Document:

exv10w26

 

CONTINGENT COMPENSATION AGREEMENT

     This Contingent Compensation Agreement (this “Agreement”) is made and entered into on the
1st day of April, 2004 (“Effective Date”) by and between Old Lyme Insurance Company
Ltd. (“OLIC”), a Bermuda corporation, and Program Brokerage Corporation, a Delaware corporation
(“PBC”).

     WHEREAS, upon the closing (the “Closing”) of the transactions contemplated by the Stock
Purchase Agreement dated as of April 1, 2004, entered into by and between Fairfax Inc., a Wyoming
corporation, and Old Lyme Insurance Group, Ltd., (the “Stock Purchase Agreement”), OLIC will be a
direct, wholly owned subsidiary of Old Lyme Insurance Group, Ltd. (“OLIG”);

     WHEREAS, OLIC desires to act as a reinsurance company on Programs (defined in Article I below)
developed by PBC and other business placed by PBC; and

     WHEREAS, PBC desires to continue offering Programs and other business to various insurance
carriers for whom OLIC desires to provide reinsurance; and

     WHEREAS, OLIC desires to incentivize PBC to develop and produce Programs and market them to
insurers to whom OLIC desires to provide reinsurance; and

     WHEREAS, OLIC desires to compensate PBC, for business produced by PBC and assumed by OLIC if,
and for so long as, such business is profitable, subject to the terms and conditions hereof.

     NOW, THEREFORE, in consideration of the premises and of the mutual promises set forth herein,
and intending to be legally bound hereby, OLIC and PBC agree as follows:

ARTICLE I

DEFINITIONS

	A.  	Capitalized terms used herein shall have the meanings set forth below:

	 	   	“Accident Year” means the period from: April 1, 2004 to December 31, 2004, and then January
1 to December 31 each year thereafter. The presentation of underwriting results for an
Accident Year represents Earned Premiums and Incurred Losses on all claims arising from
occurrences during such period.
	 
	 	   	“Acquisition Costs” means commission expenses, fronting fees or other such charges paid or
payable by OLIC to PBC in connection with direct business placed by PBC with OLIC or to any
insurers from which OLIC is assuming business in connection with a Program managed by PBC or
individual policies placed by PBC, including the Commission (as defined therein).

 

 

	 	   	“Contingent Compensation” means sixty five percent (65%) of the Underwriting Profit or
Underwriting Loss for each Accident Year.
	 
	 	   	“Contingent Compensation Statement” means the written report to be prepared by OLIC
reporting the Underwriting Profit or Underwriting Loss and the Contingent Compensation as of
the end of each calendar quarter and Accident Year. The Contingent Compensation Statement
shall be substantially in the form attached hereto as Exhibit A.
	 
	 	   	“Earned Premiums” means gross earned premium net of return premium, less ceded reinsurance
premiums earned by OLIC from business produced by PBC to unaffiliated carriers and assumed
by OLIC during the Accident Years.
	 
	 	   	“General and Administrative Expenses” means all expenses incurred by OLIC including, but not
limited to, premium taxes, salaries, rent, utilities, furniture, fixtures, inspection fees,
information technology, telecommunications, postage, boards and bureaus, licenses, legal and
auditing expenses, administrative services fees, provisions for or write-offs of
uncollectible premiums and reinsurance recoverables to the extent not recorded as a
reduction of Earned Premiums or increase in Incurred Losses, and all other overhead.
Without limiting the generality of the foregoing, “General and Administrative Expenses”
shall include any costs, fees, expenses, judgments, settlements or other charges to OLIC
arising from claims by any third parties in connection with the business produced by PBC to
unaffiliated carriers and assumed by OLIC, but shall not include: (i) the Management Fee
paid by OLIC to OLIG, pursuant to the Management Agreement between OLIC and OLIG, dated
April 1, 2004; and (ii) the fees charged by Jenkens & Gilchrist Parker Chapin LLP relating
to forming and funding OLIG and negotiating and drafting the purchase agreement related to
OLIG’s purchase of Old Lyme Insurance Co., Ltd.
	 
	 	   	“Incurred Losses” means all losses and allocated and unallocated loss adjustment expenses
paid and incurred, including IBNR (net of reinsurance), relating to business placed by PBC
with unaffiliated carriers and assumed by OLIC. The IBNR included in the Incurred Losses
shall be calculated by OLIC and reviewed by an independent third-party actuary on an annual
basis.
	 
