Exhibit 10.1
EXECUTIVE EMPLOYMENT AGREEMENT
     This Executive Employment Agreement (this “Agreement”) is effective as of
August 17, 2007 (the “Effective Date”) and is between Argo Group International
Holdings, Ltd. a Bermuda company (the “Company”) and Mark E. Watson, III (the
“Employee”).
RECITALS:
     WHEREAS, the Employee is currently serving as the President and Chief
Executive Officer of Argonaut Group, Inc. (“Argonaut”);
     WHEREAS, the Company and Argonaut have entered into an Agreement and Plan
of Merger, dated as of March 14, 2007, and amended and restated as of June 8,
2007, pursuant to which the Company and Argonaut are effectuating a merger on
the date hereof (the “Merger”);
     WHEREAS, the Company desires that the Employee become the President and
Chief Executive Officer of the Company.
     WHEREAS, the Employee desires to become the President and Chief Executive
Officer of the Company.
     NOW, THEREFORE, in consideration of the promises and mutual agreements
herein set forth, the parties hereby agree as follows:

1.   Term of Employment. The period of employment of Employee by the Company
under this Agreement (the Employment Period) shall be deemed to have commenced
on the Effective Date and shall terminate on February 7, 2011. The Employment
Period may be sooner terminated in accordance with Section 7 of this Agreement.

2.   Duties. During his employment by the Company, the Employee shall perform
such duties as shall from time to time be delegated or assigned to him by the
Company. Employee agrees to serve the Company in the position of President and
Chief Executive Officer and to perform diligently and to the best of his
abilities the duties and services pertaining to such office. Employee’s
employment shall also be subject to the policies maintained and established by
the Company, if any, as the same may be amended from time to time. Unless
otherwise agreed by the Company and Employee, Employee’s principal place of
business with the Company shall be in Bermuda. Employee acknowledges and agrees
that Employee owes a fiduciary duty of loyalty, fidelity and allegiance to act
at all times in the best interests of the Company and to do no act that would
injure the business, interests, or reputation of the Company or any of its
Affiliates. In keeping with these duties, Employee shall make full disclosure to
the Board of Directors of all business opportunities pertaining to the business
of the Company or its Affiliates and should not appropriate for Employee’s own
benefit business opportunities that fall within the scope of the businesses
conducted by the Company and its Affiliates.

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3.   Compensation.

  (a)   Base Salary. The Company shall pay to Employee an initial base salary of
$1,000,000 per annum (the “Base Salary”), less all applicable legal deductions
and/or withholding. The Base Salary shall be payable in accordance with the
Company’s policies in effect from time to time, but in any event no less
frequently than monthly. The Base Salary shall be reviewed annually by the
Compensation Committee of the Board of Directors (“the Committee”) for possible
increase (but not decrease); the Board of Directors may, in its sole discretion,
choose to increase the Base Salary during the Term of this Agreement. If the
Base Salary is increased by the Company, such Base Salary then constitutes the
Base Salary for all purposes of this Agreement. Such Base Salary shall be deemed
effective as of June 1, 2007 and the Employee shall be paid in a lump sum the
difference between the Base Salary paid to the Employee by Argonaut between
June 1, 2007 and the date hereof and the Base Salary that would have been
payable hereunder.     (b)   Incentive Bonus. In addition to the Base Salary,
during the Term of this Agreement, Employee may, in the sole discretion of the
Board of Directors, be awarded an incentive bonus based upon the achievement of
specific Company objectives as determined by the Company and the Employee and
set forth in a separate written bonus plan (the “Bonus Plan”).     (c)   Equity
Compensation. The Employee shall be entitled to participate in the equity
compensation plans established from time to time by the Company on a basis no
less favorable than any other senior officers of the Company.     (d)   Housing
Allowance. During the Employment Period and while he is a Bermuda resident, the
Employee shall be paid a housing allowance of US $30,000 per month.     (e)  
Home Leave Allowance. During the Employment Period and while he is a Bermuda
resident, the Employee shall be paid a home leave allowance of US$3,333 per
month.     (f)   Relocation Allowance. Upon execution of this Agreement, the
Employee shall be paid, in a lump sum, a relocation allowance of US$1,500,000;
provided, that, Employee shall promptly refund such relocation allowance to the
Company if the Employee terminates his employment with the Company without Good
Reason prior to the first anniversary of the date hereof.     (g)   Additional
Payment. Upon execution of this Agreement, the Employee shall be paid, in a lump
sum, an additional payment of US$1,400,000; provided, that, if the Employee
terminates his employment with the Company without Good Reason and in the
absence of the occurrence of a Change of Control prior to the fourth anniversary
of the date hereof, the Employee shall promptly refund to the Company an amount
equal to US$1,400,000 multiplied by a fraction, the numerator of which shall be
the days of the Employment Period

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      that elapsed before such termination and the denominator of which shall be
the days of the Employment Period that would have elapsed had the Employment
Period continued through the fourth anniversary of the date hereof.

