Document:

Exhibit 10.2

 

Exhibit 10.2

EXECUTION VERSION

September 12, 2005

Mr. Scott Purviance

American Wholesale Insurance Group, Inc.

4064 Colony Road, Suite 450

Charlotte, NC 28211

Dear Scott,

     This letter confirms the terms of your continued investment in American Wholesale Insurance
Holding Company, LLC (“Holdings”) and your employment by American Wholesale Insurance
Group, Inc. (the “Company”), Holdings’ subsidiary.

	 	1.	 	Your title shall be Chief Financial Officer of the Company. You shall render such
services to the Company, and have such authority and responsibilities, as are customary for
a chief financial officer. You shall consider your employment by the Company as your
principal employment, and you shall devote all necessary time and attention (and your full
business time and attention) to your duties and responsibilities as Chief Financial
Officer. During the term of your employment, you shall not maintain any other employment
without the consent of the Board of Directors of the Company (the ‘‘Board”). You
shall report directly to the President & CEO of the Company and be subject to the overall
direction and authority of the Board. You will be expected to travel to the degree
necessary and appropriate to perform the duties and responsibilities of your position.
	 
	 	2.	 	The terms of your employment with the Company shall be governed by this agreement as of
the date hereof and shall continue to be governed by this agreement, as amended or modified
from time to time, until your employment is terminated. The Company may terminate your
employment for Cause (as defined below) upon written notice to you. The Company may
terminate your employment without Cause upon thirty (30) days written notice to you. You
may terminate your employment for any reason upon thirty (30) days written notice to the
Company. Your employment would also terminate as a result of your death or Disability.
“Disability” means a termination of employment in which you are eligible for, and
are receiving, long-term disability benefits under the Company’s long-term disability plan.
If you are not eligible or elect not to receive such benefits, “Disability” means
any physical or mental impairment that renders you unable to perform the important
functions of your job under the terms of this agreement for a period of at least 180 days
during a twelve-month period. At the Company’s request, you shall submit to an examination
by a duly licensed physician who is mutually acceptable to the Company and you for the
purpose of determining whether you have a Disability, and you shall authorize the physician
to release the results of your examination to the Company.
	 
	 	3.	 	Effective January 1, 2006, and for the period thereafter that you are employed by the
Company, your salary will be $300,000 per year and an additional salary equal to the

 

 

	 	 	 	actual dues owed by you for such month for membership at a country club, up to a maximum
monthly amount of $500 (collectively, “Base Salary”), in each case, payable in
installments according to the Company’s regular payroll schedule and subject to
applicable withholdings and other applicable governmental rules and regulations. Base
Salary and all bonus amounts payable hereunder shall be reviewed annually for increase.
You shall provide the Company with supporting documentation of the country club dues
incurred by you described above. Notwithstanding the foregoing, for the period from the
effective date of this agreement through December 31, 2005, your Base Salary will be
paid on the basis of an annual salary of $225,000 (plus country club dues), and you
shall be entitled to a cash bonus, payable March 15, 2006, in the amount of $75,000, in
each case, subject to applicable withholdings and other applicable governmental rules
and regulations.
	 
	 	4.	 	Beginning for the calendar year 2006, you are eligible to receive an annual incentive
bonus while you are employed by the Company in an amount equal to up to $110,000. The
criteria for the annual incentive bonus and any bonus amount shall be determined by the
Board, in good faith consultation with you.
	 
	 	 	 	Any bonus payments made pursuant to this agreement shall be subject to applicable
withholdings and other applicable governmental rules and regulations. Any bonus payable
to you pursuant to this Section 4 shall be paid no later than March 15th of the year
immediately following the taxable year in which such bonus is earned.
	 
	 	5.	 	Upon execution of Holdings’ Amended and Restated Limited Liability Company Agreement
(the “LLC Agreement”) and an Executive Unit Agreement (an “Executive Unit
Agreement”), you will be issued (i) Class B Units (the “Class B Units”), (ii)
Class C Units (the “Class C Units”), (iii) Class D Units (the “Class D
Units”) and (iv) Class E Units (the “Class E Units”, and together with the
Class B Units, Class C Units and Class D Units, collectively the “Management
Units”) in Holdings as follows:

	 	i.	 	Your Class B Units shall constitute 0.375% of the common equity
interests of Holdings on a fully diluted basis as of the date hereof (to the extent
in-the-money), which will participate in distributions after the relevant
Investment Target (as defined below) has been met.
	 
	 	ii.	 	Your Class C Units shall constitute 0.375% of the common equity
interests of Holdings on a fully diluted basis as of the date hereof (to the extent
in-the-money), which will participate in distributions after the relevant
Investment Target (as defined below) has been met.
	 
	 	iii.	 	Your Class D Units shall constitute 0.375% of the common equity
interests of Holdings on a fully diluted basis as of the date hereof (to the extent
in-the-money), which will participate in distributions after the relevant
Investment Target (as defined below) has been met.

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	 	iv.	 	Your Class E Units shall constitute 0.375% of the common equity
interests of Holdings on a fully diluted basis as of the date hereof (to the extent
in-the-money), which will participate in distributions after the relevant
Investment Target (as defined below) has been met.

	 	 	 	The “Investment Target” shall be deemed met for any given class of Management
Units when AmWINS Holdings, LLC (“Investor”) has achieved an IRR (as defined in
Schedule 1 attached hereto) of at least the applicable IRR Target for such class
of Management Units as set forth on Schedule 1 attached hereto. Any given class
of Management Units shall only have the right to participate in distributions once the
relevant Investment Target has been achieved, and shall not receive any amounts for
distributions made prior to the time of achievement of such Investment Target.
	 
