EXECUTIVE EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into
as of the 27th day of November, 2006 (the “Effective Date”) by and between
Affirmative Insurance Holdings, Inc. (the “Company”) and Robert Bondi
(“Executive”).

PRELIMINARY STATEMENTS

A.            The Company desires to employ Executive as Executive Vice
President: Chief Operating Officer, and Executive desires to be employed by the
Company in this capacity.

 

B.             Each party desires to set forth in writing the terms and
conditions of their understandings and agreements.

NOW, THEREFORE, in consideration of the mutual covenants and obligations
contained herein, the Company hereby agrees to employ Executive and Executive
hereby accepts such employment upon the terms and conditions set forth in this
Agreement:

STATEMENT OF AGREEMENT

1.       Position.

(a)      The Company agrees to employ Executive in the position of Executive
Vice President: Chief Operating Officer. Executive shall serve and perform the
duties which may from time to time be assigned to him by the Company’s Chief
Executive Officer (“CEO”) and the Board of Directors (the “Board”).

(b)        Executive agrees to serve as Executive Vice President: Chief
Operating Officer and agrees that he will devote his best efforts and
substantially all of his business time and attention to all facets of the
business of the Company and will faithfully and diligently carry out the duties
of these positions; provided, however that Executive may devote reasonable time
to activities involving professional, charitable, and similar types of
organizations, speaking engagements and memberships on the boards of directors
of other organizations, so long a such activities do not interfere with the
performance of Executive’s duties hereunder, and do not represent a conflict of
interest. Executive agrees to comply with all Company policies in effect from
time to time, and to comply with all laws, rules and regulations applicable to
the Company, including, but not limited to, those established by the Department
of Insurance, the Securities and Exchange Commission, or any self-regulatory
organization having jurisdiction or authority over the Executive or the Company.

(c)         Executive agrees to travel as reasonably necessary to perform his
duties under this Agreement.

(d)        The Company, in its sole discretion, may require that 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 Executive by any such subsidiary or affiliate to facilitate the
Company’s internal administrative purposes shall be

 

1 of 17

 

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

 

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 Executive hereunder, including, but not limited to, Executive’s level of
compensation.

(e)        The position of Executive Vice President: Chief Operating Officer
shall be located at the Company’s corporate office in Chicago, Illinois.

2.       Term. The initial term of this Agreement shall be three (3) years from
the Effective Date (“Initial Term”), unless otherwise terminated pursuant to
Section 5 of this Agreement. Executive will not be entitled to any severance
payments under this Agreement upon the expiration of the Initial Term or
expiration of any subsequent extension of such term. If the Company does not
renew this Agreement prior to the expiration of the Agreement, Executive’s
unvested stock options will immediately vest, as provided in the Stock Option
Agreement, and Executive’s unvested restricted stock will immediately vest, as
provided in the Restricted Stock Agreement.

3.       Compensation and Benefits.

(a)        Base Salary. The Company shall pay Executive the gross amount of
$11,538.46 on a bi-weekly basis (“Base Salary”) for the first year of
employment, $12,500.00 on a bi-weekly basis (“Base Salary”) for the second year,
and $13,461.54 a bi-weekly basis (“Base Salary”) for the third year.

(b)        Bonus Opportunities. In addition to the Base Salary, Executive will
be eligible to participate in the Company’s bonus plan(s) (“Bonus”) with
eligibility for a target annual bonus of 50% of base salary. Annual bonus amount
to be determined based on achieving objectives as determined by the Board of
Directors and the Compensation Committee. A guaranteed minimum bonus will be
paid in March, 2007 in the amount of $220,000, of which $100,000 will be payable
in cash and the remainder will be paid in Restricted Stock

(c)         Stock. Executive will also be eligible to participate in the
Company’s 2004 Amended and Restated Stock Incentive Plan (“Stock Plan”), as may
be amended from time to time. Notwithstanding the foregoing, the Company’s
Compensation Committee has authorized, and pursuant to the authority of the
Compensation Committee, the Company hereby grants to Executive the following:

(i)         Restricted Stock. As of the Effective Date, the Company hereby
grants to Executive Twenty-five Thousand (25,000) restricted shares of common
stock of the Company under the terms of the Stock Plan subject to such
restrictions and limitations as are set forth in the Restricted Stock Agreement
attached hereto as Exhibit A.

(ii)        Stock Options. As of the Effective Date, the Company hereby grants
to Executive the following options to purchase shares of common stock of the
Company under the terms of the Stock Plan subject to the restrictions and
limitations as are set forth in the Stock Option Agreement attached hereto as
Exhibit B.

 

 

2 of 17

 

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

 

 

a)         Option 1 – Covering 60,000 shares with an exercise price equal to the
fair market value of the shares on the day the Executive begins employment with
the Company.

b)        Option 2 – Covering 50,000 shares with an exercise price of Twenty
dollars ($20.00) per share.

c)         Option 3 – Covering 50,000 shares with an exercise price of
Twenty-five dollars ($25.00) per share.

Each vest over five (5) years, and have a ten (10) year term. Additional
information is included in our Stock Option Agreement. The Board of Directors
and the Compensation Committee may consider additional annual stock option
awards based on performance.

(a)      Payment. Payment of all compensation to Executive hereunder shall be
made in accordance with the terms of this Agreement and applicable Company
policies in effect from time to time, including normal payroll practices, and
shall be subject to all applicable withholdings and taxes.

(b)      Benefits Generally. The Company shall make available to Executive,
throughout the term of this Agreement, benefits as are generally provided by the
Company to its executive officers, including but not limited to any group life,
health, dental, vision, disability or accident insurance, 401(k) plan, or other
such benefit plan or policy which may presently be in effect or which may
hereafter be adopted by the Company for its executive officers and key
management personnel; provided, however, that nothing herein contained shall be
deemed to require the Company to adopt or maintain any particular plan or
policy.

(c)      Vacation/Sick Time. Executive shall be entitled to paid time off
(“PTO”) accruing at 8.31 hours per period, or twenty seven (27) days when
annualized, consistent with the policies then applicable to executive officers.

4.       Reimbursement of Expenses. The Company shall reimburse Executive for
all business expenses, which are reasonable and necessary and are incurred by
Executive while performing his duties under this Agreement, upon presentation of
expense statements, receipts and/or vouchers, or such other information and
documentation as the Company may reasonably require. The CEO reserves the right
to deny any unreasonable business expense.

5.       Termination.

 

                 (a)       Termination by the Company.

 

(i)         Without Cause. The Company may terminate this Agreement for any
reason or no reason upon thirty (30) days written notice to Executive. If the
Company terminates this Agreement pursuant to this provision, the Company will
pay Executive: (1) all earned but unpaid Base Salary (“Accrued Compensation”),
(2) an additional severance payment equal to one (1) year of the sum of the
Executive’s then-current (a) Base Salary and (b) an amount equal to the previous
year’s Bonus paid to Executive (“Additional Severance Payment”); and (3)
Executive’s unvested stock options and restricted stock awards will immediately
vest, as

 

3 of 17

 

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

 

provided in the Stock Option and Restricted Stock Agreements. Upon termination
of this Agreement by the Company pursuant to Section 5(a)(i), the Company shall
pay the cost to Executive as such costs become due for continuation coverage
under COBRA (hereinafter referred to as the “Termination COBRA Payments”) during
the Continuation Period (as hereafter defined). If and when the COBRA coverage
ceases during the Continuation Period, the Company will reimburse Executive for
comparable coverage as received under COBRA during the reminder of the
Continuation Period. The Continuation Period shall be the period commencing on
the date of termination of this Agreement and end twelve (12) months after the
date of termination of this Agreement.

(ii)        For Cause. The Company may terminate this Agreement at any time for
Cause. Upon termination by the Company for Cause, Executive shall only be
entitled to all earned but unpaid Base Salary. “Cause” means any of the
following:

a)       Executive’s commission of theft, embezzlement, any other act of
dishonesty relating to his employment with the Company, or any material
violation of Company policies (including the Company’s ethics policies), or any
law, rules, or regulations applicable to the Company, including, but not limited
to, those established by the Department of Insurance, the Securities and
Exchange Commission, or any self-regulatory organization having jurisdiction or
authority over Executive or the Company or any failure by the Executive to
inform the Company of any violation of any law, rule or regulation by the
Company or one of its direct or indirect subsidiaries of which the Executive has
actual knowledge;

b)      Executive’s conviction of, or pleading guilty or nolo contendere to, a
felony or any lesser crime having as its predicate element fraud, dishonesty,
misappropriation, or moral turpitude;

c)       Executive’s neglect of duties or failure to perform obligations under
this Agreement (other than due to disability) that materially causes harm to the
Company or that has materially damaged or interfered with the Company’s
relationships with its customers, suppliers, employees or other agents;
provided, however, that the Company shall give the Executive written notice of
any actions or omissions alleged to constitute Cause under this subsection (c)
and the Executive shall have thirty (30) days to cure any such alleged Cause;

d)      Executive’s substance abuse or illegal use of drugs that impairs
Executive’s performance, that materially causes harm to the Company or that, in
the reasonable judgment of the Board, has damaged or interfered with the
Company’s relationships with its customers, suppliers, employees or other
agents;

e)       Executive’s commission of an act or acts in the performance of his
duties under this Agreement amounting to gross negligence or willful misconduct;
or

f)

Executive’s breach of Sections 7 or 8 of this Agreement;

The Company may place Executive on paid administrative leave from work during
any investigation by the Company of a “cause” reason for Executive’s
termination, and may prohibit Executive from coming into work, accessing the
Company’s computer system, and contacting its employees or customers during this
time; provided, however, upon a failure of the Board of

 

4 of 17

 

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

 

Directors to find that Cause exists, such placing of Executive on leave two
times during the Term shall constitute Good Reason under Section 5 below.

.

(iii)       Change in Control. If the Company terminates the Agreement following
a Change in Control, which results in a substantial diminution of Executive’s
duties and responsibilities or a material reduction of compensation or benefits,
the Company shall pay Executive: (1) Accrued Compensation, and (2) the
Additional Severance Payment, and (3) Executive’s unvested stock options and
restricted stock awards will immediately vest, as provided in the Stock Option
and Restricted Stock Agreements. “Change in Control” shall mean a transaction or
event (or series of transactions or events) as a result of which any “person” as
such term is used in Section 13(d) and 14(d) of the Exchange Act (other than any
Excluded Person, the Company or any Company employee benefit plan, including its
trustees) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of all of the securities of the
Company held by New Affirmative LLC held immediately prior to such transaction
or event (or series of transactions or events) and all director designees of New
Affirmative LLC are no longer on the Company’s Board; provided, however, that in
no event shall the distribution, sale, transfer, or acquisition of securities of
the Company held by New Affirmative LLC or any Excluded Persons (or any
successor thereof) to any Excluded Person trigger a “Change in Control.”
“Excluded Person” shall mean any of New Affirmative LLC, Affirmative Investment
LLC, The Enstar Group, Inc. and any of their respective stockholders, members,
affiliates, subsidiaries, or any such persons under common control.

(b)

Termination by Executive.

(i)         No Good Reason.       Executive may terminate this Agreement for any
reason upon providing thirty (30) days written notice to the Company. If
Executive terminates this Agreement pursuant to this provision, the Company will
pay Executive all earned but unpaid Base Salary.

