Exhibit 10.1

EXECUTIVE EMPLOYMENT AGREEMENT

This Executive Employment Agreement (this “Agreement”) is effective as of
August 10, 2010 (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 Company desires to continue to employ the Employee as the President
and Chief Executive Officer of the Company.

WHEREAS, the Employee desires to accept such continued employment as 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 the Employee by the Company
under this Agreement (the “Employment Period”) shall be deemed to have commenced
on the Effective Date, and shall terminate on March 15, 2014. The Employment
Period may be sooner terminated in accordance with Section 6 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. The 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. The 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 the Employee, the Employee’s principal place
of business with the Company shall be in Bermuda. The Employee acknowledges and
agrees that the 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, the 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 the Employee’s own benefit business opportunities that fall
within the scope of the businesses conducted by the Company and its Affiliates.

 

3. Compensation.

 

  (a) Base Salary. The Company shall pay to the 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
Human Resources 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 Employment Period. If
the Base Salary is increased by the Company, such Base Salary then constitutes
the Base Salary for all purposes of this Agreement.

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

  (b) Incentive Bonus. In addition to the Base Salary, during the Employment
Period, the 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) 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. The 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. Any reimbursement or
in-kind benefits to be provided by the Company in one calendar year shall not
affect the amount of reimbursements or in-kind benefits in any other calendar
year and reimbursements or in-kind benefits may not be exchanged or liquidated
for another benefit or payment. The Company shall furnish the Employee with
offices, supplies, equipment and such other facilities and services as are
suitable for performance of the Employee’s duties hereunder at the Company’s
offices in Bermuda or provide an allowance sufficient to allow the Employee to
obtain same.

 

6. Termination of Agreement.

 

  (a) Death. This Agreement shall automatically terminate upon the death of the
Employee.

 

  (b) Disability. If, as a result of the Employee’s incapacity due to physical
or mental illness, the 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, the
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 the 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 the 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 the Employee shall be final and conclusive for all purposes of the
Agreement. The 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 the Employee at any time for “Cause” in accordance with
the procedures provided below.

 

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

 

  (i) the material breach of any provision of this Agreement by the Employee
which has not been cured within five business (5) days after the Company
provides notice of the breach to the 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 the 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 the Employee;

 

  (ii) the entry of a plea of guilty or judgment entered after trial finding the
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 the Employee in conduct that the Employee knows or
reasonably should know is materially 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 6(c), the breach of any of the
provisions of Sections 8 or 9; 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 the Employee.

 

  (f) Termination By Employee With Good Reason. The Employee may terminate his
employment with good reason anytime after the Employee has actual knowledge of
the occurrence, without the written consent of the 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 the Employee that is inconsistent in any adverse respect
with the 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 the Employee’s titles or
offices (including, membership on the Board of Directors) with the Company;

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

  (ii) a reduction in the 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 the Employee is participating immediately prior to the date of this
Agreement or the taking of any action by the Company which would adversely
affect the Employee’s participation in or reduce the Employee’s benefits under
any such plan, unless the Employee is permitted to participate in other plans
providing the Employee with substantially equivalent benefits;

 

  (v) any refusal by the Company to continue to permit the Employee to engage in
activities not directly related to the business of the Company which the
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 the 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 11(a);

 

  (ix) any other breach of a material provision of this Agreement by the
Company.

For purposes of clauses (iv) 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 the
Employee shall not constitute Good Reason. The Employee’s right to terminate
employment with Good Reason shall not be affected by the Employee’s incapacity
due to mental or physical illness and the Employee’s continued employment shall
not constitute consent to, or a waiver of rights with respect to, any event or
condition constituting cause.

 

  (g) For purposes of this Agreement, “Termination Date” shall mean the date on
which the Employee’s employment hereunder terminates.

 

7. Effect of Termination. Upon the termination of this Agreement, no rights of
the Employee which shall have accrued prior to the Termination Date, including
any Base Salary accrued through the Termination Date and the right to receive
any bonus that has been allocated or awarded to the Employee for a calendar year
or other measuring period under the Bonus Plan that ends prior to the
Termination Date but has not yet been paid (“Accrued Compensation and
Benefits”), shall be affected in any way.

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

  (a) Upon Death or Disability of Employee.

