Exhibit 10.1
EXECUTIVE EMPLOYMENT AGREEMENT
     This Executive Employment Agreement (this “Agreement”), is made this 10th
day of December, 2009 (the “Effective Date”) between First Mercury Financial
Corporation (the “Company”) and John A. Marazza (“Executive”).
RECITALS
     The Company currently employs Executive as its Executive Vice President and
Chief Financial Officer, and the Company and Executive now desire to enter into
this Agreement, which shall, from the Effective Date, govern the terms and
conditions of Executive’s continued employment by the Company. Certain
capitalized terms have the definitions set forth in Section 6.
STATEMENT OF AGREEMENT
     Now, therefore, in consideration of the promises and covenants hereinafter
set forth, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and Executive agree as
follows:
SECTION 1
EMPLOYMENT AND DUTIES
     1.1 Duties and Position. During the term of this Agreement, Executive shall
provide services to the Company and its subsidiaries in accordance with this
Agreement in the capacities of Executive Vice President, Chief Financial Officer
and Corporate Secretary of the Company; provided, however, that subject to
Executive’s rights under Section 3.5(b), at the request of the Company’s Board
of Directors (the “Board”) or Chief Executive Officer at any time and from time
to time, Executive shall also serve in other or additional executive capacities.
Executive shall report directly to the Chief Executive Officer and shall perform
such duties and responsibilities consistent with his executive positions as
shall be assigned to him by the Chief Executive Officer or the Board. Executive
acknowledges that his duties and responsibilities may require significant
travel.
     1.2 Standard of Performance. Executive shall faithfully, diligently and to
the best of his abilities perform the duties inherent in his position and
otherwise assigned to him pursuant to this Agreement. Executive agrees to abide
by the Company’s rules, regulations, policies and practices as they are
presently in force and as they may be revoked, adopted or modified at any time
and from time to time during the term of this Agreement.
     1.3 Time Devoted to the Company. Executive shall be required to devote
substantially full time and attention of the business day to his duties under
this Agreement. Subject to the obligations of Executive pursuant to Section 4.5
hereof and the immediately preceding sentence, Executive may engage in any other
activity, whether for pecuniary gain or not, which does not interfere with his
obligations under this Agreement.

Page 1 of 17

--------------------------------------------------------------------------------

 

SECTION 2
COMPENSATION AND BENEFITS
     2.1 Base Salary. The Company agrees to pay or cause to be paid to Executive
for Executive’s services during the term of this Agreement an annual base salary
at the gross rate prior to all taxes and other withholdings of $375,000. The
base salary will be subject to annual review and may be adjusted from time to
time under the direction of the Board (or the Committee) considering factors
such as Executive’s performance, compensation of similar executives of similarly
sized companies and other pertinent factors (the “Base Salary”); provided that
no such adjustment shall be made to reduce the Base Salary below the higher of
(a) $375,000 or (b) its then current level without Executive’s written consent,
except that the Base Salary may be reduced without Executive’s consent in
conjunction with and consistent with (a ratio not greater than that suffered by
other senior executives) an overall reduction in base compensation paid to
senior executives of the Company as a group. The Base Salary shall be payable to
Executive in accordance with the then current payment policies of the Company
for its senior executives.
     2.2 Annual Bonus Compensation. Executive shall be eligible to participate
in the First Mercury Financial Corporation Performance Based Annual Incentive
Plan or such other short term incentive plan as the Company may adopt from time
to time for the benefit of its senior executives (the “Incentive Plan”) and to
earn annual bonuses under such plan as may from time to time be in effect based
on the financial performance of the Company and Executive’s personal performance
against annual targets, goals or other criteria as may be set by the Committee
in its sole discretion from time to time (each, an “Annual Incentive Bonus”).
Notwithstanding anything in this Agreement or any other plan or arrangement to
the contrary, in no event shall the Target Bonus of Executive be reduced without
Executive’s written consent, except that the Target Bonus may be reduced without
Executive’s consent in conjunction with and consistent with (a ratio not greater
than that suffered by other senior executives) an overall reduction in target
bonus compensation of the senior executives of the Company as a group. The
Annual Incentive Bonus for each year, if any, shall be paid in accordance with
the terms of the Incentive Plan.
     2.3 Equity Based Compensation. Executive shall be eligible to receive
equity awards under the First Mercury Financial Corporation Omnibus Incentive
Plan of 2006 (“Equity Plan”), as amended, or any successor equity based
compensation plan for senior executives as may be adopted by the Company from
time to time (each, a “Long Term Incentive Award”). The target value (as
calculated by the Committee in its sole discretion) of Executive’s annual Long
Term Incentive Award shall be 75% of his Base Salary (except that this
percentage may be reduced in conjunction with and consistent with (a ratio not
greater than that suffered by other senior executives) an overall reduction in
equity based compensation paid to senior executives of the Company as a group),
provided, however, that the timing, number of options, shares or equity units
involved, and terms and conditions of all such awards shall be determined by the
Committee in its sole discretion and shall be subject to the terms of the plan
under which such award is made.
     2.4 Benefits. In addition to the compensation to be paid under this
Agreement, the Company shall provide to, or for the benefit of, Executive the
following employee benefits:

