Exhibit 10.1
CONSULTING AGREEMENT
     THIS CONSULTING AGREEMENT (the “Agreement”), made this 20th day of
September, 2005, is entered into by ProCentury Corporation and its wholly owned
subsidiaries (collectively, the “Company”), and Charles D. Hamm, Jr., a
registered certified public accountant (the “Consultant”).
INTRODUCTION
     WHEREAS, the Consultant has served as the Chief Financial Officer and
Treasurer of the Company in accordance with the terms of an Employment Agreement
dated as of December 15, 2003 (the “Employment Agreement”) until his resignation
from the Company, which becomes effective on October 1, 2005 (the “Effective
Date”);
     WHEREAS, the Company desires to retain the services of the Consultant and
the Consultant desires to perform certain services for the Company on the terms
and conditions set forth below;
     NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by the parties hereto, the parties
agree as follows:
     1. Services. The Consultant agrees to perform such consulting, advisory and
related services to and for the Company as may be reasonably requested from time
to time by the Chief Executive Officer of the Company, including, but not
limited to, the following services and transitional activities (the “Consulting
Services”):
          (a) assisting with the preliminary presentation of quarterly financial
statements and notes to financial statements;
          (b) reviewing various quarterly filings prior to presentation to the
Audit Committee of the Board of Directors;
          (c) reviewing the Chief Financial Officer’s quarterly analyst’s call
script and helping the Chief Financial Officer prepare for questions that may be
asked;
          (d) assisting in the review of the research of issues and
documentation related to accounting literature that is newly issued or newly
applicable to the Company;
          (e) consulting with the Chief Financial Officer and others to help
foster favorable relationships and develop contacts with investment analysts, AM
Best & Co. and representatives of the Ohio Department of Insurance;
          (f) reviewing, analyzing and providing feedback as to proposed changes
in investment portfolio holdings, contractual relationships (including outside
vendors), or other significant matters that may effect changes to the strategic
plans of the Company;

 

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          (g) assisting the Chief Financial Officer with any matters involving
the Company’s independent registered public accounting firm, in meeting
Sarbanes-Oxley compliance and internal controls requirements, and reviewing
internal audit issues, and
          (h) assisting and advising the Company’s Chief Executive Officer and
other members of senior management in identifying and analyzing potential
acquisition targets, developing negotiation strategy for such transactions and
structuring financial arrangements relating to any such transactions.
          The Consultant agrees to be available to devote at least 200 hours
during the Consultation Period (as defined below) to the performance of such
Consulting Services, if requested by the Chief Executive Officer of the Company.
     2. Term. This Agreement shall commence on the Effective Date and shall
continue for a period of twelve months (such period being referred to as the
“Consultation Period”), unless sooner terminated in accordance with the
provisions of Section 4.
     3. Compensation.
          3.1 Consulting Fees.
               (a) The Consultant shall submit to the Chief Executive Officer of
the Company monthly statements, in a form satisfactory to such officer, of
Consulting Services performed for the Company in the previous month. The Company
shall pay to the Consultant consulting fees of $350.00 per hour of Consulting
Services actually performed and invoiced within 30 days after receipt of a
monthly statement.
               (b) Notwithstanding the provisions set forth in Sections 2.3,
3.6(a) and 3.6(c)(2) of the Employment Agreement, during the Consultation
Period, 1/12 of the unvested portion as of the Effective Date of (i) the 25,300
restricted common shares, without par value, of the Company (the “Common
Shares”) awarded to the Consultant on April 20, 2004 (the “IPO Shares”),
(ii) the option to purchase 49,800 Common Shares awarded to the Consultant on
April 20, 2004 (the “IPO Option”) and (iii) the 17, 659 restricted Common Shares
awarded to the Consultant on March 22, 2005 (the “Performance Shares”) will vest
on a monthly basis beginning on October 31, 2005 and at the end of each full
calendar month thereafter, provided that the Consultant has fulfilled his
obligation to provide the Consulting Services to the Company during the
preceding calendar month. In addition, if a Change in Control (as defined in the
Employment Agreement) occurs during the Consulting Period, the IPO Shares, the
IPO Option and the Performance Shares shall become fully vested as of the
effective date of such Change in Control.
          3.2 Reimbursement of Expenses. The Company shall reimburse the
Consultant for all reasonable and necessary expenses incurred or paid by the
Consultant in connection with, or related to, the performance of his services
under this Agreement. The Consultant shall submit to the Company itemized
monthly statements, in a form satisfactory to the Company, of such expenses
incurred in the previous month. The Company shall pay to the Consultant amounts
shown on each such statement within 30 days after receipt thereof.

