Document:

exv10w8

 

 

Exhibit 10.8

EMPLOYMENT AGREEMENT

     THIS
EMPLOYMENT AGREEMENT (“Agreement”) is made and
entered into as of the 6th day of November, 2003, by and between FIRST MERCURY FINANCIAL CORPORATION, a Delaware
corporation (“Employer”), and RICHARD H. SMITH (“Employee”).

     R E C I T A L S:

     R.1. Employer is a Delaware corporation which holds ownership of various businesses
in the insurance and insurance related fields.

     R.2. Employee has skill and experience in the operations of insurance businesses.

     R.3. Employer desires to employ Employee under the terms and conditions contained
herein.

     R.4. Employee desires to be employed by Employer under such terms and conditions.

     NOW, THEREFORE, in consideration of the above premises and the mutual covenants and
conditions contained herein, Employer and Employee agree as follows:

     1. EMPLOYMENT.

     Employer employs Employee as its President and Chief Operating Officer to perform, the
duties described in Section 3 of this Agreement, and Employee accepts such employment upon all of
the terms and conditions set forth in this Agreement for the term specified in Section 2 of this
Agreement.

     2. TERM.

     The term of employment under this Agreement (the “Term”) shall be continuous until
Employee’s employment is terminated pursuant to and in accordance with the terms hereof.

     3. DUTIES.

          A. Employee, as the President and Chief Operating Officer of Employer, agrees
and promises to perform and discharge in an efficient and competent manner the duties
assigned to Employee by Employer and shall devote his full business and professional
time, energy and diligence to the performance of such duties, for the conduct of
Employer’s business. the duties shall be those duties in connection with Employer’s
business and affairs as are customarily incident to the offices which Employee holds,
In addition, Employee shall serve as a director of Employer and as an officer and
director of the subsidiaries and affiliates of Employer. Those duties shall include
those generally assigned to the president and chief operating
officer of insurance holding and insurance businesses. Employee agrees to perform
those duties necessary to meet the reasonable expectations of Employer as
established from time to time by Employer.

          B. Employee shall devote such time, attention, and energies to the business of
Employer as is necessary for Employee to satisfactorily perform his duties as
President and Chief Operating Officer Except as otherwise provided in this Agreement
or Employer’s policies as adopted by its Board of Directors, Employee shall not during
the Term of this Agreement be

 

 

engaged in any other business activity or accept any
other employment, whether or not such business activity is pursued for gain, profit,
or other pecuniary advantage, without prior approval of Employer.

          C. During the Term of this Agreement, Employee agrees that he will not without
the prior written consent of Employer, either directly or indirectly, alone, or as a
member of any other corporation, partnership, organization or entity, engage in or
become concerned with any other duties or pursuits which are contrary to the best
interest of Employer, except for personal investments which do not conflict with the
business of Employer or the time which Employee is required to devote to Employer’s
business activities.

     4. COMPENSATION.

          A. Base Salary: Employer shall pay to Employee an annual salary (“Base
Salary”), payable in installments twice each month in conformity with Employer’s
ordinary executive payroll procedures in effect during the Term. Employee’s initial
Base Salary shall be Five Hundred Fifty Thousand ($550,000.00) Dollars and shall be
allocated as follows: (i) Salary — basic compensation: $350,000.00 (ii) Agreement not
to compete: $200,000.00.

          B. Bonus Compensation: Employer may but shall not be obligated to pay Employee
additional compensation in the term of a bonus. Employer’s Chairman of the Board and
Chief Executive Officer, Jerome M. Shaw, and/or the Board of Directors may, at the end
of each calendar year, evaluate Employer, the performance of Employer, and determine
Employee’s contribution to the performance. Based upon this evaluation, Employer may,
but shall not under any circumstances be obligated to, pay Employee additional bonus
compensation. Under no circumstances may Employee’s Base Salary be reduced without
Employee’s written consent.

     5. BENEFITS.

     Employer shall provide for Employee those employee welfare, pension and other benefits as
Employer from time to time provides to managerial employees. Anything contained in this Agreement
to the contrary notwithstanding, it is understood that Employer may modify, amend, change, alter,
revoke or terminate any Employer welfare,
pension, or other plan currently maintained by Employer, provided that such change shall apply
to all managerial employees and not be specifically targeted to or against Employee.

