Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
In connection with entering into the Merger Agreement, Sompo has required, among other things, that the following executive officers of Endurance execute and deliver an amended and restated employment agreement and amended and restated indemnification agreement, subject to and effective as of the closing of the Merger.
Amended and Restated Employment Agreement with John R. Charman
On October 5, 2016, Endurance and Merger Sub entered into an Amended and Restated Employment Agreement with John R. Charman, the Chairman of the Board of Directors and Chief Executive Officer of Endurance, subject to and effective as of the closing of the Merger (the “
Charman Employment Agreement
”). Mr. Charman’s current employment agreement with Endurance will remain in full force and effect through the closing of the Merger. If the Merger Agreement is terminated, the Charman Employment Agreement will terminate and have no force and effect.
The Charman Employment Agreement is for a five year term, followed by automatic one-year renewals unless notice of non-renewal is provided by Endurance or Mr. Charman at least 90 days prior to the end of the term. The Charman Employment Agreement specifies that Mr. Charman is to receive a $100 annual base salary and is not eligible to earn annual incentive compensation or long-term incentive compensation during the term of the Charman Employment Agreement. The Charman Employment Agreement provides for reimbursement of business travel expenses for Mr. Charman, the reimbursement of certain personal travel expenses of Mr. Charman and his family
between Bermuda and the East Coast of the United States and the reimbursement of incremental taxes incurred as a result of travel on behalf of Endurance.
Under the Charman Employment Agreement, Endurance may separate Mr. Charman’s service from Endurance at any time as a result of disability, for cause or without cause. Mr. Charman may separate his service from Endurance at any time, with or without good reason. Mr. Charman’s service with Endurance will automatically be severed upon his death. Upon such termination events, Mr. Charman’s severance will consist of compensation for accrued and unpaid vacation days, reimbursement of prior business expenses and other employee benefits to which employees of Endurance are generally entitled.
Mr. Charman is subject to employee and customer non-solicitation and non-competition provisions, as well as ongoing confidentiality, intellectual property and non-disparagement requirements. The non-solicitation and non-competition obligations extend for two years (less any period of garden leave) following any separation from service (other than due to death).
Amended and Restated Indemnification Agreement with John R. Charman
Concurrent with the execution of the Charman Employment Agreement, Endurance entered into an Amended and Restated Indemnification Agreement with Mr. Charman on October 5, 2016, subject to and effective as of the closing of the Merger (the “
Charman Indemnification Agreement
”). Mr. Charman’s current indemnification agreement with Endurance will remain in full force and effect through the closing of the Merger. If the Merger Agreement is terminated, the Charman Indemnification Agreement will terminate and have no force and effect. The Charman Indemnification Agreement is substantially the same as the indemnification agreement it replaces.
The Charman Indemnification Agreement provides that Endurance will indemnify Mr. Charman to the full extent permitted by Bermuda law. In addition, the Charman Indemnification Agreement provides for the reimbursement by Endurance of Mr. Charman’s expenses related to the defense of claims arising from Mr. Charman’s services as a director, officer, employee, agent or fiduciary of Endurance. In the event indemnification is unavailable to Mr. Charman, the Charman Indemnification Agreement specifies contribution. Under the Charman Indemnification Agreement, Mr. Charman’s right to indemnification does not apply to claims arising from Mr. Charman’s fraud or dishonesty in relation to Endurance. In addition, Mr. Charman’s right of indemnification is limited where payment is to be made from another source, where indemnification is prohibited by law or where the claim arises as a result of liability under Section 16(b) of the U.S. Securities Exchange Act of 1934, as amended.
The Charman Indemnification Agreement also specifies the minimum levels of directors’ and officers’ liability insurance to be purchased by Endurance, the procedure for the determination of Mr. Charman’s entitlement to indemnification by Endurance and the procedures to be followed in connection with the defense of third party claims subject to indemnification.
Form of Amended and Restated Employment Agreement
On October 5, 2016, Endurance and Merger Sub entered into an Amended and Restated Employment Agreement with each of Michael J. McGuire, Endurance’s Chief Financial Officer, John A. Kuhn, Endurance’s Chief Executive Officer, Global Insurance and John V. Del Col, Endurance’s General Counsel (each, an “
Executive Employment Agreement
”). The Executive Employment Agreement is subject to and effective as of the closing of the Merger. The current Endurance employment agreements entered into with Messrs. McGuire, Kuhn and Del Col will remain in full force and effect through the closing of the Merger. If the Merger Agreement is terminated, the Executive Employment Agreement will terminate and have no force and effect.