(ii)      For Good Reason. For purposes of this Agreement, the term “Good
Reason” shall mean termination of Executive’s employment with the Company by the
Executive by giving at least thirty (30) days advance written notice within
thirty (30) days of the occurrence of one of the following events:

a)       Executive’s removal from his position as Executive Vice President and
Chief Operating Officer, other than for Cause or by death or Disability, during
the term of this Agreement;

b)      without Executive’s written consent, a reduction in Executive’s Base
Salary or Target Bonus or any failure to pay Executive any compensation or
benefits to which heis entitled within five (5) days of the date due; provided,
however, that Executive shall give the Company written notice of any actions or
omissions alleged to constitute Good Reason under this subsection (b) and the
Company shall have ten (10) business days to cure any such alleged Good Reason;

 

 

5 of 17

 

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

 

 

c)       in the event of a requirement that Executive relocate Executive’s
principal office to a location that is more than forty (40) miles from the
location of the Company’s administrative offices in Chicago, Illinois; provided,
however, that travel as reasonably necessary to perform duties under this
Agreement shall not be deemed a violation of this subsection (c);

d)      a materially adverse change in Executive’s duties and responsibilities
or a material reduction of compensation or benefits;

e)       the Company’s material breach of any provision of this Agreement or any
of the covenants contained herein that, if capable of being cured, remains
uncured after Executive has delivered a written notice of breach to the Company
and after the Company has had thirty (30) days after receipt of such written
notice to cure such breach; or

f)       the failure of the Company to comply with and satisfy its obligations
under Section 25 hereof.

Upon termination for “Good Reason” pursuant to this provision, Executive shall
be entitled to all benefits and payments as provided in Section 5(a)(i) hereof
for a termination by the Company without Cause. Executive shall only be required
to give notice one time under this Section 5(b)(ii) and shall not be required to
provide notice and a cure period for any breach or other action that is not
capable of cure.

(c)        Disability. The Company may terminate this Agreement at any time
Executive shall be deemed by the Board to have sustained a “disability.”
Executive shall be deemed to have sustained a “disability” if he shall have been
unable to perform his duties for a period of more than ninety (90) days in any
twelve (12) month period. Upon termination of this Agreement for disability, the
Company shall pay Executive his Accrued Compensation.

(d)        Death. This Agreement will terminate automatically upon Executive’s
death. Upon termination of this Agreement because of Executive’s death, the
Company shall pay Executive’s estate his Accrued Compensation.

(e)        Employment. Upon termination of this Agreement for any reason,
including expiration of the Term, or a termination for a reason specified in
this Section 5, Executive’s employment shall also terminate and cease, and
Executive will voluntarily resign any Director or Board positions he holds,
unless otherwise requested by the Company.

(f)         Transition Period. Upon termination of this Agreement, and for a
period of thirty (30) days thereafter (the “Transition Period”), Executive
agrees to make himself available to assist the Company with transition projects
assigned to him by the Board. Executive will be paid at a daily rate of
one-thousand five hundred and no/100 ($1,500.00) dollars for any work performed
for the Company during the Transition Period.

(g)        Severance Payment. Any payment to Executive under this Section 5 will
be payable in monthly installments due on the first day of each month during the
course of the Non-Interference Period. Executive shall not be entitled to, and
the Company shall not pay, any severance under any other plan, program or policy
of the Company.

 

 

6 of 17

 

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

 

 

Notwithstanding the foregoing severance provisions, if the Board (or its
delegate) determines in its or his discretion that Executive is a “Specified
Employee” (as defined in Section 409A of the United States Internal Revenue Code
of 1986, as amended (“Section 409A”)), as of the date of termination, and that
Section 409A applies with respect to any payment(s) to Executive pursuant to any
of the paragraphs of this Section 5, such payment(s) shall not begin until the
six-month anniversary of the date of termination, and will continue in monthly
installments thereafter through completion of the Non-Interference Period (with
each monthly installment being paid in the gross sum of the full payment divided
by 18); provided, however, that if the Board (or its delegate) determines in its
or his discretion that Executive is not a Specified Employee as of the date of
termination (or that Section 409A does not apply with respect to a payment to
Executive pursuant to Section 5), such payment shall be made in accordance with
the provisions of this Section 5, provided that the requirements set forth in
Section 6 have been met by Executive.

6.       Release. Notwithstanding any other provision in this Agreement to the
contrary, as a condition precedent to receiving any payment set forth in Section
5 of this Agreement, Executive agrees to execute (and not revoke) a severance
and release agreement acceptable to the Company (the “Release”). If Executive
fails to execute and deliver the Release, or revokes the Release, Executive
agrees that he shall not be entitled to receive the above-stated severance
payments. For purposes of this Agreement, the Release shall be considered to
have been executed by Executive if it is signed by his legal representative in
the case of legal incompetence or on behalf of Executive’s estate in the case of
his death. No payments shall be made under Section 5 until the period to revoke
the release has terminated.

7.

Nondisclosure.

(a)        The Company shall, immediately after executing this Agreement,
provide Executive with some or all of the Company’s various trade secrets and
confidential or proprietary information, including information he has not
received before, consisting of, but not limited to, all information: that is
non-public or proprietary to the Company, or its affiliates including, but not
limited to, information concerning its business activities including, but not
limited to, the present marketing and administration of certain insurance
business and processes, including but not limited to any and all information
concerning non-standard automobile insurance business, financial information,
administrative procedures, pricing methods and policies, client lists and
information, business and marketing strategies, claims and underwriting
procedures and guidelines, claims and underwriting files, utilization review and
manuals, data format, data gathering retrieval systems and methods, ideas about
current and future services. Confidential Information shall not include: (i)
information that Executive may furnish to third parties regarding his
obligations under Sections 7 and 8; or (ii) information that becomes generally
available to the public by means other than Executive’s breach of Section 7 (for
example, not as a result of Executive’s unauthorized release of marketing
materials).

(b)        Executive agrees that all Confidential Information, whether prepared
by Executive or otherwise coming into his possession, shall remain the exclusive
property of the Company during Executive’s employment with the Company and
thereafter. Executive further agrees that he shall not, without the prior
written consent of the Company, use or disclose to any third party any of the
Confidential Information described herein, directly or indirectly, either

 

7 of 17

 

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

 

during Executive’s employment with the Company or at any time following the
termination of Executive’s employment with the Company, except as Executive may
be required by Court Order. If such Court Order is issued, Executive shall
inform the Company a reasonable time prior to compliance.

(c)        Upon termination of this Agreement, Executive agrees that all
Confidential Information and other files, documents, materials, records,
notebooks, customer lists, business proposals, contracts, agreements and other
repositories containing information concerning the Company or the business of
the Company (including all copies thereof) in Executive’s possession, custody or
control, whether prepared by Executive or others, shall remain with or be
returned to the Company promptly (within seventy-two (72) hours) after the
termination or expiration of this Agreement for any reason.

8.

Noncompete, Nonsolicitation, and Non-Disparagement.

(a)        Business Relationships and Goodwill. Executive acknowledges and
agrees that, as an employee and representative of the Company, Executive will be
given Confidential Information. Executive acknowledges and agrees that this
creates a special relationship of trust and confidence between the Company,
Executive and the Company’s current and prospective customers, limited partners,
and investors. Executive further acknowledges and agrees that there is a high
risk and opportunity for any person given such responsibility and Confidential
Information to misappropriate the relationship and goodwill existing between the
Company and the Company’s current and prospective customers, limited partners,
and investors. Executive therefore acknowledges and agrees that it is fair and
reasonable for the Company to take steps to protect itself from the risk of such
misappropriation. Consequently, Executive agrees to the following noncompetition
and nonsolicitation covenants.

(b)

Scope of Noncompetition Obligation.

(i)         Executive acknowledges and agrees that the period of one (1) year
following the termination or expiration of this Agreement for any reason will
constitute the non-compete, non-solicit and non-divert period (the
“Non-Interference Period”). During his employment and during the
Non-Interference Period, Executive will not engage in duties or provide services
to a Competitor which are substantially similar to those Executive provided to
the Company under this Agreement, in any capacity, upon the termination or
expiration of this Agreement in states where the Company is doing business or
has expended resources in pursuit of, or in preparation to do, business (the
“Prohibited Market”). The term “Competitor” means (i) insurance companies
providing non-standard automobile insurance coverage of any type or class as a
primary line of business (in excess of fifteen percent (15%) of aggregate
revenues), (ii) underwriting agencies (or managing general agencies) that
produce and administer non-standard automobile insurance as a primary line of
business, and (iii) retail agencies that sell non-standard automobile insurance
policies as a primary line of business.

(ii)         Executive agrees that he shall not at any time during his
employment divert away or attempt to divert away any business from the Company
to another company, business, or individual. Additionally, Executive shall not,
during the Non-Interference Period, solicit, divert away or attempt to divert
away business from any Company Customer,

 

8 of 17

 

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

 

either directly or indirectly. “Company Customer” is defined as any person,
company, or business that Executive contacted, solicited, serviced, or had
access to Confidential Information about. “Solicit” is defined as soliciting,
inducing, attempting to induce, or assisting any other person, firm, entity,
business or organization, whether direct or indirect, in any such solicitation,
inducement or attempted inducement, in all cases regardless of whether the
initial contact was by Executive, the Company Customer, or any other person,
firm, entity, business, or organization.

(iii)        Executive further agrees that during the Non-Interference Period,
he will not directly or indirectly: (a) solicit, entice, persuade or induce any
employee, agent or representative of the Company, who was an employee, agent or
representative of the Company upon the termination or expiration of this
Agreement, to terminate such person’s relationship with the Company or to become
employed by any business or person other than the Company; (b) approach any such
person for any of the foregoing purposes; (c) authorize, solicit or assist in
the taking of such actions by any third party; or (d) hire or retain any such
person

(iv)        Executive further agrees that, during the Non-Interference Period,
he shall not own, manage, operate, control, invest or acquire an interest in, or
otherwise similarly engage or participate in (whether as a proprietor, owner,
member, partner, stockholder, director, officer, employee, consultant, joint
venturer, investor, sales representative or other participant) any Competitor or
business or entity that owns or operates, or controls another business or entity
that owns or operates a Competitor located in the Prohibited Market; provided,
however, that the foregoing provisions shall not prohibit the Employee from: (a)
being a passive investor in any publicly traded entity, as long as any such
investment does not exceed ten percent (10%) of the outstanding equity
securities of such entity; (b) continuing as a non controlling investor in any
entity which subsequent to the date of the Executive’s investment therein
becomes the owner or operator of, or acquires control of another business or
entity that owns or operates, a Competitor in a Prohibited Market (provided that
if any entity in which the Executive is a non controlling investor acquires a
non-standard automobile insurance provider in a Prohibited Market, the Executive
shall limit his participation in such entity to a passive role); or (c)
investing in or becoming employed by any entity whose ownership, operation or
control of a Competitor is not material relative to its principal business
activities provided Executive’s participation in such a Competitor is not a
material part of Executive’s duties.

(v)        If Executive requests, the Company will notify Executive in writing
within fourteen (14) business days of the request whether any action proposed to
be taken by Executive would be viewed by the Company in good faith to be
inconsistent with Executive’s obligations in this Section 8(b). If the Company
informs Executive that it would not consider such action to be a violation of
any of Executive’s obligations in this Section 8(b), then the Company shall have
forever waived any claim that such action taken by Executive violates any of
Executive’s obligations in this Section 8(b).

(c)        Non-Disparagement. During the term of Executive’s employment with the
Company and following the termination or expiration of this Agreement for any
reason, Executive shall not disparage, discredit or otherwise criticize,
directly or indirectly, verbally or in writing, the Company or any of its
subsidiaries, or any of their respective businesses, products, practices,
trademarks, employees, officers, or directors. Further, during the term of
Executive’s employment with the Company and following the termination or
expiration of this Agreement,

 

9 of 17

 

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

 

the Company shall not disparage, discredit or otherwise criticize, directly or
indirectly, verbally or in writing, Executive.

(d)        Acknowledgement. Executive acknowledges that the compensation and
Confidential Information provided to Executive pursuant to this Agreement, give
rise to the Company’s interest in restraining Executive from competing with the
Company, that the noncompetition and nonsolicitation covenants are designed to
enforce such consideration and that any limitations as to time, geographic scope
and scope of activity to be restrained as defined herein are reasonable and do
not impose a greater restraint than is necessary to protect the goodwill or
other business interest of the Company.

(e)        Survival of Covenants. Sections 7 and 8 shall survive the expiration
or termination of this Agreement for any reason. Executive agrees not to
challenge the enforceability or scope of Sections 7 and 8. Executive further
agrees to notify all future persons, businesses, or other entities, with which
he becomes affiliated or employed by, of the restrictions set forth in Sections
7 and 8, prior to the commencement of any such affiliation or employment.

