Exhibit 10.1

AFFIRMATIVE INSURANCE HOLDINGS, INC.

RESTRICTED STOCK AWARD AGREEMENT

This Restricted Stock Award Agreement (this “Agreement”), made as of the     
day of March, 2011 (the “Grant Date”) by and between Affirmative Insurance
Holdings, Inc. (the “Company”), and                      (the “Grantee”),
evidences the grant by the Company of a stock award (the “Award”) of restricted
Common Stock, par value $0.01 per share (the “Common Stock”) to the Grantee on
such date and the Grantee’s acceptance of the Award in accordance with the
provisions of the Company’s 2004 Stock Incentive Plan (the “Plan”), a copy of
which is attached hereto as Exhibit A.

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

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

2. Amount of Award. The Company hereby awards and grants to Grantee __________
shares of Common Stock which shall be subject to the restrictions and conditions
set forth in the Plan and in this Agreement (the “Restricted Stock”).

3. Vesting. The Restricted Stock will vest subject to both performance and time
thresholds.

(a) Performance Vesting. The Restricted Stock will vest subject to Common Stock
per share price thresholds over a four-year time period (“Performance Vesting”).
If the Company’s Common Stock does not reach and sustain a given per share price
threshold for twenty consecutive trading days by the end of the period for that
price threshold, except as described below, the Restricted Stock subject to that
price threshold will not vest. The Restricted Stock will vest on the applicable
anniversary of the Grant Date according to the following per share price
thresholds and subject to the Time Vesting described below in Section 3(b):

(i) One-third of the Award will vest on the eighteen (18) month anniversary of
the Grant Date, subject to a share price threshold of $5.00 within eighteen
(18) month of the Grant Date;

(ii) One-third of the Award will vest on the three (3) year anniversary of the
Grant Date, subject to a share price threshold of $10.00 within three years of
the Grant Date;

(iii) One-third of the Award will vest on the four (4) year anniversary of the
Grant Date, subject to a share price threshold of $15.00 within four years of
the Grant Date, provided, however, that for a share price threshold of between
$13.00 and $15.00, the following special vesting percentages will apply:

(1) For a share price of $13.00, only 60% of the Restricted Stock subject to
this paragraph (iii) will vest; and

 

Affirmative Insurance Holdings, Inc. Restricted Stock Award Agreement     
Page 1   

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

(2) For a share price of between $13.00 and $15.00, a prorated percent of the
Restricted Stock subject to this paragraph (iii) will vest (e.g., if the share
price reaches $14.00 at the end of the fourth year, then 80% of the Restricted
Stock subject to the $15.00 price threshold will vest).

(iv) Additional Vesting of Unvested Shares. If, on the fourth anniversary of the
Grant Date, the Company’s Common Stock has reached a per share price of $15.00
for twenty consecutive trading days, then 80% of any Restricted Stock that did
not previously vest because the associated per share price threshold was not met
will vest, subject to the Time Vesting described below in Section 3(b).

(b) Time Vesting.

(i) Subject to the above Performance Vesting, the Restricted Stock will vest
20% per year beginning on the first anniversary of the Grant Date, provided the
Grantee remains employed with the Company (“Time Vesting”). Vesting will not
occur for any portions of the Award that have not satisfied the above
performance vesting price thresholds.

(ii) Accelerated Vesting. Notwithstanding the foregoing:

(1) Should Grantee be terminated without Cause within one year of the Company
completing a merger in which greater than 50% of the surviving entity represents
shareholders who were not shareholders of the Company prior to the consummation
of the transaction, Grantee will be entitled to an additional 50% of Time
Vesting (vested percentage plus accelerated vesting capped at 100%);

(2) Should Grantee be terminated without Cause or due to death or Disability,
Grantee shall be entitled to an additional 20% of Time Vesting (vested
percentage plus accelerated vesting capped at 100%).