  (h)   As additional compensation for the Employee, the Company shall provide
or maintain the medical and health insurance benefits on the same terms and
conditions as are made available to all employees of the Company generally.

4.   Vacation. Employee shall be entitled to a reasonable vacation(s) during
each year of his employment under this Agreement.

5.   Reimbursement For Expenses; Working Space. The Company shall reimburse the
Employee within 30 days of the submission of appropriate documentation, and in
no event later than the last day of the calendar year following the year in
which an expense was incurred, for all reasonable and necessary travel expenses
and other disbursements incurred by him for or on behalf of the Company in the
course and scope of his employment under this Agreement. The Company shall
furnish Employee with offices, supplies, equipment and such other facilities and
services as are suitable for performance of Employee’s duties hereunder at the
Company’s offices in Bermuda or provide an allowance sufficient to allow
Employee to obtain same.

6.   Remedies for Breach. In addition to the rights and remedies provided in
Section 7, and without waiving the same if Employee breaches, or threatens to
breach, any of the provisions of Sections 9 or 10, the Company shall have the
following rights and remedies, in addition to any others, each of which shall be
independent of the other and severally enforceable:

  (a)   The right and remedy to have such provisions specifically enforced by
any court having equity jurisdiction. Employee specifically acknowledges and
agrees that any breach or threatened breach of the provisions of Sections 9 or
10 hereof will cause irreparable injury to the Company and that money damages
will not provide an adequate remedy to the Company. Such injunction shall be
available without the posting of any bond or other security. If the Employee is
determined to have breached any provision of Sections 9 or 10 the court or
arbitrators shall extend the effect of the non-competition provisions for an
amount of time equal to the time the Employee was in breach thereof.     (b)  
The right to require Employee to account for and pay over to the Company all
compensation, profits, monies, accruals, increments or other benefits
(hereinafter collectively the “Benefits”) derived or received by the Employee as
a result of any transactions constituting a breach of any of the provisions of
Sections 9 or 10.     (c)   Upon discovery by the Company of a breach or
threatened breach of Sections 9 or 10, the right to immediately suspend payments
to Employee under Section 3 or 8(b) pending a resolution of the dispute.     (d)
  The right to terminate Employee’s employment pursuant to Section 7.

7.   Termination of Agreement.

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  (a)   Death. This Agreement shall automatically terminate upon the death of
Employee.     (b)   Disability. If, as a result of Employee’s incapacity due to
physical or mental illness, Employee shall have been substantially unable,
either with or without reasonable accommodation, to perform his duties hereunder
for an entire period of six (6) consecutive months, and within thirty (30) days
after written Notice of Termination is given after such six (6) month period,
Employee shall not have returned to the substantial performance of his duties on
a full-time basis, the Company shall have the right to terminate Employee’s
employment hereunder for Disability, and such termination in and of itself shall
not be, nor shall it be deemed to be, a breach of this Agreement. Any dispute
between the Employee and the Company regarding whether Employee has a Disability
shall be determined in writing by a qualified independent physician mutually
acceptable to the Employee and the Company. If the Employee and the Company
cannot agree as to a qualified independent physician, each shall appoint a
physician and those two physicians shall select a third who shall make such
determination in writing. The determination of Disability made in writing to the
Company and Employee shall be final and conclusive for all purposes of the
Agreement. Employee acknowledges and agrees that a request by the Company for
such a determination shall not be considered as evidence that the Company
regarded the Employee as having a Disability.     (c)   Termination By Company
For Cause. The Company may terminate this Agreement upon written notice to
Employee at any time for “Cause” in accordance with the procedures provided
below; provided, however, that the Company may instead give the Employee a
written notice that it has elected to place the Employee on “garden leave” for a
period of up to one year and that this Agreement will terminate on the date
immediately following the end of such garden leave period. If the Company elects
to place the Employee on garden leave, the Company may during the period
immediately preceding such termination date in its absolute discretion direct
the Employee (i) to perform only such of his duties as the Company may direct;
and/or, (ii) to refrain from contacting any customers, clients, advertisers,
suppliers, agents, professional advisors, brokers or employees of the Company or
any of its Affiliates (as defined in Section 12(b)(iii)); and/or, (iii) not to
enter all or any premises of the Company or any of its Affiliates and/or;
(iv) to immediately resign without claim for compensation from office as
director of the Company and any of its Affiliates and from any other office held
by him in the Company or any of its Affiliates.

