Document:

exv10w1

 

Exhibit 10.1

CONSULTING AGREEMENT

     This CONSULTING AGREEMENT (“Agreement”) dated as of October 27, 2005 is entered into by and
between AMERISAFE, INC., a Texas corporation (the “Company”), and Mark R. Anderson (“Consultant”).

WITNESSETH:

     WHEREAS, Consultant is currently an executive officer and director of the Company, and has
been an employee of the Company since 1986; and

     WHEREAS, Consultant will resign as a member of the Board of Directors of the Company effective
as of the date hereof and retire from the Company effective as of December 31, 2005; and

     WHEREAS the Company desires to retain Consultant to provide services to the Company for the
period provided in this Agreement, and Consultant desires to provide such services to the Company,
all in accordance with the terms and conditions set forth below;

     NOW, THEREFORE, for and in consideration of the premises hereof and the mutual covenants
contained herein, the parties hereto hereby covenant and agree as follows:

	1.	 	Resignation.

	 	(a)	 	Consultant hereby resigns as a member of the Board of Directors of the Company
effective as of the date hereof.
	 
	 	(b)	 	Consultant hereby agrees to continue as an employee of the Company, in the
position as an Executive Vice President, through December 31, 2005. Effective as of
the close of business on December 31, 2005, Consultant hereby agrees to resign from his
employment, and all officer and director positions, with the Company and each of its
subsidiaries.

	2.	 	Engagement.

	 	(a)	 	Effective as of January 1, 2006, the Company hereby agrees to retain Consultant
as an independent consultant to provide the services described in Section 4 of this
Agreement, and Consultant hereby agrees to provide such services, for the period set
forth in Section 3 hereof, subject to the terms and conditions hereinafter set forth.
	 
	 	(b)	 	Consultant affirms and represents that he is under no obligation to any former
employer or other party which is in any way inconsistent with, or which imposes any
restriction upon, Consultant’s engagement hereunder as a consultant with the Company,
or Consultant’s undertakings under this Agreement.

	3.	 	Term of Engagement. Unless earlier terminated by Consultant or the Company as
provided in this Agreement, the term of Consultant’s engagement under this Agreement 

 

 

	 	 	shall be
for a period beginning on January 1, 2006 (the “Effective Date”) and ending on January 1,
2011. Such period or, if Consultant’s engagement hereunder is earlier terminated as provided
herein such shorter period, is sometimes referred to herein as the “Consulting Term”.

	4.	 	Duties. Consultant shall serve as an independent contractor consultant to the
Company and, as such, will perform such general consulting and advisory services in relation
to the Company’s general business matters as may be requested from time to time by the Chief
Executive Officer of the Company. The Company and Consultant mutually agree that the scope of
Consultant’s duties may require frequent travel and the Company specifically authorizes
Consultant, for the benefit of the Company and Consultant, to perform his duties principally
from his personal residence in Florida, with such travel to other locations from time to time
as the Chief Executive Officer of the Company may reasonably prescribe. Consultant shall
render such services diligently, in a reasonable manner and in the best interests of the
Company. Consultant shall use his good faith efforts, judgment and energy to improve and
advance the business and interests of the Company and its subsidiaries. Consultant shall
reasonably and in good faith cooperate with the Company and shall attend and participate in
meetings, conferences and/or other business events as requested by the Chief Executive
Officer. Consultant shall also assist the Company to perform such other acts and to perform
such other duties, as may be requested by the Chief Executive Officer or as may be required
and/or necessary for the Company to fulfill legal, regulatory and/or compliance obligations,
fiduciary responsibilities and/or corporate reporting and/or governance requirements.

	5.	 	Conflicts of Interest and Compliance. Consultant shall not engage in any conflict of
interest and/or take any actions or engage in any conduct which is contrary to the exclusive
interests of the Company. Consultant shall comply with all applicable laws and regulations
(federal, state and/or local) and shall comply with all applicable directives, orders and
regulations of any governmental agency or regulatory body including federal, state and local
agencies and bodies. Consultant shall also comply with all policies and procedures of the
Company and directives of the Board of Directors.

	6.	 	EEO Compliance. Consultant shall not engage in any conduct which constitutes an
unlawful employment practice or which violates any laws or regulations (federal, state and/or
local) prohibiting discrimination, harassment and/or retaliation. Consultant acknowledges
that the Company is an Equal Opportunity Employer and prohibits all forms of unlawful
discrimination in the terms and conditions of employment and prohibits all forms of
harassment, including sexual harassment.

	7.	 	Compensation. As compensation for the services to be performed by Consultant
hereunder during the Consulting Term, the Company shall pay Consultant a fee in an amount
equal to $125,000 per calendar year (the “Consulting Fee”). The Consulting Fee will be earned
ratably over the applicable calendar year and one-fourth of such amount will be payable on the
first business day of each calendar quarter. Subject to the completion of the proposed
initial public offering of the Company’s Common Stock prior
to January 31, 2006, Consultant will be awarded options to purchase 95,000 shares of the
Common Stock, par value $.01 per share, of the Company pursuant to the Company’s 

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	 	 	2005 Equity
Incentive Plan. Such options shall vest ratably over a five-year period and shall be
subject to the other terms set forth in the form of Option Agreement provided to Consultant.

	8.	 	Expenses. Consultant will be entitled to reimbursement for all reasonable
out-of-pocket business expenses incurred by Consultant in the performance of his duties
hereunder incurred with the prior consent of an officer of the Company.

