EX-10.2






EXHIBIT 10.2




EMPLOYMENT AGREEMENT




     THIS EMPLOYMENT AGREEMENT (hereinafter referred to as the “Agreement”) is effective, except as
otherwise indicated below, January 1, 2009, by and among Meadowbrook, Inc., and Meadowbrook
Insurance Group, Inc., (hereinafter referred to as the “Company”), and Michael G. Costello
(hereinafter referred to as the “Executive”).



RECITALS:




     WHEREAS, the Company and the Executive desire to set forth their respective rights and
obligations in connection with the employment of the Executive by the Company by entering into a
contract of employment;



     NOW THEREFORE, in consideration of the premises and of the mutual covenants, agreements and
understandings contained herein, the parties hereto agree as follows:



AGREEMENT:




     1. Employment. The Company agrees to employ the Executive during the Employment Term (as such
term is hereinafter defined in Paragraph 5) and the Executive hereby accepts such employment by the
Company, subject to the terms and conditions hereinafter set forth and the Company’s Associate
Manual (hereinafter referred to as the “Manual”). To the extent that the terms and conditions of
this Agreement conflict with the Manual, this Agreement shall control. This Agreement establishes
the terms of the Executive’s employment and the payments to which the Executive is entitled during
such employment and upon termination of employment. Nothing in this Agreement changes the at-will
status of the Executive’s employment. The Company retains the right to terminate the Executive’s
employment with the Company for any reason, or no reason at all, and at any time and with the
notice prescribed below. The Executive retains the same right.



     2. Responsibilities and Duties. The Executive shall be employed as the Company’s Senior Vice
President and General Counsel or in such other position(s) and with such responsibilities and
duties as the Board of Directors of the Company may from time to time determine. The Executive
shall devote his full working time to the performance of his responsibilities and duties hereunder.



     3. Compensation. In consideration of the performance by the Executive of his obligations
during the Employment Term, the Company will during the Employment Term pay the Executive:




	 	(A)	 	Base Salary. A base salary of not less than $26,250 per month
(hereinafter referred to as “Base Salary”). Such Base Salary shall be payable
in accordance with the normal payroll practices of the Company then in effect.
Increases, if any, in the Base Salary shall be determined by the Company.




 









 












	 	(B)	 	Discretionary Bonus. A discretionary bonus targeted at a
minimum of fifty percent (50%) of the Executive’s Base Salary (hereinafter
referred to as the “Discretionary Bonus”). This Discretionary Bonus may be paid
at the sole discretion of the Company and will be based on attainment of:






	 	(1)	 	Corporate Goals (profit, ROE, etc.);
	 
	 	(2)	 	Profit Center Goals; and
	 
	 	(3)	 	Personal Goals and Objectives.




The Company and the Executive shall annually review and establish the Discretionary Bonus
target and the bonus formula described in Section 3(B)(1)-(3).





	 	(C)	 	Stock Options or Restricted Stock. The Executive has been, and
shall continue to be, eligible for the stock options and restricted stock
awards, in accordance with the terms and conditions of the 1995 and 2002 Stock
Option Plans of Meadowbrook Insurance Group, Inc. In the event of any Change
in Control, all stock options previously granted to the Executive shall become
exercisable by the Executive and all restricted stock awards previously granted
to the Executive shall become immediately vested.
	 
	 	(D)	 	Long Term Incentive Plan. The Executive shall be eligible for
stock awards and performance bonus awards under the Meadowbrook Insurance
Group, Inc. Long Term Incentive Plan. The aggregate annual value of a target
award shall be fifty percent (50%) of the Executive’s Base Salary. In the
event of a Change in Control the Executive shall be entitled to (i) a pro rata
portion of the bonus award for the performance period in which the Change in
Control occurs based on the Company’s ROE as of such date; (ii) cash awards
that have not yet been paid for performance period ending prior to the
effective date of the Change in Control; and (iii) to the extent provided in a
restricted stock agreement, all shares of restricted stock shall become fully
vested and nonforfeitable.
	 
	 	(E)	 	Severance.