	 	6.	 	Your Class B Units, Class C Units, Class D Units and Class E Units will vest (pro rata
as to each Class) over five years, with the first tranche (i.e., 20%) vesting on the first
anniversary of the date of the closing (the “Closing Date”) of the transactions
contemplated by the Unit Purchase Agreement (as defined below) and with pro rata vesting on
a monthly basis thereafter, such that following the five year anniversary of the Closing
Date your Management Units will be 100% vested. You will only be eligible to participate
in distributions pursuant to Section 5 above to the extent your Management Units
are vested. Any distributions made with respect to unvested but participating Management
Units shall be set aside in an escrow to be paid to you upon vesting or, if vesting is not
achieved, reallocated to the members of Holdings according to the terms of the LLC
Agreement. The Management Units will have anti-dilution protection from any non-economic
changes to Holdings (changes equivalent to unit splits, reverse unit splits and
non-economic recapitalizations). Furthermore, upon a Sale (as defined term in LLC
Agreement or Executive Unit Agreement) of Holdings or the Company, 100% of your Management
Units will vest in accordance with the terms of your Executive Unit Agreement. Holdings
shall approve such acceleration of vesting to the extent and in the manner required by
Section 280G of the Internal Revenue Code of 1986, as amended, and the related Treasury
regulations.
	 
	 	7.	 	You will be entitled to participate in all employee benefits made generally available
to executives of the Company. If your employment with the Company is terminated for any
reason, you shall be entitled to continue participation in any of the Company’s benefit
plans that constitute group health plans (as defined in Section 5000(b)(1) of the Code)
from and after the date of such termination by electing health continuation coverage
pursuant to Section 4980B of the Internal Revenue Code and Part 6 of Subtitle B of Title I
of ERISA (“COBRA”), plus the continued medical coverage described in subsection
(ii) of the first paragraph of Section 8 below. The cost of such COBRA coverage shall be
borne by you in accordance with the Company’s COBRA premiums for similarly situated
employees.
	 
	 	8.	 	If your employment with the Company is terminated by the Company without Cause,
including without limitation your death or Disability, or by you for Good Reason (as
defined below): (i) the Company or Holdings will pay you or your estate, as

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	 	 	 	applicable, or as may be directed by your or your estate’s legal representatives, an
amount equal to your Base Salary, payable following the termination date in installments
over a twelve month period according to the Company’s regular payroll schedule and
subject to applicable withholdings and other applicable governmental rules and
regulations; (ii) the Company or Holdings will continue to provide you and your
dependents with comparable health insurance and benefits until the first anniversary of
the termination at active employee rates (to the extent permitted by the Company’s
benefit plans); (iii) except as provided in this agreement, you or your estate may
retain ownership of your Class A common units, such ownership to be subject to the
restrictions on transfer and other terms of the LLC Agreement; and (iv) your Management
Units shall be subject to the terms (including repurchase terms) of the LLC Agreement
and Executive Unit Agreement.
	 
	 	 	 	If your employment with the Company is terminated by the Company without Cause or by you
for Good Reason, you shall be entitled to sell back your common units to Holdings (or
its designee) up to a value of $300,000 at the fair market value of such common units as
determined in accordance with the terms of the LLC Agreement as of the date of
termination, if and only as long as: (i) you or your (or your estate’s) legal
representative irrevocably elect to sell such common units within 30 days of
termination, (ii) at the time of such payment and after giving effect to such payment
(a) the Company would continue to have adequate cash availability (as determined by the
Company in its good faith sole discretion) and (b) the Company and its subsidiaries
would be in full compliance with all of its financing agreements (without any default,
acceleration or any other potential adverse consequences being in existence or otherwise
arising as a result of such payment), (iii) a Public Offering (as defined in the LLC
Agreement) has not previously occurred and (iv) a Sale of the Company (as defined in the
LLC Agreement) has not previously occurred in which all (or substantially all) of your
common units were sold for cash. Subject to the preceding sentence, the purchase price
for your common units as described above in this paragraph shall be paid on the one year
anniversary of the date of termination.
	 
	 	 	 	In addition to any other benefit provided pursuant to this Section 8, upon any
termination of employment, you will receive: (i) all accrued but unpaid (as of the
effective date of such termination) Base Salary and benefits, including your earned but
not yet paid bonus for the calendar year 2005, (ii) any accrued but unused vacation pay,
(iii) any other amounts or benefits owing to you under the then applicable employee
benefit plans of the Company (if any) and (iv) any unreimbursed business expenses
(collectively, the “Accrued Amounts”). You agree you shall not be entitled to
any salary, compensation or benefits from the Company after termination of your
employment with the Company, except as expressly set forth in this agreement.
	 
	 	 	 	You shall not be required to mitigate the amount of your severance benefits payable
pursuant to this Section 8.
	 
	 	 	 	You agree you shall not be entitled to any salary, compensation or benefits from the
Company after termination of your employment with the Company, except as

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	 	 	 	expressly set forth in this agreement or as contemplated by the Company’s employee
benefit plans.
	 
	 	 	 	Notwithstanding the provisions of this Section 8, the Company shall not be obligated to
make payments to you if you are in breach of Section 11.
	 
	 	 	 	“Cause” means (i) serious neglect by you in the performance of your duties to
the Company under this agreement, other than by reason of your illness or Disability,
which, in the case of serious neglect that is capable of being cured, is not cured to
the reasonable satisfaction of the Board within a reasonable time after the Company
gives you written notice of such neglect; (ii) a material breach by you of this
agreement or, in your capacity as a member, the LLC Agreement that is not cured within
thirty days after the Company has given you written notice of such breach; or (iii)
fraud, theft, embezzlement, dishonest acts, illegal conduct or similar acts of willful
misconduct by you resulting in damage to the business or reputation of the Company or of
any of its affiliates.
	 
	 	 	 	“Good Reason” means without your written consent (not to be unreasonably
withheld, conditioned or delayed), (i) any adverse change in your titles or a material
reduction in your employment responsibilities, duties or authority with the Company or
its subsidiaries as they existed as of the date of this agreement (which remains uncured
30 days following such time as you have given written notice to the Board of such
adverse change or reduction); (ii) in the case of a sale of all or substantially all of
the assets of the Company, the failure of any successor to the Company to assume the
obligations of the Company hereunder (other than with respect to your equity
arrangements set forth herein); or (iii) any breach of this agreement with respect to
the payment of your Base Salary, bonus for 2005 (including bonus payable pursuant to the
last proviso of Section 21) or benefits provided for in this agreement which is not
cured within fifteen days (or thirty days in the case of benefits other than Base Salary
and bonus) after written notice was delivered to the Company or Holdings by you
specifying such breach.
	 
