Document:

exv10w6

 

Exhibit 10.6

AMENDMENT NO. 1 TO

NON-COMPETITION AND CONFIDENTIALITY AGREEMENT

          THIS AMENDMENT NO. 1 TO NON-COMPETITION AND CONFIDENTIALITY AGREEMENT (the
“Amendment”), dated as of August 17, 2005, is entered into by and between American Risk
Pooling Consultants, Inc., a Michigan corporation (the “Company”) and Jerome M. Shaw (the
“Stockholder”).

RECITALS

          WHEREAS, the Company and Stockholder are parties to that certain Non-Competition and
Confidentiality Agreement dated as of June 14, 2004 (the “Agreement”);

          WHEREAS, capitalized terms used herein, unless otherwise herein defined, are used with the
meanings given them in the Agreement;

          WHEREAS, this Amendment amends the Agreement to satisfy certain conditions under the Stock
Contribution Agreement dated as of August 17, 2005 by and among Stockholder, First Mercury
Financial Corporation (the “FMFC”), a Delaware corporation, First Mercury Holdings, Inc.
(“Holdings”), a Delaware corporation, FMFC Holdings, LLC, a Delaware limited liability
company, and the other signatories thereto.

          NOW, THEREFORE, in consideration of the foregoing recitals and of the mutual promises set
forth herein, the parties hereto hereby agree as follows:

          1. Amendments. The paragraph defining “Non-Competition Period” in Section 3 of the
Agreement is hereby amended and restated in its entirety, as of the date of this Amendment, to read
as follows:

     
For purposes hereof, the “Non-Competition Period” shall mean the
period beginning on the Effective Date and ending on the earlier of (i) August 17,
2010 and (ii) the occurrence of a Change of Control or a Public Sale after the date
hereof. For purposes of this Agreement “Change of Control” shall mean (i)
a merger or consolidation of FMFC or Holdings with or into another corporation or
other entity, pursuant to which a Third Party beneficially owns at least a majority
of the voting power of the outstanding equity securities of the surviving
corporation or entity immediately after such merger or consolidation, (ii) the
sale, lease, license, conveyance or transfer of all or substantially all of the
assets of FMFC or Holdings other than to Glencoe or an entity in which a majority
of the voting power is beneficially owned by Glencoe, (iii) any purchase of shares
of capital stock of FMFC or Holdings (either through a negotiated stock purchase or
a tender for such shares) by a Third Party, through one, or a series of related
transactions, the effect of which is that the Third Party beneficially owns at
least a majority of the voting power of FMFC or
Holdings immediately after such purchase, or (iv) any liquidation, dissolution
or winding up of FMFC or Holdings, whether voluntary or

 

 

involuntary;
provided, that after such event, the business of FMFC or Holdings is not
owned or operated by Glencoe or by an entity in which a majority of the voting
power is beneficially owned by Glencoe. For purposes of this Agreement, “Third
Party” means a person or entity other than Glencoe or an entity in which a
majority of the voting power is beneficially owned by Glencoe. For purposes of
this Agreement, “Glencoe” means Glencoe Capital, LLC, FMFC Holdings, LLC
and each of their respective affiliates. For the purposes of this agreement,
“Public Sale” shall mean a sale of the stock of Holdings (or any material
subsidiary of Holdings) to the public pursuant to an offering registered under the
Securities Act of 1933, as amended, and any successor statute, the aggregate price
being paid for such stock being at least (i) $75,000,000 or (ii) $65,000,000 if
after completion of such offering Glencoe owns less than a majority of the fully
diluted common stock of Holdings.

2. General Provisions.

                         (a) Except as expressly amended, modified, agreed, waived, released or settled
herein, including without limitation in the recitals hereto, (i) there are no waivers
or releases hereby of any provisions of the Agreement, (ii) the Agreement shall remain
unchanged and in full force and effect, and (iii) as amended or modified herein, the
Agreement is hereby ratified, approved and confirmed in all respects.

