Document:

exv10w8

 

EXHIBIT 10.8

GUARANTY

     THIS GUARANTY is made as of the 1st day of July, 2005, by Cash America
International, Inc., a Texas corporation (hereinafter referred to as “Guarantor”), to and for the
benefit of MIDWEST R&S CORPORATION, a South Dakota corporation (hereinafter referred to as
“Lender”).

R E C I T A L S

     Cash America Financial Services, Inc. (“CAFSI”), a subsidiary of Guarantor, has, on even date
herewith, entered into an Administrative Credit Services Agreement (the “Services Agreement”) with
Lender. As a condition to entering into the Services Agreement, Lender is requiring Guarantor to
guaranty the obligations of CAFSI under the Services Agreement.

     NOW, THEREFORE, in consideration of the premises recited above and of One Dollar ($1.00) in
hand paid by CAFSI to Guarantor, and of other good and valuable consideration, the receipt and
sufficiency of all of which are hereby acknowledged by Guarantor; and for the purpose of inducing
Lender to enter into the Services Agreement; and as long as CAFSI continues to be obligated to
Lender in any manner whatsoever pursuant to the Services Agreement, Guarantor:

     1. Unconditionally and absolutely guarantees: (a) the due and punctual payment of all amounts
due and payable from CAFSI to Lender under the Services Agreement; and (b) the due and punctual
performance and observance by CAFSI of all other obligations, warranties, covenants, and duties of
CAFSI set forth in the Services Agreement, and any other instruments or documents executed by CAFSI
and Lender in connection therewith, whether according to the present terms thereof or pursuant to
any extension of time or to any change or changes in the terms, warranties, covenants, agreements
and conditions thereof now or at any time hereafter made or granted (all of which amounts payable
and the terms, warranties, agreements, covenants and conditions being herein called the
“Obligations”);

     To this end, Guarantor covenants and agrees to take all such actions necessary to enable CAFSI
to observe and perform and to refrain from taking any action which would prevent CAFSI from
observing and performing each and every such Obligation.

     2. Agrees that this Guaranty shall be a continuing guaranty, shall be binding upon Guarantor,
and upon its successors and assigns, and shall remain in full force and effect, and shall not be
discharged, impaired or affected by (a) the existence or continuance of any of the Obligations; (b)
the validity or invalidity of any document or agreement evidencing the Obligations or any of them;
(c) the existence or continuance of CAFSI as a legal entity; (d) any waiver, indulgence,
alteration, substitution, exchange, change in, modification or other disposition of any of the
Obligations, all of which CAFSI is hereby expressly authorized to make from time to time without
notice to Guarantor; (e) the acceptance by Lender of any security for, or other guarantors upon,
all or any part of the Obligations; or (f) any defense (other than the

 

 

payment or performance of the Obligations in accordance with their terms) that Guarantor may
or might have to its undertakings, liabilities and obligations hereunder, each and every such
defense being hereby waived by Guarantor; and in order to hold Guarantor liable hereunder, there
shall be no obligation on the part of Lender, or anyone, at any time, to proceed against CAFSI, its
properties or estates, or to proceed against any other guarantor, or to resort to any collateral,
security, property, liens or other rights or remedies whatsoever.

     3. Agrees that Lender shall have the right to enforce this Guaranty against Guarantor for and
to the full amount of the Obligations, with or without enforcing or attempting to enforce this
Guaranty against any other guarantor, and whether or not other proceedings or steps are pending or
have been taken or have been concluded to enforce or otherwise realize upon the obligations or
security of CAFSI or any other guarantor; and the payment of any amount or amounts by Guarantor,
pursuant to its obligations hereunder, shall not entitle Guarantor, either at law or otherwise, to
any right, title or interest (whether by way of subrogation or otherwise) in and to any of the
Obligations, unless and until the full amount of the Obligations has been fully paid and all other
Obligations have been fully performed and observed in accordance with their terms.