     6. REIMBURSEMENT
FOR EXPENSES

     Employee shall be entitled to monthly reimbursements for reasonable costs and expenses of
travel and customer entertainment in the pursuit of Employer’s business; provided. however, that no
reimbursement shall be paid by Employer until: Employee submits paid receipts and other
documentation acceptable to Employer and as required by the Internal Revenue Service to qualify as
ordinary and necessary business expenses pursuant to the applicable provisions of the Internal
Revenue Code of 1986, as amended.

     7. VACATION

     Employee shall receive such paid vacations as Employer may determine to be appropriate.

 

 

     8. DEATH
DURING EMPLOYMENT PERIOD

     In the event Employee dies during the Term. Employer agrees and shall be obligated to pay
to a beneficiary named by Employee, and in the event that Employee shall not name a beneficiary
then to Employee’s estate, the balance of Employee’s Base Salary set forth in Section 4A above for
the remainder of the calendar year in which death occurs.

     9. TERMINATION
OF EMPLOYMENT

          A. Employer shall have the right to immediately terminate Employee’s employment
under this Agreement in the following circumstance:

               (i) For Reasonable Cause. As used in this Agreement, “Reasonable
Cause” shall include any one or more of the following: (a) willful misconduct
on the part of Employee which causes material harm or damage to Employer, (b)
misappropriation by Employee of any material property of Employer, (c)
conviction of Employee of a felony, (d) the failure to perform competently the
duties and obligations assigned by Employer to Employee under the terms of
this Agreement, or (e) any other material breach by Employee of any of his
obligations under this Agreement. Termination for Reasonable Cause may occur
who or without prior notice, in Employer’s sole discretion.

               (ii) Upon a Change of Control. As used in this Agreement, “Change
of Control” shall occur if:

                              (a) Any individual, partnership, firm,
corporation, association, trust, joint-stock company, unincorporated
association or
other entity, or any syndicate or group deemed to be a person
under Section 14(d)(2) of the Securities Exchange Act of 1934, as
amended from time to time (the “Exchange Act”) (other than
shareholders holding more than 20% of Employer’s voting securities
as of the effective date of this Agreement), is or becomes the
“beneficial owner” (as defined in Rule 13d-3 of the General Rules
and Regulations under the Exchange Act), directly or indirectly,
of securities of Employer representing 50% or more of the combined
voting power of Employer’s then outstanding securities entitled to
vote in the election of directors of Employer; or

                              (b) Jerome M. Shaw no longer shall be entitled
either (i) pursuant to that certain Agreement Among Stockholders of
Mercury Insurance Group, inc., (n/k/a First Mercury Financial
Corporation), effective as of January 1, 1994, amended and restated
by agreement effective October 23, 1998, as such agreement may be
amended and/or restated from time to time, or (ii) as a stockholder
of Employer pursuant to its Bylaws, to nominate for election to
Employer’s Board that number of individuals which will constitute a
majority of Employer’s Board; or

                              (c) All or substantially all of the assets of
Employer are transferred, liquidated or distributed.

          B. Employer, at any time, shall have the right to terminate Employee’s
employment under this Agreement without cause upon ninety (90) days written notice,
but, in that event, Employer shall be required to pay to Employee severance pay in an
amount equal to two times the Base Salary plus bonus which Employee received in the
calendar year prior to the year in which such termination notice was given. Employee’s
severance pay shall be paid to Employee in equal monthly installments, the first
installment to commence on the first day of the

 

 

month after the ninety (90) day notice
expires, and a like payment to be paid to Employee on the first day of each month
thereafter until twenty four (24) consecutive equal monthly payments have been made.
The severance pay to be paid to Employee shall be deemed to be in consideration for
the agreement of Employee not to compete as set forth in Section 10 below, and shall
be in lieu of any benefits which Employee may have been entitled to receive from
Employer as an employee, which benefits shall terminate on the date of Employee’s
termination. The severance pay to be paid pursuant to this Section 9B shall be due and
payable only in the event that Employer elects in Employer’s sole discretion to
terminate Employee’s employment pursuant to this Section 9B. In addition, the
severance pay to be paid to Employee shall be in lieu of and shall not be in addition
to benefits which
Employee may have been entitled to under the First Mercury Financial Corporation
Executive Benefit Plan effective October 1, 1998, as amended, which plan is being
terminated by Employer, and Employee consents to the termination of such plan.