                         (b) After the date hereof all references in the Agreement to the “Agreement,”
“herein,” “hereof” and the like, shall refer to the Agreement as amended or modified
herein.

                         (c) This Amendment may be executed in multiple counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the same
instrument.

                         (d) This Amendment shall be governed by and construed under the laws of the State
of Delaware.

[SIGNATURE PAGE FOLLOWS]

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          IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the day
and year first above written.

	 	 	 	 	 	 	 
	 	 	COMPANY:	 	 
	 
	 	 	 	 	 	 
	 	 	American Risk Pooling Consultants, Inc.	 	 
	 
	 

	 	By:	 	/s/ William S.
Weaver	 	 
	 

	 	Name:
	 	 

	 	 
	 

	 	Title:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	STOCKHOLDER:	 	 
	 
	 	/s/ Jerome M.
Shaw	 	 
	 	 	 	 	 
	 	 	Jerome M. Shawexv10w7

 

Exhibit 10.7

NON-COMPETITION AND CONFIDENTIALITY AGREEMENT

     This
Non-Competition and Confidentiality Agreement the
(“Agreement”) is dated August 17, 2005, and is effective as of August 17, 2005 (the “Effective Date”), by and between
First Mercury Holdings, Inc., a Delaware corporation (“Holdings”), and Jerome M. Shaw
(“Stockholder”).

     WHEREAS, pursuant to that certain Stock Contribution Agreement (the “Exchange
Agreement”) dated as of August 17, 2005 by and among Holdings, Stockholder, First Mercury
Financial Corporation, a Delaware corporation (the “Company”), FMFC Holdings, LLC, a
Delaware limited liability company (the “Investor”), and certain other signatories thereto,
Stockholder will contribute to Holdings all of the shares of Company common stock, and in return
Holdings will (i) issue shares of its common stock to Stockholder and (ii) pay cash to Stockholder
in the amount of $27.5 million;

     WHEREAS, Stockholder will benefit from the consummation of the transactions contemplated by
the Exchange Agreement; and

     WHEREAS, as a condition to the consummation of the transactions contemplated by the Exchange
Agreement, Holdings has required that Stockholder execute and deliver this Agreement and
Stockholder desires to do so.

     NOW, THEREFORE, for and in consideration of the foregoing and the mutual covenants and
promises contained herein, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound hereby, agree as follows:

     1. Definitions. Capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Exchange Agreement. For purposes of Sections 3, 4, 5 and 7
hereof, the term “Holdings” shall include the Company and all Affiliates of Holdings.

     2. Consideration. In consideration of the covenants made by Stockholder herein,
Holdings shall pay to Stockholder $1,975,000 on December 31, 2005 and $1,975,000 on June 30, 2006.

     3. Non-Competition. Stockholder covenants and agrees that during the Non-Competition
Period (as defined below) Stockholder will not:

     (a) engage, directly or indirectly, in any manner (whether as an owner, officer,
director, partner, manager, employee, independent contractor, consultant or otherwise) in
the Business (as defined below) anywhere in the Territory; provided,
however, that the passive ownership by Stockholder of no more than one percent (1%)
of the total equity securities of a publicly-traded entity shall not violate the provisions
of this Section 3;

 

 

     (b) engage, directly or indirectly, in any activity that competes with the Business
anywhere in the Territory;

     (c) accept employment with or provide any services to, directly or indirectly, in any
manner (whether as an owner, officer, director, partner, manager, employee, independent
contractor, consultant or otherwise) any competitor of the Holdings or any of such
competitor’s successors, subsidiaries or affiliates; or

     (d) attempt in any way, directly or indirectly, to obtain for himself, or others, or
to divert from the Holdings any rights, benefits, sales or profits arising out of or in
connection with the Business.

For purposes hereof, “Territory” shall mean the United States.