     4. Waives diligence, presentment, protest, notice of dishonor, demand for payment, extension
of time of payment, notice of acceptance of this Guaranty, nonpayment at maturity and indulgences
and notices of every kind, and consents to any and all forbearance and extensions of the time of
payment of the Obligations, and further consents to any and all changes in the terms, covenants and
conditions thereof hereafter made or granted; it being the intention that Guarantor shall remain
liable under this Guaranty until the Obligations shall have been fully repaid to Lender and the
terms, covenants and conditions thereof shall have been fully performed and observed by CAFSI,
notwithstanding any act, omission or thing which might otherwise operate as a legal or equitable
discharge of Guarantor.

     5. Agrees that this Guaranty shall inure to the benefit of and may be enforced by Lender and
its successors and assigns.

     6. Agrees, as does Lender by the acceptance hereof, that this Guaranty shall be governed by
the laws of the State of South Dakota and that any dispute or controversy whatsoever arising
hereunder shall be resolved by arbitration pursuant to the applicable provisions set forth in the
Services Agreement or any other dispute resolution procedures which CAFSI and Lender may agree upon
in writing, all of which are hereby consented and agreed to by Guarantor and Lender.

     Guarantor has executed this instrument as of the day and year first above written.

	 	 	 	 	 
	 	CASH AMERICA INTERNATIONAL, INC.

 	 
	 	By:  	/s/ Daniel R. Feehan
 	 
	 	 	Daniel R. Feehan, Chief Executive Officer 	 
	 	 	 	 
	 

GUARANTOR

-2-

 

	 	 	 
	STATE OF TEXAS

	 	§
	 

	 	§
	COUNTY OF TARRANT

	 	§

     On this, the 1st day of , 2005, before me, the undersigned, personally appeared
Daniel R. Feehan, who acknowledged himself to be the Chief Executive Officer of Cash America
International, Inc., a Texas corporation, and that , as such officer, being authorized so to do,
executed the foregoing instrument for the purposes therein contained by signing the name of the
corporation by as Chief Executive Officer.

     IN WITNESS WHEREOF, I hereunto set my hand and official seal.

	 	 	 	 	 
	 	 	 
	 	     /s/ C. Denise Hogue
 	 
	 	Notary Public, State of Texas 	 
	 	 	 
	 

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EXHIBIT 10.1

CHANGE IN CONTROL AGREEMENT

     THIS CHANGE IN CONTROL AGREEMENT (this “Agreement”) is made by and between Affirmative
Insurance Holdings, Inc., a Delaware corporation (the “Company”), and ___(the
“Executive”), to be effective ___(the “Effective Date”).

RECITALS:

     A. The Company is a holding company for a group of insurance agencies and property and
casualty insurance subsidiaries which offer primary insurance primarily on personal risks;

     B. The Board of Directors recognizes that the possibility of a Change in Control (as defined
below) affecting the Company, and the uncertainty which it may raise among management personnel,
may result in the departure or distraction of management personnel to the detriment of the Company
and its stockholders;

     C. The Board of Directors considers it essential to the best interests of the Company and its
stockholders that its key executives be incentivized to remain with the Company, and to continue to
devote their full attention and dedication to the Company’s business and their assigned duties, in
the event of an actual or likely Change in Control;

     D. The Board of Directors believes the Executive is a key executive of the Company and, in the
event of an actual or likely Change in Control, the Board of Directors wants the Executive to
continue performing his or her duties, to assess the impact of the potential Change in Control, to
advise the Company whether the potential Change in Control is in the best interests of the Company
and its shareholders, to assist in implementing the Change in Control, and to take such other
actions as the Board might determine to be appropriate under the circumstances, all without the
Executive being distracted by personal concerns about the impact of the potential Change in Control
on the Executive;

     E. The Company and the Executive each recognize and hereby acknowledge that the Executive’s
employment with the Company is and shall continue to be terminable at will, without prior notice,
by either the Company or the Executive; and