Each Executive Employment Agreement has a term of five years following the closing of the Merger, followed by automatic one-year renewals unless notice of non-renewal is provided by Endurance or the executive at least one year prior to the end of the term. A non-renewal by Endurance will be treated as a termination without cause after the term. A non-renewal by the executive will be treated as a resignation without good reason after the term.
The compensation (annual base salary, target annual incentive and target long-term incentive) under each Executive Employment Agreement is the same as the compensation in place prior to the execution of each Executive Employment Agreement and the executive’s duties and responsibilities following the Merger will be consistent with the executive’s current duties and responsibilities. The annual base salary specified in the Executive Employment Agreements is $575,000 for Mr. McGuire, $800,000 for Mr. Kuhn and $500,000 for Mr. Del Col. The target annual incentive opportunity specified in the Executive Employment Agreements is 110% of base salary for Mr. McGuire, 120% of base salary for Mr. Kuhn and 100% of base salary for Mr. Del Col and the long-term incentive opportunity specified in the Executive Employment Agreements is 160% of base salary for Mr. McGuire, 180% of base salary for Mr. Kuhn and 150% of base salary for Mr. Del Col. In addition, each Executive Employment Agreement provides for reimbursement for housing and travel expenses, as well as a gross-up on U.S. federal and state income taxes arising from the housing and travel expense reimbursements.
During the initial term, upon a separation from service due to death or disability, by Endurance without cause (12 months’ notice required) or by the executive with good reason (three months’ notice required), subject to the execution of a release of claims and compliance with certain restrictive covenants, the executive will be entitled to the following: (a) payment equal to the base salary, annual target incentive compensation and long-term target incentive compensation for the remainder of the term; (b) vesting of all unvested long-term incentive compensation; (c) three months of housing expense reimbursement; (d) reimbursement of relocation expenses; and (e) tax preparation expenses for the last year of employment. Following the initial term, upon such separation from service, subject to the execution of a release of claims and compliance with the restrictive covenants, the executive will be entitled to the above payment, except that the amount under clause (a) above will be equal to a pro-rated annual target incentive compensation and pro-rated long-term incentive compensation.
The executive is subject to employee and customer non-solicitation and non-competition provisions, as well as ongoing confidentiality, intellectual property and non-disparagement requirements. The non-competition and non-solicitation obligations extend for one year (less any period of garden leave) following any separation from service (other than due to death), except that the non-competition obligation will be for six months following a separation from service by the Company for cause.
Form of Amended and Restated Indemnification Agreement
Concurrent with the execution of each Executive Employment Agreement, Endurance entered into an Amended and Restated Indemnification Agreement with each of Messrs. McGuire, Kuhn and Del Col on October 5, 2016, subject to and effective as of the closing of the Merger (each, an “
Executive Indemnification Agreement
”). The current Endurance indemnification agreements entered into with Messrs. McGuire, Kuhn and Del Col will remain in full force and effect through the closing of the Merger. If the Merger Agreement is terminated, the Executive Indemnification Agreement will terminate and have no force and effect. Each Executive Indemnification Agreement is substantially the same as the indemnification agreement it replaces.
Each Executive Indemnification Agreement provides that Endurance will indemnify the executive to the full extent permitted by applicable law. In addition, each Executive Indemnification Agreement provides for the reimbursement by Endurance of an executive’s expenses related to the defense of claims arising from the executive’s services as a director, officer, employee, agent or fiduciary of Endurance. In the event indemnification is unavailable to an executive, each Executive Indemnification Agreement specifies contribution. Under each Executive Indemnification Agreement, an executive’s right to indemnification does not apply if the claim arises from the executive’s fraud or dishonesty in relation to Endurance. In addition, an executive’s right of indemnification is limited where payment is to be made from another source, where indemnification is prohibited by law or where the claim arises as a result of liability under Section 16(b) of the U.S. Securities Exchange Act of 1934, as amended.
The Executive Indemnification Agreement also specifies the minimum levels of directors’ and officers’ liability insurance to be purchased by Endurance, the procedure for the determination of an executive’s entitlement to indemnification by Endurance and the procedures to be followed in connection with the defense of third party claims subject to indemnification.
The foregoing description of the Charman Employment Agreement, the Charman Indemnification Agreement, the Executive Employment Agreement and the Executive Indemnification Agreement does not purport to be complete and is subject to and qualified in its entirety by reference to the Charman Employment Agreement, the Charman Indemnification Agreement, the Executive Employment Agreement and the Executive Indemnification Agreement, as applicable, copies of which are filed as Exhibit 10.1 through 10.4, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.