Exhibit 10.1
EXECUTION COPY
Robert M. Fishman
Chief Executive Officer
United America Indemnity, Ltd.
This document sets forth the agreement between Robert M. Fishman (“CEO”) and
United America Indemnity, Ltd. (the “Company”) regarding all matters relating to
CEO’s prospective employment by the Company, but shall constitute the legally
binding agreement of CEO and the Company (the “Agreement”) if and only if it is
manually executed by (i) CEO and Saul Fox, in his capacity as chairman of the
board of directors (the “Board”) of the Company (the “Chairman”), and (ii) is
confirmed by the affirmative vote of a majority of the Board.

     
Positions & Titles:
  On November 27, 2006 (“Effective Date”), CEO shall assume the position of
chief executive officer of the Company as well as chief executive officer of any
Company Affiliates (as defined below) of the Company (as may be specified in
writing by the Chairman from time to time). CEO shall also serve on the Board as
a director of the Company (a “Director”).
 
   
Responsibilities:
  CEO shall have such responsibilities and duties as are customary for a chief
executive officer of a company conducting business comparable to the Company
(except as may be otherwise provided by the Board from time to time). CEO shall
devote his full business time and efforts to his service as chief executive
officer and as a Director and shall not engage in any other non-Company or
non-Company Affiliate business activities without the written approval of the
Board. Notwithstanding the foregoing, CEO shall be permitted to manage his and
his family’s personal investments and affairs, engage in charitable activities
and community affairs, and act as a member, director, or officer of industry
trade associations or groups, provided that such activities do not interfere
with his chief executive officer duties.
 
   
Reporting:
  During the Term (as defined below), CEO shall report to the Board regarding
the affairs of the Company and Company Affiliates at scheduled meetings of the
Board and shall otherwise report to the Chairman. All other executives and other
employees of the Company shall report to CEO (or his designees as approved by
the Board).
 
   
Location:
  Within six months of the Effective Date, CEO shall establish his and his
family’s primary residence in the greater Philadelphia metropolitan area and
shall be

 

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  provided by the Company with an office at the headquarters of the Company’s
Affiliate in Bala Cynwyd, Pennsylvania. CEO shall be reimbursed, or the Company
shall pay, for his and his family’s reasonable relocation and closing expenses
(including documented realtor commissions incurred in selling his primary
residence, but not to exceed 6%); provided that such reimbursement shall not
exceed $180,000; provided further that CEO shall be responsible for repaying to
the Company all such reimbursed amounts in the event that CEO resigns or is
terminated for Cause (as defined below), in each case on or before the first
anniversary of the Effective Date. Prior to establishing his family’s primary
residence in the greater Philadelphia metropolitan area, CEO may commute from
his current residence, but shall be present at the Company’s or the Company’s
Affiliates’ facilities or at third party commercial facilities on behalf of the
Company at least five days per week, except as may otherwise be approved by the
Chairman. The Company shall reimburse CEO for his reasonable commuting expenses
during the 135-calendar-day period commencing with the Effective Date, subject
to applicable taxes and withholding.
 
   
Term:
  The initial term of CEO’s employment under this Agreement shall be from the
Effective Date through December 31, 2010. Such term will automatically be
extended for additional one-year periods on a year-to-year basis unless CEO or
the Company notifies in writing the other to the contrary not less than three
months and not more than five months prior to the expiration of the initial term
of this Agreement and of any renewal term (the initial term and any renewal
term, collectively, the “Term”). Prior to the commencement of the Term and
following the execution of this Agreement, CEO shall provide services to the
Company as requested and as the Company determines are appropriate in light of
any pre-Term commitments of CEO.
 
   
Annual Compensation:
  $2,100,000+. Commencing on the Effective Date, CEO will accrue base salary and
be eligible for an annual bonus as provided below in consideration of his
services to the Company and its Affiliates.
 
   
Base Salary:
  The Company agrees to pay CEO an annual base salary of $600,000 (“Base
Salary”), commencing as of the Effective Date, in accordance with the Company’s
normal payroll practices for executives. Following a termination by the

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  Company of CEO without Cause (as defined below) or a resignation by CEO for
Good Reason (as defined below), CEO will receive salary payments over an
18-month period totaling $900,000, less any amounts paid during the relevant
notice period and any taxes and withholdings, subject to the conditions
described in the “Termination” Section below.
 
   
Annual Bonus:
  In respect of 2006, CEO shall receive (i) a lump sum payment of $100,000 on
December 30, 2006 and (ii) a lump sum payment of $400,000 on or about March 15,
2007, in each case subject to applicable taxes and withholding and to CEO’s
being employed by the Company in good standing on each such date. CEO shall
repay any amounts received pursuant to the foregoing sentence to the Company if
he is terminated for Cause or resigns without Good Reason on or before the first
anniversary of the Effective Date, and such repayment shall occur within ten
calendar days of CEO’s termination of employment.
 
   
 
  In respect of each full calendar year (commencing in respect of 2007) during
the Term (a “Bonus Year”), the Company shall provide CEO with a bonus
opportunity of $1,500,000+ (“Annual Bonus”), subject to the following and
determined, awarded and paid as follows:
 
   
 
  A. Plan & Performance Score:
 
   
 
 
   a. Plan: Prior to the commencement of each Bonus Year, CEO shall prepare and
submit to the Board for its approval a comprehensive business plan for the
Company and its Affiliates projecting the business performance (including among
other matters, consolidated net income per share) of the Company and its
Affiliates in respect of the forthcoming Bonus Year (including any changes made
in the good faith judgment of the Board at the time of its approval, the
“Plan”). The Plan shall be prepared and presented both (1) in accordance with
Generally Accepted Accounting Principles (“GAAP”) and (2) on an accident year
basis (“Accident Year Basis”).

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   b. Performance Score: Within 75 days after completion of each Bonus Year, a
performance score (“Performance Score”) for such Bonus Year shall be determined
by the Board in accordance with the following steps: (1) dividing (i) the actual
consolidated net income per share of the Company (adjusted to account for all
items of gain, loss or expenses determined by the Board in its sole discretion
to be unanticipated and/or extraordinary), determined on an Accident Year Basis
and as verified by the Company’s independent auditors for such Bonus Year by
(ii) the projected consolidated net income per share of the Company (determined
on an Accident Year Basis) as set forth in the Plan for such Bonus Year (and as
approved by the Board prior to the commencement of such Bonus Year in accordance
with paragraph a. (immediately preceding)), (2) multiplying the quotient
determined in accordance with Step (1) (immediately preceding) by 100, and
(3) rounding the result obtained in Step (2) (immediately preceding) to the
nearest tenth.
 
   
 
  B. Bonus Computation: The Annual Bonus shall equal:
 
   
 
 
   a. $50,000 multiplied by the excess of the Performance Score over 90, plus
 
   
 
 
   b. $200,000 multiplied by the excess of the Performance Score (capped at 100
for this purpose) over 95, plus
 
   
 
 
   c. A cash payment equal to CEO’s net federal and state tax liability directly
resulting from the vesting of the restricted shares comprising the restricted
shares portion of the Annual Bonus (to the extent provided for in Section C
below), if CEO is employed by the Company and in good standing at the time of
such vesting, with such payment to be made prior to CEO’s actual payment of such
tax liability.
 
   
 
 
Example: If the Performance Score in respect of the 2007 Original Bonus Year
equaled 100, the Annual Bonus in respect of 2007 would be equal to

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      $1,500,000 [($50,000 x (100-90)) + ($200,000 x (100-95))= $1,500,000].    
    Example: If the Performance Score in respect of the 2007 Original Bonus Year
equaled 110, the Annual Bonus in respect of 2007 would be equal to $2,000,000
[($50,000 x (110-90)) + ($200,000 x (100-95))=$2,000,000].

C.   First $500,000 of each Annual Bonus:

  a.   Restricted Shares. Subject to the immediately succeeding paragraph b.,
the first $500,000 of each Annual Bonus (determined in accordance with the
immediately preceding Section B but not including the tax liability payments
made pursuant to paragraph c. of such Section) shall be satisfied by the
issuance to CEO of restricted Class A common shares of the Company as of
March 15 of the year following the Bonus Year, subject to CEO being employed by
the Company in good standing as of such date (or if such date is not a business
day, the immediately preceding business day) (valued for this purpose at the
closing price of the Company’s Class A common shares on the last trading day of
the relevant Bonus Year as reported in the Wall Street Journal). Twenty-five
percent (25%) of the Company shares that may be issued to CEO pursuant to this
paragraph with respect to the 2007 Bonus Year, 2008 Bonus Year and the 2009
Bonus Year during the Term shall vest and become transferable on each of the
first four anniversaries of the issuance thereof. One-third of the Company
shares that may be issued to CEO pursuant to this paragraph with respect to the
2010 Bonus Year and subsequent Bonus Years during the Term shall vest and become
transferable on each of the first three anniversaries of the issuance thereof.
Notwithstanding the foregoing sentence, vesting of any such restricted shares
issued to CEO pursuant to this Section C shall cease in the event and at such
time as (1) CEO resigns from the Company without Good Reason, (2) CEO is
terminated by the Company for Cause, (3) the Term expires, if at the time of
such expiration (x) CEO declined the Company’s proposal to