	9.	 	Confidential Information. Consultant hereby covenants, agrees and acknowledges as
follows:

	 	(a)	 	Consultant has had and will have access to and will participate in the
development of or be acquainted with confidential or proprietary information and trade
secrets that directly or indirectly relate to the business, prospects, operations and
other aspects of the Company and any other present or future affiliates, subsidiaries
and/or related entities of the Company (collectively with the Company, the
“Companies”), including but not limited to (1) customer, insurance agent and reinsurer
lists; the identity, lists or descriptions of new or prospective customers, insurance
agents and reinsurers; financial statements; cost reports or other financial
information; contract proposals or bidding information, business plans; training and
operations methods and manuals; personnel records; software programs; reports and
correspondence; and management systems, policies or procedures, including related forms
and manuals; (ii) information pertaining to future developments such as future
marketing or acquisition plans or ideas; and (iii) all other tangible and intangible
property, which are used in the business and operations of the Companies but not made
public. The information and trade secrets relating to the business of the Companies
described hereinabove in this paragraph 9(a) are hereinafter referred to collectively
as the “Confidential Information”, provided that the term “Confidential Information”
shall not include any information (x) that is or becomes publicly available (other than
as a result of violation of this Agreement by Consultant), or (y) that Consultant
receives or received on a non-confidential basis from a source (other than the
Companies or any of their representatives) that is not prohibited from disclosing such
information by a legal, contractual or fiduciary obligation (provided, however that
Consultant shall not be deemed to be in violation of this clause (y) unless he has
actual knowledge of any such obligation on the party of any such source).
	 
	 	(b)	 	Consultant shall not disclose, use or make known for his or another’s benefit
any Confidential Information or use such Confidential Information in any way except in
connection with the performance of Consultant’s duties under this Agreement.
Consultant may disclose Confidential Information in response to an order or subpoena of
a court or governmental agency of competent jurisdiction and authority provided,
however, notice of such order or subpoena shall be immediately communicated to the
Company telephonically and in writing so that the Company shall have an opportunity to
intervene and assert its rights to nondisclosure prior to any response by Consultant to such an order or subpoena 

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	 	 	 	and
in such notice, Consultant shall advise as to whether or not he intends to comply
with and/or respond to the order and/or subpoena.

	 	(c)	 	Consultant acknowledges and agrees that a remedy at law for any breach or
threatened breach of the provisions of this Section 9 would be inadequate and,
therefore, agrees that the Company shall be entitled to injunctive relief in addition
to any other available rights and remedies in case of any such breach or threatened
breach; provided, however, that nothing contained herein shall be construed as
prohibiting the Company from pursuing any other rights and remedies available for any
such breach or threatened breach.
	 
	 	(d)	 	Consultant agrees that upon termination of this Agreement for any reason,
Consultant shall promptly return to the Company all Confidential Information in his
possession in whatever form maintained (including, without limitation, documentation in
any format or medium, computer disks and other electronic media).
	 
	 	(e)	 	The obligations of Consultant under this Section 9 shall, except as otherwise
provided herein, survive the termination of the Consulting Term and/or the expiration
or termination of this Agreement for a period of two years.

	10.	 	Termination.

	 	(a)	 	This Agreement shall be terminated as follows:

	 	(i)	 	upon the death of Consultant;
	 
	 	(ii)	 	upon the Disability of Consultant;
	 
	 	(iii)	 	by Consultant upon 90 days’ written notice to the Company;
	 
	 	(iv)	 	by the Company upon notice to Consultant for “Cause”.
	 
	 	 	 	For the purposes of this Agreement “Disability” means Consultant’s inability to
substantially perform his duties under this Agreement for 60 consecutive days or for
120 or more days in any 12-month period, and “Cause” means that any of the following
has occurred with respect to Consultant: (1) conviction of the commission of a
felony, (2) acts of dishonesty or moral turpitude which are materially detrimental
to the Companies, (3) acts or omissions which Consultant reasonably knew were likely
to materially damage the business of the Company (it being mutually agreed that any
breach of Section 9 (confidentiality) would result in material damage to the
Company), (4) the willful disparagement by Consultant of the Companies or their
executives or employees, or Consultant willfully engaging in any conduct detrimental
to their reputation, (5) failure by Consultant to comply with the reasonable and
lawful orders of the Chief Executive Officer of the Company, (6) gross negligence by
Consultant in the performance of, or failure to perform, his obligations hereunder,
or (7) Consultant’s breach of this Agreement; provided, however, that prior to
any 

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	 	 	 	termination pursuant to clauses (5), (6) or (7) above, the Company shall have
provided Consultant with written notice of such action, failure or event and a
reasonable period in which to cure the same. This advance notice and cure provision
for termination pursuant to clauses (5), (6) or (7) above shall not apply and is not
required if giving notice and/or a cure period would be contrary to the best
interests of the Company.

	 	(b)	 	Notwithstanding anything to the contrary expressed herein, the Company shall
not be obligated to make any payments to Consultant or on his behalf of whatever kind
or nature by reason of the termination of this Agreement pursuant to Section 8(a),
other than (i) such portion, if any, of the Consulting Fee as shall be accrued and
remained unpaid as of the date of said cessation and (ii) such other amounts, if any,
which may be then otherwise payable to Consultant pursuant to the terms of Section 6
above.

	11.	 	Restrictive Covenants.

	 	11.01	 	Non-Competition and Non-Solicitation of Customers and Agents

	 	(a)	 	Consultant agrees that during the Noncompete Period (as defined
in Section 11.01(b) of this Agreement), without the prior written consent of
the Company, Consultant shall refrain, directly or indirectly, and whether as a
principal, agent, employee, owner, partner, officer, director, shareholder,
member or otherwise, alone or in association with any other person or entity,
from carrying on or engaging in a business similar to that of the Company and
from soliciting customers, clients and insureds of the Company within the
Designated Area, so long as the Company carries on a like business therein;
	 
	 	(b)	 	For purposes of this Agreement, “Noncompete Period” shall mean
the Consulting Term; provided, however, the Company shall have the
exclusive option and absolute right to extend the Noncompete Period for a
period of up to 24 months following the termination of this Agreement (but in
no event beyond January 1, 2011) if the Company (A) delivers written notice to
Consultant exercising such option (1) on the date this Agreement is terminated
pursuant to Section 10(a)(ii) or, (2) if this Agreement is terminated pursuant
to Section 10(a)(iii) or 10 (a)(iv), within 30 days following the date on which
the notice referred to in Section 10(a)(iii) or 10(a)(iv), as applicable, is
delivered and (B) agrees to pay and does pay Consultant the portion of the
Consulting Fee that would have been payable to Consultant during such period
had this Agreement not been terminated. If the Company exercises this option
and right and complies with the requirements for same, the Noncompete Period
shall be extended for the period designated and Consultant agrees and
acknowledges that he is bound by such period.