During the Employment Period, if the Employee’s employment is terminated due to
his death or Disability, the Employee’s estate or the Employee, as applicable,
shall be entitled to receive (i) the Accrued Compensation and Benefits and
(ii) any bonus Fully Earned (as herein defined); provided, however, the
Employee’s estate or the Employee, as applicable, shall not be entitled to any
other benefits (except as provided by law or separate agreement). For purposes
of this Agreement, “Fully-Earned” shall mean that, for purposes of determining
whether the Employee shall be entitled to an annual bonus which would otherwise
have been payable, the Employee shall be treated as if the Employee 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 the Employee is no longer employed by the Company, and the
Employee’s eligibility for an annual incentive bonus, if any, shall be
determined accordingly and shall be paid at the normal time that such bonuses
are paid to other employees participating in the Bonus Plan, but the date of
such payment shall occur no later than March 15 following the year in which the
performance period ends. Further, from the period beginning on the Termination
Date through the eighteenth (18) month anniversary thereof, the Employee or, in
the event of the Employee’s death, the Employee’s eligible dependents (including
a surviving spouse), shall be entitled to continued participation in all health
and medical plans or programs in which the Employee or such eligible dependents,
as applicable, were participating on the Termination Date and, subject to
Section 5, the Company agrees to continue paying the same portion of the
premiums for such coverage as the Company paid for the Employee or eligible
dependents immediately prior to the Termination Date.

 

  (b) By Company Without Cause; By Employee with Good Reason.

If this Agreement is terminated under Section 6(e) or (f) and such termination
constitutes a “separation from service” within the meaning of Section 409A of
the US Internal Revenue Code of 1986, as amended from time to time (the “Code”),
and any related regulations or other effective guidance promulgated thereunder
(collectively, “Section 409A”):

 

  (i) The Employee shall be entitled to receive the Accrued Compensation and
Benefits, and

 

  (ii) The Employee shall be entitled to receive any bonus Fully Earned, and

 

  (iii) All unvested stock options and restricted stock grants previously
awarded to the Employee by the Company or Argonaut Group, Inc. (“Argonaut”)
shall remain in full force and effect as if no termination had occurred, and

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

  (iv)

The Company shall pay the Employee an aggregate amount equal to 2.99 times his
Base Salary, which shall, except as otherwise provided in Section 7(e), be
payable in a single lump sum payment on the first day of the month coincident
with or immediately after the sixtieth (60th) day following the Termination
Date, and

 

  (v) The Employee shall be entitled to continued participation in all health
and medical plans or programs in which the Employee was participating on the
Termination Date and, subject to Section 5, the Company agrees to continue
paying the same portion of the Employee’s premiums for such coverage as the
Company paid for the Employee immediately prior to the Termination Date, until
the earlier of (A) 18 months following the Termination Date and (B) the date the
Employee obtains reasonably equivalent coverage and benefits under the plans and
programs of a subsequent employer. Thereafter, if the Employee is eligible and
wishes to continue the Employee’s continuation coverage, the Employee may
continue such coverage, provided, however, the Employee shall be solely
responsible for payment of the entire premium for such coverage, and

 

  (vi) It shall be a condition precedent of payment to the Employee of such
payment and continued benefits pursuant to this Section 7(b) that the 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 the Employee
may have against any of them, to the extent such claims arise from the
Employee’s employment hereunder, and any revocation period with respect to such
release have expired, prior to the sixtieth (60) day following the Termination
Date, and

 

  (vii) The Employee shall no longer be bound by the prohibitions contained in
Section 9(c) hereof prohibiting the Employee from engaging or having any
interests in, directly or indirectly, a competitive business; provided, however,
the Employee shall remain bound by the further prohibitions contained in
Section 9(d), and

 

  (viii) Except as provided for in this Section 7(b), the Employee shall not
have any rights which have not previously accrued upon termination of this
Agreement.

 

  (c) By Company With Cause.

In the event the Company terminates the Employee’s employment for Cause, the
Employee shall be entitled to receive any Accrued Compensation and Benefits, and
he shall not be entitled to any other benefits (except as required by law).

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

  (d) Excise Taxes.