For purposes hereof, the “Non-Competition Period” shall mean the period beginning on the
Effective Date and ending on the later of (i) the seventh anniversary of the Effective Date and
(ii) the first date upon which Stockholder owns less than 5% of the shares of common stock of
Holdings on a fully diluted basis (assuming the conversion, exchange, or exercise of all securities
convertible into or exchangeable or exercisable for common stock of Holdings).

For purposes hereof, “Business” shall mean, collectively, (i) the provision or coordination
of accounting, finance, claims handling, underwriting, investment and general welfare services as a
third-party administrator for public entity risk pools or excess reinsurance pools and their
members, (ii) any brokerage, agency, managing general agency, administrator, third-party
administrator, insurance or other similar activities relating to the property and casualty or
excess and surplus segments of the insurance industry; and (iii) any other business in which
Holdings or any Subsidiary of Holdings is then engaged.

     4. Non-Solicitation. Stockholder covenants and agrees that during the
Non-Competition Period, Stockholder will not, directly or indirectly, in any manner (whether as an
owner, officer, director, partner, manager, employee, independent contractor, consultant or
otherwise):

     (a) solicit any Producer or customer of the Holdings for policies, products or
services competitive with the Holdings or its Subsidiaries; or

     (b) solicit for employment or other services or employ or engage as a consultant or
otherwise any person who is or was an employee of Holdings.

The covenant in subparagraph (a) above applies to those Producers and customers and the related
entities of the Producers and customers through which wrote, sold or produced any of its policies,
products or services during the twelve (12) month period prior to the termination of Stockholder’s
employment with the Company, and those prospective Producers and customers with which Holdings
pursued sales during such period.

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     5. Non-Disparagement. Stockholder covenants and agrees that from the Effective Date
and thereafter, (i) Stockholder shall not induce or incite claims of discrimination, wrongful
discharge, or any other claims against Holdings (including directors, officers, employees or equity
holders of Holdings), by any other persons, employees or entities, (ii) Stockholder shall not
undertake any harassing or disparaging conduct directed at Holdings (including any of the
directors, officers, employees or equity holders of Holdings), and (iii) Stockholder shall not make
any negative or derogatory statements concerning Holdings (including the officers, directors,
employees, equity holders and agents of Holdings) or the policies, products or services of
Holdings.

     6. Assignment. Holdings shall have the right to assign, in whole or in part and from
time to time, to any purchaser of any segment of the Business, the rights of Holdings set forth in
Sections 3, 4 and 5 of this Agreement to the extent that they relate to the segment of the Business
that is transferred to such purchaser and, upon such assignment, the provisions of Sections 3, 4
and 5 shall continue to bind Stockholder in the same manner as prior to such assignment.

     7. Confidential Information.

     (a) Non-Disclosure. Stockholder in the past has learned and had access to and
may, from time to time, learn or have additional access to information and/or materials,
constituting trade secrets and other confidential and proprietary information of Holdings
or predecessors, or of third parties to whom Holdings or predecessors is obligated to
maintain the confidentiality of, including, but not by way of limitation, financial data,
pricing information, technical data, future plans, Producer and customer and prospective
Producer and customer requirements and marketing techniques and procedures (the
“Confidential Information”). Notwithstanding the foregoing, information which is
or becomes generally available to the public other than as a result of a disclosure by the
Stockholder in violation of this Agreement or other obligation of confidentiality shall not
be deemed Confidential Information for purposes hereof. Holdings shall not be required to
advise Stockholder specifically of the confidential nature of any such Confidential
Information, nor shall Holdings be required to affix a designation of confidentiality to
any tangible item delivered or made available to Stockholder, in order to establish and
maintain the confidential nature of the same. Confidential Information shall include the
work product of Stockholder developed or to be developed as a part or in furtherance of, or
during the working hours of, Stockholder’s engagement with Holdings, including all
financial data, Producers and customers and prospective Producers and customers developed
or to be developed or identified or to be identified by Stockholder. All Confidential
Information provided to Stockholder by Holdings or predecessors or to which Stockholder,
intentionally or inadvertently, otherwise becomes aware, knowledgeable, or in possession of
as a direct or indirect result of Stockholder’s involvement with Holdings in the capacity
of director, employee, or stockholder, shall be held and protected by Stockholder with the
strictest confidentiality, and Stockholder shall not, whether during or after employment,
cause or allow any of the Confidential Information to be disclosed, delivered, transferred,
or otherwise