          C. Employee’s right to terminate his employment with Employer under this
Agreement shall be limited to the following circumstances: (i) any material breach by
Employer of any of its obligations under this Agreement; (ii) the institution of any
bankruptcy or similar proceeding against Employer, if such proceeding is not dismissed
within sixty (60) business days; (iii) the involuntary dissolution of Employer; or
(iv) for any reason or no reason following 90 days written notice to Employer.

     10. COVENANT
NOT TO COMPETE/CONFIDENTIAL INFORMATION

     Employee recognizes that during the course of his employment with Employer. Employee has
had and will continue to have access to substantial amounts of confidential and proprietary
information and trade secrets relating to the business of Employer, and that it would be
detrimental to the business of Employer, and have a substantial detrimental effect on the value to
Employer of Employee’s employment, if Employee were to compete with Employer upon the termination
of his employment. Therefore, in consideration of Employer entering into this Agreement and
establishing the compensation and benefits to be paid to and derived by Employee pursuant to the
terms of this Agreement, Employee agrees that during the Term of this Agreement and for a period of
thirty six (36) months after termination of this Agreement, Employee will not: (i) engage in,
assist in, or in any manner become interested in, directly or indirectly, as an owner, partner,
joint venturer, investor, shareholder, member, employee, consultant, agent or otherwise in any
competing business; (ii) accept employment with or directly or indirectly render services or
assistance to a third party in a competing business as a director, officer, agent, employee, or
consultant (with or without compensation) or contract with or work for a competing business; or
(iii) directly or indirectly solicit for employment any person presently employed by Employer or an
affiliate of Employer or induce any individual employed by Employer to change employment or quit
the employment of Employer. As used herein, the term “competing business” shall mean any business,
trade or operation which conducts any business in the insurance industry including but not limited
to insurance agencies, insurance carriers, insurance consulting firms, insurance brokers, insurance
general managing agencies. or similar businesses.

     Further, during employment and after termination of employment, Employee will not, unless
otherwise required to do so by law, divulge or furnish any of Employer’s confidential information
to any person, firm, company or corporation or use any such confidential information directly or
indirectly for Employee’s own benefit or for the benefit of any person, firm or entity other than
Employer. Employee acknowledges that all confidential information is to be and shall, at all times,
remain the property of Employer. Confidential information as used herein shall

 

 

mean, without
limitation, the names and addresses of brokers that do business with Employer, customer lists,
customer files, customer information including, but not limited to, expiration information and
types of coverages that customers require, pricing information, and product information of
Employer, marketing techniques and programs of Employer and methods that Employer
procures business, as well as information concerning Employer’s dealing with third parties
such as reinsurance companies,

     Upon termination, Employer shall have the right to request that Employee enter into and
execute a separate agreement which reasonably incorporates the terms and conditions of this Section
10.

     Employer and Employee agree, in light of the facts known as of this date, and after
considering the nature and extent of Employer’s business, Employee’s position with Employer, the
amount of compensation and other benefits provided herein, and the damages that could be done to
Employer’s business by Employee competing with Employer, that the foregoing restriction on
competition is reasonable. However, if a court or arbitrator should construe any portion of the
restriction to be too broad or extensive, it is the intent of the parties that this Agreement be
automatically reformed to permit the broadest scope of the restriction, and, as so reformed,
enforced to the maximum limits which may be found to be reasonable by such court or arbitrator.

     11. DISPUTE
RESOLUTION.

     Employer and Employee agree that any dispute arising out of or related to this Agreement,
or the breach thereof, whether occurring during the Term of the Agreement or after the Agreement
expires or is terminated, shall be submitted exclusively to binding arbitration in the following
manner:

          A. Within ninety (90) days of a dispute arising, the aggrieved party shall send
written notice to the other party. Such notice shall describe the nature of the
dispute that is claimed and the relief demanded by the aggrieved party.

          B. Within the next thirty (30) days, the parties shall attempt to resolve the
dispute between themselves through informal discussion.

          C. If at the end of such thirty (30) days there is no resolution of the dispute,
either party may submit the dispute to binding arbitration pursuant to the Voluntary
Labor Arbitration Rules of the American Arbitration Association, as amended, which are
incorporated herein by this reference. In addition to those rules, the following
provisions shall apply:

               (i) The decision of the arbitrator shall be final and binding
upon the parties.

               (ii) Except as explicitly provided in this Agreement, in reaching
his or her decision, the arbitrator shall have no authority to add, subtract
from or modify any provisions of this Agreement.