	 	9.	 	You understand and agree that your service as a director, manager, officer or employee
with the Company creates a relationship of confidence and trust between you and the Company
with respect to (i) all Proprietary Information (as defined below) and (ii) Third Party
Information (as defined below). The information referred to in clauses (i) and (ii) of the
preceding sentence is referred to in this agreement, collectively, as “Confidential
Information.” At all times, both during your service as a director, manager, officer
or employee with the Company and after its termination, you will keep in confidence and
trust all such Confidential Information, and will not use or disclose any such Confidential
Information without the written consent of the Company, except as may be necessary in the
ordinary course of performing your duties to the Company. The restrictions set forth in
this Section 9 will not apply to information which is generally known now or in the future
to the public or in the trade, unless such knowledge results from an unauthorized
disclosure by you, but this exception will not affect the application of any other
provision of this agreement to such information in accordance with the terms of such
provision. Furthermore, the

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	 	 	 	restrictions set forth in this Section 9 will not apply to the extent that you are
required by law (including pursuant to any subpoena) or legal or government process to
disclose any Confidential Information.
	 
	 	 	 	“Proprietary Information” means information which the Company possesses or to
which the Company has rights which has commercial value. Proprietary Information
includes, by way of example and without limitation, trade secrets, product ideas,
designs, configurations, processes, techniques, formula, software, source and object
code, domain names, improvements, inventions, data, know-how, copyrightable materials,
marketing plans and strategies, sales and financial reports and forecasts, and customer
and client lists. Proprietary Information includes information developed by you in the
course of your employment by the Company, that is used in the Business (as defined
below) of the Company, as well as other confidential information to which you may have
access in connection with your employment.
	 
	 	 	 	“Third Party Information” means confidential or proprietary information each
party has received and may in the future receive from third parties subject to a duty on
such party’s part to maintain the confidentiality of such information and to use it only
for certain limited purposes.
	 
	 	10.	 	All documents, records, apparatus, equipment, software, hardware, manuals, guides,
lists, customer and client information, correspondence, data, reports and all other
property, whether or not pertaining to Proprietary Information, which are furnished to you
by the Company or are developed by you in connection with your employment will be and
remain the sole property of the Company. You will return to the Company all such materials
and property promptly after requested by the Company. In any event, you will return all
such materials and property promptly upon termination of your service as a director,
manager, officer or employee with the Company for any reason. You will not take with you
any such material or property or any copies thereof upon such termination. Notwithstanding
the foregoing, you may retain your personal rolodex so long as it only contains only names,
addresses and telephone numbers (whether in electronic format or otherwise) and all
materials related to your employee benefits and compensation. Any references in Section 9
or this Section 10 to “the Company” shall be deemed to include the Company, its
subsidiaries and any of their respective affiliates.
	 
	 	11.	 	During the term of your service as a director, manager, officer or employee with the
Company under this agreement, and for a period ending two years from the date of your
termination for any reason, thereafter (the “Non-Compete Period”), you will not
(and will not take any steps toward or preparation in respect of), directly or indirectly,
whether as an owner, partner, stockholder, consultant, agent, employee, co-venturer or
otherwise, engage, participate, invest, or otherwise provide funds (“Participant”)
in, or in support of, any business or business activity, including without limitation the
wholesale insurance brokerage business, conducted by Holdings or any of its subsidiaries,
including without limitation the Company, on or within two years prior to the date hereof
(collectively, the “Business”). Nothing herein shall prohibit you from being a
Participant in a business or enterprise engaged in a business other than

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	 	 	 	the Business, provided that you do not participate in the business unit conducting the
Business or other Business activities of such business or enterprise
(“Competitor”). Notwithstanding the foregoing, you understand that you may hold
stock in a Competitor if the stock is publicly traded and the amount of stock you hold
is less than 5% of the outstanding capital stock of the Competitor. You hereby
acknowledge that pursuit of the activities forbidden by this Section 11 would
necessarily involve the use or disclosure of Proprietary Information in breach of this
agreement. To forestall such disclosure, use and breach, during the Non-Compete Period,
you shall not (i) induce or attempt to induce any employee of the Company to leave the
employ of the Company, or in any way interfere with the relationship between the Company
and any employee thereof, (ii) hire directly or through another entity any person who
was an employee, independent contractor or consultant of the Company at any time during
the Non-Compete Period, or (iii) induce or attempt to induce any referral source,
customer, client, supplier, licensee or other business relation of the Company to cease
doing business with the Company, or otherwise call-on, solicit, service or in any other
way interfere with the relationship between any such referral source, customer, client,
supplier, licensee or business relation and the Company; provided, that this Section 11
shall not be interpreted to apply to the exercise of your duties as chief financial
officer of the Company. You understand that the restrictions set forth in this Section
11 are intended to protect the Company’s interest in its Proprietary Information and
established customer and client relationships and goodwill, and agree that such
restrictions are reasonable and appropriate for this purpose and do not unreasonably
impose limitations on your ability to earn a living. Nothing herein shall prohibit you
from serving as a reference for an employee. You agree that it would be difficult to
measure any damages caused to the Company which might result from any breach by you of
the promises set forth in this agreement, and that in any event money damages would be
an inadequate remedy for any such breach. Accordingly, you agree that if you breach any
portion of this agreement, the Company shall be entitled, in addition to all other
remedies that it may have, to an injunction or other appropriate equitable relief to
restrain any such breach without showing or proving any actual damage to the Company.
The noncompetition, nonsolicitation, confidentiality and no-hire provisions contained in
this agreement shall be in addition to, and not in lieu of, any other similar provisions
contained in any agreements between you and any of Holdings and its subsidiaries
(including but not limited to the Company).
	 