  (a)   Participation in retirement or welfare benefit plans, if any, which are
made generally available from time to time to the salaried employees of the
Company, to the extent that

Page 2 of 17

--------------------------------------------------------------------------------

 

      Executive is eligible to participate therein pursuant to the terms and
conditions of such plans.     (b)   Participation in health, disability and
other insurance plans, if any, which are made generally available from time to
time to the salaried employees of the Company, to the extent that Executive is
eligible to participate therein pursuant to the terms and conditions of such
plans.     (c)   Sick leave in accordance with the policies of the Company in
effect from time to time.     (d)   Reasonable vacation time in accordance with
the policies of the Company in effect from time to time or as otherwise approved
by the Chief Executive Officer or the Board.     (e)   Such other benefits as
may be approved by the Board or Committee on a case-by-case basis for proper
business purpose.

     2.5 Reimbursement of Business Expenses. Executive shall be entitled to
receive reimbursement for, or payment of, the legitimate business expenses
incurred by Executive on behalf of the Company in accordance with the Company
policy in effect from time to time, including meals, lodging, transportation and
other travel expenses.
SECTION 3
TERM OF AGREEMENT; TERMINATION
     3.1 Term. This Agreement shall become effective on the date first written
above and shall continue in force until terminated in accordance with this
Section 3. Executive’s employment with the Company pursuant to this Agreement
shall terminate concurrently with the termination of this Agreement.
     3.2 Termination upon Death or Disability. Executive’s employment under this
Agreement shall terminate automatically upon the death of Executive and, unless
otherwise prohibited by law, shall terminate at the Company’s election in the
event of Executive’s Disability.
     3.3 Termination by Mutual Agreement. This Agreement may terminate at any
time upon the mutual agreement of the Company and Executive.
     3.4 Termination by the Company.

  (a)   The Company may terminate Executive’s employment under this Agreement at
any time, without Cause (as defined in Section 3.4(c)), upon 30 days prior
written notice of termination to Executive. The Company, in its sole discretion
but without derogation to any rights of Executive under Section 2, may place
Executive on administrative leave during the 30 day notice period.     (b)   The
Company may terminate Executive’s Employment under this Agreement with Cause
immediately upon written notice of termination to Executive, unless a later
termination date is specified in the notice.

Page 3 of 17

--------------------------------------------------------------------------------

 

  (c)   For the purposes of this Agreement, “Cause” for termination shall exist
in the event of Executive’s:

  (1)   embezzlement, fraud, theft or other illegal or unethical act or omission
that adversely affects (or that could reasonably be expected to adversely
affect) the Company, its Affiliates or any of their respective employees,
producers, insurers, reinsurers, agents, customers or other persons doing
business with the Company or its Affiliates;     (2)   conviction of, or plea of
guilty or nolo contendere to:

  (A)   a felony, or     (B)   other crime involving moral turpitude that (i)
materially impairs (or could reasonably be expected to materially impair)
Executive’s ability to perform his duties hereunder or (ii) otherwise results in
death or substantial bodily or psychological harm to any person;

  (3)   bar or suspension for a period of more than 60 days by any court or
regulatory agency of competent jurisdiction from performing employment duties
for, engaging in any activities on behalf of, or otherwise being associated
with, the Company or its Affiliates;     (4)   material breach of the terms of
this Agreement or of Executive’s fiduciary obligation to the Company or any of
its Affiliates or other conduct undertaken with deliberate intent to cause harm
or injury, or undertaken with reckless disregard to the harm or injury that
would be caused, to the Company, any of its Affiliates or any employee,
producer, insurer, reinsurer, agent, customer or other person doing business
with the Company other than conduct taken pursuant to advice of legal counsel to
the Company; or     (5)   willful failure or refusal to follow the lawful and
good faith directions of the Board or the Chief Executive Officer. For purposes
of this definition, no act or failure to act on the part of Executive shall be
considered “willful” unless done, or omitted to be done, by him in bad faith or
without a reasonable belief that his action or omission is in the best interests
of the Company or its Affiliates. Any act or omission, based upon directions
given pursuant to a resolution duly adopted by the Board or based upon the
advice of counsel for the Company or its Affiliates shall be conclusively
presumed to be done, or omitted to be done, in good faith and in the best
interests of the Company or its Affiliates.

     3.5 Termination by Executive.

  (a)   Executive may terminate his employment under this Agreement at any time
without Good Reason (as defined in Section 3.5(c) below) upon 45 days prior
written notice to the Company. The Company, in its sole discretion but without
derogation to any rights of Executive under Section 2, may place Executive on
administrative leave during the 45 day notice period.     (b)   Executive may
terminate his employment under this Agreement, upon 30 days prior written notice
to the Company, for Good Reason; provided that Executive shall not be

