EXHIBIT 10.1
EMPLOYMENT
AGREEMENT
This Employment Agreement (herein,
“Agreement”) is hereby made effective as of the
30 th day of November 2005, by and between
Mark E. Pape , an individual resident of Dallas, Texas (the
“Executive”), and Affirmative Insurance Holdings,
Inc. , a Delaware corporation (the
“Company”)
RECITALS:
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A.
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The Company is
a holding company for a group of insurance agencies and property
and casualty insurance subsidiaries which offer primary insurance
primarily on personal risks;
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B.
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The Executive
serves as Executive Vice President and Chief Financial Officer of
the Company;
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C.
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The Company
wishes to assure itself of the continued services of the Executive
so that it will have the continued benefit of his ability,
experience and services, and the Executive is willing to enter into
an agreement to that end, upon the terms and conditions hereinafter
set forth; and
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D.
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Certain
capitalized terms used in this Agreement shall have the meanings
given them in Section 16 hereof.
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NOW, THEREFORE, in consideration of
the mutual covenants contained herein, the Company and the
Executive hereby agree as follows:
Section 1. Employment
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(a)
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The Company
hereby agrees to employ the Executive as Executive Vice President
and Chief Financial Officer with such authority, duties and
responsibilities as are commensurate with such position and as may
be consistent with such position, and any other position agreed
upon by the parties. During the Term, the Executive shall perform
such services and duties as the Board or the Chief Executive
Officer may from time to time designate consistent with such
positions.
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(b)
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The Executive
shall report to the Chief Executive Officer.
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(c)
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The Executive
shall devote his best efforts and his full business time to the
business affairs of the Company as may be reasonably necessary for
the discharge of his duties as Executive Vice President and Chief
Financial Officer.
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(d)
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The Company, in
its sole discretion, may require that the Executive be designated
an employee of one or more of the Company’s subsidiaries or
affiliates for such purposes as payroll and benefits
administration. The employment of the Executive by any such
subsidiary or affiliate to facilitate the Company’s internal
administrative purposes shall be considered employment by the
Company within the meaning of this Agreement and shall not
otherwise affect any of the rights or responsibilities of the
Company or the Executive hereunder.
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Section 2. Term.
Unless earlier terminated as provided herein,
the Executive’s employment under this Agreement shall be for
a term (the “Term”) of two (2) years from the
Effective Date. At least sixty (60) days prior to the natural
expiration of the Term, the Company shall give Executive written
notice of whether the Company will be seeking an extension of
Executive’s services under the Employment
Agreement. Unless such notice indicates that there will be an
extension or in the event no notice is given, this Employment
Agreement will be terminated at the end of the Term.
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Employment
Agreement (Cont.)
Section 3. Compensation and
Benefits.
In consideration of the services
rendered by the Executive during the Term, the Company shall pay or
provide to the Executive the amounts and benefits set forth
below.
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(a)
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Salary . Executive shall receive an annual base salary
of $255,000. The base salary shall be paid in accordance with the
Company’s normal payroll practices. The Executive’s
base salary shall be reviewed at least annually for consideration
of appropriate merit increases and, once established, the base
salary shall not be decreased during the Term without the consent
of the Executive.
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(b)
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Other
Incentive Plans . The
Executive shall participate in all annual and long-term bonus or
incentive plans or arrangements in which substantially all other
executives of the Company of a comparable level are eligible to
participate from time to time, subject to the terms and conditions
of the applicable plan. The Executive’s incentive
compensation opportunities under such plans and arrangements shall
be determined from time to time by the Compensation
Committee.
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(c)
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Employee
Benefits . Subject to the
terms and conditions of the applicable plan, the Executive shall be
entitled to participate in employee benefit plans, programs,
practices or arrangements of the Company in which substantially all
other executives of the Company of a comparable level are eligible
to participate from time to time, including, without limitation,
any qualified or non-qualified pension, profit sharing and savings
plans, any death benefit and disability benefit plans, and any
medical, dental, health and welfare plans. Without limiting the
generality of the foregoing, the Company shall provide the
Executive with the following:
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(i)
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long-term
disability insurance coverage in an amount and on terms consistent
with the coverage in place for other management personnel of the
Company; and
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(ii)
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continued
provision of life insurance coverage in an amount and on terms
consistent with the coverage in place for other management
personnel of the Company.
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(d)
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Fringe
Benefits and Perquisites . The Executive shall be entitled to all fringe
benefits and perquisites which are generally made available to
executives of the Company of a comparable level from time to time.
Without limiting the generality of the foregoing, the Company shall
provide the Executive with the following
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(i)
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provision of
offices and secretarial staff;
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(ii)
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vacation in
accordance with the Company’s policy for other executives of
a comparable level;
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(iii)
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an automobile
owned or leased by the Company of a make and model appropriate for
the Executive’s position or, in lieu thereof, provision of a
non-accountable automobile allowance in an amount to be determined
from time to time by the Board or the Compensation Committee;
and
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(iv)
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reimbursement
of all reasonable travel and other business expenses and
disbursements incurred by the Executive in the performance of his
duties under this Agreement, upon proper accounting in accordance
with the Company’s normal practices and procedures for
reimbursement of business expenses.
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Section 4. Termination.
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(a)
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The
Executive’s employment under this Agreement may be terminated
prior to the end of the Term only as follows:
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(i)
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upon death of
the Executive or upon thirty (30) days prior delivery of a
Notice of Termination of the resignation of the
Executive;
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Employment
Agreement (Cont.)