               (iii) In reaching his or her decision, the arbitrator may award
damages and/or order the parties to provide specific performance of the terms
of this Agreement. However, the arbitrator may not under any circumstances
award punitive, exemplary or similar damages to either party.

 

 

          D. By agreeing to this arbitration provision, both parties waive any and all
rights they have to pursue any other claims arising out of this Agreement or
Employee’s employment with the Employer through civil litigation in any local, state
and/or federal court or administrative agency.

          E. Neither Employer nor Employee shall have the right to appeal any decision or
order of the arbitrators or of arbitration to any court. Either party may enter any
order, decision or judgment of any arbitration panel or arbitrator in a court of
competent jurisdiction.

          F.Anything contained in this Agreement to the contrary notwithstanding,
Employee acknowledges that in the event that Employee were to violate the terms and
conditions of Section 10 of this Agreement, Covenant Not to Compete/Confidential
Information, Employer would suffer immediate and irreparable harm. In the event of a
violation or breach of the terms and conditions of Section 10, Employee agrees that
Employer is entitled to and shall be entitled to injunctive relief in addition to any
other relief or damages that Employer shall incur and which may be recoverable in any
manner. Employer may seek injunctive relief in any manner and in any form that
Employer deems suitable in Employer’s sole discretion, and shall be entitled to
enforce injunctive relief in a court of competent jurisdiction.

     12. NOTICES.

     Any and all notices given in connection with this Agreement shall be deemed adequately
given only if in writing and personally delivered or sent by first class registered or certified
mail (or any other means which are at least as fast and reliable as registered or certified mail),
postage prepaid, to the party for whom such notices are intended. A written notice shall be deemed
to have been given to the recipient party on the earlier of. (a) the date it shall be delivered to
the address required by this Agreement; or (b) the date delivery shall have been refused at the
address required by this Agreement; or (c) with respect to notices sent by mail or other means, the
date as of which the postal service or other carrier shall have indicated such notice to be
undeliverable at the address required by this Agreement. Any and all notices referred to in this
Agreement, or which either party desires to give to the other, shall be addressed as follows:

	 	 	 	 	 	 	 
	 

	 	To Employer:
	 	First Mercury Financial Corporation	 	 
	 

	 	 	 	29621 Northwestern Highway	 	 
	 

	 	 	 	Southfield, MI 48034	 	 
	 

	 	 	 	Attention: Jerome M. Shaw	 	 
	 
	 	 	 	 	 	 
	 

	 	To Employee:
	 	Richard H. Smith	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 

	 	 

The above addresses may be changed by notice of such change, given as provided herein, to the last
address designated.

     13. REPRESENTATION
AND WARRANTY.

 

 

     Employee represents and warrants that he is in no way restricted, whether by an
employment agreement, a noncompetition agreement or otherwise, from entering into and performing
under this Agreement or from becoming employed by Employer

     14. MISCELLANEOUS.

          A. CAPTIONS AND HEADINGS: The captions and headings herein are inserted only as
a matter of convenience and for reference and in no way define, limit, or describe the
scope of this Agreement or the intent of any provision thereof

          B. GOVERNING LAW AND VENUE: This Agreement shall be construed and enforced in
accordance with and interpreted by the internal laws of the State of Illinois, without
regard to principles of conflicts of law.

          C. WAIVER: No restriction, condition, obligation or provision contained in this
Agreement shall be deemed to have been abrogated or waived by reason of any failure to
enforce the same, irrespective of the number of violations or breaches thereof which
may occur.

          D. SEVERABILITY: The provisions hereof shall be deemed independent and
severable, and the invalidity or partial invalidity or unenforceability of any
provision shall not affect the validity or enforceability of the remainder of this
Agreement. In the event any provision is deemed unenforceable, the remainder of this
Agreement shall be modified to the minimum extent necessary to render this Agreement
valid and enforceable.

          E. ASSIGNMENT: This Agreement is Employees personal undertaking, and Employee
may not transfer or assign any of his obligations or rights hereunder; however, this
Agreement shall be binding upon Employees heirs, executors, administrators and
personal representatives. The rights and obligations of Employer under this Agreement
shall inure to the benefit of and shall be binding upon its successors and assigns of
Employer.

          F. NO CONFLICTING OBLIGATIONS: Employee represents and warrants to Employer that
he is not under, or bound to be under in the future, any obligation to any person,
firm or corporation that is or would be inconsistent or conflict with this Agreement
or would prevent, limit or impair in any way the performance by Employee of his
obligations hereunder.