Page 4 of 17

--------------------------------------------------------------------------------

 

      entitled to resign pursuant to this Section 3.5(b) if, prior to the
expiration of the 30 day notice period, the Company causes the facts or events
giving rise to the Good Reason for resignation to no longer exist, so long as
the Company does not persistently give rise to Good Reason and then cause such
facts or events to no longer exist. The Company, in its sole discretion but
without derogation to any rights of Executive under Section 2, may place
Executive on administrative leave during the notice period. Notwithstanding
anything to the contrary contained herein, Executive shall not be required to
perform any act stated in his written notice of resignation that constitutes the
basis for Good Reason for his resignation for the period beginning with the
giving of such written notice and ending with the effective date of the
termination of his employment.     (c)   For purposes of this Agreement, “Good
Reason” for resignation shall exist if, prior to his resignation, any of the
following shall have occurred and Executive shall have given notice of his
resignation for Good Reason within sixty (60) days after Executive has knowledge
of the occurrence of such event:

  (1)   Executive, without his consent, ceases to hold the positions and titles
of Executive Vice President, Chief Financial Officer and Corporate Secretary
(other than upon death or Disability or in connection with an event that permits
a termination for Cause which the Company exercises);     (2)   Executive is
assigned, without his consent, authority or responsibility materially
inconsistent with the authority and responsibility contemplated by Section 1.1
of this Agreement, including without limitation any material diminution of his
authority and responsibility or change in reporting requirements;     (3)  
Executive’s Base Salary is materially reduced, or there is any material delay in
the payment of Executive’s Base Salary, or there is any material reduction in
the nature and amount of benefits (including benefits under the Incentive Plan
or the Equity Plan or any successor plans thereto) theretofore provided to
Executive pursuant to Section 2 (provided that a change in Company plans
applicable to senior executives generally or a reduction in the Company’s stock
price shall not constitute a reduction in benefits);     (4)   Any requirement
is imposed for Executive to reside outside of the Detroit, Michigan metropolitan
area;     (5)   The Company commits a material breach of this Agreement (other
than breaches which may be covered by some other subsection of this Section
3.5(c)), which breach is not cured within 30 days after written notice thereof
is given by Executive;     (6)   Richard Smith is no longer Chief Executive
Officer; or     (7)   A Change in Control Event occurs.

     3.6 Compensation Upon Termination. In addition to any employee benefits to
which Executive is entitled pursuant to Section 2.4 and any reimbursement of
business expenses pursuant to Section 2.5 (with respect to which Executive and
the Company shall reasonably cooperate), Executive shall be entitled to the
following upon termination of employment under this Agreement:

Page 5 of 17

--------------------------------------------------------------------------------

 

  (a)   In the event that the Company discharges Executive pursuant to Section
3.4(b) for Cause, or Executive resigns (other than for Good Reason), then:

  (1)   Executive shall be entitled to receive and the Company shall cause to be
paid:

  (A)   any earned but unpaid Base Salary through the effective date of
termination, and     (B)   any Annual Incentive Bonus award earned and payable
in accordance with the Annual Incentive Plan for any Performance Period which
ended prior to the effective date of termination but not theretofore paid to
Executive.         All amounts payable pursuant to this Section 3.6(a)(1) shall
be paid by the Company in a lump sum within 90 days after the date of
Executive’s termination or resignation unless otherwise agreed between the
Company and Executive.

  (2)   Executive’s rights with respect to any equity awards shall be determined
under the terms of the plan(s) under which such equity awards were granted and
the terms of any grant agreement covering such awards.

  (b)   In the event that Executive’s employment is terminated by death, then:

  (1)   Executive’s estate or personal representative shall be entitled to
receive and the Company shall cause to be paid:

  (A)   any earned but unpaid Base Salary through the date of Executive’s death;
    (B)   any Annual Incentive Bonus award earned and payable in accordance with
the Annual Incentive Plan for any Performance Period which ended prior to the
effective date of termination but not theretofore paid to Executive; and     (C)
  a Pro Rated Bonus for the Performance Period that includes the date of
Executive’s death.         All amounts payable pursuant to this
Section 3.6(b)(1) shall be paid by the Company in a lump sum within 90 days
after the date of Executive’s death unless otherwise agreed between the Company
and Executive’s estate or personal representative and provided that the Pro
Rated Bonus shall be paid within 30 days after the date on which it is
determined by the Committee in accordance with the Annual Incentive Plan.

  (2)   Executive’s rights with respect to any equity awards shall be determined
under the terms of the plan(s) under which such equity awards were granted and
the terms of any grant agreement covering such awards.

  (c)   Except as provided in Section 3.6(d) below, in the event that the
Company discharges Executive pursuant to Section 3.4(a) other than for Cause,
the Company terminates Executive’s Employment as a result of his Disability
pursuant to Section 3.2,

Page 6 of 17

--------------------------------------------------------------------------------

 

      Executive’s Employment is terminated by mutual agreement of Executive and
the Company in connection with Executive’s retirement (and subject to a
satisfactory separation and transition agreement between Executive and the
Company) or Executive resigns pursuant to Section 3.5(b) for Good Reason, then:

  (1)   Executive shall be entitled to receive and the Company shall cause to be
paid:

  (A)   any earned but unpaid Base Salary through the date of termination;    
(B)   any Annual Incentive Bonus award earned and payable in accordance with the
Incentive Plan for any Performance Period which ended prior to the effective
date of termination or resignation for Good Reason but not theretofore paid to
Executive;     (C)   a Pro Rated Bonus for the Performance Period that includes
the date of termination or resignation for Good Reason;     (D)   the
Termination Bonus Amount; and     (E)   continuation of Executive’s then current
Base Salary for the 24 month period following the date of termination or
resignation for Good Reason.