	 	(1)	 	Without Cause Termination or
Termination for Good Reason. In the event that prior to a Change
in Control, the Executive’s employment is terminated by the
Company during the Employment Term without Cause or terminated
by the Executive for Good Reason, then the Company shall make
the following payments to the Executive:






	 	(i)	 	The Company shall
pay Executive’s base salary for a period of two (2)
years in accordance with the Company’s regular
bi-monthly payroll schedule. In no event shall any
severance payable in bi-monthly installments be made
after the last day of the second




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	 	 	 	calendar year following the year in which the
Executive’s employment terminates. The amount of
severance payable in bi-monthly installments shall not
exceed the amount eligible for exemption as separation
pay under Treas. Reg. § 1.409A-1(b)(9) and to the
extent Executive is entitled to severance payments in
excess of such amount, the Employer shall pay
Executive the excess amount in a lump sum and such
lump sum shall be paid within ten (10) days following
date Executive’s employment terminates. Payment of
the amounts due under Section 5(c)(i) shall not be
reduced in the event the Executive obtains other
employment following termination of employment by the
Employer.
	 
	 	(ii)	 	The Executive
shall also be entitled to payment of a pro rata share of
such portion of the Discretionary Bonus for the year in
which his employment terminates that is based on the
Company’s actual performance and the performance
criteria in effect for the current performance period.
Such pro rata portion shall be determined by a fraction,
the numerator of which is the number of days in the year
that the Executive is employed by the Company and the
denominator of which is 365. Such payment shall be made
no later than the February 28 of the calendar year
immediately following the year in which the Executive’s
employment terminates.
	 
	 	(iii)	 	The Company
shall also pay on the Executive’s behalf an amount equal
to the premiums payable by the Executive in the event
the Executive elects continuation coverage pursuant to
the Consolidated Omnibus Budget Reconciliation Act of
1985 (“COBRA”). Such payments shall cease upon the
earlier of eighteen (18) months of continuation coverage
or the cessation of the Executive’s and the Executive’s
family members’ rights to COBRA continuation coverage.
The Company shall make such payments directly to the
party to whom premiums are payable at such times as they
are due under COBRA.






	 	(2)	 	Termination Following Change in
Control. In the event that following a Change in Control, the
Executive’s employment is terminated by the Company during the




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	 	 	 	Employment Term without Cause or terminated by the Executive
for Good Reason, then the Company shall make the following
payments to the Executive:






	 	(i)	 	The Company shall
make a single lump sum payment to the Executive equal to
the Executive’s target award for the then current three
year performance period under the Company’s Long Term
Incentive Plan plus an amount equal to two times (2x)
the sum of the Executive’s annual Base Salary and the
Executive’s target Discretionary Bonus, subject to
repayment by the Executive upon the Executive’s breach
of his covenant to not compete with the Company or to
solicit Company employees as provided in Section 7. The
Company shall make such payment within ten (10) days
following the date the Executive’s employment
terminates.
	 
	 	(ii)	 	The Executive
shall also be entitled to payment of a pro rata share of
such portion of the Discretionary Bonus for the year in
which his employment terminates that is based on the
Company’s actual performance and the performance
criteria in effect for the current performance period.
Such pro rata portion shall be determined by a fraction,
the numerator of which is the number of days in the year
that the Executive is employed by the Company and the
denominator of which is 365. Such payment shall be made
no later than the February 28 of the calendar year
immediately following the year in which the Executive’s
employment terminates.
	 
	 	(iii)	 	The Company
shall also pay on the Executive’s behalf an amount equal
to the premiums payable by the Executive in the event
the Executive elects continuation coverage pursuant to
the Consolidated Omnibus Budget Reconciliation Act of
1985 (“COBRA”). Such payments shall cease upon the
earlier of eighteen (18) months of continuation coverage
or the cessation of the Executive’s and the Executive’s
family members’ rights to COBRA continuation coverage.
The Company shall make such payments directly to the
party to whom premiums are payable at such times as they
are due under COBRA.




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	 	(3)	 	For Cause Termination.






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






	 	(a)	 	the failure by the Executive to obey the
reasonable and lawful orders of the President or
the Board of Directors of the Company;
	 
	 	(b)	 	misconduct by the Executive that is materially
injurious to the Company; or
	 
	 	(c)	 	the Executive engaging in dishonest activities
injurious to the Company.