	 	   	“Program” means a type or structure of coverage(s) offered to a number of like
policyholders.
	 
	 	   	“Underwriting Loss” has the meaning set forth in Article II(B)(1) hereof.
	 
	 	   	“Underwriting Profit” has the meaning set forth in Article II(B)(1) hereof.

 

 

ARTICLE II

CONTINGENT COMPENSATION

	A.  	Contingent Compensation Payments. OLIC shall pay to PBC an amount equal to the
Contingent Compensation as calculated on the basis of statutory income or loss, in accordance
with Section B of this Article II.
	 
	B.  	Contingent Compensation Calculations; Timing of Payments.

	 	1.  	The Underwriting Profit of OLIC relating to the business produced by PBC shall
be determined on an Accident Year basis, and shall be an amount equal to: Earned
Premiums less the sum of (i) Incurred Losses; (ii) Acquisition Costs; and (iii) General
and Administrative Expenses. In the event that such calculation results in a value
less than zero, such amount shall be referred to as the “Underwriting Loss.”
	 
	 	2.  	OLIC shall pay to PBC the Contingent Compensation calculated in accordance with
paragraph 3 of this Section B attributable to business produced by PBC to unaffiliated
carriers, having an inception date on or after April 1, 2004, and assumed by OLIC. If
the sum of the Underwriting Profits or Underwriting Losses of all open Accident Years
for all lines is a net Underwriting Loss as of the end of the applicable calculation
period, there shall be no payment due to PBC by OLIC and the amount of any such net
Underwriting Loss shall be carried forward and applied against any Underwriting Profit
reported on the Contingent Compensation Statement of succeeding periods until offset in
full by a subsequent Underwriting Profit.
	 
	 	3.  	The Contingent Compensation shall be calculated and payable as set forth below:

	 	(a)  	Within forty-five (45) days following the end of the first
calendar year in respect of each Accident Year: twenty-five percent (25%) of
the Contingent Compensation reported on the Contingent Compensation Statement
for such period.
	 
	 	(b)  	Within ninety (90) days following the end of the second
calendar year in respect of each Accident Year: the product of (x) the most
recent Contingent Compensation calculation, and (y) 0.50, less (z) the sum of
all payments made pursuant to Item (i) above; provided, however,
that, after reduction for net Underwriting Losses carried forward as provided
herein, such calculation produces an Underwriting Profit.
	 
	 	(c)  	Within ninety (90) days following the end of the third
calendar year in respect of each Accident Year: the product of (x) the most
recent Contingent Compensation calculation, and (y) 0.75, less (z) the sum of
all payments made pursuant to Item (i) above; provided, however,
that, after
reduction for net Underwriting Losses carried forward as provided herein,
such calculation produces an Underwriting Profit.

 

 

	 	(d)  	Within ninety (90) days following the end of the fourth
calendar year in respect of each Accident Year: the sum of (x) the most
recent Contingent Compensation calculation, less (y) the sum of all payments
made pursuant to Items (i) and (ii) above, subject to the application of any
Underwriting Losses carried forward.
	 
	 	(e)  	The Contingent Compensation for each Accident Year shall be
recalculated as of each subsequent calendar year-end until such time as all
claims have been settled and, in each instance, shall be payable within
ninety (90) days following the end such calendar year-end.
	 
	 	(f)  	Further Adjustments. If, at any time, the net payment due
for all lines and Accident Years combined, valued at any December 31, is
greater than the aggregate amount of the Contingent Compensation payments
previously paid by OLIC in connection with the subject Accident Years, OLIC
shall pay to PBC the additional amount. If the net payment due for all lines
and Accident Years combined , valued at December 31, is less than the
payments previously paid by OLIC in connection with the subject Accident
Years, PBC shall pay the difference to OLIC.
	 
	 	(g)  	Delivery of Information. The information necessary to prepare
the Contingent Compensation Statement in respect of each Accident Year shall
be delivered to OLIC, or to such affiliate of OLIC as OLIC may direct, no
less than 15 days prior the date on which the Contingent Compensation to
which such Statement relates is due to be paid.
	 