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	 	(c)	 	Definition of Designated Area. The term “Designated
Area” shall mean the states, parishes, counties and/or municipalities
designated in Attachment “A”.
	 
	 	(d)	 	Business of the Company. Consultant acknowledges and
understands that the “business” of the Company involves and relates to the
underwriting of risks for worker’s compensation insurance and related services.
Consultant further acknowledges, agrees and represents that he understands and
knows the business in which the Company is engaged and the scope, activities
and/or business pursuits involved in the business of the Company and in the
underwriting of risks for worker’s compensation insurance and related services.
Consultant further acknowledges and understands that the non-competition and
non-solicitation of customer restrictions in this Agreement prohibit Consultant
from engaging, in any capacity and/or any position, and/or from conducting any
activities and/or business similar to that of the Company and under the
specific terms and conditions of this Agreement.
	 
	 	(e)	 	Customers of the Company. For purposes of this
Agreement, “customers” shall include, but are not limited to, insured
businesses and/or entities who have and/or have had insurance coverage with the
Company and insurance agents with whom the Company has contracts, agreements,
arrangements and/or any type of business, insurance placement and/or working
relationship. Consultant acknowledges and represents that he understands the
nature of the Company’s customer relationships and who and/or what comprises
its customers.

	 	11.02	 	Non-Solicitation of Employees. Consultant shall not, during the
Consulting Term and for a period of two years following the termination or expiration
of this Agreement, directly or indirectly solicit or induce, or attempt to solicit or
induce, any employee, agent (including insurance agents), of or consultant to the
Company to leave his or her employment or terminate his or her consultation agreement
or similar relationship with the Company.
	 
	 	11.03	 	Amerisafe Designation. As used in this Section 11, Amerisafe, Inc.
and/or the “Company” includes Amerisafe, Inc., American Interstate Insurance Company,
Silver Oak Casualty, Inc., American Interstate Insurance Company of Texas, Amerisafe
Risk Services, Inc., Amerisafe General Agency, Inc. and any and all predecessor
entities, successor entities, affiliate entities, parent companies and subsidiaries.
The parties acknowledge and agree that the restrictive covenants in this Section 11
inure to the benefit of and operate for the interest of all of the above-mentioned
companies and affiliates.
	 
	 	11.04	 	Remedies. In the event of a breach, or a threatened or attempted
breach, of any provision of this Section 11 by Consultant, the parties recognize that
such a breach would cause irreparable harm to the Company, thus the Company shall, in
addition to all other remedies, be entitled to: (a) a temporary, preliminary and/or

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	 	 	 	permanent injunction against such breach without the necessity of showing any
actual damages or any irreparable injury; (b) a decree for the specific performance
of this Agreement; and/or (c) damages, attorney’s fees and costs. All remedies in
favor of Company shall not be exclusive, but shall be cumulative.

	 	11.05	 	Construction, Reformation and Severability. It is understood and
agreed that, should any portion of any clause or paragraph of this Section 11 be deemed
too broad to permit enforcement to its full extent, or should any portion of any clause
or paragraph of this Section 11 be deemed unreasonable, then said clause or paragraph
shall be reformed and enforced to the maximum extent permitted by law. Additionally,
if any of the provisions of this Section 11 are ever found by a court of competent
jurisdiction to exceed the maximum enforceable (i) periods of time, (ii) geographic
areas of restriction, (iii) scope of non-competition or non-solicitation and/or (iv)
description of the Company’s business or customers, or for any other reason, then such
unenforceable element(s) of this Section 11 shall be reformed and reduced to the
maximum periods of time, geographic areas of restriction, scope of non-competition or
non-solicitation and/or description of the Company’s business that is permitted by law.
In this regard, any unenforceable, unreasonable and/or overly broad provision shall be
reformed and/or severed so as to permit enforcement to the fullest extent permitted by
law. Reformation and severability shall apply. Moreover, the restrictive covenants
contained herein shall be interpreted and applied to the broadest extent possible under
La.R.S. 23:921, and any future amendments to said statute which broaden or expand the
Company’s rights shall apply.
	 
	 	11.06	 	Reasonableness. Consultant acknowledges, represents and agrees that
the restrictive covenants in this Section 11 are reasonable in nature, scope, time and
territory and in the terms and conditions set forth herein. Consultant acknowledges,
represents and agrees that the Company has expended substantial cost in training
Consultant and that the Company has provided him with access to valuable information
and has provided him with valuable experience. In addition, Consultant acknowledges,
represents and agrees that the Company has placed Consultant in contact with its
customers and has made Consultant part of its business plans. Consultant further
acknowledges, represents and agrees that Consultant would not have obtained such
training, experience, contacts and information from other sources without his
relationship with the Company. Consultant further acknowledges, represents and agrees
that the foregoing have occurred and/or resulted based on the Company’s reliance on
these restrictive covenants and Consultant’s representations and obligations made
herein. Consultant further acknowledges, represents and agrees that this Section 11
and the obligations of Consultant under these restrictive covenants are reasonable in
order to protect the legitimate interests of the Company. Consultant further
acknowledges, represents and agrees that by virtue of his prior employment with the
Company, and his knowledge of the Company and the workers’ compensation industry, he is
an integral and influential component of the

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	 	 	 	Company’s current and future business plans. It is Consultant’s desire and intent
that this Agreement be given full force and effect.