	 	(ii)	 	Should the
Executive’s employment be terminated by the Company for
Cause during the Employment Term, this Agreement shall
be terminated forthwith without notice or payment in
lieu thereof and the Executive shall not be entitled to
receive any other consideration (beyond consideration
accrued to the date of dismissal that is owing but not
yet paid) from the Company. Such payment shall be made
no later than the February 28 of the calendar year
immediately following the year in which the Executive’s
employment terminates.
	 
	 	(iii)	 	Further, in the
event the Executive’s employment is terminated by the
Company during the Employment Term for Cause, the
Executive shall be paid no severance payments.






	 	(F)	 	Change in Control. For purposes of this Agreement, a “Change in
Control” shall be deemed to have taken place upon:






	 	(1)	 	The acquisition by any
individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”)) (a “Person”) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 35% or more of either (a) the then
outstanding shares of common stock of the Company (the
“Outstanding Company Common Stock”) or (b) the combined voting
power of the then outstanding voting securities of the Company
entitled to vote generally in the




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	 	 	 	election of directors (the “Outstanding Company Voting
Securities”); provided, however, that for purposes of this
subparagraph 1, the following acquisitions shall not
constitute a Change in Control: (i) any acquisition directly
from the Company, (ii) any acquisition by the Company, (iii)
any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any
corporation controlled by the Company, or (iv) any
acquisition by any corporation pursuant to a transaction
which complies with clauses (a), (b) and (c) of
subparagraph 3 of this Section (F); or






	 	(2)	 	Individuals who, as of the date
hereof, constitute the Board of Directors of the Company (the
“Incumbent Board”) cease for any reason to constitute at least a
majority of the Board of Directors; provided, however, that any
individual who becomes a director subsequent to the date hereof
and whose election, or nomination for election by the Company’s
shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board (either by a
specific vote or by approval of the proxy statement of the
Company in which such person is named as a nominee for director,
without written objection to such nomination) shall be deemed to
be a member of the Incumbent Board; provided, further, that
notwithstanding the immediately preceding proviso, any
individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or contests by or on behalf of a Person,
other than the Board of Directors of the Company, shall not be
deemed to be a member of the Incumbent Board; or
	 
	 	(3)	 	Consummation of a reorganization,
merger, share exchange or consolidation or sale or other
disposition of all or substantially all of the assets of the
Company (a “Business Combination”), in each case, unless,
following such Business Combination: (a) all or substantially
all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock
and Outstanding Company Voting Securities immediately prior to
such Business Combination beneficially own, directly or
indirectly, more than 65% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then




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	 	 	 	outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the
corporation resulting from such Business Combination
(including, without limitation, a corporation which as a
result of such transaction owns the Company or all or
substantially all of the Company’s assets either directly or
through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such
Business Combination, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case
may be; (b) no Person (excluding any corporation resulting
from such Business Combination or any employee benefit plan
(or related trust) of the Company or such corporation
resulting from the Business Combination) beneficially owns,
directly or indirectly, 35% or more of, respectively, the
then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of
such corporation except to the extent that such ownership
existed prior to the Business Combination; and (c) at least
a majority of the members of the board of directors of the
corporation resulting from such Business Combination were
members of the Incumbent Board immediately prior to the time
of the execution of the initial agreement, or of the action
of the Board of Directors of the Company, providing for such
Business Combination; or






	 	(4)	 	Approval by the stockholders of
the Company of a complete liquidation or dissolution of the
Company.






	 	(G)	 	Good Reason. The Executive will be deemed to
have terminated his employment for “Good Reason” if he tenders his
resignation to the Company following the occurrence of any one or more
of the following, without the Executive’s prior written consent and the
Company and the Executive have not entered into a written agreement
that replaces this Agreement: (i) the Executive is not reelected to or
is removed as Senior Vice President and General Counsel of the Company;
(ii) the Company fails to vest the Executive with or removes from him
the duties, responsibilities, authority or resources that he reasonably
needs to competently perform his duties as Senior Vice President and
General Counsel of the Company; (iii)  a material reduction in the
Executive’s Base Salary or total compensation opportunity; (iv) the
Company changes the primary location of the Executive’s employment to a
place that




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	 	 	 	is more than 50 miles from Southfield, Michigan; (v) the Company
otherwise commits a material breach of its obligations under this
Agreement; or (vi) the Company gives notice that it will not renew
this Agreement pursuant to Section 5 below. Upon the occurrence
of any event referenced in (i) through (vi) above, the Executive
shall, within ninety (90) of such occurrence, provide the Company
notice of the existence of the condition. Upon receiving notice,
the Company shall have no more than thirty (30) days to remedy the
condition. The Executive shall have six (6) months from the date
of the initial existence of one of the above events to terminate
his employment under this section.