     F. The Company and the Executive each hereby acknowledge that this Agreement is not intended
to be, and shall not be construed as, an express or implied contract of employment between the
Company and the Executive

     NOW, THEREFORE, in consideration of the mutual covenants contained herein, the Company and the
Executive hereby agree as follows:

     1. Circumstances Triggering Receipt of Severance Benefits

          (a) Subject to Section 1(c) below, and conditioned on the Executive’s compliance with the
Confidential Information, Non-Compete and Non-Solicitation covenants

 

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contained in Section 6 hereof,
and the Executive’s execution of a Waiver and Release Agreement
satisfactory to the Company, the Company will provide the Executive with the benefits set
forth in Sections 3 and 5 below upon any termination of the Executive’s employment:

         (i) by the Company at any time within the first twenty-four (24) months after a Change
in Control;

         (ii) by the Company at any time within sixty (60) days prior to a Change in Control; or

         (iii) by the Executive for “Good Reason” (as defined in Section 1(b) below) at any time
within the first twenty-four (24) months after a Change in Control.

          (b) For purposes of Section 1(a)(iii) above, the Executive will be entitled to terminate
employment with the Company and its subsidiaries for “Good Reason” after a Change in Control if:

         (i) without the Executive’s written consent, one or more of the following events occurs
at any time during the first twenty-four (24) months after such Change in Control:

            (1) the Executive is not appointed to, or is otherwise removed from, any
office, title or position with the Company or its subsidiaries that is held by the
Executive ninety (90) days prior to the Change in Control for any reason other than
for Cause;

            (2) the Executive (i) suffers a significant adverse change in the nature or
scope of the authorities, powers, functions, responsibilities, reporting
relationships, or duties attached to the position with the Company which the
Executive as in effect at any time within ninety (90) days preceding the date of a
Change in Control or at any time thereafter, or (ii) is assigned any duties or
responsibilities which are inconsistent with his or her status, office, title,
position or responsibilities as in effect at any time within ninety (90) days
preceding the date of a Change in Control or at any time thereafter;

            (3) the Executive has a change in condition or circumstances that makes it
materially more difficult for the Executive to carry out the duties and
responsibilities of his or her office that existed at any time within ninety (90)
days preceding the date of a Change in Control or at any time thereafter;

            (4) the Executive’s base salary is reduced below that in effect immediately
prior to the Change in Control or there is a failure to pay the Executive any
compensation or benefits to which he is entitled within five days of the date due;

            (5) the Executive’s principal office is moved, without the Executive’s consent,
to a location that is more than thirty (30) miles from its

 

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location immediately
prior to the Change in Control, except for reasonably
required travel on the Company’s business that is not materially greater than
such travel requirements prior to the Change in Control;

            (6) the Company fails to (A) continue in effect (without reduction in benefit
level and/or reward opportunities) any material compensation or employee benefit
plan in which the Executive was participating at any time within ninety (90) days
preceding the date of a Change in Control or at any time thereafter, unless such
plan is replaced with a plan that provides substantially equivalent compensation or
benefits to the Executive or (B) provide the Executive with compensation and
benefits, in the aggregate, at least equal (in terms of benefit levels and/or reward
opportunities) to those provided for under each other employee benefit plan, program
and practice in which the Executive was participating at any time within 90 days
preceding the date of a Change in Control or at any time thereafter;

            (7) the Company becomes insolvent, or the filing by any person or entity,
including the Company or any of its subsidiaries, of a petition for bankruptcy of
the Company, or other relief under any other moratorium or similar law, which
petition is not dismissed within 60 days;

            (8) there is material breach by the Company of this Agreement;

            (9) there is a purported termination of the Executive’s employment for Cause by
the Company which does not comply with the terms of this Agreement; or

            (10) the Company fails to comply with and satisfy its obligations under Section
7(a) hereof.