	12.	 	Independent Contractor. Nothing herein shall be construed to create any relationship
of agent and principal, partnership, or joint venture between or among the parties. No party
shall assume, either directly or indirectly, any liability for the other party. Consultant’s
relationship to the Company during the Consulting Term shall be that of an independent
contractor, and Consultant acknowledges and agrees that he is not an employee and he is not
entitled to any employment benefits. Consultant expressly waives any right or claim to
participation or eligibility in any employee benefit plan. Neither party shall have the
authority to bind or obligate the other in any way and shall not represent that it has such
authority.
	 
	13.	 	Provision of Equipment. Consultant shall be permitted to retain all computers and
related equipment in his possession on the date hereof. Consultant acknowledges that he has
possession of all computer and other equipment he requires to perform his obligations under
this Agreement and that the Company has no obligation to provide any computer or other
equipment, software or other supplies.
	 
	14.	 	Non-Assignability.

	 	(a)	 	Neither this Agreement nor any right or interest hereunder shall be assignable
by Consultant or his beneficiaries or legal representatives without the Company’s prior
written consent; provided, however, that nothing in this Section 14(a) shall
preclude Consultant from designating a beneficiary to receive any benefit payable
hereunder upon his death or incapacity.
	 
	 	(b)	 	Except as required by law, no right to receive payments under this Agreement
shall be subject to anticipation, commutation, alienation, sale, assignment,
encumbrance, charge, pledge, or hypothecation or to exclusion, attachment, levy or
similar process or to assignment by operation of law, and any attempt, voluntary or
involuntary, to effect any such action shall be null, void and of no effect.
	 
	 	(c)	 	Company shall have the right to assign this agreement to any affiliate entity
or acquiring entity.

	15.	 	Binding Effect. Without limiting or diminishing the effect of Section 14 hereof,
this Agreement shall inure to the benefit of and be binding upon the parties hereto and their
respective heirs, successors, legal representatives and assigns.

	16.	 	Notices. All notices which are required or may be given pursuant to the terms of
this Agreement shall be in writing and shall be sufficient in all respects if given in writing
(i) when received if delivered personally, (ii) five business days after being mailed by
certified or registered mail, return receipt requested and postage prepaid, (iii) one business
day after being sent via a nationally recognized overnight courier, or (iv) when dispatched
via facsimile confirmed by certified or registered mail, return receipt requested and postage
prepaid, if to the Company at the Company’s principal place of

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	 	 	business, and if to Consultant, at his home address most recently filed with the Company, or
to such other address or addresses as either party shall have designated in writing to the
other party hereto.

	17.	 	Law Governing. This Agreement shall be governed by and construed in accordance with
the laws of the State of Louisiana and without regard to the application of conflict of laws
principles in general and statutory provisions addressing conflicts of laws under the
Louisiana Civil Code or any other Louisiana law.

	18.	 	Severability. Consultant agrees that in the event that any court of competent
jurisdiction shall finally hold that any provision of this Agreement is void or constitutes an
unreasonable restriction against Consultant, this agreement shall not be rendered void but
shall apply with respect to such extent as such court may judicially determine constitutes a
reasonable restriction under the circumstances. If any part of this Agreement is held by a
court of competent jurisdiction to be invalid, illegible or incapable of being enforced in
whole or in part by reason of any rule of law or public policy, such part shall be deemed to
be severed from the remainder of this Agreement for the purpose only of the particular legal
proceedings in question and all other covenants and provisions of this Agreement shall in
every other respect continue in full force and effect and no covenant or provision shall be
deemed dependent upon any other covenant or provision. Severability and reformation shall
apply.
	 
	 	 	It is understood and agreed that, should any portion of any clause or paragraph of this
Agreement be deemed too broad to permit enforcement to its full extent, or should any
portion of any clause or paragraph of this Agreement be deemed unreasonable, then said
clause or paragraph shall be reformed and enforced to the maximum extent permitted by law.

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	19.	 	Waiver. Failure to insist upon strict compliance with any of the terms, covenants
or conditions hereof shall not be deemed a waiver of such term, covenant or condition, nor
shall any waiver or relinquishment of any right or power hereunder at any one or more times
be deemed a waiver or relinquishment of such right or power at any other time or times.

	20.	 	Entire Agreement; Modifications. This Agreement, with referenced Attachment “A,”
constitutes the entire and final expression of the agreement of the parties with respect to
the subject matter hereof and supersedes all prior and/or contemporaneous agreements, oral and
written, between the parties hereto with respect to the subject matter hereof, including
without limitation the Executive Agreement, dated January 1, 2004, between Consultant and the
Company. This Agreement may be modified or amended only by an instrument in writing signed by
both parties hereto.

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

	 	 	 	 	 
	 	AMERISAFE, INC.

 	 
	 	BY: 	/s/ C. Allen Bradley, Jr.
 	 
	 	 	C. Allen Bradley, Jr., President and Chief 	 
	 	 	     Executive Officer 	 
	 

	 	 	 	 	 
	 	CONSULTANT:

 	 
	 	BY: 	 /s/ Mark R. Anderson. 	 
	 	 	Mark R. Anderson 	 
	 	 	 
	 

10exv10w6

 

Exhibit 10.6

AMERISAFE, Inc.

2005 EQUITY INCENTIVE PLAN

     1. Purpose. The purpose of the 2005 Equity Incentive Plan is to attract and retain officers
and other key employees for, and consultants to, the Company and its Subsidiaries and to provide to
such persons appropriate incentives and rewards for superior performance.

     2. Definitions. As used in this Plan,

          (a) “Award” means any award of Option Rights, Restricted Stock or Restricted Stock Units
granted under the Plan.

          (b) “Award Agreement” means a written agreement setting forth the terms, conditions and
restrictions of the Award granted to the Participant. An Award Agreement may be an “Option Award
Agreement,” a “Restricted Stock Award Agreement” or a “Restricted Stock Unit Award Agreement.”