          G. COUNTERPARTS: This Agreement may be executed in multiple counterparts, each
of which shah be considered an original, but all of which. together, shall constitute
a single agreement.

          H. GENDER: The use of any gender in this Agreement shall be deemed to include
either or both of the genders, and the use of the singular shall be deemed to include
the plural whenever the context so requires.

          I. AMENDMENT: This Agreement may be amended only by a written instrument signed
by the parties hereto.

          J. COMPLETE AGREEMENT: This Agreement constitutes the entire agreement and
understanding among the parties concerning the subject matter hereof and this
Agreement supersedes any and all prior negotiations, proposed agreements or
understandings, if any, among the parties concerning any of the provisions of this
Agreement.

 

 

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.

	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 	 	EMPLOYER:	 	 
	 	 	FIRST MERCURY FINANCIAL CORPORATION	 	 
	 
	 

	 	By:	 	/s/ Jerome M. Shaw
	 	 	 	 	 	 	 
	 

	 	 	 	Its:	 	CEO
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	EMPLOYER:	 	 
	                                                       
	 
	 	/s/ Richard H. Smith
	 	 	 	 	 
	 	 	RICHARD H. SMITHexv10w10

 

Exhibit 10.10

EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into as of the 27th day of
February, 2004, by and between FIRST MERCURY FINANCIAL CORPORATION, a Delaware corporation
(“Employer”), and WILLIAM S. WEAVER (“Employee”).

     R E C I T A L S:

     R.1. Employer is a Delaware corporation which holds ownership of various businesses in the
insurance and insurance related fields.

     R. 2. Employee has skill and experience in the operations of insurance businesses.

     R. 3. Employer desires to employ Employee under the terms and conditions contained herein.

     R. 4. Employee desires to be employed by Employer under such terms and conditions.

     NOW, THEREFORE, in consideration of the above premises and the mutual covenants and
conditions contained herein. Employer and Employee agree as follows:

     1. EMPLOYMENT.

     Employer employs Employee as its Chief Financial Officer, Senior Vice President and Treasurer
to perform the duties described in Section 3 of this Agreement, and Employee accepts such
employment upon all of the terms and conditions set forth in this Agreement for the term specified
in Section 2 of this Agreement.

     2. TERM.

     The term of employment under this Agreement (the “Term”) shall be continuous until Employee’s
employment is terminated pursuant to and in accordance with the terms hereof.

     3. DUTIES.

          A. Employee, as the Chief Financial Officer, Senior Vice President and Treasurer of Employer,
agrees and promises to perform and discharge in an efficient and competent manner the duties
assigned to Employee by Employer and shall devote his full business and professional time, energy
and diligence to the performance of such duties, for the conduct of Employer’s business. The duties
shall be those duties in connection with Employer’s business and affairs as are customarily
incident to the offices which Employee holds. In addition, Employee shall serve as a director of
Employer and as an officer and director of the subsidiaries and affiliates of Employer. Those
duties shall include those generally assigned to the chief financial officer, senior vice president
and treasurer of insurance holding and insurance businesses. Employee agrees to perform
those duties necessary to meet the reasonable expectations of Employer as established from time to
lime by Employer.

          B. Employee shall devote such time, attention, and energies to the business of Employer as is
necessary for Employee to satisfactorily perform his duties as Chief Financial Officer, Senior Vice
President and Treasurer. Except as otherwise provided in this Agreement or Employer’s policies as
adopted by its Board of Directors, Employee shall not during the Term of

 

 

this Agreement be engaged
in any other business activity or accept any other employment, whether or not such business
activity is pursued for gain, profit, or other pecuniary advantage, without prior approval of
Employer.

          C. During the Term of this Agreement, Employee agrees that he will not without the prior written
consent of Employer, either directly or indirectly, alone, or as a member of any other corporation,
partnership, organization or entity, engage in or become concerned with any other duties or
pursuits which are contrary to the best interest of Employer, except for personal investments which
do not conflict with the business of Employer or the time which Employee is required to devote to
Employer’s business activities.

     4. COMPENSATION.

          A. Base Salary: Employer shall pay to Employee an annual salary (“Base Salary”), payable in
installments twice each month in conformity with Employers ordinary executive payroll procedures in
effect during the Term. Employee’s initial Base Salary shall be TWO HUNDRED TWENTY FIVE THOUSAND
($225,000.00) Dollars.

