THIS
EMPLOYMENT AGREEMENT (hereinafter referred to as the
“Agreement”) is effective, except as otherwise
indicated below, January 1, 2009, by and among Meadowbrook,
Inc., and Meadowbrook Insurance Group, Inc., (hereinafter referred
to as the “Company”), and Robert S. Cubbin (hereinafter
referred to as the “Executive”).
WHEREAS ,
the Company and the Executive desire to set forth their respective
rights and obligations in connection with the employment of the
Executive by the Company by entering into a contract of
employment;
NOW
THEREFORE , in consideration of the premises and of the mutual
covenants, agreements and understandings contained herein, the
parties hereto agree as follows:
1.
Employment . The Company agrees to employ the Executive
during the Employment Term (as such term is hereinafter defined in
Paragraph 5) and the Executive hereby accepts such employment
by the Company, subject to the terms and conditions hereinafter set
forth and the Company’s Associate Manual (hereinafter
referred to as the “Manual”). To the extent that the
terms and Conditions of this Agreement conflict with the Manual,
this Agreement shall control. This Agreement establishes the terms
of the Executive’s employment and the payments to which the
Executive is entitled during such employment and upon termination
of employment. Nothing in this Agreement changes the at-will status
of the Executive’s employment. The Company retains the right
to terminate the Executive’s employment with the Company for
any reason, or no reason, with the notice prescribed below, and at
any time. The Executive retains the same right.
2.
Responsibilities and Duties . The Executive shall be
employed as the Company’s President and Chief Executive
Officer or in such other position(s) and with such responsibilities
and duties as the Board of Directors of the Company may from time
to time determine. The Executive shall devote his full working time
to the performance of his responsibilities and duties
hereunder.
3.
Compensation . In consideration of the performance by the
Executive of his obligations during the Employment Term, the
Company will during the Employment Term pay the
Executive:
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(A)
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Base Salary . A base salary of not less than
$54,167 per month (hereinafter referred to as “Base
Salary”). Such Base Salary shall be payable in accordance
with the normal payroll practices of the Company then in effect.
Increases, if any, in the Base Salary shall be determined by the
Company.
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(B)
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Discretionary Bonus
. A discretionary bonus
targeted at a minimum of seventy percent (70%) of the
Executive’s annual Base Salary (hereinafter referred to as
the “Discretionary Bonus”). This Discretionary Bonus
may be paid at the sole discretion of the Company and will be based
on attainment of:
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(1)
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Corporate Goals (profit, ROE,
etc.);
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(2)
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Profit Center Goals; and
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(3)
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Personal Goals and
Objectives.
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The Company and
the Executive shall annually review and establish the Discretionary
Bonus target and the bonus formula described in
Section 3(B)(1)-(3).
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(C)
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Stock Options or Restricted
Stock . The
Executive has been, and shall continue to be, eligible for the
stock options and restricted stock awards, in accordance with the
terms and conditions of the 1995 and 2002 Stock Option Plans of
Meadowbrook Insurance Group, Inc. In the event of any Change in
Control, all stock options previously granted to the Executive
shall become exercisable by the Executive and all restricted stock
awards previously granted to the Executive shall become immediately
vested.
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(D)
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Long Term Incentive Plan
. The Executive shall be
eligible for stock awards and performance bonus awards under the
Meadowbrook Insurance Group, Inc. Long Term Incentive Plan. The
aggregate annual value of a target award shall be seventy percent
(70%) of the Executive’s annual Base Salary. In the event of
a Change in Control the Executive shall be entitled to (i) a
pro rata portion of the bonus award for the performance period in
which the Change in Control occurs based on the Company’s ROE
as of such date; (ii) cash awards that have not yet been paid
for performance period ending prior to the effective date of the
Change in Control; and (iii) to the extent provided in a
restricted stock agreement, all shares of restricted stock shall
become fully vested and nonforfeitable.
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(E)
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Demand Note —
Non-Recourse . The Demand Note between the
Company and the Executive and his spouse, dated November 9,
1998, shall continue to be deemed a non-recourse loan with the
Company’s sole legal remedy in the event of a default being
the reclamation of the shares of Meadowbrook Insurance Group, Inc.,
pledged pursuant to the Stock Pledge Agreement, dated
November 9, 1998. In the event of a termination of the
Executive’s employment by the Company without Cause or as a
result of any purchaser acquiring fifty percent (50%) or more of
the outstanding shares of the Company, then (i) this Demand
Note shall be cancelled and deemed paid in full; and (ii) the
Executive shall be entitled to retain his shares of Company stock
pledged pursuant to the Stock Pledge Agreement, dated
November 9, 1998, or, at the Executive’s
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discretion, sell these shares back
to the Company at the then current market price or their book
value, whichever is greater.