	 	12.	 	For your convenience, attached hereto are summaries of certain terms of the LLC
Agreement and the Executive Unit Agreement (which contain the key terms of your Management
Units and common units). While each of the summaries represent an overview of the LLC
Agreement and the Executive Unit Agreement, these summaries do not constitute a binding
contract and are being provided solely for the purpose of outlining those terms pursuant to
which the LLC Agreement, the Executive Unit Agreement and any related documents may be
entered into. Therefore, you should review the LLC Agreement, the Executive Unit Agreement
and any related documents in its entirety, as the LLC Agreement, the Executive Unit
Agreement and any related documents will control your Management Units and common units in
all events.

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	 	13.	 	You agree that Holdings and the Company, as the case may be, shall only have
obligations under Sections 6, 7 and 8 above (other than Accrued Amounts), if, and only if,
after your employment with the Company is terminated you have executed and delivered to
Holdings and the Company an unconditional Release of Claims, and only so long as you have
not revoked or breached the provisions of such Release of Claims, this agreement or any
other agreement between you and Holdings or one of its subsidiaries, including but not
limited to the Company, and do not apply for unemployment compensation chargeable to the
Company. The Release of Claims described in this paragraph shall exclude your rights to
enforce this agreement or any other written agreement, rights under applicable law that can
not be waived and rights to indemnification and coverage under liability insurance.
	 
	 	14.	 	By accepting this agreement, you confirm that this agreement supercedes any previous
agreements regarding your employment; that this letter sets forth the entire agreement with
respect to your employment; that you have not relied on any representations not set forth
in this letter; that your employment by the Company will not violate any other agreements
by which you are bound; that you are not a party to or bound by any employment agreement,
non-compete agreement or confidentiality agreement with any other person or entity; that
upon the execution and delivery by you, the Company and Holdings of this agreement, this
agreement shall be a valid and binding obligation of you, the Company and Holdings,
enforceable against you in accordance with its terms (it being understood that an
assignment by you of this agreement may not be made without our consent); and that your
employment will be “at will”, meaning either you or the Company may terminate your
employment at any time, with or without cause, subject to the provisions hereof.
	 
	 	15.	 	You acknowledge that all out-of-pocket expenses (including without limitation, all fees
and expenses of counsel, accountants, investment bankers, experts, and consultants to the
party and its affiliates) incurred by a party or on its behalf in connection with or
related to the authorization, preparation, and execution of this agreement and the other
agreements and transactions contemplated herein shall be borne solely and entirely by the
party that has incurred the same.
	 
	 	16.	 	In the event of any termination of employment hereunder, you shall be under no
obligation to seek other employment and there shall be no offset against any amounts due
you under this agreement on account of any remuneration attributable to any subsequent
employment that you may obtain.
	 
	 	17.	 	By accepting this agreement you hereby agree and acknowledge that, neither the Company
nor any of its affiliates makes any representations with respect to the application of
Internal Revenue Code 409A to any tax, economic or legal consequences of any payments
payable to you hereunder (including, without limitation, payments pursuant to Sections 3
and 8 above) and, by the acceptance of the this agreement, Employee agrees to accept the
potential application of Internal Revenue Code 409A to the tax and legal consequences of
payments payable to you hereunder (including, without limitation, payments pursuant to
Sections 3 and 8 above). In addition, you agree to hold harmless and indemnify the Company
and its

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	 	 	 	subsidiaries and affiliates from any taxes (other than taxes and penalties under
Internal Revenue Code § 280G and the Company’s share of taxes that you as a matter of
law have no responsibility for (e.g., Company’s share of FICA taxes)) imposed on your
compensation (including without limitation any withholding or other tax obligations of
the Company with respect thereto), together with any interest and penalties related
thereto. The Company agrees to cooperate with you to amend this agreement to the extent
you deem necessary to avoid imposition of any additional tax or income recognition prior
to actual payment to you under Internal Revenue Code §409A and any temporary or final
Treasury Regulations and IRS guidance thereunder, but only to the extent such amendment
would not (and could not) have an adverse effect on the Company and would not provide
you with any additional material rights, in each case as determined by the Company in
its sole discretion.
	 
	 	18.	 	Holdings and the Company shall indemnify you in accordance with their respective
constituent documents, including but not limited to the LLC Agreement, and otherwise in
your capacity as an officer, director or manager of the Company or Holdings, as the case
may be, to the maximum extent permitted by law.
	 
	 	19.	 	If any portion or provision of this agreement is to any extent declared illegal or
unenforceable by a court of competent jurisdiction, then the remainder of this agreement,
or the application of such portion or provision in circumstances other than those as to
which it is so declared illegal or unenforceable, will not be affected thereby, and each
portion and provision of this agreement shall be valid and enforceable to the fullest
extent permitted by law. In the event that any provision of this agreement is determined
by any court of competent jurisdiction to be unenforceable by reason of excessive scope as
to geographic, temporal or functional coverage, such provision will be deemed to extend
only over the maximum geographic, temporal and functional scope as to which it may be
enforceable.
	 
	 	20.	 	If this agreement is executed prior to the Closing Date of the transactions
contemplated by that certain Unit Purchase Agreement (the “Unit Purchase
Agreement”) between Investor, Holdings and the sellers listed therein, then this
agreement shall not become effective until such Closing Date, and all references contained
in this agreement to “the date of this agreement” or “the date hereof” shall be deemed to
be references to the Closing Date. For the avoidance of doubt, this agreement shall become
void and be of no further force and effect is such transactions contemplated by the Unit
Purchase Agreement are not consummated.
	 
	 	21.	 	You acknowledge and agree that the Base Salary and bonus provisions of this agreement
applicable to any period beginning on or after January 1, 2006 shall not be effective
unless or until the expense savings of the Company resulting from the departure of
individuals who were employees of the Company as of August 31, 2005 shall equal at least
$750,000 on an annualized basis; provided, that such expense savings shall be net of
severance and other payments in respect of such individuals that must be recognized as an
expense of the Company in accordance with generally accepted accounting principles after
January 1, 2006 (it being understood and agreed that any severance paid in 2005 shall be
deemed paid in 2006 for the purposes hereof

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	 	 	 	(other than solely in respect of continued base salary and existing benefits paid in
accordance with the Company’s normal payroll practices through December 31, 2005) and,
provided further, that if and for long as such Base Salary and bonus provisions are not
effective by reason of this Section, your Base Salary and bonus arrangement in effect
prior to January 1, 2006, shall be effective for all purposes of this agreement, and all
bonuses paid consistent with such arrangement shall be considered Base Salary for all
purposes of this agreement.
	 