The Executive’s right to terminate his employment for Good Reason shall not be affected by
his incapacity due to physical or mental illness; and.

         (ii) the Executive notifies the Company in writing (addressed in care of the Chairman
of the Board of the Company) of the occurrence of such event by way of a Notice of
Termination.

          (c) Notwithstanding Sections 1(a) and 1(b) above, no benefits will be payable by reason of
this Agreement in the event of:

         (i) termination of the Executive’s employment with the Company by reason of the
Executive’s death or Disability, so long as neither the Executive nor the Company previously
received a Notice of Termination for the Executive;

         (ii) termination by the Executive of the Executive’s employment with the Company at or
after age sixty-five (65) if the Executive is then eligible for retirement; or

 

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         (iii) termination of the Executive’s employment with the Company for Cause.

This Section 1(c) will not preclude the payment of any amounts otherwise payable to the Executive
under any of the Company’s employee benefits plans, programs and arrangements and/or under any
employment agreement.

     2. Notice of Termination. Any termination of the Executive’s employment with the
Company as contemplated by Section 1 above will be communicated by written notice to the Executive
or the Company delivered in person or by certified mail. Any “Notice of Termination” will: (i)
state the effective date of termination (the “Termination Date”); and (ii) state the specific
provision in this Agreement being relied upon for termination.

     3. Termination Benefits. Subject to the conditions set forth in Section 1 above, the
Company will pay or provide to the Executive (net of any applicable payroll or other taxes required
to be withheld) the following:

          (a) the Company shall pay the Executive in cash within thirty (30) days of the Termination
Date an amount equal to all Accrued Compensation and the Pro Rata Bonus;

          (b) at the end of each of the twenty-four (24) consecutive calendar months periods following
the Termination Date, the Company shall pay to the Executive in cash an amount equal to one-twelfth
of the Base Amount (including any increases in base salary); and

          (c) (A) for a period of twenty-four (24) months following the Termination Date or (B) for such
longer period as any plan, program, practice or policy may provide, the Company shall continue
benefits to the Executive and/or the Executive’s family at least equal to those which would have
been provided to them in accordance with the Company’s plans, programs, practices and policies
providing medical, dental, health, death and disability benefits if the Executive’s employment had
not been terminated in accordance with the most favorable plans, practices, programs or policies of
the Company and its affiliated companies as in effect and applicable generally to other peer
executives and their families during the 90-day period immediately preceding the Executive’s
termination of employment; provided, however, that if the Executive becomes
reemployed with another employer and is eligible to receive medical and other welfare benefits
under another employer-provided plan, the medical and other welfare benefits described herein shall
be secondary to those provided under such other plan during such applicable period of eligibility.

     4. Limitation on Payments. In the event that the payments and other benefits provided
for in this Agreement or otherwise payable to the Executive (i) constitute “parachute payments”
within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”),
and (ii) but for this Section 4, would be subject to the excise tax imposed by Section 4999 of the
Code (or any corresponding provisions of state income tax law), then the Executive’s benefits
hereunder shall be either:

          (a) delivered in full, or

 

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          (b) delivered as to such lesser extent which would result in no portion of such benefits being
subject to excise tax under Section 4999 of the Code,

whichever of the foregoing amounts, taking into account the applicable federal, state and local
income taxes and the excise tax imposed by Section 4999, results in the receipt by the Executive on
an after-tax basis, of the greater amount of benefits, notwithstanding that all or some portion of
such benefits may be taxable under Section 4999 of the Code. Unless the Company and the Executive
otherwise agree in writing, any determination required under this Section 4 shall be made in
writing by the Company’s independent public accountants (the “Accountants”), whose determination
shall be conclusive and binding upon the Executive and the Company for all purposes. For purposes
of making the calculations required by this Section 4, the Accountants may make reasonable
assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith
interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and
the Executive shall furnish to the Accountants such information and documents as the Accountants
may reasonably request in order to make a determination under this Section. The Company shall bear
all costs the Accountants may reasonably incur in connection with any calculations contemplated by
this Section 4. In the event that subsection (a) above applies, then Executive shall be
responsible for any excise taxes imposed with respect to such benefits. In the event that
subsection (b) above applies, then each benefit provided hereunder shall be proportionately reduced
to the extent necessary to avoid imposition of such excise taxes.