     4. Other Benefits. The Executive shall also be entitled to such additional benefits as
outlined in the Manual during the Employment Term or severance period, with the exception of 401(k)
participation during the severance period.



     5. Employment Term. The period of the Executive’s employment by the Company under this
Agreement (the “Employment Term”) shall commence on January 1, 2004 and shall continue through
December 31, 2006 (or such later date as provided below) or the earliest date on which any of the
following events occurs:




	 	(A)	 	the death or retirement of the Executive;
	 
	 	(B)	 	the date on which the Company discharges the Executive by
reason of the Executive’s Total Disability. For purposes of this Agreement,
“Total Disability” shall have the same meaning as used in the Manual and
consistent with the Long Term Disability Benefits of the Company;
	 
	 	(C)	 	a mutual written agreement between the Company and the
Executive regarding an early termination date; or
	 
	 	(D)	 	the date on which the Company terminates the Executive’s
employment for Cause as recited in Section 3(E)(3).




Either party hereto may elect not to renew this Employment Agreement by giving the other party
written notice on or before December 31, 2004, and annually thereafter. If written notice of the
election not to renew this Agreement is not provided on or before December 31, 2004, and annually
thereafter, the Employment Term shall automatically be extended for an additional one (1) year
period.




     6. Confidential Information Agreement. The Executive agrees that the Confidential Information
Agreement executed by him and dated July 7, 1993 (the “Confidential Information Agreement”), which
includes, not by way of limitation, covenants not to compete with the Company and covenants to
refrain from soliciting employees to leave the Company’s employment, shall remain in full force and
effect.



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     7. Covenant not to Compete or Solicit Employees. In the event severance becomes payable to the
Executive following a Change in Control, the Executive, in addition to the restrictive covenants
contained in the Confidential Information Agreement, agrees to the restrictive covenants of this
Section:




	 	(A)	 	The Executive agrees that, for two (2) years following the
termination of the Executive’s employment under circumstances described in
Section 3(E), he will not, without the Company’s prior written consent,
directly or indirectly Compete with the Company or any of its subsidiaries.
For the purposes of Section:






	 	(1)	 	“Compete” means directly or
indirectly owning, managing or operating a Competitor which
solicits or obtains business of the Company, or directly or
indirectly serving as an employee, officer or director of or a
consultant to a Competitor which solicits or obtains business of
the Company, or soliciting or inducing any employee or agent of
the Company to terminate employment with the Company or any of
its subsidiaries and become employed by a Competitor.
	 
	 	(2)	 	“Competitor” means any person,
firm, partnership, corporation, trust or other entity that owns,
controls or is an insurance company or a similar financial
services company (a “Financial Services Company”).






	 	(B)	 	In the event that a successor to the Company
succeeds to or assumes the Company’s rights and obligations under this
Agreement, Section 7(A) will apply only to the Company as it existed
immediately before the succession or assumption occurred and will not
apply to any of the successor’s other offices.
	 
	 	(C)	 	Section 7(A) will not prohibit the Executive
from directly or indirectly owning or acquiring any capital stock or
similar securities that are listed on a securities exchange or quoted
on the NASDAQ or NYSE and do not represent more than 5% of the
outstanding capital stock of any Financial Services Company.
	 
	 	(D)	 	The Executive agrees that a violation of
Section 7 would result in direct, immediate and irreparable harm to the
Company, and in such event, agrees that the Company, in addition to
their other rights and remedies, would be entitled to injunctive relief
enforcing the terms and provisions of Section 7 and a return to




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	 	 	 	the Company of any severance payments under Section 3(E). The
terms of this Section are intended to be in addition to any
restrictions contained in the Confidential Information Agreement.