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      extend the duration of this Agreement on terms at least substantially
equivalent to the terms hereof, or (y) the Company had Cause (as defined below)
to terminate CEO, or (4) CEO does not comply with the Non-Competition,
Non-Solicitation, Confidential Information and Cooperation “Covenants” set forth
in Schedule I hereto along with his obligations, if applicable, under any
release which he is required to provide in favor of the Company and those under
any separation agreement to which he is party with the Company and/or its
Affiliates (collectively, the “Post-Termination Obligations”).     b.  
Operational Goals & Milestones. Prior to the commencement of a Bonus Year, it
shall be CEO’s responsibility to propose in writing, based upon CEO’s
discussions with the Chairman, Company milestones and operational goals for the
forthcoming Bonus Year that must be achieved for CEO to become entitled to the
restricted shares award provided in this Section C. The absence of such a
proposal as of the commencement of a Bonus Year will result in no achievement of
such milestones and goals. The Chairman shall review and revise such milestones
and goals in his discretion and refer them to the Board in writing for its
approval, in its discretion. In addition to the other requirements of paragraphs
a., b., and c. of this Section C, the Board shall make a good faith
determination, which shall be conclusive, as to whether the milestones and
operational goals as earlier approved by the Board have been satisfied thereby
entitling CEO to the amount of restricted shares determined in accordance with
paragraphs a. and b. of this Section C.     c.   Bonus Year 2007 Goals &
Milestones. The following shall constitute the Bonus Year 2007 operational goals
and milestones for purposes of this paragraph c.:

  1.   Creation of a “wholesale brokerage” division fully complimenting the
range

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      of the Company’s property and casualty insurance program operations.    
2.   Creation of a proactive program division that originates, fully develops,
and takes to market for distribution by managing general agents or other third
parties excess and surplus lines insurance programs.     3.   Establishment of
an internal, cost effective, investment management and investment accounting
division.     4.   Assist the Company’s Bermuda Affiliate in writing at least
$30,000,000 in “third party” reinsurance in compliance with the Company’s
existing “limited appetite for reinsurance risk” strategic plan for such
business.     5.   Meaningfully enhance the Company’s executive capabilities.  
  6.   Establishment of an effective investor relations initiative.

D.   Annual Bonus Cash Portion: To the extent an Annual Bonus amount exceeds
$500,000 (but not including the tax liability payments made pursuant to
paragraph c. of Section B above):

  a.   Fifty percent (50%) of such excess shall be paid in cash to CEO (the
“Paid Cash Bonus”) within thirty days of the Board’s determination with respect
to such bonus as provided for in Sections A and B above; and     b.   Fifty
percent (50%) of such excess shall be retained by the Company (the “Retained
Cash Bonus”) to satisfy the true-up adjustments provided in Section E
(immediately succeeding).

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E.   Accident Year True-Up Provisions:

  a.   The Performance Score and the amount of the Annual Bonus Cash Portion in
respect to a Bonus Year (for purposes of this Section “Annual Bonus” and the
Section “Additional Equity Participation” below, “Target Year”) shall be
redetermined or trued-up on an Accident Year Basis within 15 days following the
completion of the Company’s audited financial statements in respect of the third
full calendar year succeeding such Target Year, with such redetermination or
true-up assuming the capital structure of the Company as of the last day of the
applicable Target Year (for purposes of computing consolidated net income,
consolidated net income per share, and other capital structure dependent items
that would affect computation of the true-up contemplated by this Section E).
(The Performance Score and Annual Bonus Cash Portion as so redetermined are
referred to hereinbelow as the “Trued-Up Performance Score” and the “Trued-Up
Annual Bonus Cash Portion,” respectively.) Computation of the Trued-Up
Performance Score and the Trued-Up Annual Bonus Cash Portion shall be verified
by Company’s independent auditors and confirmed by the Board. All
redeterminations hereunder shall (i) be made without regard to the tax liability
payments made pursuant to paragraph c. of Section B above and (ii) not increase
or reduce the number of restricted shares previously awarded to CEO pursuant to
Section C of this “Annual Bonus” Section.     b.   Subject to paragraph c.
(immediately succeeding), if the Trued-Up Annual Bonus Cash Portion in respect
to a Target Year equals or exceeds the amount of the Annual Bonus Cash Portion
originally determined in respect of such Target Year, then the following amounts
shall be paid to CEO (whether or not CEO is then employed by the Company, unless
pursuant to paragraph c. (immediately succeeding) CEO is no longer then entitled
to payments under this

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      paragraph b.) within thirty days of the redetermination:

  1.   The excess of the Trued-Up Annual Bonus Cash Portion in respect of the
Target Year over the Annual Bonus Cash Portion originally determined in respect
of the Target Year; plus     2.   The Retained Cash Bonus in respect to the
Target Year; plus     3.   A deemed investment return on the amounts to be paid
to CEO pursuant to paragraphs 1 & 2 (immediately preceding), which shall be
calculated by utilizing the investment return realized by the Company and the
Company Affiliates on their investable assets (including cash) over the period
said amounts to be paid to CEO had been retained by the Company.

  c.   CEO shall not be entitled to receive any payments pursuant to paragraph
b. (immediately preceding) from and after the first to occur of the following:
(1) CEO resigns from the Company without Good Reason; (2) CEO is terminated by
the Company for Cause; (3) the expiration of the Term, if at the time of such
expiration (x) CEO declined the Company’s proposal to extend the duration of
this Agreement on terms at least substantially equivalent to the terms hereof,
or (y) the Company had Cause to terminate CEO; or (4) CEO does not comply with
the Post-Termination Obligations.     d.   If the amount of the Annual Bonus
Cash Portion originally determined in respect of a Target Year exceeds the
amount of the Trued-Up Annual Bonus Cash Portion in respect of such Target Year,
then the amount of such excess shall be offset against and reduce
dollar-for-dollar (whether or not CEO is then employed by the Company) the
aggregate amount of Retained

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              Cash Bonuses then or thereafter held by the Company. The remaining
Retained Cash Bonus with respect to the Target Year, if any, shall then be paid
to CEO within thirty days of the foregoing redetermination, along with a deemed
investment return thereon, which shall be calculated by utilizing the investment
return realized by the Company and the Company Affiliates on their investable
assets (including cash) over the period such remaining Retained Cash Bonus had
been retained by the Company.
 
                            Attached as Schedule II is an example of application
of the Bonus provisions of this Agreement.
 
                    F.   Additional Matters: All bonus payments hereunder are
intended to comply with Sections 162(m) and 409A of the Internal Revenue Code of
1986, as amended (the “Code”), and to the extent applicable shall be governed by
the terms of the Company’s incentive award plans.
 
                Employee Benefits/Expenses:   During the Term:
 
                    A.   CEO shall be entitled to participate in or receive
benefits under all employee benefit plans, including, but not limited to, any
pension or retirement plan, savings plan, medical or health-and-accident plan,
life, disability, and other insurance plans or arrangements generally made
available by the Company to its executives and key management employees, subject
to and on a basis consistent with the terms, conditions and overall
administration of such plans and arrangements and of this Agreement. Following a
termination by the Company of CEO without Cause or a resignation by CEO for Good
Reason, CEO will be entitled to be reimbursed for the cost of COBRA continuation
coverage under the Company’s group health plans for up to eighteen months
following his termination date, subject to CEO’s continued eligibility for such
coverage under COBRA and to the conditions described in the “Termination”
Section below;
 
                    B.   CEO shall be entitled to four weeks paid vacation per
full year in accordance with the policies periodically

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                          established by the Board for other senior executives
of the Company; and
 
                    C.   The Company shall pay or reimburse CEO for all
reasonable expenses incurred or paid by CEO in the performance of CEO’s duties
hereunder in accordance with the generally applicable policies and procedures of
the Company.
 
                Additional Equity Participation:   A.   Share Purchase & Option
Grant: As a condition precedent to all of the Company’s obligations and all of
CEO’s rights pursuant to this Agreement, prior to the Effective Date, CEO shall
purchase from the Company $1,000,000 of the Company’s Class A common shares
(“Shares”) at the closing price (as reported in the Wall Street Journal) on the
trading day on the execution of this Agreement (rounded to the nearest whole
share). CEO further agrees that the Shares shall not be transferable (other than
for estate planning purposes where the ultimate beneficiary of the transfer is a
member of CEO’s immediate family) earlier than (i) the end of the Term, (ii) the
occurrence of a “Change of Control” (as defined below), or (iii) the date on
which CEO is terminated. The Company shall grant CEO stock options in accordance
with the following (the “Stock Options”):  
 
          a.   Each option shall represent the right to acquire from the Company
one Class A common share of the Company, subject to paying to the Company the
“Exercise Price” (as defined in the immediately succeeding paragraph);
 
               
 
          b.   The “Exercise Price” (or strike price) of each option shall be
equal to the closing price of the Company’s Class A Common Shares on the trading
day on the execution of this Agreement (as reported in the Wall Street Journal),
and each such option shall be granted as of such trading day; and
 
               
 
          c.   The number of options granted CEO shall equal the quotient
obtained by dividing $10,000,000 by the Exercise Price (rounded to the nearest
whole option).

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                      B.   Time Vesting Options: 12.5% of the Stock Options
shall vest on each of December 31, 2007, December 31, 2008, December 31, 2009,
and December 31, 2010 (aggregating 50% of the Stock Options) if CEO is employed
by the Company and in good standing as of such respective dates.
 
                    C.   Performance Vesting Options:
 
               
 
          a.   An additional 12.5% of the Stock Options shall provisionally vest
on each of December 31, 2007, December 31, 2008, December 31, 2009 and
December 31, 2010 (aggregating the remaining 50% of the Stock Options (the
“Performance Stock Options”)) if, in addition to the criteria described below,
on such dates CEO is employed by the Company and in good standing. The number of
provisionally vested Performance Stock Options in respect to a calendar year
that shall vest conclusively shall be determined by multiplying the number of
such provisionally vested Performance Stock Options by a fraction, the numerator
of which fraction shall equal the excess over 90 of the Trued-Up Performance
Score for the Target Year inclusive of the date on which such Performance Stock
Options provisionally vested (capped at ten for this purpose) and the
denominator of which fraction shall equal ten.
 
               
 
          b.   Provisionally vested Performance Stock Options shall become
exercisable only in the event such options become conclusively vested as
verified by the Company’s independent auditors and confirmed by the Board.
 