	 	(h)  	Review of Contingent Compensation Calculations. PBC shall
have the right to review each Contingent Compensation calculated by or on
behalf of OLIC pursuant to this Article II.B and set forth in a Contingent
Compensation Statement.

	C.  	Form and Method of Payments. All payments due hereunder shall be disbursed
to PBC or OLIC, as the case may be, by wire transfer in immediately available funds to an
account to be designated in writing by the party receiving such payment.

ARTICLE III

TERM AND TERMINATION

	A.  	Term and Termination Generally. Except as provided below, the term (the
“Term”) of this Agreement shall be continuous unless (1) terminated by mutual agreement
among the parties; or (2) terminated by either party upon twenty-four (24) months prior
written notice to the other party; or (3) terminated by either party upon notice subsequent
to a period of 30 days commencing upon such party’s providing the other party with detailed
notice of breach during which the other party has not cured the breach. In the

 

 

	   	event of termination, the provisions of Article II hereof shall continue as to all business
written under this Agreement prior to the effective date of termination.
	   	 
	 
	B.  	Termination by OLIC. OLIC may immediately, unless otherwise indicated, upon
written notice to PBC, terminate this Agreement in whole or in part, for cause, which cause
shall include, but shall not be limited to, the following:

	 	(1)  	either PBC, Kaye Group Inc. or any material subsidiary of Kaye Group Inc. becomes
insolvent, institutes or acquiesces in the institution of any bankruptcy, financial
reorganization, or liquidation proceeding or any such proceeding is instituted against PBC,
Kaye Group Inc. or any subsidiary of Kaye Group Inc. and remains undismissed for thirty (30)
days (PBC shall immediately notify OLIC of the foregoing); or
	 
	 	(2)  	PBC, or the owner of a controlling interest in PBC, sells, exchanges, transfers,
assigns, consolidates, pledges or causes to be sold, exchanged, transferred, assigned,
consolidated, or pledged, all or substantially all of the stock or assets of PBC, or any
entity controlling PBC, to a third party other than Hub International Limited (“Hub”)or its
subsidiaries, without the the prior written consent of OLIC. PBC shall immediately notify
OLIC of any such sale, exchange, transfer, assignment, consolidation or pledge; or
	 
	 	(3)  	PBC fails to maintain the quality of services and obligations necessary to operate
within this Agreement; or
	 
	 	(4)  	PBC engages in acts or omissions constituting abandonment, fraud, insolvency,
misappropriation of funds, material misrepresentation, or gross and willful misconduct; or
	 
	 	(5)  	PBC’s licenses or certificates of authority are cancelled, suspended, or are declined
renewal by any regulatory body in a jurisdiction in which PBC offers Programs and such
actions materially affect the Programs which OLIC reinsures in whole or in part; or
	 
	 	(6)  	OLIC determines, in good faith, that PBC has otherwise materially breached any of its
obligations hereunder.

	C.  	Termination by PBC. PBC may immediately, unless otherwise indicated, terminate this
Agreement in whole or in part, for cause, which cause shall include, but not be limited to,
the following:

	 	(1)  	OLIC institutes or acquiesces in the institution of any bankruptcy, financial
reorganization, supervision, rehabilitation, conservationship or liquidation proceeding, or
any such proceeding is instituted against OLIC and remains undismissed for thirty (30) days;
or
	 
	 	(2)  	OLIC’s license, certificate of authority or other eligibility is cancelled or declined
renewal by any regulatory or quasi-regulatory body and such action materially affects OLIC’s
ability to issue the reinsurance that forms the basis for this Agreement:

 

 

ARTICLE IV

MISCELLANEOUS PROVISIONS

	A.  	Cooperation. The parties shall cooperate in a commercially reasonable manner in
order that the obligations of the parties hereunder will be effectively, efficiently and
promptly discharged. OLIC shall, at all reasonable times, during its normal business hours,
make available to PBC properly authorized personnel of OLIC for the purpose of consultation
and decision and information as may be reasonably required by PBC. PBC shall: (i) promptly
respond to any question from OLIC and persons authorized by it or by any regulator with
respect to the accounts and records maintained in accordance with the terms of this Agreement;
and (ii) assist and cooperate with OLIC’s auditors and regulators in the conduct of any audit
or examination of OLIC’s financial condition and results of operations; and (iii) at all
reasonable times, during its normal business hours, make available to OLIC properly authorized
personnel of PBC for the purpose of consultation and decision and information as may be
reasonably required by OLIC.
	 