     5. Termination. Except as otherwise provided in Section 1 above, the Executive’s
employment may be terminated as follows:

          (a) prior to a Change in Control, by either the Company or the Executive for any reason,
including, but not limited to, upon the resignation or death of the Executive;

          (b) following a Change in Control:

         (1) by the Company due to the Disability or death of the Executive upon delivery of a
Notice of Termination to the Executive or his estate;

         (2) by the Company for Cause or without Cause, in either event upon delivery of a
Notice of Termination to the Executive; or

         (3) by the Executive for Good Reason or without Good Reason upon delivery of a Notice
of Termination to the Company.

Except as otherwise provided in Section 3 above, if the Executive’s employment with the Company is
terminated (i) by reason of the Executive’s resignation or death, or (ii) by the Company for
Disability or Cause, the Company shall pay to the Executive (or in the case of his or her death,
the Executive’s estate) within thirty (30) days after the Termination Date a lump sum cash payment
equal to the Accrued Compensation.

 

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     7. Restrictive Covenants.

          (a) Confidential Information. Commencing on the date hereof and during the Term, the
Company agrees to provide Executive with Confidential Information (as defined below). Commencing
on the date hereof, and at all times thereafter, Executive agrees that he will not divulge or
disclose to anyone (other than the Company or any persons employed or designated by the Company)
any Confidential Information. Confidential Information shall include all information of a
confidential nature relating to the business of the Company or any of its subsidiaries or
affiliates, including, without limitation, customer lists, contract terms, marketing plans,
business plans, financial data, cost information, sales data, or business opportunities whether for
existing, new or developing businesses, and Executive further agrees not to disclose, publish or
make use of any such knowledge or Confidential Information at any time, including in any future
employment, without the consent of the Company.

          (b) Non-Compete. In consideration of the parties’ various mutual promises contained
herein, including without limitation those involving Confidential Information, Executive agrees
that commencing on the date hereof and during the Term, and upon termination of Executive’s
employment by Company after a Change in Control per Section 1(a)(i), by Company prior to a Change
in Control per Section 1(a)(ii), or by Executive for “Good Reason” (as defined in Section 1(b)
herein), Executive agrees not to enter into or engage in any phase of the business conducted by the
Company in any state in which the Company is conducting business on the date of termination of
Executive’s employment with the Company, either as an individual for his own account, as a partner
or joint venturer, or as an employee, agent, officer, director, or substantial shareholder of a
corporation or otherwise for a period of two (2) years following the date of Executive’s
termination of his employment with the Company. As of the date of execution of this Agreement, the
business conducted by the Company is defined as owning and operating (i) insurance companies
providing automobile insurance coverage of any type or class, (ii) underwriting agencies (or
managing general agencies) that produce and administer automobile insurance, and (iii) retail
agencies that sell automobile insurance policies. Notwithstanding the foregoing, in the event
Executive’s employment is not terminated for Cause, if Executive reasonably shows that his proposed
employment is not directly competitive with the Company’s business, Executive may enter into such
employment.

          (c) Non-Solicitation In consideration of the parties’ various mutual promises
contained herein, including without limitation those involving Confidential Information, Executive
agrees that commencing on the date hereof and during the Term and upon termination of Executive’s
employment, whether voluntary or involuntary, Executive agrees not to directly or indirectly
solicit either (i) any employees of the Company to leave their employment with the Company for
employment with any other entity, or (ii) business in the area of automobile insurance from any
entity, organization or person which has contracted with the Company, which has been doing business
with the Company, from which the Company was soliciting business at the time of Executive’s
termination, or from which Executive knew or had reason to know that the Company was going to
solicit business at the time of Executive’s termination, in each case for a two (2) years period
from the date of Executive’s termination of his employment with the Company.