4. Stockholder Rights. Subject at all times to the Company’s option to
repurchase Grantee’s shares of Restricted Stock as set forth in Section 6 of
this Agreement, Grantee shall have voting (and all other) rights attendant to
the ownership of shares of Common Stock with respect to the Restricted Stock but
shall not be eligible to receive cash dividends paid on the Restricted Stock
unless and until such Restricted Stock vests. Cash dividends paid on unvested
Restricted Stock will accumulate and be paid to Grantee within 60 days after the
related Restricted Stock vests, subject to approval of the Compensation
Committee of the Board of Directors of the Company.

5. Voting Proxy. As a condition precedent to the Company’s issuance of the
Restricted Stock to Grantee, Grantee acknowledges and agrees that Grantee will
execute an

 

Affirmative Insurance Holdings, Inc. Restricted Stock Award Agreement     
Page 2   

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

irrevocable voting proxy for the benefit of New Affirmative, LLC
contemporaneously with the execution of this Agreement and the acceptance of
this Award, wherein such proxy will afford New Affirmative, LLC the right to
vote Grantee’s shares of Restricted Stock for a duration of time and on the
terms and conditions set forth therein.

6. Option to Purchase Shares. The Company shall have the option to purchase some
or all of the fully-vested shares of Grantee’s Restricted Stock (the “Purchase
Option”): (i) if Grantee should voluntarily elect to sell some or all of the
fully-vested shares of Grantee’s Restricted Stock during Grantee’s employment
with the Company or during the term of Grantee’s service on the Company’s Board
of Directors, or (ii) upon the later to occur of Grantee’s termination of:
(a) employment or (b) service on the Company’s Board of Directors. If Grantee
elects to sell some or all of Grantee’s fully-vested shares of Restricted Stock
while Grantee is employed by the Company or serving as a member of the Company’s
Board of Directors, Grantee shall provide written notice to the Company
specifying the number of shares of such stock that Grantee desires to sell and
expressly requesting clearance to sell said shares in accordance with the
Company’s internal stock trading policies as in effect at the time of Grantee’s
desired trade (“Grantee’s Sale Notice”). The Company shall have up to five
(5) calendar days from and after its receipt of Grantee’s Sale Notice to
consider Grantee’s request to trade, and (provided that said trade is authorized
in accordance with the Company’s current internal stock trading policies)
exercise its Purchase Option with respect to some or all of the shares
referenced in Grantee’s Sale Notice by providing Grantee with written notice of
the Company’s intent to effectuate such purchase (the “Company Purchase
Notice”). Upon the later to occur of Grantee’s termination of: (a) employment or
(b) service on the Company’s Board of Directors, the Company shall have up to
five (5) calendar days from and after Grantee’s termination date to exercise its
Purchase Option for up to all of the fully-vested shares of Restricted Stock
then held by Grantee by providing Grantee with a Company Purchase Notice. Any
Company Purchase Notice shall specify whether the Company is exercising its
Purchase Option with respect to all or a lesser number of vested shares of
Restricted Stock than are set forth in Grantee’s Sale Notice or, in the case of
Grantee’s termination, whether the Company is exercising its Purchase Option
with respect to all or a lesser number of Grantee’s vested shares of Restricted
Stock. If the Company does not elect to exercise its Purchase Option with
respect to all vested shares of Restricted Stock that are the subject of
Grantee’s Sale Notice or less than all of the total number of vested shares of
Grantee’s Restricted Stock upon Grantee’s termination, the Company’s Purchase
Option with respect to those shares that it is not exercising its right to
acquire shall expire at the end of the five (5) calendar day period referenced
in this Section 6. Further, the Company’s Purchase Option under this Section 6
shall terminate immediately if the voting proxy referenced in Section 5 of this
Agreement terminates on the terms and conditions set forth in any such proxy.