          B. Bonus Compensation: Employer may but shall not be obligated to pay Employee additional
compensation in the term of a bonus. Employer’s Chairman of the Board and Chief Executive Officer,
Jerome M. Shaw, and/or the Board of Directors may, at the end of each calendar year, evaluate
Employer, the performance of Employer, and determine Employee’s contribution to the performance.
Based upon this evaluation, Employer may, but shall not under any circumstances be obligated to,
pay Employee additional bonus compensation. Under no circumstances may Employees Base Salary be
reduced without Employee’s written consent.

     5. BENEFITS.

     Employer shall provide for Employee those employee welfare, pension and other benefits as
Employer from time to time provides to managerial employees. Anything contained in this Agreement
to the contrary notwithstanding, it is understood that Employer may modify, amend, change, alter,
revoke or terminate any Employer welfare, pension, or other plan currently maintained by Employer,
provided that such change shall apply to all managerial employees and not be specifically targeted
to or against Employee.

     6. REIMBURSEMENT FOR EXPENSES

     Employee shall be entitled to monthly reimbursements for reasonable costs and expenses of
travel and customer entertainment in the pursuit of Employer’s business; provided, however, that no
reimbursement shall be paid by Employer until Employee submits paid receipts and other
documentation acceptable to Employer and as required
by the Internal Revenue Service to qualify as ordinary and necessary business expenses
pursuant to the applicable provisions of the Internal Revenue Code of 1986, as amended.

     7. VACATION

     Employee shall receive such paid vacations as Employer may determine to be appropriate.

     8. DEATH DURING EMPLOYMENT PERIOD

 

 

     In the event Employee dies during the Term, Employer agrees and shall be obligated to pay to a
beneficiary named by Employee, and in the event that Employee shall not name a beneficiary then to
Employee’s estate, the balance of Employee’s Base Salary set forth in Section 4A above for the
remainder of the calendar year in which death occurs.

     9. TERMINATION OF EMPLOYMENT

          A. Employer shall have the right to immediately terminate Employee’s employment under this
Agreement in the following circumstance:

               (i) For Reasonable Cause. As used in this Agreement, “Reasonable Cause” shall include any one or
more of the following: (a) willful misconduct on the part of Employee which causes material harm or
damage to Employer, (b) misappropriation by Employee of any material property of Employer, (c)
conviction of Employee of a felony, (d) the failure to perform competently the duties and
obligations assigned by Employer to Employee under the terms of this Agreement, or (e) any other
material breach by Employee of any of his obligations under this Agreement. Termination for
Reasonable Cause may occur with or without prior notice, in Employer’s sole discretion.

               (ii) Upon a Change of Control. As used in this Agreement, “Change of Control” shall occur if:

                    (a) Any individual, partnership, firm, corporation, association. trust,
joint-stock company, unincorporated association or other entity, or any syndicate or
group deemed to be a person under Section 14(d)(2) of the Securities Exchange Act of
1934, as amended from time to time (the “Exchange Act”) (other than shareholders
holding more than 20% of Employer’s voting securities as of the effective date of this
Agreement), is or becomes the “beneficial owner” (as defined in Rule 13d-3 of the
General Rules and Regulations under the Exchange Act), directly or indirectly, of
securities of Employer representing 50% or more of the combined voting power of
Employer’s then outstanding securities entitled to vote in the election of directors
of Employer; or

                    (b) Jerome M. Shaw no longer shall be entitled either (i) pursuant to that
certain Agreement Among Stockholders of Mercury Insurance Group, Inc., (n/k/a First
Mercury Financial Corporation), effective as of January 1, 1994, amended and restated
by agreement effective October 23, 1998, as such agreement may be amended and/or
restated from time to time, or
(ii) as a stockholder of Employer pursuant to its By-Laws, to nominate for election
to Employer’s Board that number of individuals which will constitute a majority of
Employer’s Board; or

                    (c) All or substantially all of the assets of Employer are transferred,
liquidated or distributed.