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          3.3 Benefits. The Consultant shall not be entitled to any benefits,
coverages or privileges, including, without limitation, social security,
unemployment, medical or pension payments, made available to employees of the
Company.
     4. Termination.
          4.1 By Either Party or Due to Death. Each of the Consultant and the
Company may terminate the Consultation Period upon 30 days’ prior written notice
to the other party. In the event of any such termination, or termination due to
the Consultant’s death, the Consultant (or his estate or personal
representative) shall be entitled to payment for services performed and expenses
paid or incurred prior to the Termination Date (as defined below). If the
Consultation Period is terminated by the Company following a change in the Chief
Executive Officer of the Company occurring after the date hereof or due to the
Consultant’s death, each of the IPO Shares, the IPO Option and the Performance
Shares shall become fully vested on the Termination Date and the IPO Option
shall remain exercisable by the Consultant (or his estate or personal
representative) for a period of five years following the Termination Date. If
the Consultation Period is terminated for any other reason, the vesting of the
IPO Shares, IPO Option and Performance Shares shall cease as of the Termination
Date and the IPO Option, to the extent vested as of such date, shall remain
exercisable by the Consultant (or his estate or personal representative) for a
period of five years following the Termination Date.
          4.2 Termination Date. For purposes of this Section 4, “Termination
Date” shall mean the effective date of termination of the Consultation Period in
accordance with Section 4.1 or 4.2, as applicable.
          4.3 Full Settlement of Claims. Any payments made in accordance with
Sections 4.1 or 4.2 shall constitute full settlement of any and all claims of
the Consultant of every description against the Company.
     5. Cooperation. The Consultant shall use his best efforts in the
performance of his obligations under this Agreement. The Company shall provide
such access to its information and property as may be reasonably required in
order to permit the Consultant to perform his obligations hereunder. The
Consultant shall cooperate with the Company’s personnel, shall not interfere
with the conduct of the Company’s business and shall observe all rules,
regulations and security requirements of the Company concerning the safety of
persons and property.
     6. Proprietary Information; Confidentiality, Non-Competition and
Non-Solicitation. The Consultant acknowledges his obligations under Section 4 of
the Employment Agreement and hereby agrees to continue to be bound thereby,
provided, however, that as of the Effective Date, all references to “the term of
this Agreement” in Section 4 of the Employment Agreement shall mean the term of
the Employment Agreement plus the term of this Agreement and all references to
the Consultant’s “employment” with the Company shall also include his consulting
relationship with the Company pursuant to this Agreement.
     7. Independent Contractor Status. The Consultant shall perform all services
under this Agreement as an “independent contractor” and not as an employee or
agent of the Company.

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The Consultant is not authorized to assume or create any obligation or
responsibility, express or implied, on behalf of, or in the name of, the Company
or to bind the Company in any manner.
     8. Notices. All notices required or permitted under this Agreement shall be
in writing and shall be deemed effective (i) upon personal delivery, (ii) upon
deposit in the United States Post Office, by registered or certified mail,
postage prepaid, or (iii) one business day after being sent for next business
day delivery, fees prepaid, via a reputable nationwide overnight courier
service, in each case to the intended recipient as set forth below or at such
other address or addresses as either party shall designate to the other in
accordance with this Section 8:

              To the Company:   ProCentury Corporation         465 Cleveland
Avenue         Westerville, Ohio 43082         Attention:   Edward F. Feighan,
Chairman of the Board,         President & Chief Executive Officer
 
            To Consultant:   Charles D. Hamm, Jr.    

                     

                     

     9. Pronouns. Whenever the context may require, any pronouns used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular forms of nouns and pronouns shall include the plural, and vice
versa.
     10. Entire Agreement. This Agreement and the Employment Agreement
constitute the entire agreement between the parties and supersedes all prior
agreements and understandings, whether written or oral, relating to the subject
matter of this Agreement.
     11. Amendment. This Agreement may be amended or modified only by a written
instrument executed by both the Company and the Consultant.
     12. Governing Law. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the State of Ohio.
     13. Successors and Assigns. This Agreement shall be binding upon, and inure
to the benefit of, both parties and their respective successors and assigns,
including any corporation with which, or into which, the Company may be merged
or which may succeed to its assets or business, provided, however, that the
obligations of the Consultant are personal and shall not be assigned by him.
     14. Miscellaneous.
          14.1 No delay or omission by the Company in exercising any right under
this Agreement shall operate as a waiver of that or any other right. A waiver or
consent given by the Company on any one occasion shall be effective only in that
instance and shall not be construed as a bar or waiver of any right on any other
occasion.

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          14.2 The captions of the sections of this Agreement are for
convenience of reference only and in no way define, limit or affect the scope or
substance of any section of this Agreement.
          14.3 In the event that any provision of this Agreement shall be
invalid, illegal or otherwise unenforceable, the validity, legality and
enforceability of the remaining provisions shall in no way be affected or
impaired thereby.

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year set forth above.

              PROCENTURY CORPORATION
 
       

  By:   /s/ Edward F. Feighan

       

      Edward F. Feighan

      Chairman of the Board, President and Chief
Financial Officer
 
            CONSULTANT
 
            /s/ Charles D. Hamm, Jr.           Charles D. Hamm, Jr.
 
       
101072355
       

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