  (i)   During any period when the provisions of this Section 7(c) are invoked,
the Employee’s salary and other contractual benefits and compensation (including
the vesting and exercisability of any equity awards) will continue to be paid or
provided by the Company and the Employee will continue to comply without
exception with all the Employee’s obligations under this Agreement.
Notwithstanding anything herein to the contrary, the Company’s invocation of the
provisions of this Section 7(c) shall not

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      constitute Good Reason and the Company shall not be obligated to make any
new awards under the Company’s Bonus Plan or equity compensation plans (other
than awards, if any, due prior to the date that the Employee ceases to perform
substantial duties for the Company pursuant to this Section 7(c)) during any
period when the Employee is performing no substantial duties for the Company
pursuant to this Section 7(c).

  (d)   For purposes of this Agreement, “Cause” shall mean:

  (i)   the material breach of any provision of this Agreement by Employee which
has not been cured within five business (5) days after the Company provides
notice of the breach to Employee; provided, however, if the act or omission that
is the subject of such notice is substantially similar to an act or omission
with respect to which Employee has previously received notice and an opportunity
to cure, then no additional notice is required and this Agreement may be
terminated immediately upon the Company’s election and written notice to
Employee);     (ii)   the entry of a plea of guilty or judgment entered after
trial finding Employee guilty of a crime punishable by imprisonment in excess of
one year involving moral turpitude (meaning a crime that includes the commission
of an act of gross dishonesty or bad morals);     (iii)   willfully engaging by
Employee in conduct that the Employee knows or reasonably should know is
detrimental to the reputation, character or standing or otherwise injurious to
the Company or any of its shareholders, direct or indirect subsidiaries and
Affiliates, monetarily or otherwise;     (iv)   without limiting the generality
of Section 7(c)(i), the breach or threatened breach of any of the provisions of
Sections 9, 10 or 11; or     (v)   a ruling in any state or federal court or by
an arbitration panel that the Employee has breached the provisions of a
non-compete or non-disclosure agreement, or any similar agreement or
understanding which would in any way limit, as determined by the Board of
Directors of the Company, the Employee’s ability to perform under this Agreement
now or in the future.

  (e)   Termination By Company Without Cause. The Company may terminate this
Agreement at any time, and for any reason, by providing at least thirty
(30) days written notice to Employee.     (f)   Termination By Employee With
Good Reason. Employee may terminate his employment with good reason anytime
after Employee has actual knowledge of the occurrence, without the written
consent of Employee, of one of the following events (each event being referred
to herein as “Good Reason”):

  (i)   (A) any change in the duties or responsibilities (including reporting
responsibilities) of Employee that is inconsistent in any adverse respect

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      with Employee’s position(s), duties, responsibilities or status with the
Company immediately prior to such change (including any diminution of such
duties or responsibilities) or (B) an adverse change in Employee’s titles or
offices (including, membership on the Board of Directors) with the Company;

  (ii)   a reduction in Employee’s Base Salary or Bonus opportunity;     (iii)  
the relocation of the Company’s principal executive offices from Bermuda;    
(iv)   the failure of the Company to continue in effect any material employee
benefit plan, compensation plan, welfare benefit plan or fringe benefit plan in
which Employee is participating immediately prior to the date of this Agreement
or the taking of any action by the Company which would adversely affect
Employee’s participation in or reduce Employee’s benefits under any such plan,
unless Employee is permitted to participate in other plans providing Employee
with substantially equivalent benefits;     (v)   any refusal by the Company to
continue to permit Employee to engage in activities not directly related to the
business of the Company which Employee was permitted to engage in prior to the
date of this Agreement;     (vi)   the Company’s failure to provide in all
material respects the indemnification set forth in the Company’s Articles of
Incorporation, By-Laws, or any other written agreement between Employee and
Company;     (vii)   a Change in Control of the Company;     (viii)   the
failure of the Company to obtain the assumption agreement from any successor
giving rise to a Change of Control as contemplated in Section 12 (a);     (ix)  
any other breach of a material provision of this Agreement by the Company.      
  For purposes of clauses (iii) through (vi) and (ix) above, an isolated,
insubstantial and inadvertent action taken in good faith and which is remedied
by the Company within ten (10) days after receipt of notice thereof given by
Employee shall not constitute Good Reason. Employee’s right to terminate
employment with Good Reason shall not be affected by Employee’s incapacity due
to mental or physical illness and Employee’s continued employment shall not
constitute consent to, or a waiver of rights with respect to, any event or
condition constituting cause.