 

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          (d) Enforcement. Executive and the Company acknowledge and agree that any of the
covenants contained in this Section 6 may be specifically enforced through injunctive relief, but
such right to injunctive relief shall not preclude Company from other remedies which may be
available to it.

          (e) Reformation. The Company and Executive agree and stipulate that the agreements
and covenants not to compete contained in this Section 5 are fair and reasonable in light of all of
the facts and circumstances of the relationship between Executive and the Company; however,
Executive and the Company are aware that in certain circumstances courts have refused to enforce
certain terms of agreements not to compete. Therefore, in furtherance of, and not in derogation of
the provisions of this Section 6, the Company and Executive agree that in the event a court should
decline to enforce any provision of this Section 6, that this Section 6 shall be deemed to be
modified or reformed to restrict Executive’s competition with the Company or its affiliates to the
maximum extent, as to time, geography and business scope, that the court shall find enforceable;
provided, however, in no event shall the provisions of this Section 6 be deemed to be more
restrictive to Executive than those contained herein.

          (f) Termination. Notwithstanding any provision to the contrary otherwise contained in
this Agreement, the agreements and covenants contained in this Section 6 shall not terminate upon
Executive’s termination of his employment with the Company or upon the termination of this
Agreement under any other provision of this Agreement.

     7. Successors, Binding Agreement.

          (a) This Agreement shall be binding upon and shall inure to the benefit of the Company
(including each of its subsidiaries), its successors and assigns and any person, firm, corporation
or other entity which succeeds to all or substantially all of the business, assets or property of
the Company. The Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation, or otherwise) to all or substantially all of the business, assets or
property of the Company, to expressly assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if no such succession had
taken place. As used in this Agreement, the “Company” shall mean the Company as hereinbefore
defined and any successor to its business, assets or property as aforesaid which executes and
delivers an agreement provided for in this Section 6 or which otherwise becomes bound by all the
terms and provisions of this Agreement by operation of law.

          (b) This Agreement and all rights of the Executive hereunder shall inure to the benefit of and
be enforceable by the Executive’s personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should die while any
amounts are due and payable to him hereunder, all such amounts, unless otherwise provided herein,
shall be paid to the Executive’s designated beneficiary or, if there be no such designated
beneficiary, to the legal representatives of the Executive’s estate.

     8. Fees and Expenses. In the event that the Executive’s employment is terminated
during the twenty-four (24) month period after a Change in Control either by the Company either

 

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for Cause or without Cause or by the Executive for Good Reason, the Company shall reimburse
the Executive for any reasonable attorneys’ fees, expenses and court costs incurred by the
Executive as a result of any litigation by the Executive regarding the validity, enforceability or
interpretation of any provision of this Agreement (excluding Section 5) (including as a result of
any litigation by the Executive regarding the benefits payable to the Executive pursuant to this
Agreement) upon receipt of proof of such expenses regardless of which party, if any, prevails in
the contest.

     9. Notice. All notices and other communications provided for in this Agreement
(including the Notice of Termination) shall be in writing and shall be deemed to have been duly
given upon personal delivery or receipt when sent by certified mail, return receipt requested,
postage prepaid, or by a nationally recognized overnight courier service that provides written
proof of delivery, and shall be addressed as follows (or to such other address as either party
shall have furnished to the other in writing in accordance herewith):

	 	 	 	 	 	 	 
	 

	 	If to the Executive:
	 	 
	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	If to the Company:
	 	Affirmative Insurance Holdings, Inc.	 	 
	 