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made known to any person or entity not expressly authorized by Holdings to receive or
be made aware of the same. Disclosure of Confidential Information by Stockholder, except
as specifically required in the performance of his duties to Holdings, to any person or
entity not then an employee of Holdings who is not subject to a confidentiality agreement
similar to this Section 7 and with a need to know such Confidential Information shall
require prior written authorization by the Board of Directors of Holdings.

     (b) Limitation on Use. All Confidential Information of Holdings or
predecessors, or of any third party to whom Holdings or predecessors owes a duty of
non-disclosure, which Stockholder has received, receives or becomes knowledgeable of shall
be utilized by Stockholder for the singular purpose of carrying out Stockholder’s duties
and undertakings on behalf of Holdings. Stockholder shall diligently protect and maintain
the confidentiality of the Confidential Information. In no event shall Stockholder,
whether during or after employment, copy any Confidential Information, except as needed,
nor utilize any Confidential Information in a manner so as to compete with Holdings, or to
aid or further the competition of any other person or entity with Holdings, or to otherwise
disclose or dispose thereof for personal gain or for any reason injurious to the interests
of Holdings. Upon termination of Stockholder’s employment for any reason, Stockholder
shall immediately turn over to Holdings all books, records, financial data, price lists,
Producer or customer lists and other material relating to Stockholder’s engagement or to
the business of Holdings.

     8. Construction. Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law, but if any provision
of this Agreement or the application thereof to any party or circumstance shall be prohibited by or
invalid under applicable law, including, without limitation, by reason of its being extended over
too great a period of time or too large a geographic area or over too great a range of activities
or otherwise, such provision shall be ineffective to the minimal extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the remaining provisions of
this Agreement or the application of such provision and, if applicable, such provision shall be
interpreted to extend only over the maximum period of time, geographic area or range of activities
as to which is may be enforceable.

     9. Injunctive Relief and Other Remedies. Stockholder agrees that any breach of the
provisions hereof will result in irreparable damage to Holdings for which Holdings will have no
adequate remedy at law, and, therefore if such a breach should occur, Stockholder consents to any
temporary or permanent injunction or decree of specific performance by any court of competent
jurisdiction in favor of Holdings enjoining any such breach, without prejudice to any other right
or remedy to which Holdings shall be entitled and without requirement of a bond or other security.
Stockholder agrees that Stockholder is subject to Section 10.2 of the Amended and Restated
Employment Agreement, dated of even date herewith, between Stockholder and the Company in
accordance with its terms.

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     10. Costs of Enforcement. In the event either party brings an action or proceeding to
enforce any provision or provisions of this Agreement or to obtain damages as a result of a breach
of this Agreement or to enjoin any breach of this Agreement, the nonbreaching party in such action
or proceeding shall be entitled to recover from the breaching party any and all reasonable costs
and expenses (including without limitation attorneys’ fees) incurred by such nonbreaching party in
connection with such action or proceeding.

     11. Extension of Time Period. The time periods for the restrictions set forth in this
Agreement shall be extended by the number of days in which Stockholder is in breach of such
restrictions.

     12. Notices. Any notice required to be given with respect to this Agreement shall be
in writing, and shall be deemed to have been duly given: (a) when delivered personally; (b) two (2)
business days after being deposited with a nationally recognized overnight courier with
instructions for next day delivery; and (c) five (5) business days after being deposited in the
mails, certified or registered, return receipt requested, and with the proper postage prepaid,
addressed as follows:

	 	 	 	 	 
	 

	 	If to Holdings:
	 	First Mercury Holdings, Inc.
	 