      Subject to Section 3.8, and except as otherwise agreed to between
Executive and the Company, all amounts payable pursuant to Section 3.6(c)(1)(A),
(B) and (D) shall be paid by the Company in a lump sum within 90 days after the
date of Executive’s termination or resignation and provided that the Pro Rated
Bonus shall be paid within 30 days after the date on which it is determined by
the Committee in accordance with the Annual Incentive Plan.     (2)   Executive
shall be entitled to, and the Company shall provide (subject to Executive making
a timely election of COBRA continuation coverage), continued benefits (to the
same extent and at the same benefit level as were provided by the Company to
Executive immediately prior to termination) under the retirement and welfare
benefit plans referenced in Section 2.4(a), and the health, disability and other
insurance plans referenced in Section 2.4(b), for the 24 month period following
the date of termination, and, to the extent permitted pursuant to such health
insurance plan(s), for such longer period as to which Executive pays the cost of
coverage thereof; provided, that if any such plans are terminated, or benefits
thereunder reduced or eliminated, during such 24 month period, or if, as a
result of termination or otherwise, Executive ceases to be eligible to
participate in any such plans during such 24 month period, the Company shall
provide to Executive substitute benefits which are provided to continuing senior
executives of the Company.     (3)   All equity awards outstanding at the time
of Executive’s termination or resignation for Good Reason shall (to the extent
not vested) immediately vest and, with respect to any stock option award, may be
exercised by Executive for a period equal to the shorter of the remaining term
of such option award and one year.

Page 7 of 17

--------------------------------------------------------------------------------

 

  (d)   In the event that (1) a Change of Control Event occurs and (2) the
Company discharges Executive pursuant to Section 3.4(a) other than for Cause or
Executive resigns pursuant to Section 3.5(b) for Good Reason within the
Protected Period, Section 3.6(c) shall be applicable, provided that amounts
payable pursuant to Section 3.6(c)(1)(A), (B), (D), and (E) shall be paid in a
lump sum promptly following the later of (x) the effective date of such
termination or (y) the effective date of the Change in Control Event.     (e)  
Except as otherwise provided in Sections 3.6(b) or 3.6(c), Executive’s right,
upon and after the termination of his employment under this Agreement pursuant
to this Section 3 or otherwise, to receive any benefit under the plans, if any,
in which Executive is entitled to participate pursuant to Section 2.4 shall be
determined under the provisions of those plans.     (f)   The foregoing
notwithstanding, except as otherwise expressly provided below, in no event shall
the Company be obligated to make payments to Executive, under this Agreement or
otherwise following his termination that would constitute “excess parachute
payments” within the meaning of Section 280G of the Code. In the event the
Company believes that any payment (including acceleration of vesting of equity
awards) due Executive would constitute an “excess parachute payment” and
Executive will be subject to the excise tax imposed by Section 4999 of the Code,
the Company and Executive agree that the aggregate parachute payments (as
defined in Section 280G) made to Executive under this Agreement and any and all
other agreements shall not exceed 299.99% of Executive’s Base Amount.

     3.7 Notices. Any termination of Executive’s employment for which notice of
termination is required to be given pursuant to this Section 3 shall be
communicated in a writing which shall indicate the specific provision in this
Section 3 relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination under the provision so
indicated.
     3.8 General Release; Transition. Notwithstanding anything in this Section 3
or elsewhere in this Agreement to the contrary, at the election of the Company,
no amount shall be payable under this Section 3 in excess of (a) any earned but
unpaid Base Salary through the date of Executive’s termination; (b) any award
under the Incentive Plan or the Equity Plan which was earned pursuant to the
terms and conditions of such plan for any Performance Period ending prior to the
effective date of termination but was not theretofore paid to Executive, unless
(i) Executive (or his personal representative or trustee of his estate, in the
case of his disability or death) executes a general release of claims in
substantially the form of Exhibit A hereto and does not revoke such release and
(ii) Executive provides transition services (including cooperation in any
litigation involving the Company) to the extent reasonably requested by the
Company.
     3.9 No Mitigation. Executive shall not be required to mitigate the amount
of the payments to be made pursuant to this Section 3 or any portion of it by
seeking other employment or otherwise. No portion of the payments to be made
pursuant to this Section 3 will be offset or reduced by the amount of any
compensation or benefits provided to Executive by a successor employer.

Page 8 of 17

--------------------------------------------------------------------------------

 

SECTION 4
CONFIDENTIALITY AND NON-COMPETITION
     4.1 Confidential Information. Except as otherwise provided in Section 4.2,
the term “Confidential Information” shall mean all information of or concerning
the Company, whether in written or oral, tangible or intangible form, including,
without limitation, the following:

  (a)   The whole or any portion or phase of any data or information relating to
the Company’s processes or techniques relating to its business, whether or not
copyrighted, copyrightable, patented or patentable;     (b)   Any software,
programs, calculations, instructions or other intellectual property and
embodiments thereof of any media, including electro magnetic, and in any form,
including source code and object code, whether or not copyrighted,
copyrightable, patented or patentable;     (c)   Underwriting processes,
methods, algorithms, data and techniques;     (d)   Claims experience, history
and data;     (e)   Business plans and programs, marketing concepts and
marketing and sales information of the Company;     (f)   Financial, pricing
and/or credit information regarding the Company or its programs, customers,
producers, insurers, reinsurers and agents of the Company;     (g)   The names,
addresses, policy expiration dates and telephone numbers of customers,
producers, insurers, reinsurers and agents of the Company;     (h)   The
internal corporate policies and procedures of the Company;     (i)   Any
information of any nature whatsoever that gives the Company the opportunity to
obtain any advantage over its competitors who do not have access to or use of
such information; and     (j)   Any other information designated by the Company
as confidential or proprietary at the time of its disclosure to Executive.