	B.  	Reasonableness. The parties will act reasonably and in good faith on all matters
within the terms of this Agreement.
	 
	C.  	Assignment. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns and legal representatives. This
Agreement is not assignable except by operation of law or by written consent of the parties
hereto.
	 
	D.  	Amendments and Waivers. This Agreement may be amended at any time by an agreement in
writing between the parties. The terms of this Agreement may be waived only by a written
instrument signed by the party waiving compliance. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver thereof. Nor
shall any waiver on the part of any party of any right, power or privilege, nor any single or
partial exercise of any such right, power or privilege, preclude any further exercise thereof
or the exercise of any other such right, power or privilege.
	 
	E.  	Entire Agreement. This Agreement constitutes the entire contract between the parties
with respect to the subject matter hereof and there are no understandings between the parties
as to the Services to be provided other than as expressed in this Agreement. Any amendment or
modification hereto shall be null and void unless made by amendment to this Agreement and
signed by all parties.
	 
	F.  	No Third-Party Beneficiaries. Nothing in this Agreement is intended or shall be
construed to give any person, other than the parties hereto, any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provision contained herein.

 

 

	G.  	Governing Law. This Agreement shall be interpreted and governed by the laws of the
State of New York, without giving effect to the conflict of laws provisions of such
jurisdiction.
	 
	H.  	Invalidity. Unless the invalidity or unenforceability of any provision or portion
hereof frustrates the intent of the parties or the purpose of this Agreement, such invalidity
or unenforceability shall not affect the validity or enforceability of the other provisions or
portions hereof. In the event that such provision shall be declared unenforceable by a court
of competent jurisdiction, such provision, to the extent declared unenforceable, shall be
stricken. However, in the event any such provision shall be declared unenforceable due to its
scope, breadth or duration, then it shall be modified to the scope, breadth or duration
permitted by law and shall continue to be fully enforceable as so modified.
	 
	I.  	Dispute Resolution. In the event of an alleged breach of this Agreement or any
dispute or difference arising with reference to the applicable interpretation or effect of
this Agreement, or any part thereof (each, a “Dispute”), the parties agree to submit the
disputes to JAMS in New York City, for non-binding mediation, the costs of which shall be
borne equally by both parties.
	 
	   	In the event a Dispute is not resolved pursuant to the preceding paragraph, such Dispute
shall be referred to a Board of Arbitration (the “Board”) of two (2) arbitrators and an
umpire. The members of the Board shall be U.S. citizens and shall be active or retired
disinterested officers of insurance or reinsurance companies.

	 	1.  	One arbitrator shall be chosen by the party initiating the arbitration and
designated in the letter requesting arbitration. The other party shall respond, within
thirty (30) days, advising of its arbitrator. The umpire shall thereafter be chosen by
the two (2) arbitrators. In the event either party fails to designate its arbitrator
as indicated above, the other party is hereby authorized and empowered to name the
second arbitrator, and the party which failed to designate its arbitrator shall be
deemed to have waived its right to designate an arbitrator and shall not be aggrieved
thereby. The two (2) arbitrators shall then have thirty (30) days within which to
choose an umpire. If they are unable to do so, the umpire shall be chosen by the
manager of the American Arbitration Association who shall be a person meeting the
qualifications set forth above. Each party shall submit its case to the Board within
thirty (30) days from the date of the appointment of the umpire, but this period of
time may be extended by unanimous written consent of the Board.
	 
	 	2.  	The sittings of the Board shall take place in New York, New York, unless
otherwise agreed by the parties hereto. The Board shall make its decision with regard
to the custom and usage of the insurance and reinsurance business. The Board is
released from all judicial formalities and may abstain from the strict rules of
evidence. The written decision of a majority of the Board shall be rendered within
sixty (60) days following the termination of the Board’s hearings, unless the

 

 

	 	   	parties consent to an extension. Such majority decision of the Board shall be final
and binding upon the parties both as to law and fact, and may not be appealed to
any court of any jurisdiction. Judgment may be entered upon the final decision of
the Board in any court of proper jurisdiction.
	 