                    D.   Special Vesting of Options:
 
               
 
          a.   Notwithstanding paragraph a. of Section C (immediately
preceding), all provisionally vested Performance Stock Options shall vest
conclusively (and thereafter be exercisable) as of the 120th day following a
two-year consecutive period of either calendar years (i) 2009 and 2010 or
(ii) calendar years 2010 and 2011 if:

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  1.   the Company’s return on equity (determined in accordance with GAAP) and
the Company’s percentage increase in gross written premiums (over the relevant
preceding year) exceeded the return on equity (determined in accordance with
GAAP) and the percentage increase in gross written premiums (over the relevant
preceding year), of more than 50% of the Peer Group (as hereafter defined), as
determined by the Board in its discretion within 120 days after the close of the
relevant two-year period. The Board, in its sole discretion, may make such
adjustments to the determination required by this paragraph as it deems
appropriate to account for unanticipated and/or extraordinary matters affecting
the Company’s or Peer Group members’ results; and     2.   CEO was employed by
the Company and in good standing on (i) December 31 of each year in which the
Company’s performance satisfied the conditions of paragraph 1 (immediately
preceding) and (ii) the date on which the relevant Board determination was made.

Example: If the Company’s return on equity for 2009 of 15% exceeded the median
return on equity for the Peer Group of 12%, the Company’s return on equity for
2010 of 18% exceeded the median return on equity for the Peer Group of 15%, the
Company’s increase in gross written premiums for 2009 of 5% exceeded the median
increase for the Peer Group of 3%, and the Company’s increase in gross written
premiums for 2010 of 8% exceeded the median increase for the Peer Group of 7%,
then all necessary targets will have been achieved and all provisionally vested
Performance Options may be conclusively vested, subject to CEO being employed in
good standing on the required dates.

  3.   For purposes of paragraph 1 of this Section D, the “Peer Group” shall
consist of W.R. Berkley Corporation (BER), RLI Corporation (RLI), James River
Group, Inc. (JRVR), Navigators Insurance Group

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      (NAVG), Philadelphia Consolidated Group (PHLY), Markel Corporation (MKL),
HCC Insurance Holdings, Inc. (HCC), Argonaut Group (AGII) and NYMAGIC, Inc.
(NYM). The companies constituting the Peer Group may be modified by the Board
from time to time in its discretion so as to take into account new competitive
entrants to the Company’s market niche, the departure of companies from the
Company’s market niche, as well as mergers, acquisitions and other changes
affecting companies included in the Peer Group.

  b.   Notwithstanding any other provision of this Agreement, upon the
consummation of a Change in Control (as defined below), if CEO is then employed
by the Company in good standing and has not given notice of resignation, all
unvested and provisionally vested Stock Options shall vest conclusively (and
thereafter become exercisable) if the Company’s publicly traded shares
appreciated in value by a 15% or greater annual compounded rate measured from
the closing price on the Effective Date through the closing price on the date of
the consummation of the Change in Control (in each case as reported in the Wall
Street Journal). In determining such compounded rate of the Company’s publicly
traded shares for purposes of this paragraph, the Board shall give appropriate
credit to dividends and other distributions made in respect to the Company’s
shares to all shareholders as well as other relevant items (such as stock
splits).         c. For purposes of this Section D:

  1.   A “Change of Control” shall mean (i) the acquisition of all or
substantially all of the Company’s assets by an Unaffiliated Person, (ii) a
merger, consolidation, statutory share exchange or similar form of corporate
transaction after which the resulting entity is controlled by an Unaffiliated
Person, or (iii) the acquisition by an Unaffiliated Person of sufficient voting
shares of the

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      Company to cause the election of a majority of the Company’s Directors.

  2.   “Unaffiliated Person” shall mean a “person” (as such term is defined in
Section 3(a)(9) of the Securities Exchange Act of 1934 and as such term is used
in Section 13(d)(3) and 14(d)(2) of such Act) or a group of “persons” which is
not an Affiliate of Fox Paine & Company, LLC (“Fox Paine”), the members thereof,
or Fox Paine Capital Fund II, L.P.

  E.   Shareholding Guidelines. In addition to any other transfer restrictions
contained herein, beginning as of January 1, 2009 and for the remainder of the
Term, CEO shall be obligated at all times to hold shares in the Company with a
value of no less than two times his “Annual Compensation” (as defined below) (or
if less, the aggregate value of the Shares, any shares which he has been granted
pursuant to this Agreement and any vested “in the money” Time Vesting Options
which he has been granted pursuant to this Agreement), or such higher amount as
may be required by the Board pursuant to share ownership guidelines adopted with
respect to the Company’s senior executive team. Such value shall include vested
share options, assuming their exercise for the underlying shares. For purposes
of this Section E, “Annual Compensation” shall be the Base Salary plus the
Annual Bonus payable upon the achievement of a Performance Score of 100 and all
applicable milestones and goals (including any retained portion of the Annual
Bonus but excluding all tax liability payments).     F.   Equity Agreements. Any
restricted shares or options which are granted pursuant to this Agreement shall
be granted pursuant to the restricted share and share option agreements attached
as Exhibits A, B and C hereto, and any grants hereunder shall be conditioned on
(i) CEO’s execution of such agreements; and (ii) the Company’s
shareholder-approved, publicly-filed equity compensation plan, i.e., its Share
Incentive Plan, as such plan may be amended from time to time (or any successor
thereto).

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Compliance with Section 409A:
  The parties have attempted in good faith to structure this Agreement to comply
with or be exempt from Section 409A of the Code and the regulations and guidance
relating thereto (“Section 409A”). Therefore, notwithstanding any other
provisions hereof, this Agreement shall be administered in good faith compliance
with Section 409A, and accordingly any payment or vesting in severance benefits
hereunder may be subject to a six-month delay as required by Section 409A, as
determined by the Board in good faith.
 
   
Termination:
  The Board may, in its absolute discretion, terminate CEO’s employment with the
Company at any time prior to the expiration of the Term, with or without Cause,
upon three full calendar months written notice (in which event CEO shall receive
accrued and unpaid Base Salary through the termination date) and during such
three-month period the Company may request that CEO resign his officerships and
direct CEO to perform only those services (if any) it determines are necessary.
If CEO’s employment terminates as a result of his death or “Disability” (such
Disability occurring when a licensed physician selected by the Company
determines that CEO is disabled and CEO is unable to perform or complete his
duties under this Agreement for a period of 180 consecutive days or 180 days
within any twelve-month period), CEO or his successors shall receive accrued and
unpaid Base Salary through to the termination date. In the event CEO’s
employment with the Company is terminated by the Company without Cause or as a
result of a resignation by the CEO for Good Reason, CEO shall receive from the
Company the salary amounts payable pursuant to the second sentence of the “Base
Salary” paragraph of the “Annual Compensation” Section hereof, continued
benefits as provided in the “Employee Benefits/Expenses” Section hereof, and
continued vesting in any equity awarded as provided in this Agreement, provided
that such payments, benefits and vesting shall be conditioned on (i) CEO
executing a general release in favor of the Company, its Directors, and
employees, Fox Paine, and its members and employees, and all Affiliates of each
of the foregoing, (ii) CEO remaining in compliance with all of his
Post-Termination Obligations, and (iii) the Company determining that it did not
have Cause to terminate CEO while he was employed. CEO may terminate his
employment with the Company at any time without Good

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  Reason upon written notice to the Chairman of at least three full calendar
months (and upon such notice the Company may elect to terminate CEO without any
further payment obligations whatsoever as if CEO was terminated with Cause). Any
termination by the Executive for Good Reason shall be upon thirty (30) days
advance written notice and subject to the cure and other provisions related to
“Good Reason” as set forth in the “Cause/Good Reason” section below.
 
   
Cause / Good Reason:
  “Cause” shall mean (i) the engaging by CEO in malfeasance, fraud, dishonesty
or gross misconduct adverse to the interests of the Company or its Affiliates,
(ii) the material violation by CEO of any of the covenants hereof or other
provisions of this Agreement after notice from the Company and a failure to cure
such violation within 10 days of said notice (to the extent the Board reasonably
determines such violation is curable and subject to notice), (iii) a breach by
CEO of any representation or warranty contained herein, (iv) the Board’s
determination that CEO has exhibited incompetence or gross negligence in the
performance of his duties hereunder, (v) receipt of a final written directive or
order of any governmental body or entity having jurisdiction over the Company
requiring termination or removal of CEO, (vi) CEO being charged with a felony or
other crime involving moral turpitude, (vii) failure to establish his and his
family’s primary residence in the greater Philadelphia metropolitan area within
six months of the Effective Date, or (viii) CEO substantially failing to perform
his duties hereunder after notice from the Company and failure to cure such
non-performance within 10 days of said notice (to the extent the Board
reasonably determines such failure to perform is curable and subject to notice)
or violating any material Company policies, including, without limitation, the
Company’s corporate governance and ethics guidelines, conflicts of interests
policies and code of conduct applicable to all Company employees or senior
executives.
 
   
 
  “Good Reason” shall mean a willful and substantial reduction in CEO’s material
responsibilities and reporting as provided for in the “Responsibilities” and
“Reporting” Sections of this Agreement which remains uncured for thirty
(30) days after written notice thereof is provided by CEO to the Company setting
forth in reasonable detail the alleged breach at issue; provided that CEO must
provide such written notice within ten (10) days of the event

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  allegedly giving rise to Good Reason or such alleged event shall not provide a
basis for such notice; provided further that (i) “dotted-line” or dual reporting
to the Chairman by any Company or Company Affiliate executive shall not
constitute Good Reason and (ii) a modification as to whom CEO shall report
resulting from a Change of Control shall not constitute Good Reason.
 