The term “Confidential Information” also shall include all trade secrets and
confidential and proprietary information of any customer, agent, producer,
insurer or reinsurer, (or prospective customer, agent, producer, insurer or
reinsurer) of the Company, whether in written or oral, tangible or intangible
form, which have been disclosed to the Company pursuant to the Company’s
agreement to maintain the confidentiality of such information.
     4.2 Excluded Information. Notwithstanding anything in Section 4.1 to the
contrary, the term “Confidential Information” shall not include any data or
information that (a) is or has become generally known to the insurance industry
(except for such public disclosure that has been made by or through Executive or
by a third person with the knowledge of Executive without authorization by the
Company); (b) has been independently developed and disclosed by parties other
than Executive or the Company to the public generally without a breach of any
known obligation of confidentiality

Page 9 of 17

--------------------------------------------------------------------------------

 

by any such person running directly or indirectly to the Company; or
(c) otherwise enters the public domain through lawful means.
     4.3 Confidentiality Agreement. Executive agrees and acknowledges that the
Confidential Information is the property of the Company, and that such
information is sensitive, confidential and important and is furnished by the
Company to Executive under the terms and conditions of this Agreement. Executive
shall keep the Confidential Information (whether obtained prior to or after the
date of this Agreement) strictly confidential during the term of this Agreement
and at all times thereafter provided, however, that Executive may disclose
Confidential Information in the performance of his employment to the extent that
he reasonably believes such disclosure is necessary or convenient, in his
reasonable discretion, in order to perform his duties. All Confidential
Information of the Company or its predecessors, or of any third party to whom
the Company owes a duty of non-disclosure, which Executive has received,
receives or becomes knowledgeable of shall be utilized by Executive for the
singular purpose of carrying out Executive’s duties and undertakings on behalf
of the Company. In no event shall Executive, whether during or after employment,
copy any Confidential Information, except as needed, nor utilize any
Confidential Information in a manner so as to compete with the Company, or to
aid or further the competition of any other person or entity with the Company,
or to otherwise disclose or dispose thereof for personal gain or for any reason
injurious to the interests of the Company.
     4.4 Return of Company Property. Executive agrees that upon termination of
this Agreement, Executive shall immediately surrender to the Company, without
request, or, at the Company’s request and in the Company’s sole discretion,
destroy or cause to be destroyed all memoranda, notes, reports, documents,
software and disks and all copies and other reproductions and extracts thereof,
including those prepared by Executive, which are in Executive’s possession or
under his control and which contain or are derived from Confidential
Information.
     4.5 Covenant Not to Compete or Solicit. Executive shall not, directly or
indirectly, do any of the following during the term of this Agreement and for
the entire Post-Termination Non-Competition Period (as defined below):

  (a)   Be employed by, serve as consultant or independent contractor to,
directly or indirectly beneficially own any equity or similar interest in
(except as the holder of not more than one percent of the voting securities of
any publicly traded entity or as a shareholder of the Company or any successor
thereto), or otherwise engage in, any business that competes with the Company or
any subsidiary of the Company in the continental United States;     (b)  
Solicit or cause to be solicited, directly or indirectly, any employees of the
Company for any purpose (other than, during the term of this Agreement, as an
employee of the Company on behalf of the Company); or     (c)   Solicit or cause
to be solicited, directly or indirectly, or in any way be responsible for, an
offer of employment to (or the hiring of) any employee of the Company by any
other person.

Page 10 of 17

--------------------------------------------------------------------------------

 