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(ii)
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by the Company
due to the Disability of the Executive upon thirty (30) days
prior delivery of a Notice of Termination to the
Executive;
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(iii)
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by the Company
for Cause or without Cause, in either event upon thirty
(30) days prior delivery of a Notice of Termination to the
Executive; or
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(iv)
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by the
Executive for Good Reason upon thirty (30) days prior delivery
of a Notice of Termination to the Company.
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(b)
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If the
Executive’s employment with the Company is terminated during
the Term by reason of the Executive’s death or Disability,
the Company shall pay to the Executive (or in the case of his
death, the Executive’s estate) within thirty (30) days
after the Termination Date a lump sum cash payment equal to the
Accrued Compensation and the Pro Rata Bonus. If the
Executive’s employment with the Company is terminated during
the Term by the Company for Cause or as a result of resignation by
the Executive for other than Good Reason, the Company shall pay to
the Executive within thirty (30) days after the Termination
Date a lump sum cash payment equal to the Accrued
Compensation.
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(c)
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If the
Executive’s employment with the Company is terminated by the
Company without Cause or by the Executive for Good Reason, the
Executive shall be entitled to the following:
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(i)
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the Company
shall pay the Executive in cash within thirty (30) days of the
Termination Date an amount equal to all Accrued Compensation and
the Pro Rata Bonus;
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(ii)
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at the end of
each of the twenty-four (24) consecutive 30-day periods
following the Termination Date, the Company shall pay to the
Executive in cash an amount equal to one-twelfth of the sum of the
Base Amount (including any increases in base salary) plus the Bonus
Amount (including any increases in bonus amount); provided ,
that the right of the Executive to receive any of the payments
contemplated by this Section 4(c)(ii) shall be subject to the
condition that the Executive shall not be in breach of the
Executive’s obligations pursuant to Section 5
hereof.
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(iii)
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(A) for a
period of twenty-four (24) months following the Termination
Date or (B) for such longer period as any plan, program,
practice or policy may provide, the Company shall continue benefits
to the Executive and/or the Executive’s family at least equal
to those which would have been provided to them in accordance with
the Company’s plans, programs, practices and policies
providing medical, dental, health, death and disability benefits if
the Executive’s employment had not been terminated in
accordance with the plans, practices, programs or policies of the
Company and its affiliated companies as in effect and applicable
generally to other peer executives and their families from time to
time; provided , however , that if the Executive
becomes reemployed with another employer and is eligible to receive
medical and other welfare benefits under another employer-provided
plan, the medical and other welfare benefits described herein shall
be secondary to those provided under such other plan during such
applicable period of eligibility.
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(d)
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The Company
shall have the ability, upon delivery of a Notice of Termination to
Executive, to terminate the officership positions of
Executive.
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Section 5. Restrictive Covenants.
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(a)
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Confidential
Information . During the
Term, the Company agrees to provide Executive with Confidential
Information (as defined below). During the Term and at all times
thereafter, the Executive agrees that he will not divulge or
disclose to anyone (other than the Company or any persons employed
or designated by the Company) any Confidential Information.
Confidential
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Employment
Agreement (Cont.)
Information shall include all
information of a confidential nature relating to the business of
the Company or any of its subsidiaries or affiliates, including,
without limitation, customer lists, contract terms, marketing
plans, business plans, financial data, cost information, sales
data, or business opportunities whether for existing, new or
developing businesses, and the Executive further agrees not to
disclose, publish or make use of any such knowledge or Confidential
Information at any time, including in any future employment,
without the consent of the Company.
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(b)
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Non-Compete . In consideration of the parties various mutual
promises contained herein, including without limitation those
involving Confidential Information, Executive agrees that: upon
termination by Executive for Good Reason, upon termination of
Executive’s employment by the Company for Cause, or upon
termination of Executive’s employment without Cause,
Executive agrees not to enter into or engage in any phase of the
Business conducted by the Company in any state in which the Company
is conducting business or is planning to conduct business on the
date of termination of Executive’s employment with the
Company, either as an individual for his own account, as a partner
or joint venturer, or as an employee, agent, officer, director, or
substantial shareholder of a corporation or otherwise for a period
of two (2) years following the date of Executive’s
termination of his employment with the Company. As of the date of
execution of this Agreement, the Business conducted by the Company
is defined as owning and operating (i) insurance companies
providing non-standard automobile insurance coverage of any type or
class, (ii) underwriting agencies (or managing general
agencies) that produce and administer non-standard automobile
insurance, and (iii) retail agencies that sell non-standard
automobile insurance policies. Notwithstanding the foregoing, in
the event Executive’s employment is not terminated for Cause,
if Executive reasonably shows that his proposed employment is not
directly competitive with the Company’s business, Executive
may enter into such employment.
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(c)
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Non-Solicitation . Upon termination or expiration of his
employment, whether voluntary or involuntary, Executive agrees not
to directly or indirectly solicit either (i) any employees of
the Company to leave their employment with the Company in favor of
employment with any other entity, (ii) any person who was an
employee of the Company at any time during the six (6) months
prior to the date of the Executive’s termination of
employment or (iii) business in the area of non-standard
automobile insurance from any entity, organization or person which
has contracted with the Company, which has been doing business with
the Company, from which the Company was soliciting business at the
time of Executive’s termination, or from which the Executive
knew or had reason to know that the Company was going to solicit
business at the time of Executive’s termination, in each case
for a two-year period from the date of Executive’s
termination of his employment with the Company.
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(d)
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Non-Disparagement . During the term of the Executive’s
employment with the Company and following the Termination Date, the
Executive shall not disparage, discredit or otherwise criticize,
directly or i
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