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(F)
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Severance .
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(1)
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Without Cause Termination or
Termination for Good Reason . In the event that prior to a
Change in Control, the Executive’s employment is terminated
by the Company during the Employment Term without Cause or
terminated by the Executive for Good Reason, then the Company shall
make the following payments to the Executive:
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(i)
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The
Company shall pay the Executive’s base salary for a period of
two (2) years in accordance with the Company’s regular
bi-monthly payroll schedule. In no event shall any severance
payable in bi-monthly installments be made after the last day of
the second calendar year following the year in which the
Executive’s employment terminates. The amount of severance
payable in bi-monthly installments shall not exceed the amount
eligible for exemption as separation pay under Treas. Reg. §
1.409A-1(b)(9) and to the extent Executive is entitled to severance
payments in excess of such amount, the Employer shall pay Executive
the excess amount in a lump sum and such lump sum shall be paid
within ten (10) days following date Executive’s
employment terminates. Payment of the amounts due under
Section 5(c)(i) shall not be reduced in the event the
Executive obtains other employment following termination of
employment by the Employer.
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(ii)
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The
Executive shall also be entitled to payment of a pro rata share of
such portion of the Discretionary Bonus for the year in which his
employment terminates that is based on the Company’s actual
performance and the performance criteria in effect for the current
performance period. Such pro rata portion shall be determined by a
fraction, the numerator of which is the number of days in the year
that the Executive is employed by the Company and the denominator
of which is 365. Such payment shall be made no later than the
February 28 of the calendar year immediately following the
year in which the Executive’s employment
terminates.
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(iii)
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The
Company shall also pay on the Executive’s behalf an amount
equal to the premiums payable by the Executive in the event the
Executive elects continuation coverage pursuant to the Consolidated
Omnibus Budget Reconciliation Act of 1985 (“COBRA”).
Such payments shall cease upon the earlier of eighteen
(18) months of continuation coverage or the cessation of the
Executive’s and the Executive’s family members’
rights to COBRA continuation coverage. The Company shall make such
payments directly to the party to whom premiums are payable at such
times as they are due under COBRA.
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(2)
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Termination Following Change in
Control . In
the event that following a Change in Control, the Executive’s
employment is terminated by the Company during the Employment Term
without Cause or terminated by the Executive for Good Reason, then
the Company shall make the following payments to the
Executive:
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(i)
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The
Company shall make a single lump sum payment to the Executive equal
to the Executive’s target award for the then current three
year performance period under the Company’s Long Term
Incentive Plan plus an amount equal to two times (2x) the sum of
the Executive’s annual Base Salary and the Executive’s
target Discretionary Bonus, subject to repayment by the Executive
upon the Executive’s breach of his covenant to not compete
with the Company or to solicit Company employees as provided in
Section 7. The Company shall make such payment within ten
(10) days following the date the Executive’s employment
terminates.
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(ii)
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The
Executive shall also be entitled to payment of a pro rata share of
such portion of the Discretionary Bonus for the year in which his
employment terminates that is based on the Company’s actual
performance and the performance criteria in effect for the current
performance period. Such pro rata portion shall be determined by a
fraction, the numerator of which is the number of days in the year
that the Executive is employed by the Company and the denominator
of which is 365. Such payment
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shall be made
no later than the February 28 of the calendar year immediately
following the year in which Executive’s employment
terminates.
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(iii)
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The
Company shall also pay on the Executive’s behalf an amount
equal to the premiums payable by the Executive in the event the
Executive elects continuation coverage pursuant to the Consolidated
Omnibus Budget Reconciliation Act of 1985 (“COBRA”).
Such payments shall cease upon the earlier of eighteen
(18) months of continuation coverage or the cessation of the
Executive’s and the Executive’s family members’
rights to COBRA continuation coverage. The Company shall make such
payments directly to the party to whom premiums are payable at such
times as they are due under COBRA.
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(3)
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For Cause Termination
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(i)
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For
purposes of this Agreement, “Cause” shall
mean:
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(a)
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the
failure by the Executive to obey the reasonable and lawful orders
of the Board of Directors of the Company;
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(b)
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misconduct by the Executive that is
materially injurious to the Company; or
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(c)
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the
Executive engaging in dishonest activities injurious to the
Company.
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(ii)
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Should the Executive’s
employment be terminated by the Company for Cause during the
Employment Term, this Agreement shall be terminated forthwith
without notice or payment in lieu thereof and the Executive shall
not be entitled to receive any other consideration (beyond
consideration accrued to the date of dismissal that is owing but
not yet paid) from the Company.
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(iii)
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Further, in the
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