	 	3.  	Each party shall bear the fees and expenses of the arbitrator elected by or on
its behalf, and the parties shall bear the fees and expenses of the umpire as
determined by the Board.

	J.  	Notices. Any notice or other communication required or permitted hereunder shall be
in writing and shall be delivered personally, telegraphed, telexed, sent by facsimile
transmission or sent by certified, registered or express mail, postage prepaid. Any such
notice shall be deemed given when so delivered personally, telegraphed or telexed or sent by
facsimile transmission to the appropriate facsimile number or, if mailed, three days after
the date of deposit in the United States mails, to the appropriate address.. Any party may,
by notice given in accordance with this Agreement to the other parties, designate another
address or person for receipt of notices hereunder.
	 
	   	Notice to Program Brokerage Corporation.:

Attn.: Marc I. Cohen, President

1065 Avenue of the Americas

New York, NY 10018       Fax:917-934-4478

	 
	   	Notice to Old Lyme Insurance Company, Ltd.:

Old Lyme Insurance Company, Ltd.

Attn.: Michael P. Sabanos

1065 Avenue of the Americas

New York, NY 10018       Fax: 917-934-4605

	K.  	Headings. The headings in this Agreement are for convenience of reference only and
shall not affect its interpretation.
	 
	L.  	Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument.

 

 

     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed in triplicate by
their respective officers duly authorized to do so, as of the date and year first above written.

      

OLD LYME INSURANCE COMPANY, LTD.

 

By: /s/   Michael Sabanos

       Name: Michael Sabanos

       Title:   Executive Vice President and Chief Financial Officer

 

 

PROGRAM BROKERAGE CORPORATION

 

By: /s/   Ivy Fischer

       Name: Ivy Fischer

       Title:   Secretary

 

 

EXHIBIT A

 

 

[form of Contingent Compensation Statement]EXHIBIT 10.7

                             EMPLOYMENT AGREEMENT

This Employment Agreement, dated as of October 1, 2004 (this "Agreement'), is by
and between American Home Mortgage Holdings, Inc., a Delaware corporation having
a place of business at 538 Broadhollow Road, Melville, NY 11747 (the "Company"),
and Dena Kwaschyn, currently residing at [ ] (the "Executive").

            Whereas the Company wishes to assure itself of the services of the
Executive, and the Executive desires to be employed by the Company, upon the
terms and conditions hereinafter set forth.

            The Company and the Executive hereby agree as follows:

            1. Employment. The Company agrees to employ the Executive, and the
Executive hereby accepts such employment by the Company during the term set
forth in Section 2 and on the other terms and conditions of this Agreement.

            2. Term. The term of this Agreement shall commence on October 1,
2004, and shall continue until the Executive resigns or is discharged, in which
case the agreement continues through four weeks following the resignation or
discharge date

            3. Position, Duties and Responsibilities, Rights.

            (a) During the term of this Agreement, the Executive shall serve as,
and be elected to and hold the office and title of Executive Vice President,
Operations, and shall report to the Deputy Chief Administrative Officer ("DCAO")
of the Company, or such other similarly situated officer designated by the
Company's Chief Executive Officer. As such, the Executive shall have all of the
powers and duties usually incident to such office.

            (b) During the term of this Agreement, the Executive agrees to
devote substantially all the Executive's time, efforts and skills to the affairs
of the Company during the Company's normal business hours, except for vacations,
illness and incapacity, but nothing in this Agreement shall preclude the
Executive from devoting reasonable periods to (i) manage the Executive's
personal investments, (ii) participate in professional, educational, public
interest, charitable, civic or community activities, including activities
sponsored by trade organizations, (iii) serve as a director or member of an
advisory committee of any corporation not in competition with the Company or any
of its subsidiaries, or as an officer, trustee or director of any charitable,
educational, philanthropic, civic, social or industry organizations, or as a
speaker or arbitrator; provided, however, that the performance o f the
Executive's duties or responsibilities in any of such capacities does not
materially interfere with the regular performance of the Executive's duties and
responsibilities hereunder
<PAGE>

            4. Place of Performance. In connection with the Executive's
employment by the Company, the Executive shall be based in Melville, New York,
and shall not be required to be absent from there on travel status or otherwise
for more than a reasonable time each year as necessary or appropriate for the
performance of the Executive's duties hereunder.