   
Covenants:
  As consideration for the payments made and equity awarded pursuant to this
Agreement, along with other good and valuable consideration, including, without
limitation, the trade secrets provided to CEO in connection with the performance
of his duties, CEO agrees and acknowledges that he will be bound by the
restrictive covenants set forth on Schedule II hereof.
 
   
Policies:
  CEO covenants and agrees to be subject to the policies applicable to a senior
executive of the Company, including without limitation the Company’s corporate
governance rules, procedures, and policies as may be adopted by the Board from
time to time.
 
   
Miscellaneous:
  CEO represents that he is not a party to any agreement or arrangement that
would limit in any manner his ability to perform the duties contemplated
hereunder and that he will not use any confidential information belonging to his
previous employer(s) in the performance of his duties hereunder. The Company may
set-off against or otherwise deduct from any amounts owed or due CEO or Company
shares or options in respect of Company shares held by CEO if and to the extent
that CEO is in default in respect of amounts he is obligated to pay to the
Company (or any Company Affiliate).
 
   
Binding Agreement:
  The obligations of CEO under this Agreement will continue after the
termination of his employment with the Company for any reason, to the extent
provided herein, and will be binding on his heirs, executors, and legal
representatives.
 
   
Assignment:
  This Agreement shall not be assignable by CEO. This Agreement is assignable by
the Company to an Affiliate. The rights and obligations hereunder shall be
binding upon and take effect for the benefit of any successor in interest of the
Company created by merger, reorganization, sale of assets, assignment or
otherwise, and the Company shall use commercially reasonable efforts to obtain
an assumption

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  agreement with respect to this Agreement from such successor.
 
   
Indemnity:
  The Company shall, as provided for by its by-laws and charter, defend and
indemnify CEO. The Company shall also include CEO in the coverage provisions of
the directors and officers liability insurance policy that it maintains for its
Directors and officers, including any applicable tail coverage that it provides
to its current and former Directors, as may be applicable.
 
   
Board Approval:
  This Agreement is subject to the approval of the Board and its Compensation
Committee. Only upon such approval and the manual execution hereof by CEO and
the Chairman shall the Agreement become a legally binding agreement of the
Company and CEO.
 
   
Governing Law:
  CEO and the Company agree that, due to the Company’s significant and ongoing
contacts and business relationships (including its listing on NASDAQ) with the
State of New York, this Agreement shall be governed by and construed in
accordance with the laws of such state, without reference to principles of
conflict of laws of that jurisdiction or any other jurisdiction.
 
   
Arbitration:
  All disputes between the Company and CEO or between CEO and any Affiliate
shall be resolved by binding confidential arbitration in front of a single
arbitrator in Philadelphia, Pennsylvania, United States conducted by the
Judicial Arbitration and Mediation Services, Inc. (“JAMS”) in accordance with
the comprehensive rules and procedures of JAMS, including the internal appeal
process provided for in Rule 34 of the JAMS rules with respect to any initial
judgment rendered in an arbitration. The Company, its Affiliates and CEO agree
that the arbitrator shall have no authority to award any punitive or exemplary
damages and waive, to the full extent permitted by law, any right to recover
such damages in arbitration. The Company (or its Affiliate) shall pay the costs
and fees of the arbitrator and appeal arbitrators. The Company (or its
Affiliate) and CEO shall each bear its own respective costs, including
attorney’s fees (and there shall not be any award of attorney’s fees). Judgment
on the award rendered in such arbitration may be entered in any court having
jurisdiction. Notwithstanding the foregoing, the Company and its Affiliates
reserve the right to obtain judicial injunctive relief arising in connection
with a prospective violation by

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  CEO of the provisions hereof relating to non-competition, non-solicitation, or
Company Confidential Information and any claim or cause of action which CEO has
against the Company or Affiliates shall not be a bar or defense to the granting
of such relief.
 
   
Affiliates/ company affiliates:
  The term “Affiliate(s)” includes: (i) the Company and any person or entity
controlled by, or under common control with, the Company; (ii) all current and
former Directors; (iii) Fox Paine, Fox Paine Capital Fund II, L.P., and Fox
Paine Capital Fund International II, L.P.; and (iv) each of such entities’
members, shareholders, partners, and employees.
 
   
 
  The term “Company Affiliate(s)” includes only the Company and any person or
entity controlled by the Company.
 
   
Integration:
  This writing supersedes and integrates all prior promises, representations,
offers, contracts, and agreements between the Company or any Affiliate and CEO
and among CEO and Fox Paine, Saul Fox, or any Affiliate of the foregoing. This
letter may not be amended except in a writing which is manually executed by CEO
and Saul Fox and approved by the Board.

     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
on November 9, 2006.

              UNITED AMERICA INDEMNITY, LTD.        
 
           
By:
  /s/ Saul A. Fox       /s/ Robert M. Fishman
 
           
 
  Saul A. Fox       Robert M. Fishman
 
  Chairman of the Board        

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Schedule I
Covenants of CEO

1)   Non-Competition. CEO covenants and agrees that during his employment with
the Company, and for a period of eighteen (18) months following the termination
of such employment for any reason, CEO shall not directly or indirectly own,
manage, operate, participate in, be employed, associate with, otherwise have an
interest or engage in, or advise as a consultant or otherwise any “Person”
(which term includes an individual, firm, trust, partnership, venture, limited
liability company, sole proprietorship, corporation, syndicate, association, and
other business vehicles) who engages in the property and casualty insurance
business with or who solicits such from any “Producer” or “Producers” (as such
terms are defined below) that either individually or in the aggregate account
for 15% or more of the Company’s aggregate premium volume. The term “Producer”
or “Producer(s)” includes managing general agents, wholesale general agents, and
other producers or distributors of property and casualty insurance business
underwritten by the Company. Notwithstanding the foregoing, it shall not be a
violation of CEO’s obligations pursuant to this paragraph for CEO to hold
publicly-traded securities of his former employer or one percent or less of the
outstanding publicly-traded securities of a different company.

2)   Non-Solicitation. CEO covenants and agrees that during his employment with
the Company, and for a period of eighteen (18) months following the termination
of such employment for any reason, he shall not (i) directly or indirectly nor
shall he be associated with, employed by, or in business with any Person who
hire(s), attempt(s) to hire, solicit(s), or induce(s) any employee of the
Company or its Affiliates, including anyone so employed within the twelve-month
period prior to his termination of employment, to either terminate such
employment with the Company or its Affiliate or associate with, be employed by,
or join in business with any other Person operating in the property and casualty
insurance industry or (ii) directly or indirectly solicit, endeavor to entice
away or otherwise interfere with the relationship of Company or its Affiliates
with any of their Producers, customers, clients or accounts.

3)   Confidential Information. CEO covenants and agrees not to, during or after
his employment with the Company (i) disclose, in whole or in part, any “Company
Confidential Information” (as defined below) to any Person unless authorized in
writing to do so by the Company or required by law or (ii) use any Company
Confidential Information for his own purpose or for the benefit of any Person
other than the Company, except in the proper performance of his duties as
instructed or approved by the Company in writing.       The term “Company
Confidential Information” means the knowledge and information acquired by CEO
concerning the Company’s and its Affiliates’ confidential and proprietary
information regarding business plans, software, formatting, programs, client
prospects, client lists, supplier and vendor information, client contacts,
client information and data, market data, marketing plans, data processing
systems and information contained therein, products, proposals to clients and
potential clients, account reports,

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    plans, studies, pricing information, loss experience information,
competitive information, price lists, financial statements and records, files
and other trade secrets, know-how, or other private, confidential or proprietary
information of or about the Company or its Affiliates which is not already
available to the public or known generally in the industry. The term “Company
Confidential Information” shall not include (x) information in the public domain
or generally known in the industry (unless CEO is responsible, directly or
indirectly, for such Company Confidential Information entering the public domain
or becoming known in the industry without the Company’s consent),
(y) information and know-how derived or known by CEO from experience in the
industry generally and not specific to the Company, or (z) information disclosed
by the Company to third parties without any duty or obligation of
confidentiality or non-disclosure.

4)   Work for Hire. All original works of authorship which have been or are made
by CEO within the scope of and during the period of his employment with the
Company and which are protectable by copyright are “works for hire” and the
Company or its designee shall own all rights therein.

5)   Assignment of Invention. CEO shall disclose promptly in writing to the
Company, all inventions, including discoveries, concepts and ideas, patentable
or not, hereafter made or conceived solely or jointly by CEO during employment
with the Company (or its Affiliates), or within six months after the termination
of CEO’s employment, if based on or related to proprietary information of the
Company or its Affiliates known by CEO, provided such invention, discovery,
concepts and ideas relate in some manner to the business or activities of the
Company. CEO agrees that in connection with any invention covered by this
paragraph, CEO shall, on request of the Company, promptly execute a specific
assignment of title to the Company or its Affiliates and do anything else
reasonably necessary to enable the Company or its Affiliates to secure a patent
therefor in the United States and foreign countries.

6)   Cooperation. CEO agrees to be available to the Company from time to time to
answer questions or provide information relating to Company matters that he
worked on during his employment at the Company or its Affiliates for a period of
six months following his termination of employment for any reason (the
“Cooperation Period”). The Company shall make reasonable efforts to minimize any
burden placed on CEO during the Cooperation Period and shall not unreasonably
interfere in CEO’s obligations to any subsequent employer. In the event that CEO
would reasonably be required to incur any cost or expense to communicate with
the Company or travel to any location requested by the Company, the Company
shall advance any such travel or other costs reasonably incurred by CEO to
comply with and perform his obligations during the Cooperation Period.