     8. Binding Effect; Assignment. The Company may assign this Agreement to any of its affiliates
or their successors or assigns. This Agreement shall be binding upon and shall inure to the benefit
of the Company, its affiliates and their successors and assigns. This Agreement shall be binding
upon and shall inure to the benefit of the Executive. Neither this Agreement nor any right or
interest hereunder shall be assignable or transferable by the Executive, his beneficiaries or legal
representatives.



     9. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is agreed to in writing and signed by the Executive and the
Company. No waiver by either party hereto at any time of any breach by the other party hereto of,
or compliance with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at
any or subsequent time. No agreement or representation, oral or otherwise, express or implied,
with respect to the subject matter hereof has been made by either party which are not expressly set
forth in this Agreement.



     10. Notices. All notices or other communications required or permitted hereunder shall be
given in writing and shall be deemed sufficient if delivered by hand (including by courier), mailed
by registered or certified mail, postage prepaid (return receipt requested), or sent by facsimile
transmission, as follows:



	 	 	 	 	 	 	 
	 

	 	If to the Executive:
	 	 	 	If to the Company:
	 
	 	 	 	 	 	 
	 

	 	To the address on file
	 	 
	 	MEADOWBROOK, INC
	 

	 	with the Company’s
	 	 	 	Attn: Human Resources
	 

	 	Human Resources
	 	 	 	26255 American Dr.
	 

	 	Department as the
	 	 	 	Southfield, MI 48034
	 

	 	Executive’s home address.	 	 	 	 





or such other address as shall be furnished in writing by such party, and any such notice or
communication shall be effective and be deemed to have been given as of the date so delivered or,
if mailed upon receipt thereof; provided, however, that any notice or communication changing any of
the addresses set forth above shall be effective and deemed given only upon its receipt.




     11. Severability. If any provision of this Agreement, or any application thereof to any
circumstance, is invalid, in whole or in part, such provision or application shall to that extent
be severable and shall not affect other provisions or applications of this Agreement.



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     12. Governing Law. This Agreement shall be construed in accordance with and governed by the
laws of the State of Michigan, excluding any choice of law rule requiring
application of the law or any other jurisdiction. Any action arising out of or relating to
this Agreement, its performance, enforcement or breach, will be venued in the Circuit Court for the
County of Oakland, State of Michigan.



     13. Entire Agreement. This Agreement and the Confidential Information Agreement, which is
incorporated herein by reference, sets forth the entire understanding of the parties hereto with
respect to the subject matter hereof and supersedes all prior and contemporaneous agreements,
written or oral, between them as to such subject matter.



     14. Compliance with Code Section 409A. Notwithstanding anything contained herein to the
contrary, if at the time of a termination of employment, (i) the Executive is a “specified
employee” as defined in Code Section 409A, and the regulations and guidance thereunder in effect at
the time of such termination (“409A”), and, (ii) any of the payments or benefits provided hereunder
may constitute “deferred compensation” under 409A, then, and only to the extent required by such
provisions, the date of payment of such payments or benefits otherwise provided shall be delayed
for a period of up to 6 months following the date of termination. The parties intend, however,
that this Agreement shall be exempt from the 409A as either a separation pay arrangement under
Treas. Reg. 1.409A-1(b)(9) or a short term deferral of compensation under 1.409A-1(b)(4). In
addition, the provisions of this Agreement relating to Code Section 409A and the severance
provisions of Section 7 of this Agreement are effective January 1, 2005.



     15. Headings. The headings contained herein are solely for the purpose of reference, are not
part of this Agreement and shall not in any way affect the meaning or interpretation of this
Agreement.



     IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed this
31st day of December, 2008.



	 	 	 	 	 
	 

	 	MEADOWBROOK INSURANCE GROUP, INC.
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	/s/ Robert S. Cubbin

By: Robert S. Cubbin
	 	 
	 

	 	Its: President & CEO	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	 

MEADOWBROOK, INC.
	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	/s/ Robert S. Cubbin

By: Robert S. Cubbin
	 	 
	 

	 	Its: President	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	/s/ Michael G. Costello

Michael G. Costello
	 	 







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