The term “Post-Termination Non-Competition Period” shall mean a period of
twenty-four (24) months following termination of employment.
     4.6 Additional Covenants. During the term of this Agreement, Executive
shall not take advantage of any Company Opportunity without first offering such
opportunity with full disclosure of material facts to the Board and receiving
notice that the Board has declined such opportunity. For this purpose, “Company
Opportunity” means any opportunity to engage in a business activity: (a) of
which Executive becomes aware (1) by virtue of Executive’s relationship with, or
in connection with performing functions in the business of, or in using
facilities or other resources of the Company; and (2) under circumstances that
should reasonably lead Executive to believe that the person offering the
opportunity expects it to be offered to the Company; or (b) which Executive
knows is closely related to a business in which the Company is engaged or
expected to engage.
     4.7 Non Disparagement. During and after the term of his employment,
Executive agrees not to in any way, directly or indirectly, slander, libel,
disparage, make derogatory statements about or take other action which is
intended, or could reasonably be expected to be, detrimental to the Company or
its Affiliates, or their business, employees or representatives.
     4.8 Remedies for Breach. Executive agrees that, in the event of any breach
or threatened breach of any provision of this Section 4 by Executive, the
Company shall be entitled to a temporary restraining order and other temporary
or permanent injunctive relief without need of a bond or other security. No
remedy conferred upon the Company by this Agreement is intended to be exclusive
of any other available remedy or remedies, but each and every such remedy shall
be cumulative and shall be in addition to every other remedy given under this
Agreement or now or hereafter existing at law, in equity or by statute.
     4.9 Reasonableness of Restrictions. Executive agrees and understands that
there are significant business reasons for the restrictions contained in this
Agreement and that such restrictions are reasonable and necessary to protect
legitimate business interests of the Company. Without limiting the generality of
the foregoing, Executive agrees and understands that because the Company may
sell its products, technology and services throughout the continental United
States, the geographic scope of Executive’s agreement not to compete with the
Company is both reasonable and necessary.
     4.10 Severability. If any provision of this Section 4 is held invalid,
illegal or unenforceable, the remaining provisions shall continue in full force
and effect. If any provision of this Section 4 is for any reason held to be
excessively broad as to time, duration, geographic scope, activity or subject,
it shall be construed, by limiting and reducing it, so as to be enforceable to
the extent permitted by applicable law.
     4.11 Scope of Section 4. As used in this Section 4, the term the “Company”
shall include all Affiliates of the Company.

Page 11 of 17

--------------------------------------------------------------------------------

 

SECTION 5
MISCELLANEOUS
     5.1 Insurance and Indemnification. The Company shall, at no cost to
Executive, (i) use its reasonable best efforts to at all times include
Executive, during the term of Executive’s employment hereunder and for so long
thereafter as Executive may be subject to any such claim, as an insured under
any directors’ and officers’ liability insurance policy maintained by the
Company, which policy shall provide such coverage in such amounts as the Board
shall deem appropriate for coverage for all officers and directors of the
Company and (ii) provide Executive with at least the same indemnification rights
as it provides to its other officers and directors.
     5.2 Key Man Life Insurance; COLI. Executive agrees to cooperate with the
Company in connection with, and consent to the placement of, “key man” or other
corporate owned insurance on Executive’s life by the Company, provided that
nothing herein shall require the Company to obtain or maintain any such
insurance on Executive’s life.
     5.4 No Conflict. Executive represents that the performance by Executive of
all the terms of this Agreement, as an Executive of the Company, has not, does
not and will not breach any agreement as to which Executive is or was a party
and which requires Executive to keep any information in confidence or in trust.
Executive has not entered into, and will not enter into, any written or oral
agreement in conflict herewith.
     5.5 Notices. Any and all notices required to be given under this Agreement
shall be given, and be deemed given, as follows: (a) by personal delivery which
shall be deemed given when delivered; (b) by U. S. first-class mail, postage
prepaid, which shall be deemed given the third day after deposit; or (c) by
telecopy (if telecopy number is listed) with confirmation of receipt which shall
be deemed given when sent. Any such notice shall be addressed, if to the Company
at its principal place of business (attn: Chief Executive Officer) and, if to
Executive at his most current home address on record with the Company for
payroll and other corporate purposes, unless a different address for notice
purposes is designated by Executive in a written notice complying with and
referring to this Section 5.5.
     5.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Michigan without regard to conflict of
law principles.
     5.7 Amendment and Waiver. This Agreement shall not be amended or modified,
and none of the provisions hereof shall be waived, except in a writing signed on
behalf of the Company and by Executive or, in the case of a waiver, on behalf of
the party making a waiver. In the event that any obligation, agreement or
covenant contained in this Agreement should be breached by either party and
thereafter waived by the other party, such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive any other breach
hereunder.
     5.8 Section Headings. Section headings contained in this Agreement are for
convenience only and shall not be considered in construing any provision hereof.

Page 12 of 17

--------------------------------------------------------------------------------

 

     5.9 Assignment. This Agreement is personal to Executive and Executive may
not assign or delegate any of his rights or obligations hereunder. Subject to
the foregoing, this Agreement shall inure to the benefit of and be binding upon
Executive and the Company and their respective heirs, administrators, executors,
successors and assigns, including successive as well as immediate heirs,
administrators, executors, successors and assigns.
     5.10 Entire Agreement. This Agreement terminates, cancels and supersedes
all previous written and oral employment agreements or other agreements relating
to the relationship of Executive with the Company entered into between the
parties hereto. This Agreement contains the entire understanding of the parties
hereto with respect to the subject matter of this Agreement. Executive is
represented by independent legal counsel or has had the opportunity to retain
independent legal counsel to represent Executive’s interests. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties and no presumption or burden
of proof shall arise favoring any party by virtue of authorship of any of the
specific provisions of the Agreement. EXECUTIVE ACKNOWLEDGES THAT, BEFORE
PLACING HIS SIGNATURE HEREUNDER, HE HAS READ ALL OF THE PROVISIONS OF THIS
AGREEMENT.
     5.11 Severability. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective only to the extent of such invalidity or unenforceability without
thereby rendering invalid or unenforceable the remaining terms and provisions
hereof or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
     5.12 409A. To the extent applicable, it is intended that this Agreement
comply with the provisions of Section 409A of the Code, and this Agreement shall
be construed and applied in a manner consistent with this intent. In the event
that the benefits or payments under this Agreement are determined by the Company
to be in the nature of nonqualified deferred compensation payments, the Company
and Executive hereby agree to take such actions and to make such changes to the
benefits or payments hereunder as may be mutually agreed between the parties to
ensure that such benefits or payments comply with the applicable provisions of
Section 409A of the Code and the official guidance issued thereunder, provided
that in the event of any such change to the benefits or payments hereunder, the
value or types of payments or benefits under this Agreement shall be
appropriately adjusted so that the aggregate present value of the payments and
benefits hereunder after such change are economically equivalent to the
aggregate present value that existed prior to such change. Executive
acknowledges and agrees that notwithstanding any other provision of this
Agreement, the Company and its Affiliates are not providing him with any tax
advice with respect to Section 409A of the Code or otherwise and are not making
any guarantees or other assurances of any kind to Executive with respect to the
tax consequences or treatment of any amounts paid or payable to Executive under
this Agreement.
     5.13 Dispute Resolution.

