Exhibit 10.3

SECOND AMENDED AND RESTATED

EXECUTIVE EMPLOYMENT AGREEMENT

THIS SECOND AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (this
“Agreement”) is effective as of the 1st day of January, 2011 (the “Effective
Date”) by and between Affirmative Insurance Holdings, Inc. (the “Company”) and
Robert A. Bondi (“Executive”).

PRELIMINARY STATEMENTS

 

  A. The Company has employed Executive as Executive Vice President since
November 27, 2006;

 

  B. In connection with such employment, the Company and Executive entered into
an Executive Employment Agreement dated November 27, 2006 (the “Anniversary
Date”), which was subsequently amended by a First Amended and Restated Executive
Employment Agreement dated March 30, 2009;

 

  C. The Company and Executive desire to amend further certain terms of the
Executive Employment Agreement, as amended; and

 

  D. 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 and President—Retail Agency Group. 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 shall report directly to the Chief Executive Officer.

(c) Executive agrees to serve as Executive Vice President and President—Retail
Agency Group 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

 

 

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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.

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

(e) 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 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.

(f) The position of Executive Vice President and President—Retail Agency Group
shall be located at the Company’s corporate office in Burr Ridge, Illinois.

2. Term of Agreement.

(a) Term. The Initial Term of this Agreement shall be extended to seven
(7) years from the Anniversary Date (“Initial Term”), unless otherwise
terminated pursuant to Section 5 of this Agreement. For the avoidance of doubt,
absent an earlier termination pursuant to Section 5, this Agreement shall expire
on November 26, 2013. The Initial Term, and any further extension thereof shall
be referred to herein as the “Term.”

(b) Expiration of Term. This Agreement will terminate automatically upon the
expiration of the Term, or any extension thereof. The Company shall provide
written notice of its intention to renew or extend this Agreement to Executive
at least six (6) months before the last day of the Term. In the event that the
Company and the Executive do not agree to a renewal or extension of this
Agreement, then as of the last day of the Term: (1) unless otherwise set forth
in the award documents, Executive’s unvested stock options and restricted stock
awards will immediately vest; and (2) Executive shall be entitled to an amount
equal to the previous year’s Bonus paid to Executive prorated on a daily basis
for the number of days employed in the year of expiration of the Term through
the date of expiration of the Term, to be paid in full within 30 days of the
expiration of the Term (the “Pro Rata Bonus”).

3. Compensation and Benefits.

(a) Base Salary. As of the Effective Date, the Company shall pay Executive an
annual salary rate of Three Hundred Sixty-Five Thousand Dollars ($365,000), with
such amounts to be paid on a bi-weekly basis (“Base Salary”) pursuant to the
Company’s standard payroll practices. Executive’s Base Salary shall be reviewed
at least annually for consideration of appropriate merit increases and, once
established, the Base Salary shall not decrease during the Term without the
consent of Executive.

 

 

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(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 an annual target bonus of no less than Seventy-Five percent
(75%) of Base Salary (“Target Bonus”). Executive’s annual bonus shall be based
upon achieving objectives as determined by the Compensation Committee of the
Board of Directors.

(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. To the extent there is any conflict between this Agreement and the
terms of any award document pursuant to which such stock, options or other
long-term equity incentives are awarded to Executive (the “Award Document”), the
terms of the Award Document shall be primary and controlling.

(d) 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.

(e) 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.

(f) 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”), and
(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
Executive’s Target Bonus (“Additional Severance Payment”). 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

 

 

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(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
the Accrued Compensation. “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;

g) 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 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.

 

 

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(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 the Accrued Compensation.

(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
President—Retail Agency Group, 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 he is 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;

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 Burr Ridge, 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

 

 

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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 and the Pro Rata Bonus in a lump sum, subject
to applicable withholdings, within thirty (30) calendar days of termination of
this agreement because of Executive’s disability.

(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 and the Pro Rata Bonus in
a lump sum, subject to applicable withholdings, within thirty (30) calendar days
of termination of this Agreement because of Executive’s death.

(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 Two Thousand and no/100
($2,000.00) 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.