Notwithstanding any other provision of this Agreement, if any portion of the
payments and benefits provided under Section 7 of this Agreement, either alone
or together with other payments and benefits which the Employee receives or is
then entitled to receive from the Company, or any successor (in the aggregate,
“Total Payments”), would be subject to the excise tax imposed by section 4999 of
the Code, or any interest or penalties with respect to such excise tax (such
excise tax, together with any interest or penalties thereon, is herein referred
to as the “Excise Tax”), then, except as otherwise provided in the next
sentence, such Total Payments shall be reduced to the extent the Independent Tax
Counsel shall determine is necessary (but not below zero) so that no portion
thereof shall be subject to the Excise Tax. If Independent Tax Counsel
determines that the Employee would receive in the aggregate greater payments and
benefits on an after tax basis if the Total Payments were not reduced pursuant
to this Section 7(d), then no such reduction shall be made. For purposes of
determining the after tax benefit to the Employee, the Employee’s estimated
actual blended marginal rate of federal, state and local income taxation in the
calendar year in which the Termination Date occurs shall be utilized. Such
marginal rate shall be determined by taking into account (A) the estimated
actual net effect on the marginal rate attributable to the deduction of state
and local income taxes, (B) the phase out, if any, of itemized deductions,
(C) the estimated actual net tax rate attributable to employment taxes, and
(D) any other tax provision that in the judgment of the Independent Tax Counsel
will actually affect the Employee’s estimated actual blended marginal tax rate.
The determination of which payments or benefits shall be reduced to avoid the
Excise Tax shall be made by the Independent Tax Counsel, provided that the
Independent Tax Counsel shall reduce or eliminate, as the case may be, payments
or benefits in the order that it determines will produce the required deduction
in Total Payments with the least reduction in the after-tax economic value to
the Employee of such payments. If the after-tax economic value of any payments
is equivalent, such payments shall be reduced in the inverse order of when the
payments would have been made to the Employee until the reduction specified
herein is achieved. The Independent Tax Counsel shall provide its determination,
together with detailed supporting calculations and documentation to the Company
and the Employee within ten (10) days of the Termination Date. The determination
of the Independent Tax Counsel under this Section 7(d) shall be final and
binding on all parties hereto. For purposes of this Section 7(d), “Independent
Tax Counsel” shall mean a lawyer, a certified public accountant with a
nationally recognized accounting firm, or a compensation consultant with a
nationally recognized actuarial and benefits consulting firm with expertise in
the area of executive compensation tax law, who shall be selected by the Company
and shall be acceptable to the Employee (the Employee’s acceptance not to be
unreasonably withheld), and whose fees and disbursements shall be paid by the
Company.

 

  (e) Six-Month Delay Under Section 409A.

Notwithstanding any provision in this Agreement to the contrary, if the Employee
is a “specified employee” (as determined under the Company’s policy for
identifying specified employees) on the date of his “separation from service”
(within the meaning of Section 409A) and if any portion of the payments or
benefits to be received by the Employee upon his separation from service would
be considered a “deferral of compensation” within the meaning of Section 409A,
then all such payments and benefits (other than payments qualifying as a
short-term deferral under Treasury Regulation §1.409A-1(b)(4), or treated as not
providing for a deferral of compensation under the separation pay provisions of
Treasury Regulation §1.409A-1(b)(9)(iii) or § 1.409A-1(b)(9)(v)) that would
otherwise be payable during the six-month period immediately following the
Employee’s separation from service shall instead be paid or made available on
the earlier of (i) the first business day after the date that is six months
following the Employee’s separation from service or (ii) the date of the
Employee’s death. For purposes of this Agreement, each payment under this
Agreement shall be considered a “separate payment” and not as part of a series
of payments for purposes of Section 409A.

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

8. Confidential Information.

 

  (a) The Company shall disclose to the Employee, or place the Employee in a
position to have access to or develop, trade secrets or confidential information
of Company or its Affiliates; and/or shall entrust the Employee with business
opportunities of Company or its Affiliates; and/or shall place the 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 Employment Period, 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.

 

  (c) The confidentiality obligations set forth in (a) and (b) of this Section 8
shall apply during the Employee’s employment with the Company and for a period
of three years following the Termination Date.

 

  (d) All information, ideas, concepts, improvements, discoveries, and
inventions, whether patentable or not, that are conceived, made, developed or
acquired by the Employee, individually or in conjunction with others, during the
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 the
Employee’s employment by the Company, for any reason, the Employee promptly
shall deliver the same, and all copies thereof, to the Company.

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

  (e) If, during the Employee’s employment by the Company, the 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 the 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
the Employee in the scope of the Employee’s employment.

 

9. Restrictive Covenants

 

  (a) For the purposes of this Section, the following words have the following
meanings:

 

  (i) “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.