  (a)   Notwithstanding any provision herein to the contrary, any determination
of (1) whether Cause for termination or Good Reason for resignation exists and
(2) whether something “materially” affects anything, or is “substantially” or
“reasonably” or “effectively” done,

Page 13 of 17

--------------------------------------------------------------------------------

 

      or is “material” or “reasonable,” as such terms are used in this
Agreement, shall be made in the first instance by the Board or one of its
appropriate oversight committees.     (b)   In the event of any dispute or claim
relating to or arising out of this Agreement (including, but not limited to, any
claims of breach of contract, wrongful termination or age, sex, race or other
discrimination), Executive and the Company agree that all such disputes shall be
fully and finally resolved by binding, confidential arbitration conducted by the
American Arbitration Association (“AAA”) in Southfield, Michigan in accordance
with the AAA’s National Rules for the Resolution of Employment Disputes,
provided, however, that this arbitration provision shall not apply to, and
Company shall be free to seek, injunctive or other equitable relief with respect
to any actual or threatened breach or violation by Executive of his obligations
under Section 4 hereof in any court having appropriate jurisdiction. Executive
acknowledges that by accepting this arbitration provision he is waiving any
right to a jury trial in the event of a covered dispute. The arbitrator may, but
is not required, to order that the prevailing party shall be entitled to recover
from the losing party its attorneys’ fees and costs incurred in any arbitration
arising out of this Agreement. The proceedings and the rulings shall be
confidential and the parties shall implement agreements and processes to
maintain such confidentiality.

SECTION 6
DEFINITIONS
     6.1 “AAA” has the meaning specified in Section 5.13(b).
     6.2 “Affiliates” means an entity shall be deemed to be an Affiliate of
another entity if it controls, is controlled by or is under common control with
the other entity, where “control” means the power to vote not less than ten
percent of the voting securities of an entity.
     6.3 “Agreement” has the meaning specified in the opening paragraph.
     6.4 “Annual Incentive Bonus” has the meaning specified in Section 2.2.
     6.5 “Base Amount” means with respect to Executive as of any point in time
his base amount with respect to his employment with the Company determined under
Section 280G(b)(3)(A) of the Code.
     6.6 “Base Salary” has the meaning specified in Section 2.1.
     6.7 “Board” has the meaning specified in Section 1.1.
     6.8 “Cause” has the meaning specified in Section 3.4(c).

Page 14 of 17

--------------------------------------------------------------------------------

 

     6.9 “Change In Control Event” means a transaction or series of related
transactions which qualify as a change in control event with respect to the
Company for purposes of Section 409A of the Code and Treas. Reg.
§1.409A-3(i)(5).
     6.10 “Code” means the Internal Revenue Code of 1986, as amended.
     6.11 “Committee” means the Compensation Committee of the Board.
     6.12 “Company” has the meaning specified in the opening paragraph.
     6.13 “Company Opportunity” has the meaning specified in Section 4.6.
     6.14 “Confidential Information” has the meaning specified in Section 4.1.
     6.15 “Disability” means a determination by the Board acting in good faith
that (i) Executive is unable to perform the essential functions of his job with
or without reasonable accommodation as a result of a physical or mental
condition and (ii) such condition can reasonably be expected to continue for an
indefinite period.
     6.16 “Effective Date” has the meaning specified in the initial paragraph.
     6.17 “Equity Plan” has the meaning specified in Section 2.3.
     6.18 “Executive” has the meaning specified in the opening paragraph.
     6.19 “Good Reason” has the meaning specified in Section 3.5(c).
     6.20 “Incentive Plan” has the meaning specified in Section 2.2.
     6.21 “Long Term Incentive Award” has the meaning specified in Section 2.3.
     6.22 “Performance Period” means a fiscal year of the Company or such other
period as may be established by the Committee or a compensation plan of the
Company for measuring performance for compensation purposes.
     6.23 “Post-Termination Non-Competition Period” has the meaning specified in
Section 4.5.
     6.24 “Pro Rated Bonus” means the Annual Incentive Bonus, if any, awarded to
Executive consistent with the compensation practices established by the
Committee with respect to other senior executives of the Company with respect to
the Performance Period in which Executive’s employment terminates based on
(i) the Company’s actual financial performance against such