7)   Acknowledgment. CEO acknowledges and agrees that the terms of these
covenants: (i) are reasonable in light of all of the circumstances; (ii) are
sufficiently limited to protect the legitimate interests of the Company and its
subsidiaries; (iii) impose no undue hardship on CEO; and (iv) are not injurious
to the public. CEO further acknowledges and agrees that (x) CEO’s breach of the
provisions of these covenants will cause the Company irreparable harm, which
cannot be adequately compensated by money

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    damages, and (y) if the Company elects to prevent CEO from breaching such
provisions by obtaining an injunction against CEO, there is a reasonable
probability of the Company’s eventual success on the merits. CEO consents and
agrees that if he commits any such breach or threatens to commit any breach, the
Company shall (at its election and notwithstanding the Arbitration provision
hereof) be entitled to temporary and permanent injunctive relief from a court of
competent jurisdiction, without posting any bond or other security and without
the necessity of proof of actual damage, in addition to, and not in lieu of,
such other remedies as may be available to the Company for such breach,
including the recovery of money damages. All references to the Company in this
paragraph shall include its Affiliates.

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Schedule II
[Example of Accident Year True-Up Provisions]

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Exhibit A
TIME VESTING SHARE OPTION AGREEMENT
     TIME VESTING SHARE OPTION AGREEMENT (“Agreement”) dated as of [date] (the
“Grant Date”), by and between United America Indemnity, Ltd., a Cayman Islands
exempted company with limited liability whose office is located c/o Walkers SPV
Limited, Walker House, 87 Mary Street, P.O. Box 908GT, George Town, Grand
Cayman, Cayman Islands (the “Company”), and Robert M. Fishman (the
“Participant”).
     WHEREAS, pursuant to the United America Indemnity, Ltd. Share Incentive
Plan (the “Plan”), the Committee (as defined in the Plan) has decided to award
share options on the terms and conditions set forth in this Agreement.
     WHEREAS, these Options are granted to the Participant in accordance with
the Employment Agreement of ___  ___, 2006, by and between the Company and the
Participant (the “Employment Agreement”).
     NOW, THEREFORE, in order to implement the foregoing and in consideration of
the mutual representations, warranties, covenants and agreements contained
herein, the parties hereto agree as follows:
     1. Definitions.
     As used in this Agreement, the following terms shall have the meanings
ascribed to them below. Any capitalized term used in this Agreement and not
defined herein shall have the meaning ascribed to it in the Plan.
     “Acquisition” shall have the meaning set forth in Section 6.3.
     “Change of Control” shall have the meaning set forth in the Employment
Agreement.
     “Class A Common Shares” shall mean the Class A common shares, par value
$0.0001 per share, of the Company, subject to adjustment pursuant to the third
paragraph of Section 3 of the Plan under certain circumstances.
     “Exercise Price” shall have the meaning set forth in Section 2.2, subject
to adjustment pursuant to the third paragraph of Section 3 of the Plan.
     “Grant Date” shall have the meaning set forth in Section 2.1.
     “Options” shall have the meaning set forth in Section 2.1.
     In addition, certain other terms used herein have definitions otherwise
ascribed to them herein.

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     2. Grant and Terms of Options.
          2.1 Grant of Options. The Company hereby grants to the Participant as
of the Grant Date ___ Nonqualified Stock Options (the “Options” or “Time Vesting
Options”) to purchase one Class A Common Share per Option on the terms and
conditions set forth below, and in reliance upon the representations and
covenants of the Participant set forth below. Unless sooner exercised or
cancelled as provided for in the Plan or this Agreement, the Options shall
expire on the tenth anniversary of the date of this Agreement.
          2.2 Exercise Price. The Exercise Price of the Options is $  per
Class A Common Share subject thereto.
          2.3 Vesting and Exercisability.
          (a) Subject to the terms and conditions herein, the Options shall vest
and become exercisable according to the following schedule:

              Percent of Total Time Vesting Option Date of Vesting   Grant
Vested
December 31, 2007
    25 %
December 31, 2008
    50 %
December 31, 2009
    75 %
December 31, 2010
    100 %

     Options that are exercisable may be exercised by the Participant only in
accordance with the terms of the Plan, this Agreement and the Employment
Agreement, subject to the termination, expiration, cancellation, lapsing and
other provisions contained in each such document.
          (b) Notwithstanding anything to the contrary in Section 2.3(a), if the
Participant is employed by the Company and in good standing at the time of a
Change in Control, the Options (or a portion thereof) may accelerate so as to
vest and become exercisable in accordance with the terms of the Employment
Agreement, if so provided under the Employment Agreement.
     3. Expiration and Cancellation.
          3.1 Termination of Employment. Upon termination of Employment for any
reason (including Cause), vesting ceases, the term of unvested Options lapses
and such unvested Options will expire immediately. If the Participant’s
Employment terminates for Cause, vested Options will also expire immediately. If
the Participant’s Employment terminates for any reason other than for Cause
(including as a result of the Participant’s resignation), the Options shall
expire on the earlier of the following occasions:

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          (i) the expiration date determined pursuant to Section 2.1; or
          (ii) the date 90 days after the termination of the Participant’s
Employment.
          The Participant may exercise all or part of the Options at any time
before its expiration under this Section 3.1, but only to the extent that the
Options have vested and become exercisable before the Participant’s Employment
terminated. In the event that the Participant dies after termination of
Employment, but before the expiration of the Options, all of the Options may be
exercised (prior to expiration) by the executors or administrators of the
Participant’s estate by any person who has acquired the Options directly from
the Participant by beneficiary designation, bequest or inheritance, but only to
the extent that the Options have vested and become exercisable before the
Participant’s Employment terminated.
          3.2 Cancellation. In the event the Participant (i) violates any
covenant provided in the Employment Agreement or (ii) is terminated for Cause
(as defined subclauses (ii) and (vii) of the “Cause” clause of the Employment
Agreement) (a “Forfeiture Event”), all Options will be cancelled, Class A Common
shares acquired upon the previous exercise of any Options (“Option Shares”) will
be subject to repurchase by the Company at the lower of the Exercise Price or
fair market value, and the Company shall be entitled to repayment by the
Participant of any Award Gain (as defined below) realized as a result of any
exercise of any Options or any sale of Option Shares.
          (a) Company Repurchase of Shares. Payment with respect to any
repurchase of Option Shares by the Company from the Participant shall take the
form of a three-year note from the Company or its designee, accruing interest at
the lowest then applicable rate mandated by U.S. law, with the principal and
interest due on the third anniversary of the date of purchase (or such later
date as may be necessary to permit the Company or its designee to comply with
any applicable borrowing covenants affecting its payment obligations), and shall
be reduced to reflect any outstanding liabilities of the Participant to the
Company or its Affiliates. The Participant promptly shall take all appropriate
and necessary action to facilitate the Company’s purchase of such equity,
including the prompt delivery to the Company (or its designee) of all share
certificates or other documents that the Company may request.
          (b) Recovery of Award Gain.
     1. The term “Award Gain” shall mean (I) in respect of a given options
exercise, the product of (X) the Fair Market Value per Option Share at the date
of such exercise (without regard to any subsequent change in the market price of
such Option Share) minus the Exercise Price times (Y) the number of Option
Shares as to which the Options were exercised at that date, and (II) in respect
of any sale of Option Shares, the value of any cash or the fair market value of
the Option Shares or property paid or payable to the Participant less any cash
or the fair market value of any Option Shares or property (other than Option
Shares or Options which would have been forfeitable hereunder and excluding any
payment of tax withholding) paid by the Participant to the Company (or its

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designee) as a condition or in connection with the acquisition of such Option
Shares or amount otherwise included in subclause (I) above.
     2. The Participant will be obligated to repay to the Company (or its
designee), in cash, within ten (10) business days after demand is made therefor,
by the Company (or its designee), the total amount of Award Gain realized by the
Participant (I) upon each exercise of the Options that occurred on or after
(A) the date that is six (6) months prior to the Forfeiture Event, if the
Forfeiture Event occurred while the Participant was employed by the Company or a
subsidiary or affiliate, or (B) the date that is six (6) months prior to the
date that the Participant’s employment by the Company or a subsidiary or
affiliate terminated, if the Forfeiture Event occurred after the Participant
ceased to be so employed, or (II) upon any sale, transfer or other disposition
of the Option Shares.
     4. Transferability of Plan Shares and Options.
     The Participant shall not be permitted to sell, assign, transfer, pledge or
otherwise encumber any Options, except as hereinafter provided in Section 6.1
and in accordance with the Articles of Association of the Company.
     5. Participant’s Representations, Warranties and Agreements.
     In connection with the exercise of any Options, the Participant shall make
to the Company, in writing, such representations, warranties and agreements in
connection with such exercise and investment in Class A Common Shares as the
Committee shall reasonably request.
     6. Successors.
          6.1 This Agreement is personal to the Participant and, without the
prior written consent of the Company, shall not be transferable by the
Participant otherwise than (i) by will or the laws of descent and distribution,
(ii) pursuant to a qualified domestic relations order (as defined in the Code)
or (iii) pursuant to a gift to the Participant’s spouse, children, grandchildren
or other living descendants, whether directly or indirectly or by means of a
trust, partnership, limited liability company or otherwise. This Agreement shall
inure to the benefit of and be enforceable by the Participant’s legal
representatives.
          6.2 This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
          6.3 The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation, scheme of arrangement or otherwise
(an “Acquisition”)) to all or substantially all of the business and/or assets of
the Company expressly to assume and to agree to perform this Agreement in the
same manner and to the same extent that the Company would have been required to
perform it if no such succession had taken place (or by substituting for such
Options new options, based upon the shares of such successor, having an
aggregate spread between the Fair Market Value of the underlying shares and the
Exercise Price thereof, and the same term, immediately after such substitution,
equal to the spread on, and the term of, such Options immediately before such
substitution but in any case subject to the same terms and

