<PAGE>
Exhibit 10.18
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT,
made and entered into this 8th day of September, 2006 by and
between Majestic Insurance Company, a California corporation (the
"COMPANY"),
and John L. Sullivan ("EXECUTIVE").
W I T N E S S E T H:
--------------------
WHEREAS,
Executive has been the chief executive officer of the Company
for
a number of years;
WHEREAS,
CRM USA Holdings Inc., a Delaware corporation ("CRM"), and the
shareholders of the Company's parent have entered into a Stock
Purchase
Agreement (the "Stock Purchase Agreement") of even date herewith
pursuant to
which, at the Closing thereunder, CRM will indirectly acquire all
of the issued
and outstanding shares of capital stock of the Company; and
WHEREAS,
the Company and CRM desire that effective upon the Closing Date
under the Stock Purchase Agreement, (the "CLOSING DATE"), Executive
be employed
as the president of the Company, and Executive desires to be so
employed, on the
terms and conditions set forth in this Agreement;
NOW,
THEREFORE, in consideration of the premises and mutual
covenants
contained herein and for other good and valuable consideration, the
receipt and
sufficiency of which are mutually acknowledged, the Company and
Executive
(sometimes hereinafter referred to individually as a "PARTY" and
together as the
"PARTIES") hereby agree to be bound in accordance with the terms of
this
Agreement.
1. Term.
The term of Executive's employment under this Agreement shall
commence on the Closing Date and end on the last day of the
calendar month in
which the 18th month anniversary of the Closing Date occurs (the
"ORIGINAL
TERM"). The Original Term shall be automatically renewed for
successive one-year
terms (the "RENEWAL TERMS") unless at least sixty (60) days prior
to the
expiration o the Original Term or any Renewal Term, either the
Company or
Executive notifies the other in writing that it or he elects to
terminate this
Agreement at the expiration of the then current Term. "TERM" shall
mean the
Original Term and all Renewal Terms, unless the Original Term or
any Renewal
Term is terminated earlier in accordance herewith.
2.
Position, Duties and Responsibilities.
(a) Generally. Executive shall serve as the President of the
Company. In such capacity, Executive shall report to the Chairman
of the Board
and chief executive officer of the Company (the "CHIEF EXECUTIVE
OFFICER").
Executive shall have and perform such duties, responsibilities and
authorities
as are customary for a president who reports to the chief executive
officer of
similar size companies and businesses as the Company. Executive
shall devote
substantially all of his business time and attention (except for
periods of
vacation or absence due to illness), and his best efforts,
abilities, experience
and talent, to the business of the
<PAGE>
Company and its affiliates and shall perform such duties with
respect to the
subsidiaries of the Company and with respect to CRM and its
affiliates as may be
assigned to him by the Chief Executive Officer without any
additional
consideration.
(b) Other Activities. During the Term, Executive may (i) serve
on
the Boards of Directors of trade associations and/or charitable
organizations,
provided that Executive shall notify the Chief Executive Officer of
any such
position, and on the Boards of Directors of Starboard Captive
Insurance Company
and MTC Holdings unless and until the Chief Executive Officer
requests that he
resign from such Boards; (ii) engage in charitable activities and
community
affairs; and (iii) manage personal investments and affairs,
provided that such
activities do not materially interfere with the proper performance
of his duties
as President of the Company.
(c) Place of Employment. Executive's principal place of
employment
shall be the corporate offices of the Company in San Francisco,
California.
3. Base
Salary. Executive shall be paid an annualized salary ("BASE
SALARY") of $350,000 in accordance with the Company's normal pay
practices. The
Base Salary shall be reviewed for increase by the Compensation
Committee (the
"COMPENSATION COMMITTEE") of the Board of Directors of CRM's
parent, CRM
Holdings, Ltd., a Bermuda corporation ("PARENT"), no less
frequently than
annually.
4.
Incentive Awards. Executive shall participate in Parent's
annual
incentive compensation plan with a target maximum annual incentive
award
opportunity of 75% of Base Salary ("ANNUAL INCENTIVE"), based on
performance
criteria determined by the Compensation Committee on an annual
basis.
5.
Long-Term Incentive Programs; Restricted Stock.
(a) Executive shall be eligible to participate in Parent's
long--term incentive compensation programs, as determined by the
Compensation
Committee, including Parent's qualified stock option plan.
(b) At the
meeting of the Board of Directors of Parent next
following the Closing Date, Executive shall be awarded a number of
"restricted"
shares of common stock of Parent having a fair market value on the
date of the
award equal to 75% of Executive's Base Salary, such restricted
shares to vest in
three (3) equal annual installments commencing on the first
anniversary of the
Closing Date.
6. Other
Payments.
(a) Car Allowance. Executive shall receive a $800 a month car
allowance to cover the cost of owning, operating, maintaining and
insuring a
motor vehicle of his choosing.
(b) Vacation. Executive shall be entitled to five (5) weeks of
paid
vacation and shall take holidays in accordance with the Company's
standard
holiday schedule as amended from time to time.