8.   Effect of Termination. Upon the termination of this Agreement, no rights of
Employee which shall have accrued prior to the date of such termination,
including the right to

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    receive any bonus Fully-Earned through the date of such termination, shall
be affected in any way.

  (a)   Upon Death of Employee.         During the Term, if Employee’s
employment is terminated due to his death, Employee’s estate shall be entitled
to receive the Base Salary set forth in Section 3 accrued through the date of
death and any bonus Fully-Earned (as herein defined) through the date of such
termination; provided, however, Employee’s estate shall not be entitled to any
other benefits (except as provided by law or separate agreement). “Fully-Earned”
shall mean that for purposes of determining whether the Employee shall be
entitled to a bonus, that such Employee shall be treated as if he had been
employed through the last date of the regular period for determining whether or
not a bonus is payable in the standard manner that all such employees are
evaluated even though Employee is no longer employed by the Company, and his
eligibility for an incentive bonus, if any, shall be determined accordingly.
Further, a surviving spouse of Employee shall be eligible for continuation of
family benefits pursuant to Section 3(c) subject to compliance with Plan
provisions at the full premium rate (Company plus employee portion) for a one
year period after the date of termination.     (b)   For Disability; By Company
Without Cause; By Employee with Good Reason.         If this Agreement is
terminated under Section 7 (b), (e) or (f):

  (i)   Employee shall be entitled to receive his Base Salary set forth in
Section 3 accrued through the date of such termination and any bonus
Fully-Earned through the date of such termination, and     (ii)   All unvested
stock options and restricted stock grants previously awarded to Employee by the
Company or Argonaut shall remain in full force and effect as if no termination
had occurred, and     (iii)   If a Change of Control (x) has not then occurred,
Company shall pay Employee on the six month anniversary of the date of such
termination an amount equal to three times his Base Salary, and (y) has then
occurred (or is reasonably expected to occur), Company shall pay Employee on the
six month anniversary of the date of such termination an amount equal to five
times his Base Salary. Further, Employee shall be eligible for continuation of
benefits pursuant to Section 3(h) subject to compliance with Plan provisions at
the full premium rate (Company plus employee portion) until Employee obtains
reasonably equivalent employment or for three (3) years from the date of
termination, whichever is earlier. It shall be a condition precedent of payment
to Employee of such payment and continued benefits pursuant to this Section 8(b)
that Employee execute a full and complete release of the Company, each of its
subsidiaries, Affiliates and their respective past, present and future partners,
officers, directors, employees, consultants, attorneys, agents and shareholders,
in form and substance reasonably acceptable to the Company, of any claims

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      Employee may have against any of them, to the extent such claims arise
from Employee’s employment hereunder, and any revocation period with respect to
such release have expired, prior to the six month anniversary of the date of
such termination, and

  (iv)   Employee shall no longer be bound by the prohibitions contained in
Section 10.3 and 10.4.2 hereof prohibiting Employee from engaging or having any
interests in, directly or indirectly, in a competitive business or soliciting
employees; provided, however, Employee shall remain bound by the further
prohibition contained in Section 10.4.1, and     (v)   Except as provided for in
this Section 8(b), Employee shall not have any rights which have not previously
accrued upon termination of this Agreement.

  (c)   By Company With Cause         In the event of termination of Employee’s
employment Section 7(c) Employee shall be entitled to receive the Base Salary
and benefits set forth in Section 3 accrued through the date of termination, and
he shall not be entitled to any other benefits (except as required by law).    
(d)   Gross-Up Payment.