            5. Compensation

            (a) During the term of this Agreement, the Company shall pay the
Executive, and the Executive agrees to accept a base salary at the rate of not
less than $375,000.00 per year (the annual base salary as increased from time to
time during the term of this Agreement being hereinafter referred to as the
"Base Salary'). The Base Salary shall be paid in installments no less frequently
than monthly. Any increase in Base Salary or other compensation shall not limit
or reduce any other obligation of the Company hereunder, and once established at
an increased specified rate, the Executive's Base Salary hereunder shall not
thereafter be reduced.

            (b) During the term of this Agreement, the Company shall, after the
close of each calendar year, pay the Executive an objective achievement bonus,
the amount of which will be determined by the DCAO. To determine the amount of
the objective achievement bonus for a given year, the DCAO will consider whether
the Executive achieved the objectives set forth in the Executive's business plan
for that calendar year. If the DCAO determines that the objectives were
achieved, the DCAO will award the Executive an objective achievement bonus of
17.50% of Base Salary. If the objectives were surpassed, the DCAO may award a
greater amount, if the objectives were only partially achieved, it may award a
lesser amount. Objective achievement bonuses for a given year will be paid no
later than the last day of March of the succeeding year.

            (c) During the term of this Agreement, the Company shall, after the
close of each calendar year, pay the Executive a company performance award the
amount of which will be determined by the DCAO. To determine the amount of the
company performance award for a given year, the DCAO will consider whether the
Company achieved the objectives set forth in the Company's business plan for
that calendar year. Additionally, the DCAO will consider the appreciation or
depreciation of the Company's share price compared to its peer group and the
Company's return equity compared to its peer group. The DCAO's determination
will be made in good faith after an analytic review. The amount of the company
performance award will be targeted at 6.25% of Base Salary, but may be a greater
or lesser amount based on the above-mentioned criteria. Company performance
bonuses for a given year will be paid no later than the last day of March of the
succeeding year.

            (d) During the term of this Agreement, the Company shall pay the
Executive a discretionary management evaluation bonus, with the amount of said
bonus to be determined by the DCAO. The amount of the management evaluation
bonus will be targeted at 6.25% of Base Salary, but may be a greater or lesser
amount. The DCAO will determine the actual amount of the management evaluation
bonus for a given year based

<PAGE>

on the DCAO's evaluation of the Executive's overall performance during the year.
Management evaluation bonuses for a given year will be paid no later than the
last day of March of the succeeding year.

            (e) Notwithstanding the foregoing, the Executive shall not be
entitled to any unpaid bonuses if she is no longer employed by the Company as of
the payment date.

            (f) The Executive will be eligible to participate in the Company's
stock option plan. Upon execution of this Agreement and the execution of a Stock
Option Grant Agreement in a form customarily utilized by the Company, the
Executive shall receive an option award for 10,000 shares of the existing class
of the common stock of the Company. One-half of the award (5,000 shares) shall
vest and be exercisable two years following the date this Agreement is executed.
The remainder of the award (5,000 shares) shall vest and be exercisable three
years following the date this Agreement is executed. The complete terms of the
option award will be governed by the Company's 1999 Omnibus Stock Option Plan.

            (g) During the term of this Agreement, the Executive shall be
entitled to fringe benefits, in each case at least equal to and on the same
terms and conditions as those attached to the Executive's office on the date
hereof, as the same may be improved from time to time during the term of this
Agreement. The Company shall directly pay the pre-tax cost of medical and dental
health insurance benefits in accordance with the attached Schedule 1.

            (h) During the term of this Agreement, the Executive shall also be
entitled to reimbursement, upon proper accounting, of all reasonable expenses
and disbursements incurred by the Executive in the course of the Executive's
duties.

            6. Employment At Will; Severance. Employment hereunder shall be at
all times "at will". The Company may discharge the Executive and terminate this
Agreement at any time and for any reason, and the Executive may terminate his
employment with the Company for any reason.

            If the Company discharges the Executive, it will deliver a notice
letter of discharge pursuant to the notice provisions of Section 12 herein that
will state whether the Executive has been discharged for Cause or without Cause.
If the Executive chooses to resign, the Executive will deliver a notice letter
of resignation pursuant to the notice provisions of section 12 herein stating
whether the resignation is for Good Reason or without Good Reason.