	 	22.	 	This agreement shall be assignable by the Company only to an acquirer of all or
substantially all of the assets of the Company. This agreement shall inure to the benefit
of and be binding upon the personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees, legatees and permitted assignees of the parties
hereto.
	 
	 	23.	 	This agreement may be signed in two or more counterparts (including by facsimile). any
one of which need not contain the signature of more than one party, but all such
counterparts taken together will constitute one and the same agreement and shall be
governed by the laws of the State of Delaware.

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	 	Sincerely,
	 
	 	 	 	 
	 

	 	American Wholesale Insurance Holding Company, LLC
	 
	 	 	 	 
	 

	 	By:
	 	/s/ M. Steven DeCarlo
	 

	 	Name:
	 	M. Steven DeCarlo
	 

	 	Title:	 	Manager
	 
	 	 	 	 
	 

	 	American Wholesale Insurance Group, Inc.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ M. Steven DeCarlo
	 

	 	Name:
	 	M. Steven DeCarlo

	 

	 	Title:
	 	President and CEO
	 
	 	 	 	 
	Agreed and Accepted on ___, 2005:
	 	 	 	 
	 
	 	 	 	 
	/s/ Scott Purviance

Scott Purviance
	 	 	 	 
	 
	 	 	 	 
	Agreed and Accepted on ___, 2005:
	 	 	 	 
	 
	 	 	 	 
	AmWINS Holdings, LLC
	 	 	 	 
	 
	 	 	 	 
	By: /s/ Marc Rubin

Name: Marc Rubin

Title: Vice President
	 	 	 	 

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Schedule 1

	 	 	 	 	 	 
	 
	 	Management Units	 	 	IRR Target	 
	 	Class B Units
	 	 	10%	 
	 	Class C Units
	 	 	20%	 
	 	Class D Units
	 	 	30%	 
	 	Class E Units
	 	 	40%	 
	 

“IRR” means the annual interest rate (compounded annually) which, when used to calculate
the net present value as of the date of this agreement of all Investor Cash Inflows (as defined in
the LLC Agreement) and all Investor Cash Outflows (as defined in the LLC Agreement), cause the
difference between such net present value amounts to equal zero.

13Exhibit 10.3

 

Exhibit 10.3

Confidential
treatment has been requested for portions of this document. This copy
of the document filed as an exhibit omits the confidential
information subject to the confidential treatment request. Omissions
are designated by three asterisks (***). A complete version of this
document is being filed with the Securities and Exchange Commission.

EMPLOYMENT AND NONCOMPETE AGREEMENT

     This EMPLOYMENT AND NONCOMPETE AGREEMENT (this “Agreement”), made and entered into as
of the 22nd day of May, 2003, is by and between SAMUEL H. FLEET, an individual resident of Rhode
Island (“Executive”), and National Employee Benefit Companies, Inc. (the
“Company”), a Rhode Island corporation. For purposes of this Agreement
“Affiliates” includes American Wholesale Insurance Holding Company LLC and American
Wholesale Insurance Group, Inc., the owner of all the outstanding shares of capital stock of the
Company (“Parent”).

     IN CONSIDERATION of the promises and the mutual covenants contained herein, the parties hereto
agree as follows:

     1. Employment. Subject to the terms and conditions stated herein, and in
consideration of Executive’s obligations and covenants, including without limitation, those
obligations and covenants set forth in Sections 6, 7 and 8, the Company agrees to employ Executive
on an active and full-time basis, and Executive accepts such employment, subject to the terms
hereof.

     2. Duties. Executive shall serve the Company as its President and will manage the
day-to-day operations of the Company and perform all duties customary to the role of President.
Executive shall be based at the Company’s offices in Warwick, Rhode Island and shall report to the
Chief Executive Officer of the Company. Executive shall devote Executive’s full business time,
attention, skill and best efforts to the business of the Company and faithfully perform such
executive, administrative and supervisory duties as may be consistent with his role as President
and prescribed by the Company’s Board of Directors or the Chief Executive Officer of the Company.
Executive shall act at all times in compliance, in all material respects, with all written policies
and rules adopted from time to time by the Company’s Board of Directors.

     3. Term of Employment. The term of Executive’s employment shall commence as of July
1, 2003 and shall end on June 30, 2006 (the “Term of Employment”). After June 30, 2006,
the Term of Employment shall be automatically extended each July 1st for successive
periods of one (1) year, unless (a) either party shall provide the other not less than 30 days
written notice of non-renewal or (ii) this Agreement is terminated by either Executive or the
Company pursuant to Section 5.

     4. Compensation.

          (a) Base Salary and Bonus. The base annual salary set forth on Schedule A
attached hereto shall be paid to Executive for the services to be rendered hereunder throughout the
Term of Employment (the “Base Salary”), in accordance with the Company’s normal payroll
practices, subject to applicable federal and state income and social security tax withholding
requirements. Such Base Salary shall be increased on January 1st of each calendar year
as set forth on Schedule A; provided that commencing on January 1, 2006, such Base Salary
shall be increased by mutual consent of Executive and the Company; provided, further, that if such

 

 

parties
shall not agree on such increase, the increase for each year shall be equal to at
least 5% of the then-current Base Salary. Additionally, Executive shall be entitled to receive
incentive bonus compensation pursuant to the provisions set forth on Schedule A attached
hereto throughout the Term of Employment (the “Bonus”).

          (b) Executive Benefit Plans. In addition to the Base Salary and Bonus, the Company
shall provide Executive with the opportunity to participate in the life insurance, medical,
disability and other executive benefit plans set forth on Schedule A attached hereto
(collectively, “Executive Benefit Plans”), subject to the terms and conditions of such
benefit plans. Executive shall also be entitled to four weeks of vacation in each year and
spending allowances as set forth on Schedule A attached hereto. Notwithstanding the
foregoing, nothing contained in this Agreement shall require the Company to establish, maintain or
continue any of the Executive Benefit Plans already in existence or hereafter adopted for the
executive employees of the Company, or restrict the right of the Company to amend, modify or
terminate such Executive Benefit Plans in a manner that does not discriminate against Executive as
compared to other executive employees of the Company.