9.       Severability and Reformation. If any one or more of the terms,
provisions, covenants or restrictions of this Agreement shall be determined by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions shall remain in
full force and effect, and the invalid, void or unenforceable provisions shall
be deemed severable. Moreover, if any one or more of the provisions contained in
this Agreement shall for any reason be held to be excessively broad as to
duration, geographical scope, activity or subject, it shall be reformed by
limiting and reducing it to the minimum extent necessary, so as to be
enforceable to the extent compatible with the applicable law as it shall then
appear.

10.     Entire Agreement. This Agreement sets forth the entire agreement between
the parties hereto and fully supersedes any and all prior agreements or
understandings, written or oral, between the parties hereto pertaining to the
subject matter hereof.

11.     Notices. All notices and other communications required or permitted to
be given hereunder shall be in writing and shall be deemed to have been duly
given if delivered personally, mailed by certified mail (return receipt
requested) or sent by overnight delivery service, or electronic mail, or
facsimile transmission (with electronic confirmation of successful transmission)
to the parties at the following addresses or at such other addresses as shall be
specified by the parties by like notice, in order of preference of the
recipient:

If to the Company:

Senior Vice President, General Counsel

 

150 Harvester Drive, Suite 300

 

 

Burr Ridge, Illinois 60527

 

 

If to Executive:

Robert Bondi

26519 Southgate Trail

Port Barrington, IL 60010

 

 

10 of 17

 

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

 

 

Notice so given shall, in the case of mail, be deemed to be given and received
on the fifth calendar day after posting, in the case of overnight delivery
service, on the date of actual delivery and, in the case of facsimile
transmission or personal delivery, on the date of actual transmission or, as the
case may be, personal delivery.

12.     Governing Law and Venue. This Agreement will be governed by and
construed in accordance with the laws of the State of Illinois, without regard
to any conflict of laws rule or principle which might refer the governance or
construction of this Agreement to the laws of another jurisdiction. Any action
or arbitration in regard to this Agreement or arising out of its terms and
conditions, pursuant to Sections 26 and 27, shall be instituted and litigated
only in Chicago, Illinois.

13.     Assignment. This Agreement is personal to Executive and may not be
assigned in any way by Executive without the prior written consent of the
Company. The Company may assign its rights and obligations under this Agreement.

14.     Counterparts. This Agreement may be executed in counterparts, each of
which will take effect as an original, and all of which shall evidence one and
the same Agreement.

15.     Amendment. This Agreement may be amended only in writing signed by
Executive and by a duly authorized representative of the Company (other than
Executive).

16.     Construction. The headings and captions of this Agreement are provided
for convenience only and are intended to have no effect in construing or
interpreting this Agreement. The language in all parts of this Agreement shall
be in all cases construed in accordance to its fair meaning and not strictly for
or against the Company or Executive.

17.     Non-Waiver. The failure by either party to insist upon the performance
of any one or more terms, covenants or conditions of this Agreement shall not be
construed as a waiver or relinquishment of any right granted hereunder or of any
future performance of any such term, covenant or condition, and the obligation
of either party with respect hereto shall continue in full force and effect,
unless such waiver shall be in writing signed by the Company (other than
Executive) and Executive.

18.     Announcement. Company shall have the right to make public announcements
concerning the execution of this Agreement and the terms contained herein, at
the Company’s discretion.

19.     Use of Name, Likeness and Biography. Company shall have the right (but
not the obligation) to use, publish and broadcast, and to authorize others to do
so, the name, approved likeness and approved biographical material of Executive
to advertise, publicize and promote the business of Company and its affiliates,
but not for the purposes of direct endorsement without Executive’s consent. This
right shall terminate upon the termination of this Agreement. An “approved
likeness” and “approved biographical material” shall be, respectively, any
photograph or other depiction of Executive, or any biographical information or
life story concerning the professional career of Executive.

 

 

11 of 17

 

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

 

 

20.     Corporate Opportunities. Executive acknowledges that during the course
of Executive’s employment by Company, Executive may be offered or become aware
of business or investment opportunities in which Company may or might have an
interest (a “Corporate Opportunity”) and that Executive has a duty to advise
Company of any such Corporate Opportunities before acting upon them.
Accordingly, Executive agrees: (a) that Executive will disclose to the Board any
Corporate Opportunity offered to Executive or of which Executive becomes aware,
and (b) that Executive will not act upon any Corporate Opportunity for
Executive’s own benefit or for the benefit of any Person other than Company
without first obtaining consent or approval of the Board (whose consent or
approval may be granted or denied solely at the discretion of the Board;
provided, that Executive, at Executive’s election, may act upon any such
Corporate Opportunity for Executive’s benefit or the benefit of any other Person
if the Board has not caused Company to act upon any such Corporate Opportunity
within sixty (60) days after disclosure of such Corporate Opportunity to Company
by Executive.

21.     Right to Insure. Company shall have the right to secure, in its own name
or otherwise, and at its own expense, life, health, accident or other insurance
covering Executive, and Executive shall have no right, title or interest in and
to such insurance. Executive shall assist Company in procuring such insurance by
submitting to examinations and by signing such applications and other
instruments as may be required by the insurance carriers to which application is
made for any such insurance.

22.     Assistance in Litigation. Executive shall reasonably cooperate with the
Company in the defense or prosecution of any claims or actions now in existence
or that may be brought in the future against or on behalf of the Company that
relate to events or occurrences that transpired while Executive was employed by
the Company. Executive’s cooperation in connection with such claims or actions
shall include, but not be limited to, being available to meet with counsel to
prepare for discovery or trial and to act as a witness on behalf of the Company
at mutually convenient times. Executive also shall cooperate fully with the
Company in connection with any investigation or review by any federal, state, or
local regulatory authority as any such investigation or review relates to events
or occurrences that transpired while Executive was employed by the Company. The
Company will pay Executive one thousand five hundred dollars ($1,500) per
eight-hour day for the Executive’s cooperation pursuant to this Section 22.

23.     No Inconsistent Obligations. Executive represents and warrants that to
his knowledge he has no obligations, legal, in contract, or otherwise,
inconsistent with the terms of this Agreement or with his undertaking employment
with the Company to perform the duties described herein. Executive will not
disclose to the Company, or use, or induce the Company to use, any confidential,
proprietary, or trade secret information of others. Executive represents and
warrants that to his knowledge he has returned all property and confidential
information belonging to all prior employers, if he is obligated to do so.

24.     Notification of New Employer. Upon termination of this Agreement for any
reason, or expiration of this Agreement, Executive hereby consents to the
notification by the Company to Executive’s new employer of Executive’s rights
and obligations under this Agreement. In addition, in the event that Executive
plans to render services to a company that works in a similar field as the
Company, Executive agrees to provide the Company with as much notice as possible
of Executive’s intention to join that company or business but in no event will

 

12 of 17

 

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

 

Executive provide less than two weeks notice of that intention; provided,
however, the provision of such notice and the Company’s receipt thereof shall
not constitute a waiver of any breach of any provision of this Agreement.

25.     Binding Agreement. This Agreement shall inure to the benefit of and be
binding upon Executive, his heirs and personal representatives, and the Company,
its successors and assigns.

26.     Remedies. The parties recognize and affirm that in the event of a breach
of Sections 7 and 8 of this Agreement, money damages would be inadequate and the
Company would not have an adequate remedy at law. Accordingly, the parties agree
that in the event of a breach or a threatened breach of Sections 7 and 8, the
Company may, in addition and supplementary to other rights and remedies existing
in its favor, apply to any court of law or equity of competent jurisdiction for
specific performance and/or injunctive or other relief in order to enforce or
prevent any violations of the provisions hereof (without posting a bond or other
security). In addition, Executive agrees that in the event a court of competent
jurisdiction or an arbitrator finds that Executive violated Sections 7 or 8, the
time periods set forth in those Sections shall be tolled until such breach or
violation has been cured. Executive further agrees that the Company shall have
the right to offset the amount of any damages resulting from a breach by
Executive of Sections 7 or 8 against any payments due Executive under this
Agreement. The parties agree that if one of the parties is found to have
breached this Agreement by a court of competent jurisdiction, the breaching
party will be required to pay the non-breaching party’s attorneys’ fees.

27.     Arbitration. Other than as stated in Section 26, the parties agree that
any controversy or claim arising out of or relating to this Agreement, or the
breach thereof, shall be resolved by arbitration administered by the American
Arbitration Association (“AAA”) under its Commercial Arbitration Rules. The
arbitration will take place in Chicago, Illinois. All disputes shall be resolved
by a one (1) arbitrator. The method for selecting the arbitrator is set forth in
the AAA’s Commercial Arbitration Rules. The arbitrator will have the authority
to award the same remedies, damages, and costs that a court could award, and
will have the additional authority to award those remedies set forth in Section
26. The arbitrator shall issue a reasoned award explaining the decision, the
reasons for the decision, and any damages awarded, including those set forth in
Section 26 where the arbitrator finds Executive violated Sections 7 or 8. The
arbitrator’s decision will be final and binding. The judgment on the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The arbitration proceedings, any record of the same, and the award
shall be considered Confidential Information under this Agreement. This
provision and any decision and award hereunder can be enforced under the Federal
Arbitration Act.

28.      Indemnification. The Company agrees that if Executive is made a party
to or involved in, or is threatened to be made a party to or otherwise to be
involved in, any action, suit or proceeding, whether civil, criminal,
administrative or investigative (a “Proceeding”), by reason of the fact that
heis or was an officer or employee of the Company or is or was serving at the
request of the Company as an officer, member, employee or agent of another
corporation, limited liability corporation, partnership, joint venture, trust or
other enterprise, including service with respect to employee benefit plans,
whether or not the basis of such Proceeding is

 

13 of 17

 

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

 

Executive’s alleged action in an official capacity while serving as an officer,
member, employee or agent, Executive shall be indemnified and held harmless by
the Company against any and all liabilities, losses, expenses, judgments,
penalties, fines and amounts reasonably paid in settlement in connection
therewith, to the fullest extent legally permitted or authorized by the
Company’s By-laws or, if greater, by the laws of the State of Delaware, as may
be in effect from time to time, except that this Section 28 shall not apply to
the following Proceedings: (a) any Proceeding initiated or brought voluntarily
by Executive against the Company or its directors, officers employees or other
indemnitees, unless the Board of Directors has authorized or consented to the
initiation of the Proceeding (or any part of the Proceeding), and (b) for an
accounting of profits made from the purchase and sale (or sale and purchase) by
Executive of securities of the Company within the meaning of Section 16(b) of
the Exchange Act or any similar successor statute. The rights conferred on
Executive by this Section 28 shall not be exclusive of any other rights which
Executive may have or hereafter acquire under any statute, the By-laws,
agreement, vote of stockholders or disinterested directors, or otherwise. The
indemnification provided for by this Section 28 shall continue until and
terminate upon the latest of: (a) the statute of limitations applicable to any
claim that could be asserted against Executive with respect to which he may be
entitled to indemnification under this Section 28, (b) ten years after the date
that Executive has ceased to serve as a director or officer of the Company or as
a director, officer, employee, member, or agent of any other corporation,
limited liability corporation, partnership, joint venture, trust or other
enterprise at the request of the Company, or (c) if, at the later of the dates
referred to in (a) and (b) above, there is a pending Proceeding in respect of
which Executive is granted rights of indemnification under this Section 28, one
year after the final termination of such Proceeding, including any and all
appeals. The indemnification provided for by this Section 28 shall inure to the
benefit of his heirs, executors and administrator

29.

Tax Gross Up.