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conditions, including those applicable to vesting and exercise, as may otherwise
be applicable to the Options granted by the Company), and the Participant hereby
agrees to such assumption (or substitution); provided, however, that the Company
or such successor may, at its option, at the time of or promptly after such
Acquisition, terminate all of its obligations hereunder with respect to the
Options by paying to the Participant or the Participant’s successors or assigns
an amount equal to the product of (i) the number of Options and (ii) the Fair
Market Value per share of the shares underlying such Options at the time of such
Acquisition less the amount of such Options’ Exercise Price (but not in excess
of such Fair Market Value per share), in either case, in exchange for the
Participant’s Options. As used in this Agreement, the “Company” shall mean both
the Company as defined above and any such successor that assumes and agrees to
perform this Agreement, by operation of law or otherwise.
     7. Miscellaneous.
          7.1 This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware, without regard to the
principles of conflicts of law thereof. The captions of this Agreement are not
part of the provisions hereof and shall have no force or effect. This Agreement
may not be amended or modified except by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
          7.2 Plan Shares may bear legends to the extent the Committee or the
Board determines it to be necessary or appropriate.
          7.3 All notices and other communications under this Agreement shall be
in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed if to the Participant, at the address set forth on the signature page
hereto, and if to the Company: United America Indemnity, Ltd., c/o Walkers SPV
Limited, Walker House, 87 Mary Street, P.O. Box 908GT, George Town, Grand
Cayman, Cayman Islands, Attention: General Counsel, or to such other addresses
as either party furnishes to the other in writing in accordance with this
Section 7.3. Notices and communications shall be effective when actually
received by the addressee.
          7.4 The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
          7.5 No later than the date as of which an amount first becomes
includible in the gross income of the Participant for federal, state, foreign or
other income tax purposes with respect to any Options, the Participant shall pay
to the Company, or if appropriate, any of its Affiliates, or make arrangements
satisfactory to the Committee regarding the payment of, any federal, state,
local, foreign or other taxes of any kind required by law to be withheld with
respect to such amount. If approved by the Committee, withholding obligations
may be settled with Class A Common Shares, including Class A Common Shares that
are part of the award that gives rise to the withholding requirement. The
obligations of the Company under the Plan shall be conditional on such payment
or arrangements, and the Company and its Affiliates shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment
otherwise due to the Participant. The Committee may establish such procedures as
it deems appropriate,

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including making irrevocable elections, for the settlement of withholding
obligations with Class A Common Shares.
          7.6 The Participant’s or the Company’s failure to insist upon strict
compliance with any provision of, or to assert any right under, this Agreement
shall not be deemed to be a waiver of such provision or right or of any other
provision of or right under this Agreement.
          7.7 The Options are granted pursuant to the Plan which is incorporated
herein by reference and the Options shall, except as otherwise expressly
provided herein, be governed by the terms thereof. The Participant hereby
acknowledges receipt of a copy of the Plan and agrees to be bound by all the
terms and provisions thereof. The Participant and the Company each acknowledges
that this Agreement (together with the Plan and the other agreements referred to
herein and therein) constitutes the entire agreement and supersedes all other
agreements and understandings, both written and oral, among the parties or
either of them, with respect to the subject matter hereof; provided, however,
that the Employment Agreement shall control in the event of any conflict between
the Employment Agreement and this Agreement.
     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

                  UNITED AMERICA INDEMNITY, LTD.            
 
               
By:
          By:    
 
               
Title:
              Robert M. Fishman

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Exhibit B
PERFORMANCE VESTING SHARE OPTION AGREEMENT
     PERFORMANCE VESTING SHARE OPTION AGREEMENT (“Agreement”) dated as of [date]
(the “Grant Date”) by and between United America Indemnity, Ltd., a Cayman
Islands exempted company with limited liability whose office is located c/o
Walkers SPV Limited, Walker House, 87 Mary Street, P.O. Box 908GT, George Town,
Grand Cayman, Cayman Islands (the “Company”), and Robert M. Fishman (the
“Participant”).
     WHEREAS, pursuant to the United America Indemnity, Ltd. Share Incentive
Plan (the “Plan”), the Committee (as defined in the Plan) has decided to award
share options on the terms and conditions set forth in this Agreement.
     WHEREAS, these Options are granted to the Participant in accordance with
the Employment Agreement of ___  ___, 2006, by and between the Company and the
Participant (the “Employment Agreement”).
     NOW, THEREFORE, in order to implement the foregoing and in consideration of
the mutual representations, warranties, covenants and agreements contained
herein, the parties hereto agree as follows:
     1. Definitions.
     As used in this Agreement, the following terms shall have the meanings
ascribed to them below. Any capitalized term used in this Agreement and not
defined herein shall have the meaning ascribed to it in the Plan.
     “Acquisition” shall have the meaning set forth in Section 6.3.
     “Change of Control” shall have the meaning set forth in the Employment
Agreement.
     “Class A Common Shares” shall mean the Class A common shares, par value
$0.0001 per share, of the Company, subject to adjustment pursuant to the third
paragraph of Section 3 of the Plan, under certain circumstances.
     “Exercise Price” shall have the meaning set forth in Section 2.2, subject
to adjustment pursuant to the third paragraph of Section 3 of the Plan.
     “Grant Date” shall have the meaning set forth in Section 2.1.
     “Options” shall have the meaning set forth in Section 2.1.
     In addition, certain other terms used herein have definitions otherwise
ascribed to them herein.

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     2. Grant and Terms of Options.
          2.1 Grant of Options. The Company hereby grants to the Participant as
of the Grant Date ___ Nonqualified Stock Options (the “Options”) to purchase one
Class A Common Share per Option on the terms and conditions set forth below, and
in reliance upon the representations and covenants of the Participant set forth
below. Unless sooner exercised as provided for in the Plan or this Agreement,
the Options shall expire on the tenth anniversary of the date of this Agreement.
          2.2 Exercise Price. The Exercise Price of the Options is $ ___ per
Class A Common Share subject thereto.
          2.3 Vesting and Exercisability.
          (a) The Options shall vest as described in the Employment Agreement
with the Company and once vested shall become exercisable to the extent provided
for in the Employment Agreement. Options that are exercisable may be exercised
by the Participant only in accordance with the terms of the Plan and this
Agreement and Employment Agreement, subject to the termination, expiration,
cancellation, lapsing and other provisions contained herein and in the Plan.
          (b) Notwithstanding anything to the contrary in Section 2.3(a), if the
Participant is employed by the Company and in good standing at the time of a
Change in Control, the Options (or a portion thereof) may accelerate so as to
vest and become exercisable in accordance with the terms of the Employment
Agreement, if so provided by the Employment Agreement.
     3. Expiration and Cancellation.
          3.1 Termination of Employment. Upon termination of Employment for any
reason (including Cause), vesting ceases (other than with respect Options that
have vested provisionally as of such date of termination under the terms of the
Employment Agreement), the term of unvested Options lapses and such unvested
Options will expire immediately. If the Participant’s Employment terminates for
Cause, vested Options will also expire immediately. If the Participant’s
Employment terminates for any reason other than for Cause (including as a result
of the Participant’s resignation), the Options shall expire on the earlier of
the following occasions:
          (i) the expiration date determined pursuant to Section 2.1; or
          (ii) the date 90 days after the termination of the Participant’s
Employment.
          The Participant may exercise all or part of the Options at any time
before its expiration under this Section 3.1, but only to the extent that the
Options have vested and become exercisable before the Participant’s Employment
terminated. In the event that the Participant dies after termination of
Employment, but before the expiration of the Options, all of the Options may be
exercised (prior to expiration) by the executors or administrators of the
Participant’s estate by any person who has acquired the Options directly from
the Participant by beneficiary

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designation, bequest or inheritance, but only to the extent that the Options
have vested and become exercisable before the Participant’s Employment
terminated.
          3.2 Cancellation. In the event the Participant (i) violates any
covenant provided in the Employment Agreement or (ii) is terminated for Cause
(as defined subclauses (ii) and (vii) of the “Cause” clause of the Employment
Agreement) (a “Forfeiture Event”), all Options will be cancelled, Class A Common
shares acquired upon the previous exercise of any Options (“Option Shares”) will
be subject to repurchase by the Company at the lower of the Exercise Price or
fair market value, and the Company shall be entitled to repayment by the
Participant of any Award Gain (as defined below) realized as a result of any
exercise of any Options or any sale of Option Shares.
          (a) Company Repurchase of Shares. Payment with respect to any
repurchase of Option Shares by the Company from the Participant shall take the
form of a three-year note from the Company or its designee, accruing interest at
the lowest then applicable rate mandated by U.S. law, with the principal and
interest due on the third anniversary of the date of purchase (or such later
date as may be necessary to permit the Company or its designee to comply with
any applicable borrowing covenants affecting its payment obligations), and shall
be reduced to reflect any outstanding liabilities of the Participant to the
Company or its Affiliates. The Participant promptly shall take all appropriate
and necessary action to facilitate the Company’s purchase of such equity,
including the prompt delivery to the Company (or its designee) of all share
certificates or other documents that the Company may request.
          (b) Recovery of Award Gain.
     1. The term “Award Gain” shall mean (I) in respect of a given options
exercise, the product of (X) the Fair Market Value per Option Share at the date
of such exercise (without regard to any subsequent change in the market price of
such Option Share) minus the Exercise Price times (Y) the number of Option
Shares as to which the Options were exercised at that date, and (II) in respect
of any sale of Option Shares, the value of any cash or the fair market value of
the Option Shares or property paid or payable to the Participant less any cash
or the fair market value of any Option Shares or property (other than Option
Shares or Options which would have been forfeitable hereunder and excluding any
payment of tax withholding) paid by the Participant to the Company (or its
designee) as a condition or in connection with the acquisition of such Option
Shares or amount otherwise included in subclause (I) above.
     2. The Participant will be obligated to repay to the Company (or its
designee), in cash, within ten (10) business days after demand is made therefor,
by the Company (or its designee), the total amount of Award Gain realized by the
Participant (I) upon each exercise of the Options that occurred on or after
(A) the date that is six (6) months prior to the Forfeiture Event, if the
Forfeiture Event occurred while the Participant was employed by the Company or a
subsidiary or affiliate, or (B) the date that is six (6) months prior to the
date that the Participant’s employment by the Company or a subsidiary or
affiliate terminated,