          (c) Equity Compensation. In the event that the Company or the Parent adopt an equity,
incentive, stock option or similar plan (a “Plan”) under which all or substantially all of the
Company’s or the Parent’s employees or management participate on a formula basis, the Executive
shall be entitled to participate in such Plan on substantially the same terms as other similarly
situated executive officers of the Company or its Affiliates.

          (d) Change of Control. If the Company or the Parent consummates a Change of Control
transaction during the Term of Employment and if upon such Change of Control this Agreement is not
assumed by the acquiring or surviving entity or if during the one-year period following the
consummation of such Change of Control, Executive’s employment is terminated by the Company (other
than for Cause or by reason of death or Permanent Disability) or by Executive for Good Reason, in
satisfaction of all obligations of the Company to Executive hereunder as a result of such
termination, the Company shall pay to the Executive an amount equal to Base Salary (at the
then-current rate) for the greater of the balance of the Term of Employment or one (1) year (the
“Minimum Term”), which payment shall be made in cash in a lump sum payment at the time of
such termination. For purposes of this Section 4(d), a Change of Control” shall mean the sale of
all or substantially all of the assets or capital stock of the Company or the Parent, as the case
may be, or the merger or consolidation of the Company or the Parent with another entity where the
Company or the Parent, as the case may be, is not the surviving entity or the stockholders of such
Company or the Parent, as the case may be, immediately prior to such Change of Control transaction
are not the owners of at least 51% of the outstanding stock of the Company or the Parent, as the
case may be, after such Change of Control transaction.

     5. Termination.

          (a) Termination by the Company. The Company may terminate Executive’s employment
hereunder at any time and for any reason whatsoever, with or without Cause. Any

 

 

such termination shall be effective from the date on which the Company delivers to Executive
notice of Executive’s termination.

          (b) Termination by Executive. Executive may terminate Executive’s employment
hereunder at any time and for any reason whatsoever. Any such termination shall be effective from
the date Executive delivers to Company notice of Executive’s termination.

          (c) Termination Payments.

                     (i) In the event Executive terminates Executive’s employment with the Company voluntarily and
without Good Reason, or the Company terminates Executive’s employment for Cause or by reason of
Executive’s death or Permanent Disability, the Company shall not be liable to Executive or
Executive’s family or estate for the payment of salary, benefits or payments of any kind, except
for the Base Salary payable under this Agreement attributable to services performed by Executive
prior to the termination of Executive’s employment or except as provided in the terms of the
Executive Benefit Plans in which Executive may be a participant. Notwithstanding the foregoing, in
the event that the Company terminates Executive’s employment as a result of the Executive’s death
or Permanent Disability, the Company shall pay to the Executive or his family or estate a Bonus in
an amount equal to the product of (A) the Bonus that Executive would have been entitled to receive
had he remained employed for the entire calendar year in which his employment was terminated,
multiplied by (B) a fraction, the numerator of which is the number of calendar days in such year
prior to the termination of Executive’s employment and the denominator of which is 365. Such Bonus
amount shall be paid at the time the Company customarily makes such bonus payments.

                     (ii) In the event the Company terminates Executive’s employment without Cause or the Executive
terminates his employment for Good Reason, the Company shall continue to pay the Base Salary to
Executive for a period equal to the greater of the balance of the Term of Employment or one year,
conditional upon Executive’s execution of a release of claims against the Company. This release
shall be in a form reasonably satisfactory to the Company and shall be a general release of all
claims. Additionally, the Company shall pay to the Executive a Bonus in an amount equal to the
product of (A) the Bonus that Executive would have been entitled to receive had he remained
employed for the entire calendar year in which his employment was terminated, multiplied by (B) a
fraction, the numerator of which is the number of calendar days in such year prior to the
termination of Executive’s employment and the denominator of which is 365. The Base Salary and
Bonus payments shall be paid in accordance with the regular payroll practices of the Company, but
shall not commence until the execution of such release by Executive and the satisfaction of all
waiting and revocation periods required by law. All such amounts (the “Severance”) shall
be subject to and reduced by any applicable federal and state withholding taxes.

          (d) Definition of “Cause”. For purposes of this Agreement, “Cause” means (i)
the commission by Executive of an act constituting financial dishonesty against the Company or any
of its Affiliates; (ii) the conviction of, or pleading of guilty or nolo contendre to, a felony by
Executive (other than a traffic-related infraction); (iii) the commission of an act by Executive
involving moral turpitude that brings the Company or any of its Affiliates into public disrepute

 

 

or disgrace or causes the termination of customer relations of the Company or any of its
Affiliates; (iv) failure by the Company to generate in excess of $500,000 of EBITDA (as such term
is defined on Schedule A hereto) or failure by the Company to generate an EBITDA Margin (as
such term is defined on Schedule A hereto) equal to or more than 10%, in each case for any
calendar year during the Term of Employment; or (v) Executive willfully and repeatedly neglecting
his duties to the Company and, in the first instance of such neglect, such behavior continues for
more than thirty (30) days after written notice from the Company describing in reasonable detail
the misconduct or neglect.

          (e) Definition of “Permanent Disability”. For purposes of this Agreement,
“Permanent Disability” means any physical or mental impairment that renders Executive
unable to perform the essential functions of Executive’s job under the terms of this Agreement for
a period of at least 90 days, either with or without reasonable accommodation, which impairment is
confirmed pursuant to a physical examination in accordance with this Section 5(e). At the
Company’s request, Executive shall submit to an examination by a duly licensed physician who is
mutually acceptable to the Company and Executive for the purpose of ascertaining the existence of a
Permanent Disability, and shall authorize the physician to release the results of Executive’s
examination to the Company.

