Saturday, Sunday or legal holiday.
Section 13: Pronouns and Plurals.
     All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural as the identity of the person or
persons may require.
Section 14: Presumption.
     This Agreement or any section thereof shall not be construed against any
party due to the fact that said Agreement or any section thereof was drafted by
said party.
Section 15: Further Action.
     The parties hereto shall execute and deliver all documents, provide all
information and take or forbear from all such action as may be necessary or
appropriate to achieve the purposes of this Agreement.

30

--------------------------------------------------------------------------------

 

Section 16: Parties in Interest.
     Nothing herein shall be construed to be to the benefit of any third party,
nor is it intended that any provision shall be for the benefit of any third
party.
Section 17: Savings Clause.
     If any provision of this Agreement, or the application of such provision to
any person or circumstance, shall be held invalid, the remainder of this
Agreement, or the application of such provisions to persons or circumstances
other than those as to which it is held invalid, shall not be affected thereby.
Section 18: Failure to Enforce and Waiver.
     The failure to insist upon strict compliance with any of the terms,
covenants or conditions of this Agreement shall not be deemed a waiver of such
terms, covenants or conditions, and the waiver or relinquishment or any right or
power under this Agreement at any one or more times shall not be deemed a waiver
or relinquishment of such right or power at any other time or times.
Section 19: Counterparts; Facsimile Signatures.
     This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original copy of this Agreement and all of which, when
taken together, will be deemed to constitute one and the same agreement. This
Agreement may be executed by facsimile signatures.

31

--------------------------------------------------------------------------------

 

Section 20: Headings.
     The headings of the Sections and sub-sections contained in this Agreement
are for convenience only and shall not be deemed to control or affect the
meaning or construction of any provision of this Agreement.
Section 21: Section 409A Compliance.
     (i) Anything in this Agreement to the contrary notwithstanding, any
reimbursement payable to Executive pursuant to any provisions of this Agreement,
shall be paid no later than the last day of the calendar year following the
calendar year in which the related expense was incurred, except to the extent
that the right to reimbursement does not provide for a “deferral of
compensation” subject to Section 409A of the Code. No amount reimbursed during
any calendar year shall affect the amounts eligible for reimbursement in any
other calendar year, and the right to reimbursement or in-kind benefits shall
not be subject to liquidation or exchange for another benefit.
     (ii) Anything in this Agreement to the contrary notwithstanding, any
payment that is delayed as a result Executive being a “specified employee” as
defined in Section 409A of the Code shall commence earlier in the event of
Executive’s death prior to the six-month anniversary of the date of Executive’s
termination of employment. Whenever a payment under this Agreement specifies a
payment period with reference to a number of days (e.g., “payment shall be made
within thirty (30) days following the date of
[Remainder of page intentionally left blank]

32

--------------------------------------------------------------------------------

 

termination”), the actual date of payment within the specified period shall be
within the sole discretion of Employer.

          Date: October 1, 2009    
 
        ODYSSEY RE HOLDINGS CORP.    
 
       
By:
  /s/ Andrew A. Barnard    
 
       
 
  ANDREW A. BARNARD, CHIEF EXECUTIVE OFFICER    
 
       
 
  /s/ Richard Scott Donovan           RICHARD SCOTT DONOVAN    

33