(h) Section 409A. Notwithstanding the foregoing severance provisions, if the
Board (or its delegate) determines in its or his or her discretion that
Executive is a “Specified Employee” (as defined in Section 409A of the United
States Internal Revenue Code of 1986, as amended, and applicable guidance issued
thereunder (“Section 409A”)) as of the Executive’s separation from service (as
defined in Section 409A), the following rules will apply with respect to
severance payable in installments:

(i) For purposes of applying the exception to Section 409A for short-term
deferrals, each severance payment installment under Section 5(g) above will be
treated as a separate payment for purposes of Section 409A. Accordingly, any
severance payment paid (i) within 2-1/2 months of the end of the Company’s
taxable year containing Executive’s termination date, or (ii) within 2-1/2
months of Executive’s taxable year containing the termination date shall be
exempt from Section 409A and shall be paid as described above;

(ii) To the extent severance payments are not exempt from Section 409A under
subparagraph (i) above, if Executive’s severance payments otherwise payable in
the first six months following Executive’s termination date are equal to or less
than the lesser of the amounts described in Treasury Regulation
Section 1.409A-1(b)(9)(iii)(A)(1) and (2), such

 

 

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severance payments shall be exempt from Section 409A and shall be paid as
described above; and

(iii) Only to the extent a portion of Executive’s severance payments are not
exempt from Section 409A pursuant to subparagraphs (i) and (ii) above, then, any
such remaining severance payments will not be paid to Executive until the first
payroll date of the 7th month following Executive’s termination date. Any
deferred payments will be paid in a lump sum and shall be equal to the portion
of the severance payment that exceeds the Section 409A limit. Thereafter, the
remainder of Employee’s severance payments will continue in monthly installments
through completion of the Non-Interference Period (with each monthly installment
being paid in the gross sum of the Additional Severance Payment divided by 24).

If the Board (or its delegate) determines that Executive is a “Specified
Employee” and Executive is entitled to a lump sum severance payment, such
payment shall be made on the first day of the 7th month following Executive’s
termination date

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

 

 

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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 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”);
provided, however, that the foregoing shall not apply in the event that the Term
of this Agreement expires by reason of the Company’s election not to renew or
extend this Agreement. 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

 

 

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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, 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,

 

 

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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, 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:

  

General Counsel

Affirmative Insurance Holdings, Inc.

150 Harvester Drive, Suite 300

Burr Ridge, Illinois 60527

If to Executive:

  

Robert Bondi

26519 Southgate Trail

Port Barrington, IL 60010

 

 

 

 

 

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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

 

 

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or other depiction of Executive, or any biographical information or life story
concerning the professional career of Executive.

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 Two Thousand dollars ($2,000) 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
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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 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 he is or was an
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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 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. 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
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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.

(c) 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. 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.

31. Section 409A. To the extent any amounts payable hereunder are deferred
compensation within the meaning of Section 409A, this Agreement is intended to
comply with Section 409A and the terms of this Agreement shall be applied
consistent with the requirements of Section 409A. To the extent that any
provision of this Agreement is or will be in violation of Section 409A, the
Company and Executive agree to amend this Agreement so that it complies with
Section 409A. If any amounts payable under this Agreement would be subject to
any penalty tax by reason of the application of Section 409A, the Company will
use commercially reasonable efforts to take such reasonable steps as it may
determine to be necessary or desirable, with Executive’s consent, to ensure that
such amounts are not subject to such penalty tax. However, any such tax under
Section 409A is ultimately the responsibility of the Executive. Executive is
advised to seek tax advice and agrees to assume such personal tax liability as
may be incurred under this Agreement.

 

 

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Each amount to be paid or benefit to be provided to Executive pursuant to this
Agreement shall be construed as a separate identified payment for purposes of
Section 409A. Amounts reimbursable under Section 5(a)(iii) and Section 28 of
this Agreement shall be paid on or before the last day of the year following the
year in which the applicable expense was incurred, the amount of expenses
eligible for reimbursement (and in-kind benefits provided to Executive) during
any one year may not effect amounts reimbursable or provided in any subsequent
year, and the right to reimbursement (and in-kind benefits provided to
Executive) shall not be subject to liquidation or exchange for another benefit.

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IN WITNESS WHEREOF, the Company and Executive have executed this Agreement, as
of the Effective Date.

 

    COMPANY Dated: January 4, 2011     By: /s/ Joseph G. Fisher     Name: Joseph
G. Fisher     Title: EVP & General Counsel     EXECUTIVE Dated: January 7, 2011
    By: /s/ Robert Bondi     Name: Robert Bondi

 

 

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