          (c) “Board” means the Board of Directors of the Company and, to the extent of any delegation
by the Board to a committee (or subcommittee thereof) pursuant to Section 12 of this Plan, such
committee (or subcommittee).

          (d) “Change in Control” has the meaning provided in Section 9 of this Plan.

          (e) “Code” means the Internal Revenue Code of 1986, as amended from time to time.

          (f) “Common Shares” means the shares of common stock, par value $0.01 per share, of the
Company or any security into which such Common Shares may be changed by reason of any transaction
or event of the type referred to in Section 8 of this Plan.

          (g) “Company” means AMERISAFE, Inc., a Texas corporation.

          (h) “Covered Employee” means a Participant who is, or is determined by the Board to be likely
to become, a “covered employee” within the meaning of Section 162(m) of the Code (or any successor
provision).

          (i) “Date of Grant” means the date specified by the Board on which an Award will become
effective (which date will not be earlier than the date on which the Board takes action with
respect thereto).

          (j) “Director” means a member of the Board of Directors of the Company.

          (k) “Effective Date” means October 27, 2005.

 

 

          (l) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder, as such law, rules and regulations may be amended from time to time.

          (m) “Incentive Stock Options” means Option Rights that are intended to qualify as “incentive
stock options” under Section 422 of the Code or any successor provision.

          (n) “Incumbent Directors” means the individuals who, as of the Effective Date, are Directors
of the Company and any individual becoming a Director subsequent to the date thereof whose
election, nomination for election by the Company’s shareholders, or appointment, was approved by a
vote of at least two-thirds of the then Incumbent Directors (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 objection to such nomination); provided, however, that an
individual shall not be an Incumbent Director if such individual’s election or appointment to the
Board occurs as a result of an actual or threatened election contest (as described in Rule
14a-12(c) of the Exchange Act) with respect to the election or removal of Directors or other actual
or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board.

          (o) “Management Objectives” means the measurable performance objective or objectives
established pursuant to this Plan for, when so determined by the Board, Participants who have
received grants of Option Rights, Restricted Stock or Restricted Stock Units. Management
Objectives may be described in terms of Company-wide objectives or objectives that are related to
the performance of the individual Participant or of the Subsidiary, division, department, region or
function within the Company or Subsidiary in which the Participant is employed. The Management
Objectives may be made relative to the performance of other companies. The Management Objectives
applicable to any Award to a Covered Employee will be based on specified levels of or growth in one
or more of the following criteria:

	 	 	 	 	 	 	 	 	 
	1.

	 	cash flow/net assets ratio;
	 	 	6.	 	 	total return to shareholders;
	2.

	 	return on total capital;
	 	 	7.	 	 	loss ratio;
	3.

	 	return on equity;
	 	 	8.	 	 	expense ratio;
	4.

	 	earnings per share growth;
	 	 	9.	 	 	combined ratio; and
	5.

	 	revenue growth;
	 	 	10.	 	 	premium volume.

          If the Board determines that a change in the business, operations, corporate structure or
capital structure of the Company, or the manner in which it conducts its business, or other events
or circumstances render the Management Objectives unsuitable, the Board may in its discretion
modify such Management Objectives or the related minimum acceptable level of achievement, in whole
or in part, as the Board deems appropriate and equitable, except in the case of a Covered Employee
where such action would result in the loss of the otherwise available exemption of the Award under
Section 162(m) of the Code. In such case, the Board will not make any modification of the
Management Objectives or minimum acceptable level of achievement with respect to such Covered
Employee.

          (p) “Market Value per Share” means, as of any particular date, (i) the closing sale price per
Common Share on that date (or if there are no sales on that date, on the next preceding trading
date during which a sale occurred) as reported on the Nasdaq National Market

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System, or if the Common Shares are not then-traded on the Nasdaq National Market System, the
principal exchange on which the Common Shares are then trading, or (ii) if clause (i) does not
apply, the fair value of the Common Shares as determined by the Board.

          (q) “Optionee” means the optionee named in an Award Agreement evidencing an outstanding Option
Right.

          (r) “Option Price” means the purchase price payable on exercise of an Option Right.

          (s) “Option Right” means the right to purchase Common Shares upon exercise of an option
granted pursuant to Section 4 of this Plan.

          (t) “Participant” means a person who is selected by the Board to receive benefits under this
Plan and who is at the time an officer or other key employee of, or a consultant to, the Company or
any one or more of its Subsidiaries, or who has agreed to commence serving in any of such
capacities within 90 days of the Date of Grant. The term “Participant” shall also include any
person who provides services to the Company (other than in the capacity as a member of the Board)
or a Subsidiary that are equivalent to those typically provided by an employee.

          (u) “Person” means any individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act).

          (v) “Plan” means this 2005 Equity Incentive Plan.

          (w) “Restricted Stock” means Common Shares granted or sold pursuant to Section 5 of this Plan
as to which neither the substantial risk of forfeiture nor the prohibition on transfers has
expired.

          (x) “Restriction Period” means the period of time during which Restricted Stock Units are
subject to a substantial risk of forfeiture (based on the passage of time, the achievement of
performance goals, or upon the occurrence of other events as determined by the Board, in its
discretion), as provided in Section 6 of this Plan.

          (y) “Restricted Stock Unit” means an award made pursuant to Section 6 of this Plan of the
right to receive Common Shares or cash at the end of a specified period.

          (z) “Subsidiary” means a corporation, limited liability company, partnership or other entity
(i) more than 50 percent of whose outstanding shares or other securities (representing the right to
vote for the election of directors or other managing authority) are, or (ii) which does not have
outstanding shares or other securities (as may be the case in a partnership, limited liability
company, business trust or other legal entity), but more than 50 percent of whose ownership
interest representing the right generally to make decisions for such entity is, now or hereafter,
owned or controlled, directly or indirectly, by the Company except that for purposes of determining
whether any person may be a Participant for purposes of any grant of Incentive Stock Options,
“Subsidiary” means any corporation in which the Company owns or controls, directly or indirectly,
more than 50 percent of the total combined voting power represented by all classes of stock issued
by such corporation.