 

  (ii) “Confidential Information” has the meaning ascribed thereto in Section 8.

 

  (iii) “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:

 

  (1) the Employee had material personal dealings pursuant to his employment; or

 

  (2) any employee who was under the direct or indirect supervision of the
Employee had material personal dealings pursuant to their employment.

 

  (iv) “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:

 

  (1) the Employee shall have had material personal dealings pursuant to his
employment; or

 

  (2) any employee who was under the direct or indirect supervision of the
Employee shall have had material personal dealings pursuant to their employment;
or

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

  (3) the Employee was directly responsible in a client management capacity on
behalf of the Company.

 

  (v) “Restricted Area” means:

 

  (1) Bermuda; or

 

  (2) 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 the Employee’s termination of employment by the Company.

 

  (vi) “Restricted Employee” means any person who on the date of the 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.

 

  (vii) “Restricted Period” means the period of 12 months following the last day
of the Employee’s employment with the Company.

 

  (viii) “Restricted Services” means Company Services or any services of the
same or of a similar kind.

 

  (b) The Employee recognizes that, while 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.

 

  (c) 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 organization, directly or indirectly:

 

  (i) 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

 

  (ii) 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

 

  (iii) 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.

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

  (d) 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 organization directly or indirectly:

 

  (i) 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;

 

  (ii) solicit or induce or endeavour to solicit or induce any Restricted
Employee to cease working for or providing services to the Company, or hire,
directly or indirectly, any Restricted Employee, in either case, whether or not
any such person would thereby commit a breach of contract.

 

  (e) The benefit of Sections 9(c) and 9(d) 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:

 

  (i) acquired knowledge of its trade secrets or Confidential Information; or

 

  (ii) had material personal dealings with its Customers or Prospective
Customers; or

 

  (iii) supervised directly or indirectly employees having material personal
dealings with its Customers or Prospective Customers but so that references in
Section 9 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 9(e) 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 favor of any other Affiliate or the Company.

 

  (f) While the restrictions in this Section 9 (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.

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

10. Remedies for Breach. In addition to the rights and remedies provided in
Section 6, and without waiving the same if the Employee breaches, or threatens
to breach, any of the provisions of Sections 8 or 9, 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. The Employee specifically acknowledges and
agrees that any breach or threatened breach of the provisions of Sections 8 or 9
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 8 or 9 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 the 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 8 or 9.

 

  (c) Upon discovery by the Company of a breach or threatened breach of Sections
8 or 9, the right to immediately suspend payments to the Employee under
Section 3 or 7(b) pending a resolution of the dispute.

 

  (d) The right to terminate the Employee’s employment pursuant to Section 6.

 

11. Change Of Control.

 

  (a) 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 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.

 

  (b) For purposes of this Section 11:

 

  (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 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.

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

12. 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.

 

13. 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.

 

14. 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.

 

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

 

16. Entire Agreement. This Agreement 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 Executive Employment Agreement, dated
August 17, 2007 between the Employee and the Company.

 

17. Applicable Law and Venue. This Agreement is entered into under, and shall be
governed for all purposes, by the laws of the State of Texas; with venue of any
lawsuit between the parties in Bexar County, Texas.

 

18. 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.

 

19. 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.

 

20. 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.

 

21. 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.

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

22. Section 409A and Section 457A of the Code. To the extent applicable, it is
intended that the compensation arrangements under this Agreement be in full
compliance with Section 409A and Section 457A of the Code. This Agreement shall
be construed in a manner to give effect to such intention.

 

23. Clawback. Notwithstanding any provision in this Agreement to the contrary,
any portion of the payments and benefits provided under this Agreement, as well
as any other payments and benefits which the Employee receives pursuant to a
Company plan or other arrangement, shall be subject to a clawback to the extent
necessary to comply with the requirements of the Dodd-Frank Wall Street Reform
and Consumer Protection Act or any Securities and Exchange Commission rule.

[signatures on following page]

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

In witness whereof, the parties hereto have executed this Agreement as of the
day and year above written.

 

ARGO GROUP INTERNATIONAL

HOLDINGS, LTD.

By:  

/s/ John R. Power, Jr.

  John R. Power, Jr., Chairman   Human Resources Committee,   Board of Directors
of   Argo Group International Holdings, Ltd. EMPLOYEE

/s/ Mark E. Watson III

Mark E. Watson III