          B. Employer, at any time, shall have the right to terminate Employee’s employment under this
Agreement without cause upon ninety (90) days written notice, but, in that event, Employer shall be
required to pay to Employee severance pay in an amount equal to two times the Base Salary plus
bonus which Employee received in the calendar year prior to the year in which such termination
notice was given. Employee’s severance pay shall be paid to Employee in equal monthly installments,
the first installment to commence on the first day of the month after the ninety (90) day notice
expires, and a like payment to be paid to Employee on the first day of each month thereafter until
twenty four (24) consecutive equal monthly payments

 

 

have been made. The severance pay to be paid to
Employee shall be deemed to be in consideration for the agreement of Employee not to compete as set
forth in Section 10 below, and shall be in lieu of any benefits which Employee may have been
entitled to receive from Employer as an employee, which benefits shall terminate on the date of
Employee’s termination. The severance pay to be paid pursuant to this Section 98 shall be due and
payable only in the event that Employer elects in Employer’s sole discretion to terminate
Employee’s employment pursuant to this Section 9B. In addition, the severance pay to be paid to
Employee shall be in lieu of and shall not be in addition to benefits which Employee may have been
entitled to under the First Mercury Financial Corporation Executive Benefit Plan effective October
1, 1998, as amended, which plan is being terminated by Employer, and Employee consents to the
termination of such plan.

          C. Employee’s right to terminate his employment with Employer under this Agreement shall be limited
to the following circumstances: (i) any material breach by Employer of any of its obligations under
this Agreement; (ii) the institution of any bankruptcy or similar proceeding against Employer, if
such proceeding is not dismissed within sixty (60) business days: (iii) the involuntary dissolution
of Employer; or (iv) for any reason or no reason following 90 days written notice to Employer.

     10. CONFIDENTIAL INFORMATION

     During employment and after termination of employment, Employee will not, unless otherwise
required to do so by law, divulge or furnish any of Employer’s confidential information to any
person, firm, company or corporation or use any such confidential information directly or
indirectly for Employee’s own benefit or for the benefit of any person, firm or entity other than
Employer. Employee acknowledges that all confidential information is to be and shall, at all times,
remain the property of Employer Confidential information as used herein shall mean, without
limitation, the names and addresses of brokers that do business with Employer, customer lists,
customer files, customer information including, but not limited to, expiration information and
types of coverages that customers require, pricing information, and product information of
Employer, marketing techniques and programs of Employer and methods that Employer procures
business, as well as information concerning Employer’s dealing with third parties such as
reinsurance companies.

     Upon termination. Employer shall have the right to request that Employee enter into and
execute a separate agreement which reasonably incorporates the terms and conditions of this Section
10.

     11. DISPUTE RESOLUTION.

     Employer and Employee agree that any dispute arising out of or related to this Agreement, or
the breach thereof, whether occurring during the Term of the Agreement or after the Agreement
expires or is terminated, shall be submitted exclusively to binding arbitration in the following
manner:

          A. Within ninety (90) days of a dispute arising, the aggrieved party shall send written notice to
the other party. Such notice shall describe the nature of the dispute that is claimed and the
relief demanded by the aggrieved party.

          B. Within the next thirty (30) days, the parties shall attempt to resolve the dispute between
themselves through informal discussion.

 

 

          C. If at the end of such thirty (30) days there is no resolution of the dispute, either party may
submit the dispute to binding arbitration pursuant to the Voluntary Labor Arbitration Rules of the
American Arbitration Association, as amended, which are incorporated herein by this reference. In
addition to those rules, the following provisions shall apply:

               (i) The decision of the arbitrator shall be final and binding upon the parties.

               (ii) Except as explicitly provided in this Agreement, in reaching his or her decision, the
arbitrator shall have no authority to add, subtract from or modify any provisions of this
Agreement.

               (iii) In reaching his or her decision, the arbitrator may award damages and/or order the parties to
provide specific performance of the terms of this Agreement. However, the arbitrator may not under
any circumstances award punitive, exemplary or similar damages to either party.

          D. By agreeing to this arbitration provision, both parties waive any and all rights they have to
pursue any other claims arising out of this Agreement or Employee’s employment with the Employer
through civil litigation in any local, state and/or federal court or administrative agency.

          E. Neither Employer nor Employee shall have the right to appeal any decision or order of the
arbitrators or of arbitration to any court. Either party may enter any order, decision or judgment
of any arbitration panel or arbitrator in a court of competent jurisdiction.

          F. Anything contained in this Agreement to the contrary notwithstanding, Employee acknowledges that
in the event that Employee were to violate the terms and conditions of Section 10 of this
Agreement, Confidential Information, Employer would suffer immediate and irreparable harm. In the
event of a violation or breach of the terms and conditions of Section 10, Employee agrees that
Employer is entitled to and shall be entitled to injunctive relief in addition to any other relief
or damages that Employer shall incur and which may be recoverable in any manner. Employer may seek
injunctive relief in any manner and in any form that Employer deems suitable in Employer’s sole
discretion, and shall be entitled to enforce injunctive relief in a court of competent
jurisdiction.