          (f) Definition of Good Reason. For purposes of this Agreement “Good Reason”
means (i) a requirement by the Company or Parent that Executive relocate beyond a reasonable
commuting distance from Warwick, Rhode Island, (ii) a material change in the responsibilities of
Executive which are inconsistent with Executive’s position as President of the Company and to which
Executive has not consented, (iii) a decrease in Executive’s Base Salary or Bonus to which
Executive has not consented, or (iv) a failure by the Company to pay any Base Salary or Bonus
amounts owed to Executive, which failure continues 15 days after written notice of such failure
from Executive to Parent.

     6. Confidentiality. Executive acknowledges that during Executive’s employment with
the Company, Executive will acquire and will have access to material, data and information of the
Company and its Affiliates and their customers or clients that is confidential, proprietary and/or
a trade secret. At all times, both during and after the Term of Employment, Executive shall keep
and retain in confidence and shall not disclose, except as required in the course of Executive’s
employment with the Company, to any person or entity or use for Executive’s own purposes any of
this proprietary, confidential or trade secret information. For purposes of this Section, such
information shall include, but shall not be limited to: sales methods, information concerning
customers and clients, advertising methods, financial affairs or methods of procurement, marketing
and business plans, strategies, projections, business opportunities, client lists, sales and cost
information and financial results and performance of the Company and its Affiliates. The
confidentiality obligations set forth herein shall not apply to any information which is already
generally available to the public, becomes known to the public other than by a breach of this
Section 6 by Executive, is required to be disclosed pursuant to law, regulation or court order, or
is learned by Executive from a source other than the Company or its Affiliates, which source is not
bound by confidentiality obligations with respect to such information.

 

 

     7. Non-Competition and Non-Solicitation Agreement.

     (a) Non-Competition. During the Term of Employment and for one year thereafter
(such period not to include any period(s) of time during which Executive is violating this
Section 7), and regardless of whether Executive’s employment is terminated either by
Executive with or without Good Reason or by the Company with or without Cause (the
“Non-Competition Period”), Executive shall not become employed by (as an officer,
director, executive, consultant or otherwise), or otherwise become commercially interested
in or affiliated with (whether through direct, indirect, actual or beneficial ownership or
through a financial interest), any person or entity that competes with the Business of the
Company and its Affiliates (a “Competitor”); provided, however, that
Executive may acquire beneficial ownership or a financial interest in a public company that
is a passive investment that does not exceed a 1% equity position in such company; and
provided, further, that the Company pays the Severance (if any) in full when
due. For purposes of this Agreement it is specifically acknowledged and agreed that the
“Business” of the Company and its Affiliates is arranging the sale, on a wholesale
basis, of life and health insurance products.

     (b) Non-Solicitation. During the Term of Employment and for two years
thereafter (the “Non-Solicitation Period”), regardless of whether Executive’s
employment is terminated either by Executive with or without Good Reason or by the Company,
with or without Cause, Executive shall not:

     (i) Solicit or attempt to solicit, for purposes that would be competitive with
the Business of the Company and its Affiliates, the business of any of their
clients, prospective clients that the Company has actively pursued, suppliers,
insurance carriers, insurance brokers or insured parties as such existed during the
12 months immediately preceding the termination of Executive’s employment
(“Company Business Partners”), or otherwise induce any Company Business
Partners to reduce, terminate or restrict their business relationships with the
Company and its Affiliates; or

     (ii) Induce or attempt to induce any executive, consultant, contractor or agent
of the Company or any of its Affiliates (“Company Executives”) to leave the
employment of such entity.

     In recognition of the broad geographic scope of the Business of the Company and its Affiliates
and of the ease of competing with that Business in any part of the United States, the restrictions
on competition and solicitation set forth in Sections 7(a) and (b) are intended to cover the
following geographic areas: (i) each city and county in which any Competitor, Company Business
Partner or Company Executive is located as of the date hereof or during either of the
Non-Competition Period or the Non-Solicitation Period; and (ii) each state in which any Competitor,
Company Business Partner or Company Executive is located as of the date hereof or during either of
the Non-Competition Period or the Non-Solicitation Period. If any court should construe the
geographic scope of this Section to be too broad to permit enforcement to its fullest extent, then
such restrictions shall be enforced to the maximum extent that such court finds reasonable and
enforceable.

 

 

     Executive and the Company agree that the geographic areas set forth above and the other
restrictions set forth in this Section are reasonable and completely severable and independent, and
any invalidity or unenforceability of this Agreement with respect to any one area or restriction in
this Section shall not render any other section of this Agreement unenforceable.

     8. Assignment of Inventions. Executive understands and agrees that Executive is
performing work for hire for the Company and that any Inventions developed or conceived by
Executive during Executive’s employment with the Company are the sole property of the Company. For
purposes of this Agreement, “Inventions” shall include any inventions, discoveries,
programs, programming techniques, underlying program designs and/or concepts, machinery, products,
processes, computer hardware, information systems, software (including without limitation source
code, object code, documentation, diagrams and flow charts), as well as any other discoveries,
concepts and ideas, whether patentable or not, relating to the Business as conducted by the
Company. Executive agrees to assign, and does hereby assign, to the Company or its nominees, all
right, title and interest in and to Inventions made by Executive. Executive will, with
reimbursement for reasonable expenses incurred, but at no other expense to the Company, at any time
during or after the Term of Employment, sign and deliver all lawful papers and cooperate in such
other lawful acts which may be reasonably necessary or desirable to protect or vest title in
Inventions in the Company or its nominees, including applying for, obtaining, maintaining, and
enforcing copyrights and/or patents on Inventions in all countries of the world.

     9. Company’s Right to Obtain an Injunction. Executive acknowledges that the Company
will have no adequate means of protecting its rights under Sections 6, 7 and 8 of this Agreement
other than by securing an injunction (a court order prohibiting Executive from violating the
Agreement). Accordingly, Executive agrees that the Company is entitled to enforce this Agreement
by obtaining a preliminary and permanent injunction and any other appropriate equitable relief.
Nothing contained in this Section shall prohibit the Company from pursuing any remedies in addition
to injunctive relief, including recovery of damages.