(a)        If, as a result of payments provided for under or pursuant to this
Agreement together with all other payments in the nature of compensation
provided to or for the benefit of Executive under any other agreement in
connection with a Change in Control, Executive becomes subject to taxes of any
state, local or federal taxing authority that would not have been imposed on
such payments but for the occurrence of a Change in Control, including any
excise tax under Section 4999 of the Code an any successor or comparable
provision, then, in addition to any other benefits provided under or pursuant to
this Agreement or otherwise, Company (including any successor to Company) shall
pay to Executive at the time any such payments are made under or pursuant to
this or the other agreements, an amount equal to the amount of any such taxes
imposed or to be imposed on Executive (the amount of any such payment, the
“Parachute Tax Reimbursement”).

(b)        In addition, Company (including any successor to Company) shall
“gross up” such Parachute Tax Reimbursement by paying to Executive at the same
time an additional amount equal to the aggregate amount of any additional taxes
(whether income taxes, excise taxes, special taxes, employment taxes or
otherwise) that are or will be payable by Executive as a result of the Parachute
Tax Reimbursement being paid or payable to Executive and/or as a result of the
additional amounts paid or payable to Executive pursuant to this sentence, such
that after

 

14 of 17

 

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

 

payment of such additional taxes Executive shall have been paid on a net
after-tax basis an amount equal to the Parachute Tax Reimbursement.

(c)        The amount of any Parachute Tax Reimbursement and of any such
gross-up amounts shall be determined by a nationally recognized accounting firm
selected by the Company (with all such cost borne by the Company), whose
determination, absent manifest error, shall be treated as conclusive and binding
absent a binding determination by a governmental taxing authority that a greater
amount of taxes is payable by Executive.

(d)        The term “Change in Control” shall mean a transaction or event (or
series of transactions or events) as a result of which any “person” as such term
is used in Section 13(d) and 14(d) of the Exchange Act (other than any Excluded
Person, the Company or any Company employee benefit plan, including its
trustees) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of all of the securities of the
Company held by New Affirmative LLC held immediately prior to such transaction
or event (or series of transactions or events) and all director designees of New
Affirmative LLC are no longer on the Company’s Board; provided, however, that in
no event shall the distribution, sale, transfer, or acquisition of securities of
the Company held by New Affirmative LLC or any Excluded Persons (or any
successor thereof) to any Excluded Person trigger a “Change in Control.”
“Excluded Person” shall mean any of New Affirmative LLC, Affirmative Investment
LLC, The Enstar Group, Inc. and any of their respective stockholders, members,
affiliates, subsidiaries, or any such persons under common control.

30.     Fees and Expenses. To induce the Executive to execute this Agreement and
to provide the Executive with reasonable assurance that the purposes of this
Agreement will not be frustrated by the cost of its enforcement should the
Company fail to perform its obligations under this Agreement:

(a)        In the event that the Executive’s employment is terminated by the
Company prior to a Change in Control either for Cause or without Cause, the
Company shall reimburse the Executive for any reasonable attorneys’ fees,
expenses and court costs incurred by the Executive as a result of any litigation
by the Executive regarding the validity, enforceability or interpretation of any
provision of this Agreement (except as stated in Section 8(e), and including as
a result of any litigation by the Executive regarding the benefits payable to
the Executive pursuant to this Agreement); provided, however, that such
reimbursement shall only be payable by the Company (i) if the Executive prevails
on any material issues involved in such litigation and (ii) upon receipt of
proof of such expenses.

(b)        In the event that the Executive’s employment is terminated after a
Change in Control either by the Company either for Cause or without Cause or by
the Executive for Good Reason, the Company shall reimburse the Executive for any
reasonable attorneys’ fees, expenses and court costs incurred by the Executive
as a result of any litigation by the Executive regarding the validity,
enforceability or interpretation of any provision of this Agreement (except as
stated in Section 8(e)), and including as a result of any litigation by the
Executive regarding the benefits payable to the Executive pursuant to this
Agreement) upon receipt of proof of such expenses regardless of which party, if
any, prevails in the contest.

 

 

15 of 17

 

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

 

 

 

31.     Voluntary Agreement. Each party to this Agreement has read and fully
understands the terms and provisions hereof, has had an opportunity to review
this Agreement with legal counsel, has executed this Agreement based upon such
party’s own judgment and advice of counsel (if any), and knowingly, voluntarily,
and without duress, agrees to all of the terms set forth in this Agreement. The
parties have participated jointly in the negotiation and drafting of this
Agreement. If an ambiguity or question of intent or interpretation arises, this
Agreement will be construed as if drafted jointly by the parties and no
presumption or burden of proof will arise favoring or disfavoring any party
because of authorship of any provision of this Agreement. Except as expressly
set forth in this Agreement, neither the parties nor their affiliates, advisors
and/or their attorneys have made any representation or warranty, express or
implied, at law or in equity with respect of the subject matter contained
herein. Without limiting the generality of the previous sentence, the Companies,
their affiliates, advisors, and/or attorneys have made no representation or
warranty to Executive concerning the state or federal tax consequences to
Executive regarding the transactions contemplated by this Agreement.

<remainder of page intentionally left blank>

 

 

16 of 17

 

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

 

 

IN WITNESS WHEREOF, the Company and Executive have executed this Agreement,
effective as of the day and year first above written.

COMPANY

Dated:

January 26, 2007

By: /s/ Kevin Callahan

Name: Kevin Callahan

Title: Chief Executive Officer

EXECUTIVE

Dated:

January 26, 2007

By: /s/ Robert Bondi

Name: Robert Bondi

 

 

 

17 of 17

 

 

 

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

EXHIBIT A

RESTRICTED STOCK AGREEMENT

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

AFFIRMATIVE INSURANCE HOLDINGS, INC.

AMENDED AND RESTATED 2004 STOCK INCENTIVE PLAN

as amended

RESTRICTED STOCK AWARD AGREEMENT

This Restricted Stock Award Agreement (this “Agreement”), made as of the 27th
day of November, 2006 (the “Grant Date”) by and between Affirmative Insurance
Holdings, Inc. (the “Company”), and Robert Bondi (the “Grantee”), evidences the
grant by the Company of a Stock Award (the “Award”) of restricted Common Stock,
par value $0.01 per share (the “Common Stock”) to the Grantee on such date and
the Grantee’s acceptance of the Award in accordance with the provisions of the
Company’s Amended and Restated 2004 Stock Incentive Plan, as amended (the
“Plan”), a copy of which is attached hereto as Exhibit A.

NOW, THEREFORE, in consideration of the premises and the benefits to be derived
from the mutual observance of the covenants and promises contained herein and
other good and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:

1.          Basis for Award. This Award is made pursuant to the Plan for
services rendered to the Company by the Grantee.

2.          Restricted Stock Award. The Company hereby awards and grants to
Grantee, in consideration for past services rendered to the Company or an
Affiliate of the Company which services have a value in excess of the aggregate
par value of the Common Stock awarded to Grantee, 25,000 shares of Common Stock
of the Company (the “Restricted Stock Award”) which shall be subject to the
restrictions and conditions set forth in the Plan and in this Agreement.

3.          Vesting. The Restricted Stock Award (the “Restricted Stock”) shall
vest and be held subject to the following:

(a)        provided Grantee continues to provide Continuous Service to the
Company or any Affiliate, the Restricted Stock Award will become vested and
exercisable with respect to twenty percent (20%) of the Restricted Stock on the
first anniversary of November 27, 2006 (the “Vesting Commencement Date”) and
thereafter, at the end of each full succeeding year, for four years, on the
anniversary date of the Vesting Commencement Date, will become vested and
exercisable as to twenty percent (20%) of the Restricted Stock until the
Restricted Stock is vested and exercisable with respect to one hundred percent
(100%) of the Restricted Stock. If application of the vesting percentage causes
a fractional share, such share shall be rounded down to the nearest whole share
for each vesting period except for the last period in such vesting period, at
the end of which last period this Restricted Stock Award shall become
exercisable for the full remainder of the Restricted Stock; and

(b)        notwithstanding the foregoing, the Restricted Stock shall become
immediately vested and free of all restrictions hereunder upon the earliest of
the following to occur:

 

 

Page 1

 

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

 

 

(i)

Termination by the Company other than for Cause;

(ii)

Termination by the Grantee for Good Reason; or

 

(iii)        Non-renewal of Participant’s employment agreement, to the extent
and only to the extent provided in Section 2(b) of Participant’s employment
agreement.

For purposes of clarity, a termination due to death or disability of Participant
shall not cause the Award to become immediately vested and fully exercisable.
For purposes of this Agreement, the terms Cause, Good Reason, death or
disability shall have the meaning ascribed to them under the Participant’s
employment agreement.

4.          Compliance with Laws and Regulations. The issuance and transfer of
Common Stock shall be subject to compliance by the Company and Grantee with all
applicable requirements of federal and state securities laws and with all
applicable requirements of any stock exchange on which the Company’s Common
Stock may be listed at the time of such issuance or transfer. Grantee
understands that the Company is under no obligation to register or qualify the
Common Stock with the SEC, any state securities commission or any stock exchange
to effect such compliance.

5.

Tax Withholding.

(a)        Grantee agrees that, subject to Section 5(b) below, no later than the
first to occur of (i) the date as of which the restrictions on the Restricted
Stock shall lapse with respect to all or any of the Restricted Stock covered by
this Agreement or (ii) the date required by Section 5(b) below, Grantee shall
pay to the Company (in cash or to the extent permitted by the Board, Company
Stock held by the Grantee whose Fair Market Value on the date the Restricted
Stock vests is equal to the amount of Grantee’s tax withholding liability) any
federal, state or local taxes of any kind required by law to be withheld, if
any, with respect to the Restricted Stock for which the restrictions shall
lapse. The Company shall, to the extent permitted by law, have the right to
deduct from any payment of any kind otherwise due to Grantee any federal, state
or local taxes of any kind required by law to be withheld with respect to the
shares of such Company Stock.

(b)        Grantee has the right to elect, within thirty (30) days of the Grant
Date, to include in gross income for federal income tax purposes an amount equal
to the Fair Market Value of the Restricted Stock less the amount, if any, paid
by the Grantee for the Restricted Stock, which was granted hereunder pursuant to
Section 83(b) of the Internal Revenue Code of 1986, as amended. Grantee shall
pay to the Company, or make other arrangements satisfactory to the Board to pay
to the Company on the date of such grant, any federal, state or local taxes
required to be withheld with respect to such Company Stock. If Grantee fails to
make such payments, the Company shall, to the extent permitted by law, have the
right to deduct from any payment of any kind otherwise due to Grantee any
federal, state or local taxes of any kind required by law to be withheld with
respect to such Restricted Stock.

6.          No Right to Continued Service. Nothing in this Agreement shall be
deemed by implication or otherwise to impose any limitation on any right of the
Company to terminate the Grantee’s service at any time. In the event Grantee’s
employment with the Company is

 

Page 2

 

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

 

terminated by the Company, by Grantee or as a result of Grantee’s death or
disability, no unvested shares of Common Stock shall become vested after such
termination of employment.

7.          Representations and Warranties of Grantee. Grantee represents and
warrants to the Company that:

(a)        Agrees to Terms of the Plan. Grantee has received a copy of the Plan
and has read and understands the terms of the Plan and this Agreement, and
agrees to be bound by their terms and conditions. Grantee acknowledges that
there may be adverse tax consequences upon the vesting of Restricted Stock or
disposition of the shares of Common Stock once vested, and that Grantee should
consult a tax advisor prior to such time.

(b)        Stock Ownership. Grantee is the record and beneficial owner of the
shares of Restricted Stock with full right and power to transfer the Unvested
Shares defined below, to the Company free and clear of any liens, claims or
encumbrances and Grantee understands that the stock certificates evidencing the
Restricted Stock will bear a legend referencing this Agreement.

(c)        SEC Rule 144. Grantee understands that Rule 144 promulgated under the
Securities Act may indefinitely restrict transfer of the Common Stock so long as
Grantee remains an “affiliate” of the Company or if “current public information”
about the Company (as defined in Rule 144) is not publicly available.

8.          Dividends. Grantee shall be entitled to receive dividends and
distributions paid on all unvested Restricted Stock; provided, however, that no
dividends or distributions shall be payable to or for the benefit of Grantee
with respect to record dates for such dividends or distributions occurring
before or prior to the Vesting Commencement Date, or with respect to record
dates for such dividends or distributions occurring on or after the date, if
any, on which Grantee has forfeited the Restricted Stock.