            If the Company discharges the Executive for Cause, the Executive
will not be entitled to a severance benefit. If the Company discharges the
Executive without cause the Executive will be entitled to severance of six
months base salary.

            The Company may only discharge the Executive at any time for Cause:
<PAGE>

            (A) if the Executive fails to substantially perform the Executive's
duties hereunder, other than by reason of a disability; or

            (B) if the Executive is grossly negligent or engages in gross
misconduct in the performance of the Executive's duties hereunder; or

            (C) if the Executive knowingly engages in an act of dishonesty, an
act of fraud or embezzlement, or any conduct resulting in a felony conviction.

            (D) if the Executive dies or becomes disabled.

            The Company may discharge the Executive due to the Executive's
disability only if the Executive has suffered an accident or physical or mental
illness that prevents the Executive from substantially performing the
Executive's duties hereunder for six consecutive months. In such event,
discharge will be without prejudice to any payments due to the Executive in
respect of disability under any plan or practice of the Company.

            The Executive may resign and thereby terminate this Agreement
without Good Reason. In such event, the Executive shall not be entitled to
severance. The Executive may also resign and thereby terminate this Agreement
for Good Reason. In such event, the Company shall pay the Executive severance
equal to six months Base Salary. The Executive may resign for Good Reason only
if the Company (i) reduces the Executive's rate of compensation, or (ii) if any
person or entity other than, individually or collectively, the Board of
Directors of American Home Mortgage Investment Corp. ("AHMIC") as constituted as
of the date of this Agreement, obtains control of more than 50% of the voting
securities of AHMIC, and the Executive is discharged as a result thereof, or the
Executive's responsibilities are diminished as a result thereof and the
Executive consequently resigns (all of the foregoing, a "Change in Control").

            7. Confidential and Proprietary Information; Company Property For
the purpose of this section 7, Confidential Information shall mean all
information and intellectual property owned by and proprietary to the Company,
including but not limited to marketing programs such as Homebuyers Marketing and
Marketing Portal, loan applications, loan files, loan file documents, accounts,
customer or client information, contracts or agreements, data, records,
appraisals, financial information, software, customer lists, prospective
customer leads or lists, product information, strategic business plans, trade
secrets, manuals, business methodology and processes, and cost and pricing
policies. All Confidential Information disclosed or provided to the Executive by
the Company, or developed or created by the Executive during the term of his or
her employment with the Company, or developed or created by the Executive during
the term of his or her employment with the Company, is, shall become, and shall
at all times remain, the sole and exclusive property of the Company. The
Executive agrees not to disclose the Confidential Information to any other
party, except to the extent that such disclosure is reasonably necessary in
order for the Executive to perform his or her responsibilities as an Executive
Vice President of the Company. The Executive also

<PAGE>

agrees that he or she will not use the Confidential Information for any purpose
other than to fulfill his or her responsibilities as an Executive Vice President
of the Company.

            The Executive acknowledges, understands, and agrees that the
Confidential Information is of substantial value to the Company and that, in the
event of the use or disclosure of such Confidential Information in breach of
this Agreement, the resulting damages will be difficult, if not impossible, to
determine and that money damages will be inadequate. Therefore, without
prejudice to the rights and remedies otherwise available to the Company, and in
addition to such rights and remedies, the Company shall be entitled to equitable
relief by way of injunction if the Executive breaches or threatens to breach any
of the provisions of this Agreement relating to the Executive's use or
disclosure of any of the Confidential Information.

            The Executive further acknowledges that the Company may provide the
Executive with access to or use of equipment or other property owned or leased
by the Company ("Company Property"). The Executive agrees to abide by all
agreements and policies relating to the use of Company Property, as may be in
effect or modified from time to time at the sole discretion of the Company. The
Executive further agrees to promptly return in good working condition all
Company Property in his or her possession upon termination of the Executive's
employment with the Company for any reason, and shall be liable in damages,
including but not limited to replacement cost, for any financial loss to the
Company if Company Property is not returned in such manner.