  (i)   Anything in this Agreement to the contrary notwithstanding, in the event
it shall be determined that any payment, award, benefit or distribution (or any
acceleration of any payment, award, benefit or distribution) by the Company, or
any successor, to or for the benefit of Employee (the “Payments”) would be
subject to the excise tax imposed by Section 4999 or Section 409(A) of the US
Internal Revenue Code of 1986, as amended from time to time (the “Code”) (the
“Excise Tax”), then the Company shall pay to Employee within 30 days of such
determination an additional payment (a “Gross-Up Payment”) in an amount such
that after payment by Employee of all taxes (including any Excise Tax) imposed
upon the Gross-Up Payment, Employee retains an amount of the Gross-Up Payment
equal to the sum of (x) the Excise Tax imposed upon the Payments and (y) the
products of any deductions disallowed because of the inclusion of the Gross-Up
Payment in Employee’s adjusted gross income and the highest applicable marginal
rate of federal income taxation for the calendar year in which the Gross-Up
Payment is to be made. For purposes of determining the amount of the Gross-Up
Payment, Employee shall be deemed to (A) pay federal income taxes at the highest
marginal rates of federal income taxes at the highest marginal rate of taxation
for the calendar year in which the Gross-Up Payment is to be made, and (B) have
otherwise allowable deductions for federal income tax purposes at least equal to
those which could be disallowed because of the inclusion of the Gross-Up Payment
in Employee’s adjusted gross income.

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  (ii)   As a result of the uncertainty in the application of Section 4999 or
Section 409(A) of the Code at the time of the Determination, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made (Underpayment) or Gross-Up Payments are made by the Company which should
not have been made (Overpayment), consistent with the calculations required to
be made hereunder. In the event that Employee thereafter is required to make
payment of any Excise Tax or additional Excise Tax, any such Underpayment
(together with interest at the rate provided in Section 1274(b)(2)(B) of the
Code) shall be paid by the Company to or for the benefit of Employee within
30-days of any such required payment by Employee. In the event the amount of the
Gross-Up Payment exceeds the amount necessary to reimburse Employee for his
Excise Tax, any such Overpayment (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code) shall be promptly paid by Employee (to the
extent he has received a refund if the applicable Excise Tax has been paid to
the Internal Revenue Service) to or for the benefit of the Company. Employee
shall cooperate, to the extent his expenses are reimbursed by the Company, with
any reasonable requests by the Company in connection with any contest or
disputes with the Internal Revenue Service in connection with the Excise Tax.

9.   Confidential Information.

  (a)   The Company shall disclose to Employee, or place Employee in a position
to have access to or develop, trade secrets or confidential information of
Company or its Affiliates; and/or shall entrust Employee with business
opportunities of Company or its Affiliates; and/or shall place Employee in a
position to develop business good will on behalf of Company or its Affiliates.  
  (b)   The Employee acknowledges that in his employment hereunder he occupies a
position of trust and confidence and agrees that he will treat as confidential
and will not, without prior written authorization from the Company, directly or
indirectly, disclose or make known to any person or use for his own benefit or
gain, the methods, process or manner of accomplishing the business undertaken by
the Company or its Affiliates, or any non-public information, plans, formulas,
products, trade secrets, marketing or merchandising strategies, or confidential
material or information and instructions, technical or otherwise, issued or
published for the sole use of the company, or information which is disclosed to
the Employee or in any acquired by him during the term of this Agreement, or any
information concerning the present or future business, processes, or methods of
operation of the Company or its Affiliates, or concerning improvement,
inventions or know how relating to the same or any part thereof, it being the
intent of the Company, with which intent the Employee hereby agrees, to restrict
him from disseminating or using for his own benefit any information belonging
directly or indirectly to the Company which is unpublished and not readily
available to the general public.

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  (c)   The confidentiality obligations set forth in (a) and (b) of this
Section 9 shall apply during Employee’s employment and for a period of one year
after termination of employment.     (d)   All information, ideas, concepts,
improvements, discoveries, and inventions, whether patentable or not, that are
conceived, made, developed or acquired by Employee, individually or in
conjunction with others, during Employee’s employment with Company (whether
during business hours or otherwise and whether on the premises of the Company or
one of its Affiliate or otherwise) that relate to the business, products or
services of the Company or any of its Affiliates shall be disclosed to the Board
of Directors and are and shall be the sole and exclusive property of the Company
or such Affiliate. Moreover, all documents, drawings, memoranda, notes, records,
files, correspondence, manuals, models, specifications, computer programs,
e-mail, voice mail, electronic data bases, maps and all other writings and
materials of any type embodying any such information, ideas, concepts,
improvements, discoveries and inventions are and shall be the sole and exclusive
property of the Company. Upon termination of Employee’s employment by the
Company, for any reason, Employee promptly shall deliver the same, and all
copies thereof, to the Company.     (e)   If, during Employee’s employment by
the Company, Employee creates any work of authorship fixed in any tangible
medium of expression that is the subject matter of copyright (such as video
tapes, written presentations, or acquisitions, computer programs, e-mail, voice
mail, electronic data bases, drawings, maps, architectural renditions, models,
manuals, brochures or the like) relating to the Company’s business, products or
services, whether such work is created solely by Employee or jointly with others
(whether during business hours or otherwise and whether on the Company’s
premises or otherwise), the Company shall be deemed the author of such work if
the work is prepared by Employee in the scope of Employee’s employment.