2
<PAGE>
(c) Corporate Travel. Executive shall be entitled to business
class
airplane travel for all travel in connection with the performance
of his duties
hereunder.
7.
Employee Benefit Programs.
During the
Term, Executive shall be entitled to participate in the
Company's employee pension and welfare benefit plans and programs
as such plans
or programs may be in effect from time to time, including, without
limitation,
health, medical and dental coverage (together, "WELFARE
BENEFITS").
8.
Reimbursement of Business and Other Expenses.
Executive
is authorized to incur reasonable expenses in carrying out his
duties and responsibilities under this Agreement, and the Company
shall promptly
reimburse him for all such reasonable business expenses, subject
to
documentation in accordance with the Company's applicable
policies.
9.
Termination of Employment.
(a) Death. If Executive dies during the Term, Executive's
estate
and/or beneficiaries sole remedies under this Agreement or
otherwise shall be
and they shall be entitled to receive only:
(i) Base Salary through the date of Executive's death;
(ii) the balance
of any incentive awards earned as of December
31 of the prior year (but not yet paid), (together, with unpaid
Base
Salary, "ACCRUED AMOUNTS");
(iii) a pro rata Annual Incentive for the year in which the
date of termination ("TERMINATION DATE") occurs assuming Target
performance ("PRO RATA ANNUAL INCENTIVE");
(iv) immediate vesting of all restricted stock awards,
unvested stock options and other unvested long-term incentive
compensation, if any ("EQUITY ACCELERATION"); and
(v) such other or additional benefits then due or earned in
accordance with applicable plans and programs of the Company
("ENTITLEMENTS").
(b) Disability. The Company may terminate Executive's
employment
hereunder at any time after Executive becomes "TOTALLY DISABLED."
For purposes
of this Agreement, Executive shall be "TOTALLY DISABLED" upon
Executive's
inability to perform his duties and responsibilities contemplated
under this
Agreement for a period of more than one hundred and twenty (120)
days in any
three hundred sixty-five (365) day period due to physical or mental
incapacity
or impairment which is determined to be total and permanent by a
physician
selected by the Company or its insurers and reasonably acceptable
to Executive
or Executive's legal representative. Such termination shall become
effective
five (5) days after the Company
3
<PAGE>
gives notice of such termination to Executive, or to Executive's
spouse or legal
representative, in accordance with Section 14(h) of this Agreement.
In the event
the Company terminates Executive's employment pursuant to this
Section 9(b),
Executive's sole remedies under this Agreement or otherwise shall
be and he
shall be entitled to receive only:
(i) All Accrued Amounts;
(ii) A Pro Rata Annual Incentive; and
(iii) All Entitlements.
(c) Termination by the Company for Cause.
(i) In the event the Company terminates Executive's employment
for Cause, Executive's sole remedies under this Agreement or
otherwise shall be and Executive shall be entitled to receive
only
all Accrued Amounts and any Entitlements. Executive shall not
be
entitled to receive any Severance Pay (as defined in Section
9(e)(iv) of this Agreement), and his equity awards will be
settled
in accordance with the terms and conditions of the applicable
grant
agreements.
(i) "CAUSE" shall mean Executive's:
(A) breach of Section 10 or 11 of this Agreement or
Section 5.5 of the Stock Purchase Agreement;
(B) conviction of, or plea of nolo contendre to, any
felony that is materially injurious to the Company's, CRM's or
Parent's financial condition or reputation;
(C) engaging in conduct constituting misconduct or a
knowing violation of law in carrying out his duties under this
Agreement; or
(D) material failure to perform his duties hereunder.
(ii) A termination for "CAUSE" under Clause (C) or (D) of this
Section 9(c)(ii) shall not take effect until Executive receives
written notice from the Company stating in reasonable detail
the
particular act or acts
or failure or failures to act constituting
the grounds for Cause. Executive shall have ten (10) days after
the
date that such written notice has been received by him in which
to
cure such conduct and if such conduct is not cured within such
ten
(10) day period, Executive's employment hereunder shall be
terminated for Cause at the end of such ten (10) day period
without
any further action or notice by the Company.
(d) Voluntary Termination. In the event of a termination of
employment by Executive on his own initiative after delivery of
thirty (30)
business days advance written notice, other than a termination due
to death,
Disability or Retirement (as defined below), Executive
4
<PAGE>
shall be entitled to receive under this Agreement or otherwise only
all Accrued
Amounts and Entitlements.
(e) Termination by the Company without Cause or by Executive
for
Good Reason. If the Company terminates Executive's employment
without Cause
(which termination shall be effective as of the date specified by
the Company in
a written notice to Executive), other than due to Executive's death
or
Disability, or if Executive terminates his employment for Good
Reason (as
defined in Section 9(g) of this Agreement), Executive's sole
remedies under this
Agreement or otherwise shall be and Executive shall be entitled to
receive only:
(i) all Accrued Amounts;
(ii) a Pro
