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| Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers |
On April 7, 2022 (the “Effective Date”), Universal Insurance Holdings, Inc. (the “Company”) entered into an amended and restated employment agreement with Stephen J. Donaghy, the Company’s Chief Executive Officer (the “Agreement”). Mr. Donaghy and the Company are parties to an employment agreement dated as of February 12, 2020, as amended as of April 20, 2020, which expires on December 31, 2022, and is superseded and replaced in all respects by the Agreement as of April 7, 2022; provided, however, that the terms of the Agreement shall not supersede or replace any equity award made prior to the Effective Date. The following summary of the Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Agreement, which is attached hereto as Exhibit 10.1 and incorporated herein by reference thereto.
Term
Mr. Donaghy’s Agreement provides that he will continue to serve as the Chief Executive Officer of the Company for a term beginning on January 1, 2020 (the “Term”).
Base Salary
Mr. Donaghy will receive a base salary of $1 million, which will not be increased or decreased during the Term.
Annual Bonus
Mr. Donaghy is eligible to receive an annual cash bonus for each calendar year ending during the Term in which Mr. Donaghy remains employed by the Company. The annual bonus for each calendar year shall be 150% of Mr. Donaghy’s base salary for target performance, 75% of Mr. Donaghy’s base salary for threshold performance, and 300% of Mr. Donaghy’s base salary for maximum performance, with the actual annual bonus payable being based upon the level of achievement of annual company and individual performance objectives for such calendar year as determined by the Compensation Committee of the Board of Directors (the “Compensation Committee”).
Restricted Share Units
Mr. Donaghy is eligible to receive an annual grant of restricted share units (the “RSU Grant”) with a target value of $1,750,000, which grant shall be made pursuant to the Universal Insurance Holdings, Inc. 2021 Omnibus Incentive Plan. No more than 50% of the RSU Grant will be subject to time-based vesting conditions, and no less than 50% of the RSU Grant will be subject to performance-based vesting conditions.
Termination
If Mr. Donaghy is terminated without cause or resigns for good reason (as such terms are defined in the Agreement), he would be entitled to a lump-sum cash amount equal to 12 months’ base salary and 12 months of COBRA coverage, subject to his execution of a general release of claims in favor of the Company. He would also be entitled to receive a pro rata portion of his annual bonus award for the year of termination, calculated on the basis of the Company’s actual performance for such year.
Change in Control
In the event of a change in control (as defined in the Agreement) and Mr. Donaghy is terminated without cause or resigns for good reason within 24 months after such change in control, Mr. Donaghy would be entitled to a lump-sum cash amount equal to 24 months’ base salary, plus two times any bonus paid for the calendar year prior to the change in control, subject to his execution of a general release of claims in favor of the Company. All such change in control payments would be reduced to the extent they would constitute an “excess parachute payment” within the meaning of Section 280G of the Code, if such reduction would result in Mr. Donaghy receiving a higher net after-tax amount.
Disability
If Mr. Donaghy becomes disabled during the Term, then the Company would be entitled to suspend his officership, but Mr. Donaghy would be entitled to remain an employee of the Company and receive his compensation and benefits for the lesser of (i) one year from the date of such suspension or (ii) the date on which he is first eligible for long-term disability payments under the Company’s long-term disability plan. If Mr. Donaghy is terminated due to disability or dies during the Term, he or his estate, respectively, would be entitled to receive a pro rata portion of his annual bonus award for the year of termination, calculated on the basis of the Company’s actual performance for such year.
Non-Compete
Mr. Donaghy is subject to a non-compete provision under the Agreement that prohibits him from engaging in certain competitive activities during the Term and for a period of three years following his termination.
Other
The Agreement also contains nondisparagement, nonsolicitation and confidentiality provisions.