10.   Restrictive Covenants   10.1   For the purposes of this Section, the
following words have the following meanings:

  10.1.1   “Company Services” means any services (including but not limited to
technical and product support, technical advice, underwriting and customer
services) supplied by the Company or its Affiliates in the specialty property
and/or casualty insurance business;     10.1.2   “Confidential Information” has
the meaning ascribed thereto in Section 9;     10.1.3   “Customer” means any
person or firm or company or other organization whatsoever to whom or which the
Company supplied Company Services during the Restricted Period and with whom or
which, during the Restricted Period:
(a)  the Employee had material personal dealings pursuant to his employment; or

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      (b)  any employee who was under the direct or indirect supervision of the
Employee had material personal dealings pursuant to their employment.     10.1.5
  “Prospective Customer” means any person or firm or company or other
organization whatsoever with whom or which the Company or its Affiliates shall
have had negotiations or material discussions regarding the possible
distribution, sale or supply of Company Services during the Restricted Period
and with whom or which during such period:
(a)  the Employee shall have had material personal dealings pursuant to his
employment; or
(b)  any employee who was under the direct or indirect supervision of the
Employee shall have had material personal dealings pursuant to their employment;
or
(c)  the Employee was directly responsible in a client management capacity on
behalf of the Company.     10.1.6   “Restricted Area” means:        
(a)  Bermuda; or         (b)  any geographic area in which the Company or
Affiliates provided Restricted Services and for which the Employee was
responsible in the 12 months preceding the date of Employee’s termination of
employment by the Company.     10.1.7   “Restricted Employee” means any person
who on the date of Employee’s termination of employment by the Company was at
the level of director, manager, underwriter or salesperson with whom the
Employee had material contact or dealings in the course of his Employment during
the Restricted Period;     10.1.8   “Restricted Period” means the period of
12 months ending on the last day of the Employee’s employment with the Company
or, in the event that no duties were assigned to the Employee or the Employee
was placed upon garden leave, the 12 months immediately preceding the last day
on which the Employee carried out any duties for the Company;     10.1.10  
“Restricted Services” means Company Services or any services of the same or of a
similar kind.

10.2   The Employee recognises that, whilst performing his duties for the
Company, he will have access to and come into contact with trade secrets and
confidential information belonging to the Company and its Affiliates and will
obtain personal knowledge of and influence over its or their customers and/or
employees. The Employee therefore agrees that the restrictions set out in this
Section are reasonable and necessary to protect the legitimate business
interests of the Company and its Affiliates both during and after the
termination of his employment.

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10.3   The Employee hereby undertakes with the Company that he will not during
his employment with the Company and for the period of twelve months after he
ceases to be employed by the Company whether by himself through his employees or
agents or otherwise howsoever and whether on his own behalf or on behalf of any
other person, firm, company or other organisation, directly or indirectly:

  10.3.1   in competition with the Company or its Affiliates within the
Restricted Area, be employed or engaged or otherwise interested in the business
of researching into, developing, underwriting, distributing, selling, supplying
or otherwise dealing with Restricted Services; or     10.3.2   in competition
with the Company or its Affiliates, accept orders or facilitate the acceptance
of any orders or have any business dealings for Restricted Services from any
Customer or Prospective Customer; or     10.3.3   employ or otherwise engage in
the business of or be personally involved to a material extent in employing or
otherwise engaging in the business of researching into, developing,
distributing, selling, supplying or otherwise dealing with Restricted Services,
any person who was during the Restricted Period employed or otherwise engaged by
the Company and who by reason of such employment or engagement is reasonably
likely to be in possession of any trade secrets or Confidential Information
relating to the business of the Company.