3

 

          (aa) “Voting Securities” means, at any time, (i) the securities entitled to vote generally in
the election of Directors in the case of the Company, or (ii) the securities entitled to vote
generally in the election of members of the board of directors or similar body in the case of
another legal entity.

     3. Shares Available Under the Plan.

          (a) Subject to adjustment as provided in Section 3(b) and Section 8 of this Plan, the number
of Common Shares that may be issued or transferred (i) upon the exercise of Option Rights, (ii) as
Restricted Stock and released from substantial risks of forfeiture thereof, or (iii) as Restricted
Stock Units, shall not exceed in the aggregate 1,900,000 Common Shares. Such shares may be
authorized but unissued shares or treasury shares or a combination of the foregoing.

          (b) The number of shares available in Section 3(a) above shall be adjusted to account for
shares relating to Awards that expire or are canceled or forfeited. Upon payment in cash of the
benefit provided by any Award granted under this Plan, any shares that were covered by that Award
shall again be available for issue or transfer hereunder.

          (c) Notwithstanding anything in this Section 3 or elsewhere in this Plan to the contrary but
subject to adjustment as provided in Section 8 of this Plan, (i) the aggregate number of Common
Shares actually issued or transferred by the Company upon the exercise of Incentive Stock Options
will not exceed 1,900,000 Common Shares; (ii) no Participant will be granted Option Rights,
Restricted Stock or Restricted Stock Units during the term of the Plan, in the aggregate, for more
than 500,000 Common Shares during any calendar year; (iii) the number of shares issued as
Restricted Stock and Restricted Stock Units (after taking into account any forfeitures,
expirations, cancellations or transfers upon expiration of any withholding amount) will not during
the term of the Plan in the aggregate exceed 1,900,000 Common Shares.

     4. Option Rights. The Board may, from time to time and upon such terms and conditions as it
may determine, authorize the granting to Participants of options to purchase Common Shares. Each
such grant may utilize any or all of the authorizations, and will be subject to all of the
requirements contained in the following provisions:

          (a) Each grant will specify the number of Common Shares covered by such grant, subject to the
limitations set forth in Section 3 of this Plan.

          (b) Each grant will specify an Option Price per share, which may not be less than the Market
Value per Share on the Date of Grant.

          (c) Each grant will specify the date or event (which may include the achievement of specified
Management Objectives) when all or any portion of the Option Right is to become exercisable, and
may provide for the earlier exercise of such Option Right in the event of a Change in Control.
Notwithstanding the foregoing, no Option Right will be exercisable more than 10 years from the Date
of Grant.

          (d) Each grant will specify whether the Option Price will be payable (i) in cash or by check
acceptable to the Company or by wire transfer of immediately available funds, (ii) by the actual or
constructive transfer to the Company of Common Shares owned by the

4

 

Optionee for at least 6 months having a Market Value per Share at the time of exercise equal
to the total Option Price, or (iii) by a combination of such methods of payment.

          (e) To the extent permitted by law, any grant may provide for deferred payment of the Option
Price from the proceeds of sale through a bank or broker on a date satisfactory to the Company of
some or all of the shares to which such exercise relates.

          (f) Successive grants may be made to the same Participant whether or not any Option Rights
previously granted to such Participant remain unexercised.

          (g) Option Rights granted under this Plan may be (i) options, including, without limitation,
Incentive Stock Options, that are intended to qualify under particular provisions of the Code, (ii)
options that are not intended so to qualify, or (iii) combinations of the foregoing.

          (h) Each grant of Option Rights shall be evidenced by an Award Agreement, which shall specify
whether the Option Right is intended to be an Incentive Stock Option. Each Award Agreement shall
be subject to the Plan and shall contain such terms and provisions, consistent with this Plan, as
the Board may approve, and, if the Board shall so provide, may require the satisfaction or
achievement of certain Management Objectives as a condition to the exercise thereof.

     5. Restricted Stock. The Board may also authorize the grant or sale of Restricted Stock to
Participants. Each such grant or sale may utilize any or all of the authorizations, and will be
subject to all of the requirements, contained in the following provisions:

          (a) Each such grant or sale will constitute an immediate transfer of the ownership of Common
Shares to the Participant in consideration of the performance of services, entitling such
Participant to voting, dividend and other ownership rights, but subject to the substantial risk of
forfeiture and restrictions on transfer as provided in this Plan or the applicable Award Agreement.

          (b) Each such grant or sale may be made without additional consideration or in consideration
of a payment by such Participant that is less than the Market Value per Share at the Date of Grant.

          (c) Each such grant or sale will provide that the Restricted Stock covered by such grant or
sale will be subject to a “substantial risk of forfeiture” within the meaning of Section 83 of the
Code for a period to be determined by the Board at the Date of Grant and set forth in an Award
Agreement. Notwithstanding the foregoing, each such grant may provide for the earlier lapse of
such substantial risk of forfeiture upon (i) the Participant achieving Management Objectives
specified in such grant, or (ii) a Change in Control.

          (d) Each such grant or sale will provide that during the period for which such substantial
risk of forfeiture is to continue, the transferability of the Restricted Stock will be prohibited
or restricted in the manner and to the extent prescribed by the Board at the Date of Grant (which
restrictions may include, without limitation, rights of repurchase or first refusal in the Company
or provisions subjecting the Restricted Stock to a continuing substantial risk of forfeiture in the
hands of any transferee).

5

 

          (e) Any such grant or sale of Restricted Stock may require that any or all dividends or other
distributions paid thereon during the period of such restrictions be automatically deferred and
reinvested in additional shares of Restricted Stock, which may be subject to the same restrictions
as the underlying award.