	 	 	 	29621 Northwestern Highway
	 

	 	 	 	Southfield, Michigan 48034
	 

	 	 	 	Attention: Richard Smith
	 
	 	 	 	 
	 

	 	If to Stockholder:
	 	Jerome M. Shaw
	 

	 	 	 	3 Grove Isle
	 

	 	 	 	Penthouse 1
	 

	 	 	 	Coconut Grove, Florida 33133
	 
	 	 	 	 
	 

	 	With a copy to:
	 	Spilkin, Shapiro & Feeney, P.C.
	 

	 	 	 	29621 Northwestern Hwy.
	 

	 	 	 	Southfield, Michigan 48034
	 

	 	 	 	Attention: Larry J. Spilkin

The address of any party hereto may be changed by a notice in writing given in accordance with the
provisions hereof.

     13. Amendments and Waiver. No amendment, waiver or consent with respect to any
provision of this Agreement shall in any event be effective, unless the same shall be in writing
and signed by each of the parties hereto, and then such amendment, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which given.

     14. Entire Agreement. This Agreement contains the entire understanding of the parties
hereto respecting the subject matter hereof and supersedes all prior agreements, discussions and
understandings.

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     15. Assignment; Successors. Stockholder may not assign any of his obligations
hereunder. Any assignment in violation of the foregoing shall be null and void. Subject to the
foregoing, this Agreement shall be binding upon the parties hereto and shall inure to the benefit
of the parties hereto and their respective heirs, executors, administrators, legal representatives,
successors and permitted assigns.

     16. Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall constitute but one and the same instrument. One or more counterparts of this Agreement
may be delivered via facsimile, with the intention that they shall have the same effect as an
original counterpart hereof.

     17. Non-Waiver of Breach. A waiver by any party hereto of a particular breach or
default by another party in connection with any provision of this Agreement must be in writing and
shall not be deemed a waiver of a default by a third party or any subsequent default or breach of
the same or any other provision of this Agreement.

     18. GOVERNING LAW. THE VALIDITY AND EFFECT OF THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL SUBSTANTIVE LAWS OF THE STATE OF ILLINOIS.
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF, OR WITH RESPECT TO, THIS AGREEMENT OR ANY JUDGMENT
ENTERED BY ANY COURT IN RESPECT THEREOF SHALL BE BROUGHT EXCLUSIVELY IN THE COURTS OF ILLINOIS OR
IN THE U.S. DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS, AND THE PARTIES HERETO ACCEPT THE
EXCLUSIVE JURISDICTION OF THOSE COURTS FOR THE PURPOSE OF ANY SUIT, ACTION OR PROCEEDING. IN
ADDITION, EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY JUDGMENT ENTERED BY ANY COURT IN
RESPECT THEREOF BROUGHT IN ILLINOIS OR THE U.S. DISTRICT COURT FOR THE NORTHERN DISTRICT OF
ILLINOIS, AND HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUIT, ACTION OR PROCEEDINGS
BROUGHT IN ILLINOIS OR IN SUCH DISTRICT COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. THE
PARTIES HERETO HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING ARISING
OUT OF, OR WITH RESPECT TO, THIS AGREEMENT AND AGREE THAT ANY SUCH SUIT, ACTION OR PROCEEDING SHALL
BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year
first above written.

	 	 	 	 	 	 	 
	 	 	HOLDINGS:	 	 
	 
	 	 	 	 	 	 
	 	 	First Mercury Holdings, Inc.	 	 
	 
	 

	 	By:	 	/s/ Richard H. Smith	 	 
	 

	 	Name:
	 	 
Richard H. Smith
	 	 
	 

	 	Title: 	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	STOCKHOLDER:	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ Jerome M. Shaw 	 	 
	 	 	 	 	 
	 

	 	Name: Jerome M. Shaw	 	 

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