9.          Voting Rights. Grantee shall be entitled to vote all unvested
Restricted Stock; provided, however, that Grantee shall not be entitled to vote
Restricted Stock with respect to record dates for any Restricted Stock occurring
on or after the date, if any, on which the Grantee has forfeited the Restricted
Stock.

10.        Compliance with U.S. Federal Securities Laws. Grantee understands and
acknowledges that notwithstanding any other provision of the Agreement to the
contrary, the vesting and holding of the Common Stock is expressly conditioned
upon compliance with the Securities Act and all applicable state securities
laws. Grantee agrees to cooperate with the Company to ensure compliance with
such laws.

11.        Forfeiture of Unvested Stock. In the event that the Restricted Stock
was issued to Grantee solely in consideration for services rendered and shares
of unvested Common Stock (“Unvested Shares”) standing the in name of Grantee on
the books of the Company do not become vested on or before the expiration of the
period during which the applicable vesting conditions must occur, such Unvested
Shares shall be automatically forfeited and cancelled as outstanding shares of
Common Stock immediately upon the occurrence of the event or time period after
which such Unvested Shares may no longer become vested.

 

Page 3

 

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

 

 

12.

Restrictions on Unvested Shares.

(a)        Deposit of the Unvested Shares. Grantee shall deposit all of the
Unvested Shares with the Company to hold until the Unvested Shares become
vested, at which time such vested shares shall no longer constitute Unvested
Shares. The Company will deliver to Grantee the shares of Common Stock that
become vested upon vesting of such shares. Grantee shall execute and deliver to
the Company, concurrently with the execution of this Agreement blank stock
powers for use in connection with the transfer to the Company or its designee of
Unvested Shares that do not become vested.

(b)        Restriction on Transfer of Unvested Shares. Grantee shall not
transfer, assign, grant a lien or security interest in, pledge, hypothecate,
encumber or otherwise dispose of any of the Unvested Shares, or any economic
interest or voting rights with respect to the foregoing except as permitted by
this Agreement.

13.        Adjustments. The number of Unvested Shares shall be automatically
adjusted to reflect any stock split, stock dividend, recapitalization, merger,
consolidation, reorganization, combination or exchanges of shares or other
similar event affecting the Company’s outstanding Common Stock subsequent to the
date of this Agreement. If Grantee becomes entitled to receive any additional
shares of Common Stock or other securities (“Additional Securities”) in respect
of the Unvested Shares, the total number of Unvested Shares shall be equal to
the sum of (i) the initial Unvested Shares; and, (ii) the number of Additional
Securities issued or issuable in respect of the initial Unvested Shares and any
Additional Securities previously issued to Grantee.

14.

Restrictive Legends and Stop-Transfer Orders.

(a)        Legends. Grantee understands and agrees that the Company will place
the legends set forth below or similar legends on any stock certificate(s)
evidencing the Common Stock, together with any other legends that may be
required by state or U.S. Federal securities laws, the Company’s Certificate of
Incorporation or Bylaws, any other agreement between Grantee and the Company or
any agreement between Grantee and any third party:

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS
ON PUBLIC RESALE AND TRANSFER AS SET FORTH IN A RESTRICTED STOCK AWARD AGREEMENT
BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES. SUCH PUBLIC SALE AND
TRANSFER RESTRICTIONS ARE BINDING ON TRANSFEREES OF THESE SHARES.

(b)        Stop-Transfer Instructions. Grantee agrees that, to ensure compliance
with the restrictions imposed by this Agreement, the Company may issue
appropriate “stop-transfer” instructions to its transfer agent, if any, and if
the Company transfers its own securities, it may make appropriate notations to
the same effect in its own records.

(c)        Refusal to Transfer. The Company will not be required (i) to transfer
on its books any shares of Common Stock that have been sold or otherwise
transferred in violation of any of the provisions of this Agreement or (ii) to
treat as owner of such shares, or to accord the right to vote or pay dividends
to any purchaser or other transferee to whom such shares have been so
transferred.

 

Page 4

 

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

 

 

15.        Modification. The Agreement may not be modified except in writing
signed by both parties.

16.        Plan. Except as otherwise provided herein, or unless the context
clearly indicates otherwise, capitalized terms herein which are defined in the
Plan have the same definitions as provided in the Plan. The terms and provisions
of the Plan are incorporated herein by references, and the Grantee hereby
acknowledges receiving a copy of the Plan. In the event of a conflict or
inconsistency between the terms and provisions of the Plan and the provisions of
this Agreement, the Plan shall govern and control.

17.        Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by Grantee or the Company to the Plan Administrator
for review. The resolution of such a dispute by the Plan Administrator shall be
final and binding on the Company and Grantee.

18.        Entire Agreement. The Plan and Grantee’s employment agreement are
incorporated herein by reference. This Agreement and the Plan constitute the
entire agreement of the parties and supercede all prior undertakings and
agreements with respect to the subject matter hereof. If any inconsistency
should exist between the nondiscretionary terms and conditions of this Agreement
and the Plan, the Plan shall govern and control.

19.        Notices. Any notice required to be given or delivered to the Company
under the terms of this Agreement shall be in writing and addressed to the
Corporate Secretary of the Company at its principal corporate offices. Any
notice required to be given or delivered to Grantee shall be in writing and
addressed to Grantee at the address indicated on the signature page hereof or to
such other address as such party may designate in writing from time to time to
the Company. All notices shall be deemed to have been given or delivered upon:
(a) personal delivery; (b) three (3) days after deposit in the United States
mail by certified or registered mail (return receipt requested); (c) one (1)
business day after deposit with any return receipt express courier (prepaid); or
(d) one (1) business day after transmission by facsimile or telecopier.

20.        Successors and Assigns. The Company may assign any of its rights
under this Agreement. This Agreement shall be binding upon and inure to the
benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer set forth herein, this Agreement shall be binding upon
Grantee and Grantee’s heirs, executors, administrators, legal representatives,
successors and assigns.

21.        Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to its
conflict of law principles. If any provision of this Agreement is determined by
a court of law to be illegal or unenforceable, then such provision will be
enforced to the maximum extent possible and the other provisions will remain
fully effective and enforceable.

 

Page 5

 

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

 

 

22.        Acceptance. Grantee hereby acknowledges receipt of a copy of the Plan
and this Agreement. Grantee has read and understands the terms and provisions
thereof, and accepts the Award subject to all the terms and conditions of the
Plan and this Agreement. Grantee acknowledges that there may be adverse tax
consequences upon vesting of the Award or disposition of the underlying shares
and that Grantee should consult a tax advisor prior to such exercise or
disposition.

[SIGNATURE PAGE FOLLOWS]

 

Page 6

 

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

 

 

IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the date
first above written.

 

 

AFFIRMATIVE INSURANCE HOLDINGS, INC.

 

 

 

 

 

 

By:

/s/ Chad M. Emmerich

 

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

 

Chad M. Emmerich

Title:

Senior VP, Human Resources

 

 

 

 

 

 

 

 

 

GRANTEE

 

 

 

/s/ Robert Bondi

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

Robert Bondi

 

Address:             26519 Southgate Trail

Barrington, Illinois 60010

 

 

 

 

Page 7

 

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

EXHIBIT B

STOCK OPTION AGREEMENTS

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

AFFIRMATIVE INSURANCE HOLDINGS, INC.

AMENDED AND RESTATED 2004 STOCK INCENTIVE PLAN

as amended

STOCK OPTION AGREEMENT

This Stock Option Agreement (the “Agreement”) is made and entered into as of the
date of grant set forth below (the “Date of Grant”) by and between Affirmative
Insurance Holdings, Inc., a Delaware corporation (the “Company”), and the
participant named below (the “Participant”). Capitalized terms not defined
herein shall have the meaning ascribed to them in the Company’s Amended and
Restated 2004 Stock Incentive Plan, as amended (the “Plan”).

 

Participant:

 

Robert Bondi

 

 

 

 

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

 

 

Address:

 

26519 Southgate Trail

 

 

 

 

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

 

 

 

 

Barrington, Illinois 60010

 

 

 

 

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

 

 

Total Option Shares:

 

50,000

 

 

 

 

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

 

 

Exercise Price Per Share:

 

$20.00

 

 

 

 

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

 

 

Date of Grant:

 

November 27, 2006

 

 

 

 

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

 

 

Expiration Date:

 

November 27, 2016

 

 

 

 

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

 

 

Vesting Commencement Date:

 

November 27, 2006

 

 

Vesting Schedule:

 

The Option will become vested and exercisable with respect to twenty percent
(20%) of the Shares (defined below) on the first anniversary of the Vesting
Commencement Date set forth above and thereafter, at the end of each full
succeeding year, for four years, on the anniversary date of the Vesting
Commencement Date the Option will become vested and exercisable as to twenty
percent (20%) of the Shares until the Option is vested and exercisable with
respect to one hundred percent (100%) of the Shares.

 

Type of Stock Option:

 

[ ] Incentive Stock Option

 

 

 

 

[ X ] Nonstatutory Stock Option

 

 

 

 

Page 1

 

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

 

 

1.          Grant of Option. The Company hereby grants to Participant an option
(this “Option”) to purchase the total number of shares of Common Stock of the
Company set forth above as Total Option Shares (the “Shares”) at the Exercise
Price Per Share set forth above (the “Exercise Price”), subject to all of the
terms and conditions of this Agreement and the Plan. If designated as an
Incentive Stock Option above, the Option is intended to qualify as an “incentive
stock option” (an “ISO”) within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the “Code”), although the Company makes no
representation or guarantee that such Option will qualify as an ISO.

2.

Exercise Period; Vesting.

2.1.       Exercise Period. Unless expired as provided in Section 3 of this
Agreement, this Option may be exercised from time to time after the Date of
Grant set forth above (the “Date of Grant”) to the extent the Option has vested
in accordance with the vesting schedule in Subsection 2.2.

2.2.       Vesting. Provided Participant’s employment pursuant to his employment
agreement has not terminated prior to such vesting dates, the Option will become
vested and exercisable according to the Vesting Schedule. If application of the
vesting percentage causes a fractional share, such share shall be rounded down
to the nearest whole share for each vesting period except for the last period in
such vesting period, at the end of which last period this Option shall become
exercisable for the full remainder of the Shares. The Shares issued upon
exercise of the Option will be subject to the restrictions on transfer set forth
in Sections 8 and 9 below.

2.3.       Acceleration of Vesting. Notwithstanding the foregoing, any unvested
portion of the Option shall become immediately vested and fully exercisable upon
the earliest of the following to occur:

(a)

Termination by the Company other than for Cause;

 

(b)

Termination by the Participant for Good Reason; or

(c)        Non-renewal of Participant’s employment agreement, to the extent and
only to the extent provided in Section 2(b) of Participant’s employment
agreement.

For purposes of clarity, a termination due to death or disability of Participant
shall not cause the Option to become immediately vested and fully exercisable.
For purposes of this Option, the terms Cause, Good Reason, death or disability
shall have the meaning ascribed to them under the Participant’s employment
agreement.

3.          Expiration. The Option shall expire on the Expiration Date set forth
above or earlier as provided in Section 4 below or, if applicable, pursuant to
Section 11 of the Plan.

4.

Termination of Continuous Service.

4.1.       Termination for Any Reason Except Death, Disability or Cause. Unless
otherwise provided in an employment agreement the terms of which have been
approved by the

 

Page 2

 

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

 

Administrator, if Participant’s Continuous Service is terminated for any reason,
except death, disability or for Cause, the Option, to the extent (and only to
the extent) that it would have been exercisable by Participant on the date of
termination, may be exercised by Participant no later than the one (1) month
anniversary of the date of termination, but in any event no later than the
Expiration Date.