     10. Condition to Seeking Subsequent Employment. Executive agrees to show a copy of
this Agreement to any Competitor with whom Executive interviews during the Term of Employment and
the Non-Competition Period.

     11. General Provisions.

          (a) Entire Agreement. This Agreement contains the entire understanding between the
parties hereto relating to the employment of Executive by the Company and supersedes any and all
prior employment or compensation agreements between the Company, its affiliates and Executive.

          (b) Severability. If any provision contained in this Agreement shall for any reason
be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement but this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been contained herein.

 

 

          (c) Assignment. Neither this Agreement nor any right or interest hereunder shall be
assignable by Executive, Executive’s beneficiaries or legal representatives, without the prior
written consent of the Company. The Company may transfer or assign its rights and interest in this
Agreement to Parent or any successor upon a Change of Control.

          (d) Binding Agreement. This Agreement shall be binding upon, and inure to the benefit
of Executive and the Company and their respective permitted successors and assigns.

          (e) Amendment or Modification of Agreement. This Agreement may not be modified or
amended except by an instrument in writing signed by the parties hereto.

          (f) Waiver. No delay or omission by either party hereto in exercising any right,
power or privilege hereunder shall impair such right, power or privilege, nor shall any single or
partial exercise of any right, power or privilege preclude any further exercise thereof or the
exercise of any other right, power or privilege. The provisions of this Section cannot be waived
except in writing signed by both parties.

          (g) Governing Law. This Agreement shall be construed in accordance with and governed
by the laws of the State of Rhode Island.

          (h) Notices. Any notice, offer, acceptance or other document required or permitted to
be given pursuant to any provisions of this Agreement shall be in writing, signed by or on behalf
of the person giving the same, and (as elected by the person giving such notice) delivered by hand
or mailed to the parties at the following addresses by registered or certified mail, postage
prepaid, return receipt requested, or by a third party company or governmental entity providing
delivery services in the ordinary course of business, which guarantees delivery on a specified
date:

	 	 	 
	If to Executive:

	 	Samuel H. Fleet
	 

	 	__________________
	 

	 	East Greenwich, RI 02818
	 
	 	 
	If to the Company:

	 	American Wholesale Insurance Group, Inc.
	 

	 	5955 Carnegie Blvd, Suite 350
	 

	 	Charlotte, NC 28209
	 

	 	Attention: Scott M. Purviance

or to such other address as any party hereto may designate by complying with the provisions of this
Section.

     Such notice shall be deemed given (i) as of the date of written acknowledgment by Executive or
an officer of the Company if delivered by hand, (ii) 72 hours after deposit in United States mail
if sent by registered or certified mail or (iii) on the delivery date if sent by overnight courier
service.

 

 

     Rejection or other refusal to accept or inability to deliver because of changed address of
which no notice has been received shall not affect the date upon which the notice is deemed to have
been given pursuant hereto. Notwithstanding the foregoing, no notice of change of address shall be
effective until the date of receipt hereof.

 

 

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

	 	 	 	 	 
	 	EXECUTIVE:

 	 
	 	/s/ Samuel H. Fleet
 	 
	 	Samuel H. Fleet 	 
	 	 	 
	 
	 
	 
	 	COMPANY:

NATIONAL EMPLOYEE BENEFIT COMPANIES, INC.

 	 
	 	By:  	/s/ M. Steven DeCarlo
 	 
	 	 	Name:  	M. Steven DeCarlo 	 
	 	 	Title:  	Chief Executive Officer 	 
	 

 

 

SCHEDULE A

COMPENSATION AND BENEFITS

	 	 	 
	Base Salary

	 	$265,000 for 2003, $285,000 for 2004 and $300,000 for 2005
	 
	 	 
	Bonus
	 	Executive will be eligible to participate in the
Company’s Management Bonus Plan. The plan is
designed to reward the senior leaders in the
organization for profitable performance.
	 
	 	 
	 
	 	I. Qualifying Hurdles:
	 
	 	(a). Minimum EBITDA Margin (as
defined below) of ***% (increasing 1% per year to a maximum of ***%)
	 
	 	(b). Minimum Net Revenue (as defined below) growth of 15%
	 
	 	 
	 

	 	II. Once the hurdles are achieved a bonus pool will
be established equal to ***% of the excess EBITDA
above the target EBITDA Margin (***% in 2003). If
the margin hurdle is achieved and the Net Revenue
hurdle is not, the pool will be proportionately
reduced by the percentage of the Net Revenue
shortfall. If the EBITDA Margin hurdle is not
achieved there will be no bonus pool established.
Once the total bonus pool amount reaches $1,000,000
in any one year, the pool percentage will decline
to ***% thereafter.
	 
	 	 
	 

	 	III. Executive will be eligible for 1/3 of the
bonus pool established. Executive will also be
eligible for the remainder of the bonus pool after
the other participants are paid their 20% share and
discretionary bonuses.
	 
	 	 
	 

	 	IV. The maximum total bonus the Executive is
eligible to received is capped at 200% of his
salary until the Company generates cumulative
EBITDA of $7,000,000 (from 2002 forward).
	 
	 	 
	 

	 	V. Bonus compensation shall be paid within 30 days
of completion of the annual audit of the Company.
	 
	 	 
	 

	 	“Net Revenue” is defined as net commission and
other income recognized by the Company on a GAAP
basis. Commission income on benefits business is
recognized monthly as billed.
	 
	 	 
	 

	 	“EBITDA” is defined as the Company’s pre-tax
operating income, plus interest, income taxes,
depreciation and amortization.

 

 

	 	 	 
	 
	 	“EBITDA Margin” is defined as EBITDA divided by Net Revenue.
	 
	 	 
	Business Expenses

	 	The Company will reimburse all customary business expenses.
	 
	 	 
	Auto Allowance

	 	$500/month
	 
	 	 
	Country Club Allowance

	 	$500/month
	 
	 	 
	Vacation

	 	4 weeks
	 
	 	 
	Benefit Plans

	 	Executive may participate in such benefit plans as
are customarily granted to persons performing
similar services for the Company and its
affiliates.

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