10.4   The Employee hereby undertakes with the Company that he shall not during
his employment with the Company and for the period of 12 months after he ceases
to be employed by the Company without the prior written consent of the Company
whether by himself through his employees or agents or otherwise howsoever and
whether on his own behalf or on behalf of any other person, firm, company or
other organisation directly or indirectly:

  10.4.1   in competition with the Company, solicit business from or endeavour
to entice away or canvass any Customer or Prospective Customer if such
solicitation or canvassing is in respect of Restricted Services;     10.4.2  
solicit or induce or endeavour to solicit or induce any Restricted Employee to
cease working for or providing services to the Company, whether or not any such
person would thereby commit a breach of contract.

10.5   The benefit of Sections 10.3 and 10.4 shall be held on trust by the
Company for each of its Affiliates and the Company reserves the right to assign
the benefit of such provisions to any of its Affiliates, in addition such
provisions also apply as though there were substituted for references to “the
Company” references to each of its Affiliates in relation to which the Employee
has in the course of his duties for the Company or by reason of rendering
services to or holding office in such Affiliate:

  10.5.1   acquired knowledge of its trade secrets or Confidential Information;
or     10.5.2   had material personal dealings with its Customers or Prospective
Customers; or

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  10.5.3   supervised directly or indirectly employees having material personal
dealings with its Customers or Prospective Customers but so that references in
Section 10 to “the Company” shall for this purpose be deemed to be replaced by
references to the relevant Affiliate. The obligations undertaken by the Employee
pursuant to this Section 10.5 shall, with respect to each Affiliate of the
Company, constitute a separate and distinct covenant and the invalidity or
unenforceability of any such covenant shall not affect the validity or
enforceability of the covenants in favour of any other Affiliate or the Company.

10.6   The parties agree that the periods referred to in Sections 10.3 and 10.4
above will be reduced by one day for every day, during which, at the Company’s
direction the Employee has been excluded from the Company’s premises and has not
carried out any duties.

10.7   While the restrictions in this Section 10 (on which the Employee has had
the opportunity to take independent advice, as the Employee hereby acknowledges)
are considered by the parties to be reasonable in all the circumstances, it is
agreed that if any such restrictions, by themselves, or taken together, shall be
adjudged to go beyond what is reasonable in all the circumstances for the
protection of the legitimate interests of the Company or its Affiliates but
would be adjudged reasonable if part or parts of the wording thereof were
deleted, the relevant restriction or restrictions shall apply with such
deletion(s) as may be necessary to make it or them valid and effective.

11.   [Intentionally blank]   12   Change Of Control.

  (f)   For purposes of this Agreement, a “Change of Control” shall be deemed to
occur if:

  (i)   Any Person, other than (1) the Company or any of its subsidiaries, (2) a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or any of its Affiliates, (3) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (4) a corporation
owned, directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock of the Company,
is or becomes the Beneficial Owner, directly or indirectly, of securities of the
Company (not including in the securities beneficially owned by such person any
securities acquired directly from the Company or its Affiliates) representing
50% or more of the combined voting power of the Company’s then outstanding
securities, or 50% or more of the then outstanding common stock of the Company,
excluding any Person who becomes such a Beneficial Owner in

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      connection with a merger or consolidation of the Company described in (ii)
below.     (ii)   There is consummated a merger or consolidation of the Company
or any direct or indirect subsidiary of the Company with any other corporation,
except if: (A) the merger or consolidation would result in the voting securities
of the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity or any parent thereof) at least fifty percent (50%) of the
combined voting power of the voting securities of the Company or such surviving
entity or any parent thereof outstanding immediately after such merger or
consolidation; or (B) the merger or consolidation is effected to implement a
recapitalization of the Company (or similar transaction) in which no Person is
or becomes the beneficial owner, directly or indirectly, of securities of the
Company (not including in the securities beneficially owned by such Person any
securities acquired directly from the Company or its Affiliates other than in
connection with the acquisition by the Company or its Affiliates of a business)
representing 50% or more of the combined voting power of the Company’s then
outstanding securities;     (iii)   The shareholders of the Company approve a
plan of complete liquidation or dissolution of the Company or an agreement for
the sale or disposition by the Company of all or substantially all the Company’s
assets, other than a sale or disposition by the Company of all or substantially
all of the Company’s assets to an entity, at least 50% of the combined voting
power of the voting securities of which are owned by the stockholders of the
Company in substantially the same proportions as their ownership of the Company
immediately prior to such sale.     (iv)   During any one year period,
individuals who at the beginning of the period constitute the Board of Directors
of the Company cease for any reason to constitute a majority of the Board of
Directors.