4.2.       Termination Because of Death or Disability. If Participant’s
Continuous Service is terminated because of death or disability of Participant,
the Option, to the extent that it would have been exercisable by Participant on
the date of termination, may be exercised by Participant (or Participant’s legal
representative) no later than twelve (12) months after the date of termination,
but in any event no later than the Expiration Date. If permitted by this
Agreement, any exercise beyond twelve (12) months after the date of termination
when the termination is for Participant’s disability is deemed to be a
Nonstatutory Stock Option (an “NSO”) and not an ISO.

4.3.       Termination for Cause. If Participant’s Continuous Service is
terminated for Cause, then the Option will expire on the Participant’s date of
termination.

4.4.       No Obligation to Employ. Nothing in the Plan or this Agreement shall
confer on Participant any right to continue in the employ of, or other
relationship with, the Company or any Affiliate, or limit in any way the right
of the Company or any Affiliate to terminate Participant’s employment or other
relationship at any time, with or without Cause.

5.

Manner of Exercise.

5.1.       Stock Option Exercise Agreement. To exercise this Option, Participant
(or in the case of exercise after Participant’s death or incapacity,
Participant’s executor, administrator, heir or legatee, as the case may be) must
deliver to the Company an executed stock option exercise agreement in the form
attached hereto as Exhibit A, or in such other form as may be approved by the
Administrator from time to time (the “Exercise Agreement”), which shall set
forth, inter alia, (a) Participant’s election to exercise the Option, (b) the
number of Shares being purchased, (c) any restrictions imposed on the Shares and
(d) any representations, warranties, and agreements regarding Participant’s
investment intent and access to information as may be required by the Company to
comply with applicable securities laws. If someone other than Participant
exercises the Option, then such person must submit documentation reasonably
acceptable to the Company verifying that such person has the legal right to
exercise the Option.

5.2.       Limitations on Exercise. The Option may not be exercised unless such
exercise is in compliance with all applicable federal and state securities laws,
as they are in effect on the date of exercise. The Option may not be exercised
for fewer than one (1) Share unless it is exercised as to all Shares as to which
the Option is then exercisable.

5.3.       Payment. The Exercise Agreement shall be accompanied by full payment
of the Exercise Price for the shares being purchased in cash (by certified check
or wire transfer), or where permitted by law and upon written approval by the
Administrator:

(a)        by surrender of shares of the Company’s Common Stock that (i) either
(1) have been owned by Participant for more than six (6) months and have been
paid for

 

Page 3

 

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

 

within the meaning of SEC Rule 144 (and, if such shares were purchased from the
Company by use of promissory note, such note has been fully paid with respect to
such shares); or (2) were obtained by Participant in the open public market; and
(ii) are clear of all liens, claims, encumbrances or security interests;

(b)        provided that a Listing Date has occurred: (i) through a “same day
sale” commitment from Participant and a broker-dealer that is a member of the
National Association of Securities Dealers (an “NASD Dealer”) whereby
Participant irrevocably elects to exercise the Option and to sell a portion of
the Shares so purchased sufficient to pay for the total Exercise Price and
whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the total Exercise Price directly to the Company, or (ii) through a
“margin” commitment from Participant and an NASD Dealer whereby Participant
irrevocably elects to exercise the Option and to pledge the Shares so purchased
to the NASD Dealer in a margin account as security for a loan from NASD Dealer
in the amount of the total Exercise Price, and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to forward the total Exercise
Price directly to the Company; provided, however, a cashless exercise by a
Director or executive officer that involves or may involve a direct or indirect
extension of credit or arrangement of an extension of credit by the Company or
an Affiliate in violation of Section 402(a) of the Sarbanes-Oxley Act (codified
as Section 13(k) of the Securities Exchange Act of 1934, 15 U.S.C. § 78m(k))
shall be prohibited;

(c)        by any other form of legal consideration that may be acceptable to
the Administrator; or

(d)

by any combination of the foregoing.

5.4.       Tax Withholding. Prior to the issuance of the Shares upon exercise of
the Option, Participant must pay or provide for any applicable federal, state
and local withholding obligations of the Company.

5.5.       Issuance of Shares. Provided that the Exercise Agreement and payment
are in form and substance satisfactory to counsel for the Company, the Company
shall issue the Shares registered in the name of Participant, Participant’s
authorized assignee, or Participant’s legal representative, and shall deliver
certificates representing the Shares with the appropriate legends affixed
thereto.

6.          Notice of Disqualifying Disposition of ISO Shares. If the Option is
an ISO, and if Participant sells or otherwise disposes of any of the Shares
acquired pursuant to the ISO on or before the later of (a) the date two (2)
years after the Date of Grant, and (b) the date one (1) year after transfer of
such Shares to Participant upon exercise of the Option, Participant shall
immediately notify the Company in writing of such disposition. Participant
agrees that Participant may be subject to income tax withholding by the Company
on the compensation income recognized by Participant from the early disposition
by payment in cash or out of the current wages or other compensation payable to
Participant.

7.          Compliance with Laws and Regulations. The exercise of the Option and
the issuance and transfer of Shares shall be subject to compliance by the
Company and Participant

 

Page 4

 

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

 

with all applicable requirements of federal and state securities laws and with
all applicable requirements of any stock exchange on which the Company’s Common
Stock may be listed at the time of such issuance or transfer. Participant
understands that the Company is under no obligation to register or qualify the
Shares with the SEC, any state securities commission or any stock exchange to
effect such compliance.

8.          Nontransferability of Option. If the Option is an ISO, the Option
may not be transferred in any manner other than by will or by the laws of
descent and distribution and may be exercised during the lifetime of Participant
only by Participant or in the event of Participant’s incapacity, by
Participant’s legal representative. The terms of the Option shall be binding
upon the executors, administrators, successors and assigns of Participant. If
the Option is not an ISO, upon written approval by the Administrator, it may be
transferred by gift or domestic relations order to a member of the Participant’s
immediate family (child, stepchild, grandchild, parent, stepparent, grandparent,
spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including
adoptive relationships, any person sharing the Participant’s household (other
than a tenant or employee), a trust in which these persons have more than 75% of
the beneficial interest, a foundation in which these persons (or the
Participant) control the management of assets, and any other entity in which
these persons (or the Participant) own more than 75% of the voting interests.

9.          Privileges of Stock Ownership. Participant shall not have any of the
rights of a stockholder with respect to any Shares until the Shares are issued
to Participant.

10.

General.

10.1.     Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by Participant or the Company to the Administrator
for review. The resolution of such a dispute by the Administrator shall be final
and binding on the Company and Participant.

10.2.     Entire Agreement. The Plan and Participant’s employment agreement are
incorporated herein by reference. This Agreement and the Plan constitute the
entire agreement of the parties and supercede all prior undertakings and
agreements with respect to the subject matter hereof. If any inconsistency
should exit between the nondiscretionary terms and conditions of this Agreement
and the Plan, the Plan shall govern and control.

10.3.     Notices. Any notice required to be given or delivered to the Company
under the terms of this Agreement shall be in writing and addressed to the
Corporate Secretary of the Company at its principal corporate offices. Any
notice required to be given or delivered to Participant shall be in writing and
addressed to Participant at the address indicated above or to such other address
as such party may designate in writing from time to time to the Company. All
notices shall be deemed to have been given or delivered upon: (a) personal
delivery; (b) five (5) days after deposit in the United States mail by certified
or registered mail (return receipt requested); (c) two (2) business day after
deposit with any return receipt express courier (prepaid); or (d) one (1)
business day after transmission by facsimile.

 

 

Page 5

 

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

 

 

10.4.     Successors and Assigns. The Company may assign any of its rights under
this Agreement. This Agreement shall be binding upon and inure to the benefit of
the successors and assigns of the Company. Subject to the restrictions on
transfer set forth herein, this Agreement shall be binding upon Participant and
Participant’s heirs, executors, administrators, legal representatives,
successors and assigns.

10.5.     Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to its
conflict of law principles. If any provision of this Agreement is determined by
a court of law to be illegal or unenforceable, then such provision will be
enforced to the maximum extent possible and the other provisions will remain
fully effective and enforceable.

11.        Acceptance. Participant hereby acknowledges receipt of a copy of the
Plan and this Agreement. Participant has read and understands the terms and
provisions thereof, and accepts the Option subject to all the terms and
conditions of the Plan and this Agreement. Participant acknowledges that there
may be adverse tax consequences upon exercise of the Option or disposition of
the Shares and that Participant should consult a tax advisor prior to such
exercise or disposition.

[SIGNATURE PAGE FOLLOWS]

 

Page 6

 

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

 

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its
duly authorized representative and Participant has executed this Agreement,
effective as of the Date of Grant.

AFFIRMATIVE INSURANCE HOLDINGS, INC.

 

 

By:

/s/ Chad M. Emmerich

 

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

Name:

Chad M. Emmerich

Title:

Senior VP, Human Resources

 

 

PARTICIPANT

 

 

 

/s/ Robert Bondi

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

(Signature)

 

Printed Name: Robert Bondi

 

 

 

Page 7

 

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

AFFIRMATIVE INSURANCE HOLDINGS, INC.

AMENDED AND RESTATED 2004 STOCK INCENTIVE PLAN

as amended

STOCK OPTION AGREEMENT

This Stock Option Agreement (the “Agreement”) is made and entered into as of the
date of grant set forth below (the “Date of Grant”) by and between Affirmative
Insurance Holdings, Inc., a Delaware corporation (the “Company”), and the
participant named below (the “Participant”). Capitalized terms not defined
herein shall have the meaning ascribed to them in the Company’s Amended and
Restated 2004 Stock Incentive Plan, as amended (the “Plan”).

 

Participant:

 

Robert Bondi

 

 

 

 

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

 

 

Address:

 

26519 Southgate Trail

 

 

 

 

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

 

 

 

 

Barrington, Illinois 60010

 

 

 

 

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

 

 

Total Option Shares:

 

50,000

 

 

 

 

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

 

 

Exercise Price Per Share:

 

$25.00

 

 

 

 

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

 

 

Date of Grant:

 

November 27, 2006

 

 

 

 

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

 

 

Expiration Date:

 

November 27, 2016

 

 

 

 

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

 

 

Vesting Commencement Date:

 

November 27, 2006

 

 

 

 

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

 

 

Vesting Schedule:

 

The Option will become vested and exercisable with respect to twenty percent
(20%) of the Shares (defined below) on the first anniversary of the Vesting
Commencement Date set forth above and thereafter, at the end of each full
succeeding year, for four years, on the anniversary date of the Vesting
Commencement Date the Option will become vested and exercisable as to twenty
percent (20%) of the Shares until the Option is vested and exercisable with
respect to one hundred percent (100%) of the Shares.

 

Type of Stock Option:

 

[ ] Incentive Stock Option

 

 

 

 

[ X ] Nonstatutory Stock Option

 

 

 

Page 1

 

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

 

 

1.          Grant of Option. The Company hereby grants to Participant an option
(this “Option”) to purchase the total number of shares of Common Stock of the
Company set forth above as Total Option Shares (the “Shares”) at the Exercise
Price Per Share set forth above (the “Exercise Price”), subject to all of the
terms and conditions of this Agreement and the Plan. If designated as an
Incentive Stock Option above, the Option is intended to qualify as an “incentive
stock option” (an “ISO”) within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the “Code”), although the Company makes no
representation or guarantee that such Option will qualify as an ISO.

2.

Exercise Period; Vesting.

2.1.       Exercise Period. Unless expired as provided in Section 3 of this
Agreement, this Option may be exercised from time to time after the Date of
Grant set forth above (the “Date of Grant”) to the extent the Option has vested
in accordance with the vesting schedule in Subsection 2.2.

2.2.       Vesting. Provided Participant’s employment pursuant to his employment
agreement has not terminated prior to such vesting dates, the Option will become
vested and exercisable according to the Vesting Schedule. If application of the
vesting percentage causes a fractional share, such share shall be rounded down
to the nearest whole share for each vesting period except for the last period in
such vesting period, at the end of which last period this Option shall become
exercisable for the full remainder of the Shares. The Shares issued upon
exercise of the Option will be subject to the restrictions on transfer set forth
in Sections 8 and 9 below.