The purchase price for any shares of Restricted Stock purchased by the Company
under this Section 6 shall be equal to: (A) the per share closing price for the
Company’s Common Stock on the NASDAQ Stock Market on the date of: (1) the
Company’s receipt of Grantee’s Sale Notice or (2) Grantee’s termination (as
applicable), multiplied by (B) the number of shares of Restricted Stock being
purchased from Grantee (the “Purchase Price”). The Company shall also pay any
accrued and unpaid dividends on any vested shares of Grantee’s Restricted Stock
as of the date Grantee’s Sale Notice is received by the Company or Grantee’s
termination date (“Accrued Dividends”) to Grantee in addition to the Purchase
Price. The Company shall pay the Purchase Price and any Accrued Dividends to
Grantee within two (2) business days after the Company has delivered its Company
Purchase Notice to Grantee.

 

Affirmative Insurance Holdings, Inc. Restricted Stock Award Agreement     
Page 3   

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

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

8. Tax Withholding.

(a) Grantee agrees that, subject to Section 8(b) below, no later than the first
to occur of (i) the date as of which the restrictions on the Restricted Stock
shall lapse with respect to any of the Restricted Stock covered by this
Agreement or (ii) the date required by Section 8(b) below, Grantee shall pay to
the Company (in cash or to the extent permitted by the Board, Company stock held
by the Grantee whose Fair Market Value on the date the Restricted Stock vests is
equal to the amount of Grantee’s tax withholding liability) any federal, state
or local taxes of any kind required by law to be withheld, if any, with respect
to the Restricted Stock for which the restrictions shall lapse. The Company
shall, to the extent permitted by law, have the right to deduct from any payment
of any kind otherwise due to Grantee any federal, state or local taxes of any
kind required by law to be withheld with respect to the shares of such
Restricted Stock.

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

9. No Right to Continued Service. Nothing in this Agreement shall be deemed by
implication or otherwise to impose any limitation on any right of the Company to
terminate the Grantee’s service at any time. In the event Grantee’s employment
with the Company is terminated, except as stated otherwise in Section 3 above,
no unvested shares of Common Stock shall become vested after such termination of
employment.

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

(a) Agrees to Terms of the Plan. Grantee has received a copy of the Plan and has
read and understands the terms of the Plan and this Agreement, and agrees to be

 

Affirmative Insurance Holdings, Inc. Restricted Stock Award Agreement     
Page 4   

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

bound by their terms and conditions. Grantee acknowledges that there may be
adverse tax consequences upon the vesting of Restricted Stock or disposition of
the Common Stock once vested, and that Grantee should consult a tax advisor
prior to such time.

(b) Stock Ownership. Grantee is the record and beneficial owner of the shares of
Restricted Stock with full right and power to transfer the Unvested Shares (as
defined in Section 11) to the Company free and clear of any liens, claims or
encumbrances and Grantee understands that the stock certificates evidencing the
Restricted Stock will bear a legend referencing this Agreement.

(c) Voting Proxy. Grantee has executed an irrevocable proxy together with this
Agreement on the Grant Date, and said proxy has granted New Affirmative, LLC the
right to vote all of Grantee’s shares of Restricted Stock for a duration of time
and on the terms and conditions set forth therein.

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

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

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

13. Restrictions on Unvested Shares.

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

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

 

Affirmative Insurance Holdings, Inc. Restricted Stock Award Agreement     
Page 5   

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

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

15. Restrictive Legends and Stop-Transfer Orders.

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

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

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

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

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

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

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

 

Affirmative Insurance Holdings, Inc. Restricted Stock Award Agreement     
Page 6   

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

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

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

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

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

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

[SIGNATURE PAGE FOLLOWS]

 

Affirmative Insurance Holdings, Inc. Restricted Stock Award Agreement     
Page 7   

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

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

 

AFFIRMATIVE INSURANCE HOLDINGS, INC. By:  

 

Name:  

 

Title:  

 

GRANTEE  

 

Address:  

 

 

 

 

 

 

Affirmative Insurance Holdings, Inc. Restricted Stock Award Agreement     
Page 8   

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

EXHIBIT A

Affirmative Insurance Holdings, Inc. 2004 Stock Incentive Plan

 

Affirmative Insurance Holdings, Inc. Restricted Stock Award Agreement     
Page 9