          (f) Each grant or sale of Restricted Stock will be evidenced by an Award Agreement and will
contain such terms and provisions, consistent with this Plan, as the Board may approve. Unless
otherwise directed by the Board, all certificates representing shares of Restricted Stock will be
held in custody by the Company until all restrictions thereon will have lapsed, together with a
stock power or powers executed by the Participant in whose name such certificates are registered,
endorsed in blank and covering such Shares.

     6. Restricted Stock Units. The Board may also authorize the grant or sale of Restricted Stock
Units to Participants. Each such grant or sale may utilize any or all of the authorizations, and
will be subject to all of the requirements contained in the following provisions:

          (a) Each such grant or sale will constitute the agreement by the Company to deliver Common
Shares or cash to the Participant in the future in consideration of the performance of services,
but subject to the fulfillment of such conditions during the Restriction Period as the Board may
specify.

          (b) Each such grant or sale may be made without additional consideration or in consideration
of a payment by such Participant that is less than the Market Value per Share at the Date of Grant.

          (c) Each such grant or sale will be subject to a Restriction Period as determined by the Board
at the Date of Grant, and may provide for the earlier lapse or other modification of such
Restriction Period upon (i) the Participant achieving Management Objectives specified in such grant
or (ii) a Change in Control.

          (d) During the Restriction Period, the Participant will have no right to transfer any rights
under his or her Restricted Stock Units and will have no rights of ownership in the Restricted
Stock Units and will have no right to vote them, but the Board may, at or after the Date of Grant,
authorize the payment of dividend equivalents on such Restricted Stock Units on either a current or
deferred or contingent basis.

          (e) Each grant or sale of Restricted Stock Units will be evidenced by an Award Agreement and
will contain such terms and provisions, consistent with this Plan, as the Board may approve.

     7. Transferability. Except as otherwise determined by the Board, no Award shall be
transferable by a Participant other than by will or the laws of descent and distribution. Except
as otherwise determined by the Board, Option Rights shall be exercisable during the Optionee’s
lifetime only by him or her or by his or her guardian or legal representative.

     8. Adjustments. The Board may make or provide for such adjustments in the numbers of Common
Shares covered by outstanding Option Rights and Restricted Stock Units granted hereunder and in the
kind of securities covered thereby as the Board, in its sole

6

 

discretion, exercised in good faith, may determine is equitably required to prevent dilution
or enlargement of the rights of Participants or Optionees that otherwise would result from (a) any
stock dividend, stock split, combination of shares, recapitalization or other change in the capital
structure of the Company, or (b) any merger, consolidation, spin-off, split- off, spin-out,
split-up, reorganization, partial or complete liquidation or other distribution of assets, issuance
of rights or warrants to purchase securities, or (c) any other corporate transaction or event
having an effect similar to any of the foregoing. Moreover, in the event of any such transaction
or event, the Board, in its discretion, may provide in substitution for any or all outstanding
Awards under this Plan such alternative consideration as it, in good faith, may determine to be
equitable in the circumstances and may require in connection therewith the surrender of all Awards
so replaced. The Board may also make or provide for such adjustments in the numbers of shares
specified in Section 3 of this Plan as the Board in its sole discretion, exercised in good faith,
may determine is appropriate to reflect any transaction or event described in this Section 8;
provided, however, that any such adjustment to the number specified in Section 3(c)(i) will be made
only if and to the extent that such adjustment would not cause any Option intended to qualify as an
Incentive Stock Option to fail so to qualify.

     9. Change in Control. For purposes of this Plan, except as may be otherwise defined in an
individual Participant’s Award Agreement, a “Change in Control” shall mean the occurrence of any of
the following events:

          (a) the acquisition by any Person of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 35% or more of the then outstanding Voting Securities of the
Company; provided, however, that for purposes of this Section 9(a), the following
acquisitions shall not constitute a Change in Control: (A) any acquisition by the Company or a
Subsidiary of Voting Securities, (B) any acquisition of Voting Securities by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any Subsidiary or (C) any
acquisition of Voting Securities by any Person pursuant to a Business Combination that complies
with clauses (A), (B) and (C) of Section 9(c) below;

          (b) a majority of the Board ceases to be comprised of Incumbent Directors;

          (c) consummation of a reorganization, merger or consolidation, a sale or other disposition of
all or substantially all of the assets of the Company or other transaction (each, a “Business
Combination”), unless, in each case, immediately following the Business Combination, (A) all or
substantially all of the individuals and entities who were the beneficial owners of Voting
Securities immediately prior to the Business Combination beneficially own, directly or indirectly,
more than 50% of the combined voting power of the then outstanding Voting Securities of the entity
resulting from the Business Combination (including, without limitation, an entity 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), (B) no Person (other than the Company, such entity
resulting from the Business Combination, or any employee benefit plan (or related trust) sponsored
or maintained by the Company, any Subsidiary or such entity resulting from the Business
Combination) beneficially owns, directly or indirectly, 35% or more of the combined voting power of
the then outstanding Voting Securities of the entity resulting from the Business Combination;
provided, however, that no Person will be treated for purposes of this Section 9(c)
as beneficially owning 35% or more of the Voting Securities of the entity resulting from the
Business Combination solely as a result of the Voting

7

 

Securities held in the Company prior to consummation of the Business Combination and (C) at
least a majority of the members of the board of directors of the entity resulting from the Business
Combination were Incumbent Directors at the time of the execution of the initial agreement or of
the action of the Board providing for the Business Combination; or

          (d) approval by the shareholders of the Company of a complete liquidation or dissolution of
the Company, except pursuant to a Business Combination that complies with clauses (A), (B) and (C)
of Section 9(c) hereof.