2.3.       Acceleration of Vesting. Notwithstanding the foregoing, any unvested
portion of the Option shall become immediately vested and fully exercisable upon
the earliest of the following to occur:

(a)

Termination by the Company other than for Cause;

 

(b)

Termination by the Participant for Good Reason; or

(c)        Non-renewal of Participant’s employment agreement, to the extent and
only to the extent provided in Section 2(b) of Participant’s employment
agreement.

For purposes of clarity, a termination due to death or disability of Participant
shall not cause the Option to become immediately vested and fully exercisable.
For purposes of this Option, the terms Cause, Good Reason, death or disability
shall have the meaning ascribed to them under the Participant’s employment
agreement.

3.          Expiration. The Option shall expire on the Expiration Date set forth
above or earlier as provided in Section 4 below or, if applicable, pursuant to
Section 11 of the Plan.

4.

Termination of Continuous Service.

4.1.       Termination for Any Reason Except Death, Disability or Cause. Unless
otherwise provided in an employment agreement the terms of which have been
approved by the

 

Page 2

 

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

 

Administrator, if Participant’s Continuous Service is terminated for any reason,
except death, disability or for Cause, the Option, to the extent (and only to
the extent) that it would have been exercisable by Participant on the date of
termination, may be exercised by Participant no later than the one (1) month
anniversary of the date of termination, but in any event no later than the
Expiration Date.

4.2.       Termination Because of Death or Disability. If Participant’s
Continuous Service is terminated because of death or disability of Participant,
the Option, to the extent that it would have been exercisable by Participant on
the date of termination, may be exercised by Participant (or Participant’s legal
representative) no later than twelve (12) months after the date of termination,
but in any event no later than the Expiration Date. If permitted by this
Agreement, any exercise beyond twelve (12) months after the date of termination
when the termination is for Participant’s disability is deemed to be a
Nonstatutory Stock Option (an “NSO”) and not an ISO.

4.3.       Termination for Cause. If Participant’s Continuous Service is
terminated for Cause, then the Option will expire on the Participant’s date of
termination.

4.4.       No Obligation to Employ. Nothing in the Plan or this Agreement shall
confer on Participant any right to continue in the employ of, or other
relationship with, the Company or any Affiliate, or limit in any way the right
of the Company or any Affiliate to terminate Participant’s employment or other
relationship at any time, with or without Cause.

5.

Manner of Exercise.

5.1.       Stock Option Exercise Agreement. To exercise this Option, Participant
(or in the case of exercise after Participant’s death or incapacity,
Participant’s executor, administrator, heir or legatee, as the case may be) must
deliver to the Company an executed stock option exercise agreement in the form
attached hereto as Exhibit A, or in such other form as may be approved by the
Administrator from time to time (the “Exercise Agreement”), which shall set
forth, inter alia, (a) Participant’s election to exercise the Option, (b) the
number of Shares being purchased, (c) any restrictions imposed on the Shares and
(d) any representations, warranties, and agreements regarding Participant’s
investment intent and access to information as may be required by the Company to
comply with applicable securities laws. If someone other than Participant
exercises the Option, then such person must submit documentation reasonably
acceptable to the Company verifying that such person has the legal right to
exercise the Option.

5.2.       Limitations on Exercise. The Option may not be exercised unless such
exercise is in compliance with all applicable federal and state securities laws,
as they are in effect on the date of exercise. The Option may not be exercised
for fewer than one (1) Share unless it is exercised as to all Shares as to which
the Option is then exercisable.

5.3.       Payment. The Exercise Agreement shall be accompanied by full payment
of the Exercise Price for the shares being purchased in cash (by certified check
or wire transfer), or where permitted by law and upon written approval by the
Administrator:

(a)        by surrender of shares of the Company’s Common Stock that (i) either
(1) have been owned by Participant for more than six (6) months and have been
paid for

 

Page 3

 

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

 

within the meaning of SEC Rule 144 (and, if such shares were purchased from the
Company by use of promissory note, such note has been fully paid with respect to
such shares); or (2) were obtained by Participant in the open public market; and
(ii) are clear of all liens, claims, encumbrances or security interests;

(b)        provided that a Listing Date has occurred: (i) through a “same day
sale” commitment from Participant and a broker-dealer that is a member of the
National Association of Securities Dealers (an “NASD Dealer”) whereby
Participant irrevocably elects to exercise the Option and to sell a portion of
the Shares so purchased sufficient to pay for the total Exercise Price and
whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the total Exercise Price directly to the Company, or (ii) through a
“margin” commitment from Participant and an NASD Dealer whereby Participant
irrevocably elects to exercise the Option and to pledge the Shares so purchased
to the NASD Dealer in a margin account as security for a loan from NASD Dealer
in the amount of the total Exercise Price, and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to forward the total Exercise
Price directly to the Company; provided, however, a cashless exercise by a
Director or executive officer that involves or may involve a direct or indirect
extension of credit or arrangement of an extension of credit by the Company or
an Affiliate in violation of Section 402(a) of the Sarbanes-Oxley Act (codified
as Section 13(k) of the Securities Exchange Act of 1934, 15 U.S.C. § 78m(k))
shall be prohibited;

(c)        by any other form of legal consideration that may be acceptable to
the Administrator; or

(d)

by any combination of the foregoing.

5.4.       Tax Withholding. Prior to the issuance of the Shares upon exercise of
the Option, Participant must pay or provide for any applicable federal, state
and local withholding obligations of the Company.

5.5.       Issuance of Shares. Provided that the Exercise Agreement and payment
are in form and substance satisfactory to counsel for the Company, the Company
shall issue the Shares registered in the name of Participant, Participant’s
authorized assignee, or Participant’s legal representative, and shall deliver
certificates representing the Shares with the appropriate legends affixed
thereto.

6.          Notice of Disqualifying Disposition of ISO Shares. If the Option is
an ISO, and if Participant sells or otherwise disposes of any of the Shares
acquired pursuant to the ISO on or before the later of (a) the date two (2)
years after the Date of Grant, and (b) the date one (1) year after transfer of
such Shares to Participant upon exercise of the Option, Participant shall
immediately notify the Company in writing of such disposition. Participant
agrees that Participant may be subject to income tax withholding by the Company
on the compensation income recognized by Participant from the early disposition
by payment in cash or out of the current wages or other compensation payable to
Participant.

7.          Compliance with Laws and Regulations. The exercise of the Option and
the issuance and transfer of Shares shall be subject to compliance by the
Company and Participant

 

Page 4

 

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

 

with all applicable requirements of federal and state securities laws and with
all applicable requirements of any stock exchange on which the Company’s Common
Stock may be listed at the time of such issuance or transfer. Participant
understands that the Company is under no obligation to register or qualify the
Shares with the SEC, any state securities commission or any stock exchange to
effect such compliance.

8.          Nontransferability of Option. If the Option is an ISO, the Option
may not be transferred in any manner other than by will or by the laws of
descent and distribution and may be exercised during the lifetime of Participant
only by Participant or in the event of Participant’s incapacity, by
Participant’s legal representative. The terms of the Option shall be binding
upon the executors, administrators, successors and assigns of Participant. If
the Option is not an ISO, upon written approval by the Administrator, it may be
transferred by gift or domestic relations order to a member of the Participant’s
immediate family (child, stepchild, grandchild, parent, stepparent, grandparent,
spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including
adoptive relationships, any person sharing the Participant’s household (other
than a tenant or employee), a trust in which these persons have more than 75% of
the beneficial interest, a foundation in which these persons (or the
Participant) control the management of assets, and any other entity in which
these persons (or the Participant) own more than 75% of the voting interests.

9.          Privileges of Stock Ownership. Participant shall not have any of the
rights of a stockholder with respect to any Shares until the Shares are issued
to Participant.

10.

General.

10.1.     Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by Participant or the Company to the Administrator
for review. The resolution of such a dispute by the Administrator shall be final
and binding on the Company and Participant.

10.2.     Entire Agreement. The Plan and Participant’s employment agreement are
incorporated herein by reference. This Agreement and the Plan constitute the
entire agreement of the parties and supercede all prior undertakings and
agreements with respect to the subject matter hereof. If any inconsistency
should exit between the nondiscretionary terms and conditions of this Agreement
and the Plan, the Plan shall govern and control.

10.3.     Notices. Any notice required to be given or delivered to the Company
under the terms of this Agreement shall be in writing and addressed to the
Corporate Secretary of the Company at its principal corporate offices. Any
notice required to be given or delivered to Participant shall be in writing and
addressed to Participant at the address indicated above or to such other address
as such party may designate in writing from time to time to the Company. All
notices shall be deemed to have been given or delivered upon: (a) personal
delivery; (b) five (5) days after deposit in the United States mail by certified
or registered mail (return receipt requested); (c) two (2) business day after
deposit with any return receipt express courier (prepaid); or (d) one (1)
business day after transmission by facsimile.

 

Page 5

 

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

 

 

10.4.     Successors and Assigns. The Company may assign any of its rights under
this Agreement. This Agreement shall be binding upon and inure to the benefit of
the successors and assigns of the Company. Subject to the restrictions on
transfer set forth herein, this Agreement shall be binding upon Participant and
Participant’s heirs, executors, administrators, legal representatives,
successors and assigns.

10.5.     Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to its
conflict of law principles. If any provision of this Agreement is determined by
a court of law to be illegal or unenforceable, then such provision will be
enforced to the maximum extent possible and the other provisions will remain
fully effective and enforceable.

11.        Acceptance. Participant hereby acknowledges receipt of a copy of the
Plan and this Agreement. Participant has read and understands the terms and
provisions thereof, and accepts the Option subject to all the terms and
conditions of the Plan and this Agreement. Participant acknowledges that there
may be adverse tax consequences upon exercise of the Option or disposition of
the Shares and that Participant should consult a tax advisor prior to such
exercise or disposition.

[SIGNATURE PAGE FOLLOWS]

 

Page 6

 

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

 

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its
duly authorized representative and Participant has executed this Agreement,
effective as of the Date of Grant.

AFFIRMATIVE INSURANCE HOLDINGS, INC.

 

 

By:

/s/ Chad M. Emmerich

 

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

Name:

Chad M. Emmerich

Title:

Senior VP, Human Resources

 

 

 

PARTICIPANT

 

 

 

/s/ Robert Bondi

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

(Signature)

 

Printed Name: Robert Bondi

 

 

 

Page 7

 

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

AFFIRMATIVE INSURANCE HOLDINGS, INC.

AMENDED AND RESTATED 2004 STOCK INCENTIVE PLAN

as amended

STOCK OPTION AGREEMENT

This Stock Option Agreement (the “Agreement”) is made and entered into as of the
date of grant set forth below (the “Date of Grant”) by and between Affirmative
Insurance Holdings, Inc., a Delaware corporation (the “Company”), and the
participant named below (the “Participant”). Capitalized terms not defined
herein shall have the meaning ascribed to them in the Company’s Amended and
Restated 2004 Stock Incentive Plan, as amended (the “Plan”).

 

 

Participant:

 

Robert Bondi

 

 

 

 

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

 

 

Address:

 

26519 Southgate Trail

 

 

 

 

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

 

 

 

 

Barrington, Illinois 60010

 

 

 

 

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

 

 

Total Option Shares:

 

60,000

 

 

 

 

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

 

 

Exercise Price Per Share:

 

$16.08

 

 

 

 

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

 

 

Date of Grant:

 

November 27, 2006

 

 

 

 

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

 

 

Expiration Date:

 

November 27, 2016

 

 

 

 

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

 

 

Vesting Commencement Date:

 

November 27, 2006

 

 

 

 

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

 

 

Vesting Schedule:

 

The Option will become vested and exercisable with respect to twenty percent
(20%) of the Shares (defined below) on the first anniversary of the Vesting
Commencement Date set forth above and thereafter, at the end of each full
succeeding year, for four years, on the anniversary date of the Vesting
Commencement Date the Option will become vested and exercisable as to twenty
percent (20%) of the Shares until the Option is vested and exercisable with
respect to one hundred percent (100%) of the Shares.