	 	 	 	4450 Sojourn Drive, Suite 500	 	 
	 

	 	 	 	Addison, Texas, 75001	 	 
	 

	 	 	 	Attention: Chief Executive Officer	 	 
	 

	 	 	 	Copy to: General Counsel	 	 

     10. Settlement of Claims. The Company’s obligation to make the payments provided for
in this Agreement and to otherwise perform its obligations hereunder shall not be affected by any
circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or
other right which the Company may have against the Executive or others. The Company may, however,
withhold from any benefits payable under this Agreement all federal, state, city or other taxes as
shall be required pursuant to any law or governmental regulation or ruling.

     11. Modification and Waiver. No provisions 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 any 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 prior or subsequent time.

     Notwithstanding any other provisions of this Agreement to the contrary, the parties hereto
agree that they will in good faith amend this Agreement in any manner reasonably necessary in order
to comply with Code Section 409A, as enacted by the American Jobs Creation Act of 2004, and the
parties further understand and agree that any provision in this Agreement that shall violate the
requirements of Code Section 409A shall be of no force and effect after such amendment.

 

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     12. Governing Law. This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Texas without giving effect to the conflict of laws
principles thereof.

     13. Severability. The provisions of this Agreement shall be deemed severable, and the
invalidity or unenforceability of any provision shall not affect the validity or enforceability of
the other provisions hereof.

     14. Entire Agreement. This Agreement constitutes the entire agreement between the
parties hereto and supersedes all prior agreement, if any, understandings and arrangements, oral or
written, between the parties hereto with respect to the subject matter hereof.

     15. Headings. The headings of Sections herein are included solely for convenience of
reference and shall not control the meaning or interpretation of any of the provisions of this
Agreement.

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

     17. Definitions. For purposes of this Agreement, the following terms shall have the
following meanings:

          (a) “Accrued Compensation” shall mean an amount which shall include all amounts earned or
accrued through the Termination Date but not paid as of the Termination Date, including without
limitation, (i) base salary, (ii) deferred compensation accumulated under any plan, arrangement or
agreement, (iii) reimbursement for reasonable and necessary expenses incurred by the Executive on
behalf of the Company prior to Termination Date, and (iv) bonuses and incentive cash compensation
(other than the Pro Rata Bonus).

          (b) “Base Amount” shall mean the greater of the Executive’s annual base salary at the highest
rate in effect at any time during the 90-day period prior to a Change in Control, and shall include
all amounts of his base salary that are deferred under any plans, arrangements or agreements of the
Company or any of its affiliates.

          (c) “Board” shall mean the Board of Directors of the Company.

          (d) “Bonus Amount” shall mean the greater of (i) the most recent annual cash bonus paid or
payable to the Executive, or, if greater, the annual cash bonus paid or payable for the year ended
prior to the fiscal year during which a Change in Control occurred, or (ii) the average of the
annual cash bonuses paid or payable during the three full fiscal years ended prior to a Change in
Control (or such lesser period for which annual bonuses were paid or payable to the Executive).

          (e) “Cause” shall mean

 

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          (i) neglect of his or her material duties or failure to perform his or her material
obligations under this Agreement that materially causes harm to the Company or that, in the
reasonable judgment of the Company, has materially damaged or interfered with the Company’s
relationships with its customers, suppliers, employees or other agents; provided,
however, that the Company shall give the Executive written notice of any actions or
omissions alleged to constitute Cause under this subparagraph (a) and the Executive shall
have forty-five (45) days to cure any such alleged Cause;

          (ii) refusal or failure to follow lawful directives of the Board that are not arbitrary
and capricious; provided, however, that the Company shall give the Executive
written notice of any actions or omissions alleged to constitute Cause under this
subparagraph (b) and the Executive shall have forty-five (45) days to cure any such alleged
Cause;