  (g)   For purposes of this Section 12:

  (i)   The term “Person” shall have the meaning given in Section 3(a)(9) of the
1934 Act as modified and used in Sections 13(d) and 14(d) of the 1934 Act.    
(ii)   The term “Beneficial Owner” shall have the meaning provided in Rule 13d-3
under the 1934 Act.     (iii)   The term “Affiliate” means, with respect to any
individual or a corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock

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      company, government (or an agency or political subdivision thereof) or
other entity of any kind (each a “person”), any other person that directly or
indirectly controls or is controlled by or under common control with such
person. For the purposes of this definition, “control” when used with respect to
any person, means the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of such person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms of “affiliated”, “controlling” and “controlled” have meanings correlated
to the foregoing.

13.   Successors and Assigns. This Agreement is personal in its nature and
neither of the parties hereto shall, without the consent of the other, assign or
transfer this Agreement or any rights or obligations hereunder, provided,
however, that the provisions hereof shall enure to the benefit of, and be
binding upon, each successor of the Company, whether by merger, consolidation,
acquisition or otherwise, unless otherwise agreed to by the Employee and the
Company.

14.   Notices. Any notice required or permitted to be given to the Employee
pursuant to this Agreement shall be sufficiently given if sent to the Employee
by registered or certified mail addressed to the Employee at 110 Pitts Bay Road,
Pembroke HM 08 Bermuda, or at such other address as he shall designate by notice
to the Company, and any notice required or permitted to be given to the Company
pursuant to this Agreement shall be sufficiently given if sent to the Company by
registered or certified mail addressed to it at 110 Pitts Bay Road, Pembroke HM
08 Bermuda, or at such other address as it shall designate by notice to the
Employee.

15.   Invalid Provisions. The invalidity or unenforceability of a particular
provision of this Agreement shall not affect the enforceability of any other
provisions hereof and this Agreement shall be construed in all respects as if
such invalid or unenforceable provision were omitted.

16.   Amendments To The Agreement. This Agreement may only be amended in writing
by an agreement executed by both parties hereto.

17.   Entire Agreement. This Agreement contains the entire agreement of the
parties hereto and supersedes any and all prior agreements, oral or written, and
negotiations between said parties regarding the subject matter contained herein.
The parties further agree that this Agreement shall supersede and replace in its
entirety the Amended and Restated Executive Employment Agreement, dated
February 7, 2005 and amended November 1, 2006, between the Employee and
Argonaut.

18.   Applicable Law and Venue. This Agreement is entered into under, and shall
be governed for all purposes, by the laws of Bermuda; with venue of any lawsuit
between the parties in Hamilton, Bermuda.

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19.   No Waiver. No failure by either party hereto at any time to give notice of
any breach by the other party of, or to require compliance with, any condition
or provision of this Agreement shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.

20.   Severability. If a Court of competent jurisdiction determines that any
provision of this Agreement is invalid or unenforceable, then the invalidity or
unenforceability of that provision shall not affect the validity or
unenforceability of any other provision of this Agreement, and all other
provisions shall remain in full force and effect.

21.   Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original, but all of which together will
constitute one in the same agreement.

22.   Withholding of Taxes and Other Employee Deductions. The Company may
withhold from any benefits and payments made pursuant to this Agreement all
federal, state, city and other taxes as may be required pursuant to any law or
governmental regulation or ruling and any and all other normal employee
deductions made with respect to the Company’s employees generally.

23.   Section 409A of the Code. The provisions of this Agreement and any
payments made herein are intended to comply with, and should be interpreted
consistent with, the requirements of Section 409A of the Code, and any related
regulations or other effective guidance promulgated thereunder (collectively,
“Section 409A”). The time or schedule of a payment to which the Executive is
entitled under this Agreement may be accelerated at any time that this Agreement
fails to meet the requirements of Section 409A and any such payment will be
limited to the amount required to be included in the Executive’s income as a
result of the failure to comply with Section 409A. Reference herein to
termination of employment shall be deemed to mean a separation from service.    
In witness whereof, the parties hereto have executed this Agreement as of the
day and year above written.

              Argo Group International
Holdings, Ltd.       Employee:
 
           
By:
  /s/ John Power       /s/ Mark E. Watson III              
 
  John Power, Chairman,
Compensation Committee,
Board of Directors of
Argo Group International Holdings, Ltd.       Mark E. Watson III

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