 

Type of Stock Option:

 

[ ] Incentive Stock Option

 

 

 

Page 1

 

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

 

 

 

 

 

 

[ X ] Nonstatutory Stock Option

 

1.          Grant of Option. The Company hereby grants to Participant an option
(this “Option”) to purchase the total number of shares of Common Stock of the
Company set forth above as Total Option Shares (the “Shares”) at the Exercise
Price Per Share set forth above (the “Exercise Price”), subject to all of the
terms and conditions of this Agreement and the Plan. If designated as an
Incentive Stock Option above, the Option is intended to qualify as an “incentive
stock option” (an “ISO”) within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the “Code”), although the Company makes no
representation or guarantee that such Option will qualify as an ISO.

2.

Exercise Period; Vesting.

2.1.       Exercise Period. Unless expired as provided in Section 3 of this
Agreement, this Option may be exercised from time to time after the Date of
Grant set forth above (the “Date of Grant”) to the extent the Option has vested
in accordance with the vesting schedule in Subsection 2.2.

2.2.       Vesting. Provided Participant’s employment pursuant to his employment
agreement has not terminated prior to such vesting dates, the Option will become
vested and exercisable according to the Vesting Schedule. If application of the
vesting percentage causes a fractional share, such share shall be rounded down
to the nearest whole share for each vesting period except for the last period in
such vesting period, at the end of which last period this Option shall become
exercisable for the full remainder of the Shares. The Shares issued upon
exercise of the Option will be subject to the restrictions on transfer set forth
in Sections 8 and 9 below.

2.3.       Acceleration of Vesting. Notwithstanding the foregoing, any unvested
portion of the Option shall become immediately vested and fully exercisable upon
the earliest of the following to occur:

(a)

Termination by the Company other than for Cause;

 

(b)

Termination by the Participant for Good Reason; or

(c)        Non-renewal of Participant’s employment agreement, to the extent and
only to the extent provided in Section 2(b) of Participant’s employment
agreement.

For purposes of clarity, a termination due to death or disability of Participant
shall not cause the Option to become immediately vested and fully exercisable.
For purposes of this Option, the terms Cause, Good Reason, death or disability
shall have the meaning ascribed to them under the Participant’s employment
agreement.

3.          Expiration. The Option shall expire on the Expiration Date set forth
above or earlier as provided in Section 4 below or, if applicable, pursuant to
Section 11 of the Plan.

4.

Termination of Continuous Service.

 

 

Page 2

 

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

 

 

4.1.       Termination for Any Reason Except Death, Disability or Cause. Unless
otherwise provided in an employment agreement the terms of which have been
approved by the Administrator, if Participant’s Continuous Service is terminated
for any reason, except death, disability or for Cause, the Option, to the extent
(and only to the extent) that it would have been exercisable by Participant on
the date of termination, may be exercised by Participant no later than the one
(1) month anniversary of the date of termination, but in any event no later than
the Expiration Date.

4.2.       Termination Because of Death or Disability. If Participant’s
Continuous Service is terminated because of death or disability of Participant,
the Option, to the extent that it would have been exercisable by Participant on
the date of termination, may be exercised by Participant (or Participant’s legal
representative) no later than twelve (12) months after the date of termination,
but in any event no later than the Expiration Date. If permitted by this
Agreement, any exercise beyond twelve (12) months after the date of termination
when the termination is for Participant’s disability is deemed to be a
Nonstatutory Stock Option (an “NSO”) and not an ISO.

4.3.       Termination for Cause. If Participant’s Continuous Service is
terminated for Cause, then the Option will expire on the Participant’s date of
termination.

4.4.       No Obligation to Employ. Nothing in the Plan or this Agreement shall
confer on Participant any right to continue in the employ of, or other
relationship with, the Company or any Affiliate, or limit in any way the right
of the Company or any Affiliate to terminate Participant’s employment or other
relationship at any time, with or without Cause.

5.

Manner of Exercise.

5.1.       Stock Option Exercise Agreement. To exercise this Option, Participant
(or in the case of exercise after Participant’s death or incapacity,
Participant’s executor, administrator, heir or legatee, as the case may be) must
deliver to the Company an executed stock option exercise agreement in the form
attached hereto as Exhibit A, or in such other form as may be approved by the
Administrator from time to time (the “Exercise Agreement”), which shall set
forth, inter alia, (a) Participant’s election to exercise the Option, (b) the
number of Shares being purchased, (c) any restrictions imposed on the Shares and
(d) any representations, warranties, and agreements regarding Participant’s
investment intent and access to information as may be required by the Company to
comply with applicable securities laws. If someone other than Participant
exercises the Option, then such person must submit documentation reasonably
acceptable to the Company verifying that such person has the legal right to
exercise the Option.

5.2.       Limitations on Exercise. The Option may not be exercised unless such
exercise is in compliance with all applicable federal and state securities laws,
as they are in effect on the date of exercise. The Option may not be exercised
for fewer than one (1) Share unless it is exercised as to all Shares as to which
the Option is then exercisable.

5.3.       Payment. The Exercise Agreement shall be accompanied by full payment
of the Exercise Price for the shares being purchased in cash (by certified check
or wire transfer), or where permitted by law and upon written approval by the
Administrator:

 

Page 3

 

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

 

 

(a)        by surrender of shares of the Company’s Common Stock that (i) either
(1) have been owned by Participant for more than six (6) months and have been
paid for within the meaning of SEC Rule 144 (and, if such shares were purchased
from the Company by use of promissory note, such note has been fully paid with
respect to such shares); or (2) were obtained by Participant in the open public
market; and (ii) are clear of all liens, claims, encumbrances or security
interests;

(b)        provided that a Listing Date has occurred: (i) through a “same day
sale” commitment from Participant and a broker-dealer that is a member of the
National Association of Securities Dealers (an “NASD Dealer”) whereby
Participant irrevocably elects to exercise the Option and to sell a portion of
the Shares so purchased sufficient to pay for the total Exercise Price and
whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the total Exercise Price directly to the Company, or (ii) through a
“margin” commitment from Participant and an NASD Dealer whereby Participant
irrevocably elects to exercise the Option and to pledge the Shares so purchased
to the NASD Dealer in a margin account as security for a loan from NASD Dealer
in the amount of the total Exercise Price, and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to forward the total Exercise
Price directly to the Company; provided, however, a cashless exercise by a
Director or executive officer that involves or may involve a direct or indirect
extension of credit or arrangement of an extension of credit by the Company or
an Affiliate in violation of Section 402(a) of the Sarbanes-Oxley Act (codified
as Section 13(k) of the Securities Exchange Act of 1934, 15 U.S.C. § 78m(k))
shall be prohibited;

(c)        by any other form of legal consideration that may be acceptable to
the Administrator; or

(d)

by any combination of the foregoing.

5.4.       Tax Withholding. Prior to the issuance of the Shares upon exercise of
the Option, Participant must pay or provide for any applicable federal, state
and local withholding obligations of the Company.

5.5.       Issuance of Shares. Provided that the Exercise Agreement and payment
are in form and substance satisfactory to counsel for the Company, the Company
shall issue the Shares registered in the name of Participant, Participant’s
authorized assignee, or Participant’s legal representative, and shall deliver
certificates representing the Shares with the appropriate legends affixed
thereto.

6.          Notice of Disqualifying Disposition of ISO Shares. If the Option is
an ISO, and if Participant sells or otherwise disposes of any of the Shares
acquired pursuant to the ISO on or before the later of (a) the date two (2)
years after the Date of Grant, and (b) the date one (1) year after transfer of
such Shares to Participant upon exercise of the Option, Participant shall
immediately notify the Company in writing of such disposition. Participant
agrees that Participant may be subject to income tax withholding by the Company
on the compensation income recognized by Participant from the early disposition
by payment in cash or out of the current wages or other compensation payable to
Participant.

 

Page 4

 

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

 

 

7.          Compliance with Laws and Regulations. The exercise of the Option and
the issuance and transfer of Shares shall be subject to compliance by the
Company and Participant with all applicable requirements of federal and state
securities laws and with all applicable requirements of any stock exchange on
which the Company’s Common Stock may be listed at the time of such issuance or
transfer. Participant understands that the Company is under no obligation to
register or qualify the Shares with the SEC, any state securities commission or
any stock exchange to effect such compliance.

8.          Nontransferability of Option. If the Option is an ISO, the Option
may not be transferred in any manner other than by will or by the laws of
descent and distribution and may be exercised during the lifetime of Participant
only by Participant or in the event of Participant’s incapacity, by
Participant’s legal representative. The terms of the Option shall be binding
upon the executors, administrators, successors and assigns of Participant. If
the Option is not an ISO, upon written approval by the Administrator, it may be
transferred by gift or domestic relations order to a member of the Participant’s
immediate family (child, stepchild, grandchild, parent, stepparent, grandparent,
spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including
adoptive relationships, any person sharing the Participant’s household (other
than a tenant or employee), a trust in which these persons have more than 75% of
the beneficial interest, a foundation in which these persons (or the
Participant) control the management of assets, and any other entity in which
these persons (or the Participant) own more than 75% of the voting interests.

9.          Privileges of Stock Ownership. Participant shall not have any of the
rights of a stockholder with respect to any Shares until the Shares are issued
to Participant.

10.

General.

10.1.     Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by Participant or the Company to the Administrator
for review. The resolution of such a dispute by the Administrator shall be final
and binding on the Company and Participant.

10.2.     Entire Agreement. The Plan and Participant’s employment agreement are
incorporated herein by reference. This Agreement and the Plan constitute the
entire agreement of the parties and supercede all prior undertakings and
agreements with respect to the subject matter hereof. If any inconsistency
should exit between the nondiscretionary terms and conditions of this Agreement
and the Plan, the Plan shall govern and control.

10.3.     Notices. Any notice required to be given or delivered to the Company
under the terms of this Agreement shall be in writing and addressed to the
Corporate Secretary of the Company at its principal corporate offices. Any
notice required to be given or delivered to Participant shall be in writing and
addressed to Participant at the address indicated above or to such other address
as such party may designate in writing from time to time to the Company. All
notices shall be deemed to have been given or delivered upon: (a) personal
delivery; (b) five (5) days after deposit in the United States mail by certified
or registered mail (return receipt requested); (c) two (2) business day after
deposit with any return receipt express courier (prepaid); or (d) one (1)
business day after transmission by facsimile.

 

Page 5

 

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

 

 

10.4.     Successors and Assigns. The Company may assign any of its rights under
this Agreement. This Agreement shall be binding upon and inure to the benefit of
the successors and assigns of the Company. Subject to the restrictions on
transfer set forth herein, this Agreement shall be binding upon Participant and
Participant’s heirs, executors, administrators, legal representatives,
successors and assigns.

10.5.     Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to its
conflict of law principles. If any provision of this Agreement is determined by
a court of law to be illegal or unenforceable, then such provision will be
enforced to the maximum extent possible and the other provisions will remain
fully effective and enforceable.

11.        Acceptance. Participant hereby acknowledges receipt of a copy of the
Plan and this Agreement. Participant has read and understands the terms and
provisions thereof, and accepts the Option subject to all the terms and
conditions of the Plan and this Agreement. Participant acknowledges that there
may be adverse tax consequences upon exercise of the Option or disposition of
the Shares and that Participant should consult a tax advisor prior to such
exercise or disposition.

[SIGNATURE PAGE FOLLOWS]

 

Page 6

 

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

 

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its
duly authorized representative and Participant has executed this Agreement,
effective as of the Date of Grant.

AFFIRMATIVE INSURANCE HOLDINGS, INC.

 

 

By:

/s/ Chad M. Emmerich

 

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

Name:

Chad M. Emmerich

Title:

Senior VP, Human Resources

 

 

PARTICIPANT

 

 

 

/s/ Robert Bondi

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

(Signature)

 

Printed Name: Robert Bondi

 

 

 

Page 7

 

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