          (iii) conviction of, or a plea of nolo contendere to, or deferred adjudication for (x)
a felony relating to the Company’s assets, activities, operations or employees or (y) a
felony or a misdemeanor involving moral turpitude that causes harm to the Company or that,
in the good faith judgment of the Company, has damaged or interfered with the Company’s
relationships with its customers, suppliers, employees or other agents;

          (iv) substance abuse or illegal use of drugs that materially impairs Executive’s
performance, that materially causes harm to the Company or that, in the reasonable judgment
of the Company, has materially damaged or interfered with the Company’s relationships with
its customers, suppliers, employees or other agents;

          (v) commission of an act of fraud, illegality, theft or intentional dishonesty in the
course of Executive’s employment with the Company and relating to $5,000 or more of the
Company’s assets, or causing $5,000 or more in harm or damages with respect to the Company’s
activities, operations or employees; or

          (vi) breach by Executive of Section 6 of this
Agreement.

          (f) A “Change in Control” shall mean the happening during the Term of any of the following:

          (i) when any “person” as such term is used in Section 13(d) and 14(d) of the Exchange
Act (other than the Company or any Company employee benefit plan, including its trustees) is
or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly of securities of the Company representing twenty percent (20%) or
more of the combined voting power of the Company’s then outstanding securities;

          (ii) the occurrence of any transaction or event relating to the Company required to be
described pursuant to the requirements of Item 6(e) of Schedule 14A of Regulation 14A under
the Exchange Act;

 

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          (iii) when, during any period of two (2) consecutive years during the Term, the
individuals who, at the beginning of such period, constitute the Board cease, for any
reason other than death, to constitute at least a majority thereof, unless each director who
was not a director at the beginning of such period was elected by, or on the recommendation
of, at least two-thirds (2/3) of the directors at the beginning of such period; or

          (iv) the occurrence of a transaction requiring stockholder approval for the acquisition
of the Company by an entity other than the Company through purchase of assets, or by merger,
or otherwise.

          (g) “Compensation Committee” shall mean the Compensation Committee of the Board.

          (h) “Disability” shall mean the inability of the Executive to perform his or her duties to the
Company on account of physical or mental illness for a period of six consecutive full months, or
for a period of eight full months during any 12-month period. The Executive’s employment shall
terminate in such a case on the last day of the applicable period; provided,
however, in no event shall the Executive be terminated by reason of Disability unless (i)
the Executive is eligible for the long-term disability benefits under the Company’s long-term
disability insurance policy or plan and (ii) the Executive receives written notice from the
Company, at least 30 days in advance of such termination, stating its intention to terminate the
Executive for reason of Disability and setting forth in reasonable detail the facts and
circumstances claimed to provide a basis for such termination.

          (i) “Effective Date” shall mean the day and year first above written.

          (j) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

          (k) “Notice of Termination” shall have the meaning defined in Section 2 above.

          (l) “Pro Rata Bonus” shall mean an amount equal to the Bonus Amount multiplied by a fraction
the numerator of which is the number of days in the applicable year through the Termination Date
and the denominator of which is 365.

          (m) “Term” shall mean, unless earlier terminated as provided herein, this Agreement shall be
for a term of two (2) years from the Effective Date. Thereafter, the Term shall be automatically
extended for an additional year on each anniversary of the Effective Date, unless written notice of
non-extension is provided by either party to the other party at least 90 days prior to such
anniversary.

          (n) “Termination Date” shall have the meaning defined in Section 2 above.

 

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[SIGNATURES ON FOLLOWING PAGE]

 

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     IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its officer
thereunto duly authorized, and the Executive has signed this Agreement, effective as of the date
first above written.

	 	 	 
	 

	 	AFFIRMATIVE INSURANCE HOLDINGS, INC.
	 
	 	 
	 

	 	 
	 

	 	 
	 

	 	By:
	 

	 	Its:
	 
	 	 
	 

	 	EXECUTIVE:
	 
	 	 
	 

	 	 
	 

	 	 
	 

	 	By:

 

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