     12. NOTICES.

     Any and all notices given in connection with this Agreement shall be deemed adequately given
only if in writing and personally delivered or sent by first class registered or certified mail (or
any other means which are at least as fast and reliable as registered or certified mail), postage
prepaid, to the party for whom such notices are intended. A written notice shall be deemed to have
been given to the recipient party on the earlier of. (a) the date it shall be delivered to the
address required by this Agreement; or (b) the date delivery shall have been refused at the address
required by this Agreement; or (c) with respect to notices sent by mail or other means, the date as
of which the postal service or other carrier shall have indicated such notice to be undeliverable
at the address required by this Agreement. Any and all notices referred to in this Agreement, or
which either party desires to give to the other, shall be addressed as follows:

 

 

	 	 	 	 	 
	 

	 	To Employer:
	 	First Mercury Financial Corporation
	 

	 	 	 	29621 Northwestern Highway
	 

	 	 	 	Southfield, Ml 48034
	 

	 	 	 	Attention: Jerome M. Shaw
	 
	 	 	 	 
	 

	 	To Employee:
	 	William S. Weaver
	 

	 	 	 	47455 Blue Heron Court
	 

	 	 	 	Northville, Ml 46167

     The above addresses may be changed by notice of such change, given as provided herein, to the
last address designated.

     13. REPRESENTATION AND WARRANTY.

     Employee represents and warrants that lie is in no way restricted, whether by an employment
agreement. a noncompetition agreement or otherwise, from entering into and performing under this
Agreement or from becoming employed by Employer.

     14. MISCELLANEOUS.

          A. CAPTIONS AND HEADINGS: The captions and headings herein are inserted only as a matter of
convenience and for reference and in no way define, limit or describe the scope of this Agreement
or the intent of any provision thereof

          B. GOVERNING LAW AND VENUE: This Agreement shall be construed and enforced in accordance with and
interpreted by the internal laws of the State of Illinois, without regard to principles of
conflicts of law.

          C. WAIVER: No restriction, condition, obligation or provision contained in this Agreement shall be
deemed to have been abrogated or waived by reason of any failure
to enforce the same, irrespective of the number of violations or breaches thereof which may occur

          D. SEVERABILITY: The provisions hereof shall be deemed independent and severable, and the
invalidity or partial invalidity or unenforceability of any provision shall not affect the validity
or enforceability of the remainder of this Agreement. In the event any provision is deemed
unenforceable, the remainder of this Agreement shall be modified to the minimum extent necessary to
render this Agreement valid and enforceable.

          E. ASSIGNMENT: This Agreement is Employee’s personal undertaking, and Employee may not transfer or
assign any of his obligations or rights hereunder; however, this Agreement shall be binding upon
Employees heirs, executors, administrators and personal representatives. The rights and obligations
of Employer under this Agreement shall inure to the benefit of and shall be binding upon its
successors and assigns of Employer.

          F. NO CONFLICTING OBLIGATIONS: Employee represents and warrants to Employer that he is not under,
or bound to be under in the future, any obligation to any person, firm or corporation that is or
would be inconsistent or conflict with this Agreement or would prevent, limit or impair in any way
the performance by Employee of his obligations hereunder.

 

 

          G. COUNTERPARTS: This Agreement may be executed in multiple counterparts, each of which shall be
considered an original, but all of which, together. shall constitute a single agreement.

          H. GENDER: The use of any gender in this Agreement shall be deemed to include either or both of the
genders, and the use of the singular shall be deemed to include the plural whenever the context so
requires.

          I. AMENDMENT: This Agreement may be amended only by a written instrument signed by the parties
hereto

          J. COMPLETE AGREEMENT: This Agreement constitutes the entire agreement and understanding among the
parties concerning the subject matter hereof and this Agreement supersedes any and all prior
negotiations, proposed agreements or understandings, if any, among the parties concerning any of
the provisions of this Agreement.

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed
as of the date first above written.

	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 	 	EMPLOYER:	 	 
	 	 	FIRST MERCURY FINANCIAL CORPORATION	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	/s/ Jerome M. Shaw 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Its:	 	Chairman	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	EMPLOYEE:	 	 
	 
	 	/s/ William S. Weaver	 	 
	 	 	 	 	 
	 	 	WILLIAM S. WEAVER

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