Page 15 of 17

--------------------------------------------------------------------------------

 

financial performance targets as may have been set by the Committee for such
Performance Period and (ii) the portion of such Performance Period during which
Executive was employed.
     6.25 “Protected Period” means the period commencing 90 days before the
effective date of a Change in Control Event and ending on the first anniversary
of the effective date of such Change in Control Event.
     6.26 “Target Bonus” means for the fiscal year ending December 31, 2009,
seventy five percent (75%) of Executive’s Base Salary as in effect at January 1,
2009, and thereafter the percentage of Executive’s Base Salary as in effect at
the beginning of each fiscal year of the Company as is determined by the
Committee.
     6.27 “Termination Bonus Amount” means an amount equal to the sum of the
actual Annual Incentive Bonuses awarded and paid to Executive with respect to
the two fiscal years immediately preceding the fiscal year in which termination
of employment occurs.
[Remaining page intentionally left blank]

Page 16 of 17

--------------------------------------------------------------------------------

 

SIGNATURES
     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
set forth above.

         
 
  COMPANY:   EXECUTIVE:
 
       
 
  FIRST MERCURY FINANCIAL CORPORATION   JOHN A. MARAZZA
 
       
By:
  /s/ Richard H. Smith   /s/ John A. Marazza
 
       
 
  Richard H. Smith, Chairman, President and
Chief Executive Officer   John A. Marazza

Page 17 of 17

--------------------------------------------------------------------------------

 

EXHIBIT A
Form of Release
          Date:                                         
     In consideration of the agreement of First Mercury Financial Corporation
(“Company”) to enter into that certain Employment Agreement, dated as
                                        , 2009, with the undersigned and the
promises and covenants of Company made there under, the undersigned, on behalf
of himself and his respective heirs, representatives, executors, family members
and assigns hereby fully and forever releases and discharges Company and its
past, present and future shareholders, directors, officers, employees, agents,
attorneys, investors, administrators, affiliates, divisions, subsidiaries,
predecessors, successors and assigns from and against, and agrees not to sue or
otherwise institute or cause to be instituted any legal, alternative dispute
resolution or administrative proceeding concerning, any claim, duty, liability,
obligation or cause of action relating to any matters of any kind, whether
presently known or unknown, suspected or unsuspected, that he may possess
arising from any omissions, acts or facts that have occurred through the date
his employment terminates, including without limitation those relating to or
arising from:
          A. his employment by Company and the termination of such employment;
          B. his Employment Agreement;
          C. wrongful discharge, termination in violation of good policy,
discrimination, breach of contract, both expressed or implied, covenants of good
faith or fair dealing, both expressed or implied, promissory estoppel, negligent
or intentional infliction of emotional distress, negligent or intentional
misrepresentation, negligent or intentional interference with contract or
prospective economic advantage, unfair business practice, defamation, libel,
slander, negligence, personal injury, assault, battery, invasion of privacy,
false imprisonment, or conversion;
          D. violation of any federal, state or municipal statute, including,
without limitation, Title VII of the Civil Rights Act of 1964, the Civil Rights
Act of 1991, the Age Discrimination in Employment Act of 1967, the Americans
with Disabilities Act of 1990, the Fair Labor Standards Act, the Employee
Retirement Income Security Act of 1974, the Worker Adjustment and Retraining
Notification Act, the Michigan’s Elliott Larsen Civil Rights Act, and all
amendments to each such Act as well as the regulations issued there under; and
          E. attorneys’ fees and costs.
     The foregoing release shall not apply with respect to Company’s payment
obligations under Section 3 of the Employment Agreement or the undersigned’s
rights under any “employee benefit plans” as that term is defined in the
Employee Retirement Income Security Act of 1974, as amended.

E-1

--------------------------------------------------------------------------------

 

     The undersigned acknowledges that (i) he has been advised by the Company to
consult a lawyer of his own choice prior to executing this release and has done
so or voluntarily declined to seek such counsel, (ii) he has read this release
and understands the terms and conditions hereof and the binding nature hereof,
(iii) he has had at least twenty-one (21) days within which to consider the
terms of this release and executed this release voluntarily and without duress
or undue influence on the part of Company, (iv) he has seven (7) days to revoke
his execution of this release and that such execution shall not be effective
until seven (7) days following delivery to Company, and (v) he understands that
his right to receive payments under Section 3 of the Employment Agreement is
subject to and conditioned on the undersigned’s full and complete compliance
with Section 4 of the Employment Agreement following his termination and subject
to full recoupment by Company in the event of a violation of any Covenant. In
the event of such recoupment, the release set forth in this document shall
remain in full force and effect.
     Initially capitalized terms used in this release and defined in the
Employment Agreement shall have the meanings given to such terms under the
Employment Agreement.

     
 
   
 
  Printed Name
 
   
 
   
 
   
 
  Signature
 
   
 
   
 
   
 
  Date
 
   
 
   
Notary
   
 
   
My Commission expires:
 
   

E-2