     Notwithstanding anything to the contrary contained in this Section 9, a Person who holds 35%
or more of the Voting Securities of the Company on the Effective Date will not be deemed to have
acquired 35% or more of the Voting Securities of the Company for purposes of Section 9(a) of this
Plan (and as a result, such circumstance shall not constitute a Change in Control) unless after the
Effective Date such person acquires, in one or more transactions, additional Voting Securities of
the Company representing 1% or more of the then outstanding Voting Securities of the Company it
being understood that an increase in the percentage of Voting Securities held by a Person as a
result of (i) the exercise of any conversion or exchange right pursuant to any securities of the
Company that were outstanding on the Effective Date shall not be deemed to be an acquisition of
Voting Securities by such Person, or (ii) the Company’s repurchase of Voting Securities of the
Company is not an acquisition of Voting Securities by such Person.

     10. Fractional Shares. The Company will not be required to issue any fractional Common Shares
pursuant to this Plan. The Board may provide for the elimination of fractions or for the
settlement of fractions in cash.

     11. Withholding Taxes. To the extent that the Company is required to withhold federal, state,
local or foreign taxes in connection with any payment made or benefit realized by a Participant or
other person under this Plan, and the amounts available to the Company for such withholding are
insufficient, it will be a condition to the receipt of such payment or the realization of such
benefit that the Participant or such other person make arrangements satisfactory to the Board for
payment of the balance of such taxes required to be withheld, which arrangements (in the discretion
of the Board) may include relinquishment of a portion of such benefit.

     12. Administration of the Plan.

          (a) This Plan will be administered by the Board, which may from time to time delegate all or
any part of its authority under this Plan to the Compensation Committee or another committee of the
Board (or a subcommittee thereof), as constituted from time to time. To the extent of any such
delegation, references in this Plan to the Board will be deemed to be references to such committee
or subcommittee.

          (b) The interpretation and construction by the Board of any provision of this Plan or of any
Award Agreement and any determination by the Board pursuant to any provision of this Plan or of any
such Award Agreement will be final and conclusive. No member of the Board will be liable for any
such action or determination made in good faith.

8

 

     13. Amendments and Other Matters

          (a) The Board may at any time and from time to time amend the Plan in whole or in part;
provided, however, that any amendment (i) which must be approved by the
shareholders of the Company in order to comply with applicable law or the rules of the Nasdaq
National Market System or, if the Common Shares are not traded on the Nasdaq National Market
System, the principal national securities exchange upon which the Common Shares are traded or
quoted, or (ii) which would increase the benefits accruing to Participants, increase the aggregate
number of Common Shares that may be issued under the Plan or materially modify the eligibility
requirements for participating in the Plan, will not be effective unless and until the shareholders
of the Company have approved such amendment.

          (b) The Board will not, without the further approval of the shareholders of the Company,
authorize the amendment of any outstanding Option Right to reduce the Option Price. Furthermore,
no Option Right will be cancelled and replaced with awards having a lower Option Price without
further approval of the shareholders of the Company. This Section 13(b) is intended to prohibit
the repricing of “underwater” Option Rights and will not be construed to prohibit the adjustments
provided for in Section 8 of this Plan.

          (c) The Board also may permit Participants to elect to defer the issuance of Common Shares or
the settlement of Awards in cash under the Plan pursuant to such rules, procedures or programs as
it may establish for purposes of this Plan. The Board also may provide that deferred issuances and
settlements include the payment or crediting of dividend equivalents or interest on the deferral
amounts.

          (d) In case of termination of employment by reason of death, disability or normal or early
retirement, or in the case of hardship or other special circumstances, of a Participant who holds
an Option Right not immediately exercisable in full, or any shares of Restricted Stock as to which
the substantial risk of forfeiture or the prohibition or restriction on transfer has not lapsed, or
any Restricted Stock Units as to which the Restriction Period has not been completed, the Board
may, in its sole discretion, accelerate the time at which such Option Right or other Award may be
exercised or the time at which such substantial risk of forfeiture or prohibition or restriction on
transfer will lapse or the time when such Restriction Period will end or may waive any other
limitation or requirement under any such Award.

          (e) This Plan will not confer upon any Participant any right with respect to continuance of
employment or other service with the Company or any Subsidiary, nor will it interfere in any way
with any right the Company or any Subsidiary would otherwise have to terminate such Participant’s
employment or other service at any time.

          (f) The Board may amend the terms of any Award granted under this Plan prospectively or
retroactively but, subject to Section 8, no such amendment shall impair the rights of any holder
without his or her consent.

9

 

     14. Governing Law. The Plan and all grants and Awards and actions taken thereunder shall be
governed by and construed in accordance with the internal substantive laws of the State of Texas.

     15. Termination. This plan will expire on the tenth anniversary of the Effective Date (the
“Expiration Date”). No grant will be made under this Plan after the Expiration Date, but all
grants made on or prior to such date will continue in effect thereafter subject to the terms
thereof and of this Plan. The Board may, in its discretion, terminate this Plan at any time.
Termination of this Plan will not affect the rights of Participants or their successors under any
Awards outstanding hereunder and not exercised in full on the date of termination.

     16. General Provisions.

          (a) No Award under this Plan may be exercised by the holder thereof if such exercise, and the
receipt of cash or stock thereunder, would be, in the opinion of counsel selected by the Board,
contrary to law or the regulations of any duly constituted authority having jurisdiction over this
Plan.

          (b) Absence on leave approved by an officer of the Company or any of its Subsidiaries shall
not be considered interruption or termination of service of any employee for any purposes of this
Plan or Awards granted hereunder, except that no Awards may be granted to an employee while he or
she is absent on leave.

          (c) No Participant shall have any rights as a shareholder with respect to any Common Shares
subject to Awards granted to him or her under this Plan prior to the date as of which he or she is
actually recorded as the holder of such Common Shares upon the stock records of the Company.

          (d) All notices under this Plan will be in writing, and if to the Company, will be delivered
to the Secretary of the Company or mailed to its principal executive office, addressed to the
attention of the Secretary; and if to a Participant, shall be delivered personally or mailed to the
Participant at the address appearing in the records of the Company or Subsidiary. Such address may
be changed at any time by written notice to the other party.

10

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