            The Executive agrees that this section 7 shall survive the
termination of this Agreement, and that all of the obligations of the Executive
set forth in this section 7 shall remain in full force and effect after this
Agreement is terminated. The Executive further agrees that, upon termination of
this Agreement, he will return to the General Counsel all Confidential
Information (including all copies of Confidential Information) which is then in,
or which later comes into, his or her possession or custody.

            8. Non-Solicitation; Non-Disparagement The Executive agrees that:
(a) during the term of the Executive's employment with the Company, the
Executive shall not, directly or indirectly, attempt to divert any of the
business of the Employer, or any business which the Employer has a reasonable
expectation of obtaining, by soliciting, contacting, or communicating with any
customers and/or potential customers of the Company which have been derived from
leads and/or lists developed and provided to the Executive by the Company; (b)
during the term of the Executive's employment with the Company, and for a period
of two (2) years after termination of the Executive's employment with the
Company, whether such termination is voluntary or involuntary, with or without
cause, the Executive shall not, directly or indirectly, influence or advise any
other person to employ or solicit for employment anyone who is an executive of
the Company; and (c) during the term of Executive's employment with the Company,
and for a period of one (1) year after termination of the Executive's employment
with the Company, whether such termination is voluntary or involuntary, with or
without cause, the Executive shall not, directly or indirectly, influence or
advise any person who is an executive of the Company, to leave the employment of
the Company, and shall not

<PAGE>

employ any person who is an executive of the Company. The Executive agrees that
during the term of Executive's employment with the Company, the Executive shall
not, directly or indirectly, attempt to divert any of the business of the
Company, or any business which the Company has a reasonable expectation of
obtaining, by soliciting, contacting, or communicating with any customers or
business referral sources, including but not limited to realtors, builders and
affinity organizations, joint venture partners, borrowers and loan applicants,
obtained by, or whose contact information is stored in the records of, the
Company. The Executive expressly agrees that this section is fair and reasonable
and that Executive is being adequately compensated for agreeing to the terms of
this section. The Executive's obligations as set forth in this section 8 shall
survive the termination of this Agreement.

            The Company and the Executive agree that neither will disparage the
other, and that their representatives will not disparage either party hereto.

            9. Non-Compete. The Executive agrees that, during the term of the
Executive's employment with the Company, the Executive shall not, directly or
indirectly, engage, participate, make any financial investment in, or become
employed by or render advisory or other services to or for any person, firm
corporation or other business enterprise which is, or is reasonably likely to
become engaged, directly or indirectly, in competition with the Company in any
county in which the Company is doing business at the time the Executive's
employment with the Company terminates. The Executive expressly agrees that this
section is fair and reasonable and that the Executive is being adequately
compensated for agreeing to the terms of this section.

            10. Entire Agreement: Amendment

            (a) This Agreement contains the entire understanding of the parties
with Respect to the subject matter hereof and supersedes any and all other
agreements between the parties, their predecessors and affiliates.

            (b) Any amendment of this Agreement shall. not be binding unless in
writing and signed by both (i) the Company's DCAO and (ii) the Executive.

            11. Enforceability. In the event that any provision of this
Agreement is determined to be invalid or unenforceable, the remaining terms and
conditions of this Agreement shall be unaffected and shall remain in full force
and effect, and any such determination of invalidity or enforceability shall not
affect the validity or enforceability of any other provision of this Agreement.

            12. Notices. All notices which may be necessary or proper for either
the Company or the Executive to give to the other shall be in writing and shall
be sent by hand delivery, registered or certified mail, return receipt requested
or overnight courier, if to the Executive, to her at [ ], and, if to the
Company, to it at its principal executive offices at 538 Broadhollow Road,
Melville, NY 11747, Attention: Human

<PAGE>

Resources Director, with a copy to the Company's General Counsel, and shall be
deemed given when sent. Either party may by like notice to the other party
change the address at which it is to receive notices hereunder.

            13. Governing Law. THIS AGREEMENT SHALL BE GOVERNED

            BY, AND BE ENFORCEABLE IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.

            IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first written above.

                                    American Home Mortgage Holdings, Inc,

                                    By: /s/ Dick Loeffler
                                       ---------------------------------------
                                    Name: Dick Loeffler
                                    Title: Deputy Chief Administrative Officer

                                        /s/ Dena Kwaschyn
                                    ------------------------------------------
                                    Dena Kwaschyn

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