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if the Forfeiture Event occurred after the Participant ceased to be so employed,
or (II) upon any sale, transfer or other disposition of the Option Shares.
     4. Transferability of Plan Shares and Options.
     The Participant shall not be permitted to sell, assign, transfer, pledge or
otherwise encumber any Options, except as hereinafter provided in Section 6.1
and in accordance with the Articles of Association of the Company.
     5. Participant’s Representations, Warranties and Agreements.
     In connection with the exercise of any Options, the Participant shall make
to the Company, in writing, such representations, warranties and agreements in
connection with such exercise and investment in Class A Common Shares as the
Committee shall reasonably request.
     6. Successors.
          6.1 This Agreement is personal to the Participant and, without the
prior written consent of the Company, shall not be transferable by the
Participant otherwise than (i) by will or the laws of descent and distribution,
(ii) pursuant to a qualified domestic relations order (as defined in the Code)
or (iii) pursuant to a gift to the Participant’s spouse, children, grandchildren
or other living descendants, whether directly or indirectly or by means of a
trust, partnership, limited liability company or otherwise. This Agreement shall
inure to the benefit of and be enforceable by the Participant’s legal
representatives.
          6.2 This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
          6.3 The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation, scheme of arrangement or otherwise
(an “Acquisition”)) to all or substantially all of the business and/or assets of
the Company expressly to assume and to agree to perform this Agreement in the
same manner and to the same extent that the Company would have been required to
perform it if no such succession had taken place (or by substituting for such
Options new options, based upon the shares of such successor, having an
aggregate spread between the Fair Market Value of the underlying shares and the
Exercise Price thereof, and the same term, immediately after such substitution,
equal to the spread on, and the term of, such Options immediately before such
substitution but in any case subject to the same terms and conditions, including
those applicable to vesting and exercise, as may otherwise be applicable to the
Options granted by the Company), and the Participant hereby agrees to such
assumption (or substitution); provided, however, that the Company or such
successor may, at its option, at the time of or promptly after such Acquisition,
terminate all of its obligations hereunder with respect to the Options by paying
to the Participant or the Participant’s successors or assigns an amount equal to
the product of (i) the number of Options and (ii) the Fair Market Value per
share of the shares underlying such Options at the time of such Acquisition less
the amount of such Options’ Exercise Price (but not in excess of such Fair
Market Value per share), in either case, in exchange for the Participant’s
Options. As used in this Agreement, the “Company” shall mean both the Company as
defined above and any such successor that assumes and agrees to perform this
Agreement, by operation of law or otherwise.

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     7. Miscellaneous.
     7.1 This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware, without regard to the
principles of conflicts of law thereof. The captions of this Agreement are not
part of the provisions hereof and shall have no force or effect. This Agreement
may not be amended or modified except by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
     7.2 Plan Shares may bear legends to the extent the Committee or the Board
determines it to be necessary or appropriate.
     7.3 All notices and other communications under this Agreement shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed if to
the Participant, at the address set forth on the signature page hereto, and if
to the Company: United America Indemnity, Ltd., c/o Walkers SPV Limited, Walker
House, 87 Mary Street, P.O. Box 908GT, George Town, Grand Cayman, Cayman
Islands, Attention: General Counsel, or to such other addresses as either party
furnishes to the other in writing in accordance with this Section 7.3. Notices
and communications shall be effective when actually received by the addressee.
     7.4 The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
     7.5 No later than the date as of which an amount first becomes includible
in the gross income of the Participant for federal, state, foreign or other
income tax purposes with respect to any Options, the Participant shall pay to
the Company, or if appropriate, any of its Affiliates, or make arrangements
satisfactory to the Committee regarding the payment of, any federal, state,
local, foreign or other taxes of any kind required by law to be withheld with
respect to such amount. If approved by the Committee, withholding obligations
may be settled with Class A Common Shares, including Class A Common Shares that
are part of the award that gives rise to the withholding requirement. The
obligations of the Company under the Plan shall be conditional on such payment
or arrangements, and the Company and its Affiliates shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment
otherwise due to the Participant. The Committee may establish such procedures as
it deems appropriate, including making irrevocable elections, for the settlement
of withholding obligations with Class A Common Shares.
     7.6 The Participant’s or the Company’s failure to insist upon strict
compliance with any provision of, or to assert any right under, this Agreement
shall not be deemed to be a waiver of such provision or right or of any other
provision of or right under this Agreement.
     7.7 The Options are granted pursuant to the Plan which is incorporated
herein by reference and the Options shall, except as otherwise expressly
provided herein, be governed by the terms thereof. The Participant hereby
acknowledges receipt of a copy of the Plan and agrees to be bound by all the
terms and provisions thereof. The Participant and the Company each acknowledges
that this Agreement (together with the Plan and the other agreements referred to
herein and therein) constitutes the entire agreement and supersedes all other
agreements and

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understandings, both written and oral, among the parties or either of them, with
respect to the subject matter hereof; provided, however, that the Employment
Agreement shall control in the event of any conflict between the Employment
Agreement and this Agreement.
     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

                  UNITED AMERICA INDEMNITY, LTD.            
 
               
By:
          By:    
 
               
Title:
              Robert M. Fishman

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Exhibit C
RESTRICTED SHARE AGREEMENT
     THIS AGREEMENT, made as of the ___ day of                     , 200___ (the
“Grant Date”), by and between United America Indemnity, Ltd., a Cayman Islands
exempted company with limited liability whose office is located c/o Walkers SPV
Limited, Walker House, 87 Mary Street, P.O. Box 908GT, George Town, Grand
Cayman, Cayman Islands (the “Company”), and Robert M. Fishman (the
“Participant”), with an address of                                         .
     1. Grant of Shares. Subject to the restrictions, terms and conditions of
the United America Indemnity, Ltd. Share Incentive Plan (the “Plan”), this
Agreement and, if the Participant is party to such an agreement, the operative
employment agreement between the Participant and United America Indemnity, Ltd.
(the “Employment Agreement”), the Company hereby awards to the Participant ___
(_0) shares of the Company’s validly issued Class A common shares, par value
$.0001 per share (“Common Shares” or the “Plan Shares”). To the extent required
by law, the Participant shall pay the Company the par value ($.0001) for each
Share awarded to the Participant simultaneously with the execution of this
Agreement. Pursuant to Section 2 hereof, the Plan Shares are subject to certain
restrictions, which restrictions relate to the passage of time as an employee of
the Company and/or its Affiliates. While such restrictions are in effect (such
period, the “Restricted Period”), the Plan Shares subject to such restrictions
shall be referred to herein as “Restricted Shares.”
     2. Restrictions on Transfer. The Participant shall not sell, transfer,
pledge, hypothecate, assign or otherwise dispose of the Plan Shares, except as
set forth in the Plan, this Agreement or the Employment Agreement. Any attempted
sale, transfer, pledge, hypothecation, assignment or other disposition of the
Plan Shares in violation of the Plan or this Agreement shall be void and of no
effect and the Company shall have the right to disregard the same on its books
and records and to issue “stop transfer” instructions to its transfer agent.
     3. Restricted Shares.
          3.1 Retention of Certificates. Promptly after the date of this
Agreement, the Company shall issue share certificates representing the
Restricted Shares unless it elects to recognize such ownership through book
entry by the transfer agent. The share certificates shall be registered in the
Participant’s name and shall bear any legend required under the Plan. Such share
certificates shall be held in custody by the Company (or its designated agent)
until the restrictions thereon shall have lapsed. Upon the Company’s request,
the Participant shall deliver to the Company a duly signed share power, endorsed
in blank, relating to the Restricted Shares. In the event the Participant
receives a share dividend on the Restricted Shares or the Plan Shares of
Restricted Shares are split or the Participant receives any other shares,
securities, moneys or property representing a dividend on the Restricted Shares
(other than regular cash dividends on and after the date of this Agreement) or
representing a distribution or return of capital upon or in respect of the
Restricted Shares or any part thereof, or resulting from a split-up,
reclassification or other like changes of the Restricted Shares, or otherwise
received in exchange therefor, and any warrants, rights or options issued to the
Participant in respect of the Restricted Shares (collectively “RS Property”),
the Participant will also immediately deposit with and deliver to the

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Company any of such RS Property, including any certificates representing shares
duly endorsed in blank or accompanied by share powers duly executed in blank,
and such RS Property shall be subject to the same restrictions, including that
of this Section 3.1, as the Restricted Shares with regard to which they are
issued and shall herein be encompassed within the term “Restricted Shares.”
     3.2 Rights with Regard to Restricted Shares. The Participant will have the
right to vote the Restricted Shares, to receive and retain all regular cash
dividends payable to holders of Plan Shares of record on and after the transfer
of the Restricted Shares (although such dividends shall be treated, to the
extent required by applicable law, as additional compensation for tax purposes
if paid on Restricted Shares), and to exercise all other rights, powers and
privileges of a holder of Common Shares with respect to the Restricted Shares
set forth in the Plan, with the exceptions that: (i) the Participant will not be
entitled to delivery of the share certificate or certificates representing the
Restricted Shares until the Restricted Period shall have expired; (ii) the
Company (or its designated agent) will retain custody of the share certificate
or certificates representing the Restricted Shares and the other RS Property
during the Restricted Period; (iii) no RS Property shall bear interest or be
segregated in separate accounts during the Restricted Period; and (iv) the
Participant may not sell, assign, transfer, pledge, exchange, encumber or
dispose of the Restricted Shares during the Restricted Period, except as set
forth in the Plan, this Agreement or the Employment Agreement.
     3.3 Vesting. The Restricted Shares shall become vested and cease to be
Restricted Shares in installments as follows, provided that the Participant is
continuously employed by the Company or any of its Affiliates from the Grant
Date until the applicable Vesting Date (as specified below), unless provided
otherwise in the Employment Agreement:

                  Percent of Total         Grant Vested   Shares Vested  
Vesting Date   25 %     —    
First Anniversary of Grant Date
  50 %     —    
Second Anniversary of Grant Date
  75 %     —    
Third Anniversary of Grant Date
  100 %     —    
Fourth Anniversary of Grant Date

          3.4 Forfeiture. The Participant shall forfeit to the Company, without
compensation, other than repayment of the par value paid for such Plan Shares,
any and all unvested Restricted Shares (but no vested portion of the Plan
Shares) and RS Property upon the Participant’s Termination with the Company and
its Affiliates for any reason.
          3.5 Section 83(b). If the Participant properly elects (as required by
Section 83(b) of the Code) within thirty (30) days after the issuance of the
Restricted Shares to include in gross income for federal income tax purposes in
the year of issuance the fair market value of such Plan Shares of Restricted
Shares, the Participant shall pay to the Company or make

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arrangements satisfactory to the Company to pay to the Company upon such
election, any federal, state or local taxes required to be withheld with respect
to the Restricted Shares. If the Participant shall fail to make such payment, or
otherwise make arrangements satisfactory to the Company to pay to the Company,
upon election, any federal state or local taxes required to be withheld, the
Company shall, to the extent permitted by law, have the right to deduct from any
payment of any kind otherwise due to the Participant any federal, state or local
taxes of any kind required by law to be withheld with respect to the Restricted
Shares. The Participant acknowledges that it is his or her sole responsibility,
and not the Company’s, to file timely and properly the election under Section
83(b) of the Code and any corresponding provisions of state tax laws if he or
she elects to utilize such election.
          3.6 Delivery Delay. The delivery of any certificate representing the
Restricted Shares or other RS Property may be postponed by the Company for such
period as may be required for it to comply with any applicable federal or state
securities law, or any national securities exchange listing requirements and the
Company is not obligated to issue or deliver any securities if, in the opinion
of counsel for the Company, the issuance of such Plan Shares shall constitute a
violation by the Participant or the Company of any provisions of any law or of
any regulations of any governmental authority or any national securities
exchange.
          3.7 Withholding. Participant acknowledges that the Restricted Shares
is subject to applicable withholding as described in Section 10(e) of the Plan.
     4. Not an Employment Agreement. The issuance of the Plan Shares hereunder
does not constitute an agreement by the Company to continue to employ the
Participant during the entire, or any portion of the, term of this Agreement,
including but not limited to any period during which the Restricted Shares is
outstanding.
     5. Power of Attorney. The Company, its successors and assigns, is hereby
appointed the attorney-in-fact, with full power of substitution, of the
Participant for the purpose of carrying out the Company’s rights and obligations
with respect to the Restricted Shares and RS Property under the provisions of
this Agreement and taking any action and executing any instruments which such
attorney-in-fact may deem necessary or advisable to accomplish the purposes
thereof, which appointment as attorney-in-fact is irrevocable and coupled with
an interest. The Company, as attorney-in-fact for the Participant, may in the
name and stead of the Participant, make and execute all conveyances, assignments
and transfers of the Restricted Shares and RS Property provided for herein, and
the Participant hereby ratifies and confirms all that the Company, as said
attorney-in-fact, shall do by virtue hereof. Nevertheless, the Participant
shall, if so requested by the Company, execute and deliver to the Company all
such instruments as may, in the judgment of the Company, be advisable for the
purpose.
     6. Miscellaneous.
          6.1 This Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective heirs, legal representatives, successors
and assigns.

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          6.2 Notwithstanding those powers granted the Company pursuant to
Section 5 hereof, no modification or waiver of any of the provisions of this
Agreement shall be effective unless agreed upon, reflected in writing and signed
by the parties to this Agreement.
          6.3 This Agreement may be executed in one or more counterparts, all of
which taken together shall constitute one contract.
          6.4 The failure of any party hereto at any time to require performance
by another party of any provision of this Agreement shall not affect the right
of such party to require performance of that provision, and any waiver by any
party of any breach of any provision of this Agreement shall not be construed as
a waiver of any continuing or succeeding breach of such provision, a waiver of
the provision itself, or a waiver of any right under this Agreement.
          6.5 The headings of the sections of this Agreement have been inserted
for convenience of reference only and shall in no way restrict or modify any of
the terms or provisions hereof.
          6.6 All notices, consents, requests, approvals, instructions and other
communications provided for herein shall be in writing and validly given or made
when delivered, or on the second succeeding business day after being mailed by
registered or certified mail, whichever is earlier, to the persons entitled or
required to receive the same, at the addresses set forth at the heading of this
Agreement or to such other address as either party may designate by like notice.
Notices to the Company shall be addressed to the General Counsel of the Company.
          6.7 This Agreement and the award hereunder are subject to all the
restrictions, terms and provisions of the Plan which are incorporated herein by
reference. In the event of an inconsistency between any provision of the Plan
and this Agreement, the terms of the Plan shall control. The capitalized terms
in this Agreement that are not otherwise defined shall have the same meaning as
set forth in the Plan. The Participant and the Company each acknowledges that
this Agreement (together with the Plan and the other agreements referred to
herein and therein) constitutes the entire agreement and supersedes all other
agreements and understandings, both written and oral, among the parties or
either of them, with respect to the subject matter hereof; provided, however,
that the Employment Agreement shall control in the event of any conflict between
the Employment Agreement and this Agreement.
     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

                  UNITED AMERICA INDEMNITY, LTD.            
 
               
By:
          By:    
 
               
Title:
              Robert M. Fishman

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Schedule II
UAI CEO Employment Agreement
Retained Cash Bonus True-up Example

                                                                               
                                      Year Ended     2007 Payout on     Year
Ended     2008 Payout on     Year Ended     2009 Payout on     Year Ended    
2010 Payout on     Year Ended     2011 Payout on     Year Ended     2012 Payout
on     Year Ended     2013 Payout on       2007     Mar./Apr. 2008 (1)     2008
    Mar./Apr. 2009     2009     Mar./Apr. 2010     2010     Mar./Apr. 2011 (13)
    2011     Mar./Apr. 2012     2012     Mar./Apr. 2013     2013     Mar./Apr.
2014  
Projected Consolidated Net Income Per Share — (Accident Year Basis)
  $ 2.30             $ 2.53             $ 2.78             $ 3.06             $
3.37             $ 3.70             $ 4.07          
Actual Consolidated Net Income Per Share — (Accident Year Basis)
  $ 2.30             $ 2.67             $ 2.50             $ 3.34             $
3.40             $ 3.65             $ 4.08          
Performance Score — Section A.b
    100.0 %             105.5 %             90.0 %             109.1 %          
  101.0 %             98.5 %             100.1 %        
 
                                                                               
                               
Bonus Components:
                                                                               
                               
Section B.(a) bonus (2)
    500,000               775,000               —               955,000        
      550,000               425,000               505,000          
Section B.(b) bonus (3)
    1,000,000               1,000,000               —               1,000,000  
            1,000,000               700,000               1,000,000          
Payment for Tax liability on restricted share vesting (12) — Section B.c
            —               46,250               92,500               92,500    
          154,167               169,584               185,000  
Annual Bonus
            1,500,000               1,821,250       —       92,500              
2,047,500               1,704,167               1,294,584              
1,690,000  
Paid in Restricted Stock (4) — Section C
    (500,000 )     500,000       (500,000 )     500,000       —       —      
(500,000 )     500,000       (500,000 )     500,000       (500,000 )     500,000
      (500,000 )     500,000  
Annual Bonus Cash Portion (without regard to tax liability payments) — Section D
    1,000,000               1,275,000               —               1,455,000  
            1,050,000               625,000               1,005,000          
Paid Cash Bonus — Section D.a
    500,000       500,000       637,500       637,500       —       —      
727,500       727,500       525,000       525,000       312,500       312,500  
    502,500       502,500  
Retained Cash Bonus — Section D.b
    500,000               637,500               —       —       727,500        
      525,000               312,500               502,500          
 
                                                                               
                               
 
                                                          2007 Payout on        
  2008 Payout on           2009 Payout on           2010 Payout on
 
                                                  2007     April 15, 2011 (6)  
2008     April 15, 2012   2009     April 15, 2013   2010     April 15, 2014
Accident Year Performance Score True-Up
                                                                               
                               
Trued-up Performance Score — Section E.a
                                                    97.0 %             99.0 %  
          98.0 %             102.0 %        
Recalculated Section B.(a) Bonus
                                                    350,000              
450,000               400,000               600,000          
Recalculated Section B.(b) Bonus
                                                    400,000              
800,000               600,000               1,000,000          
Total recalculated Annual Bonus (without regard to tax liability payments)
                                                    750,000              
1,250,000               1,000,000               1,600,000          
Less: Restricted Stock component (5)
                                                    (500,000 )            
(500,000 )             (500,000 )             (500,000 )        
Trued Up Annual Bonus Cash Portion — Section E.a
                                                    250,000              
750,000               500,000               1,100,000          
Excess of Trued-Up Annual Bonus Cash Portion over originally determined Annual
Bonus Cash Portion — Section E.b or Section E.d
                                                    (750,000 )            
(525,000 )             500,000               (355,000 )        
Retained Cash Bonus for Target Year — Section E.b.2
                                                    500,000              
637,500               —               727,500          
Excess + Retained Cash Bonus for Target Year— Sections E.b.1 and 2 or
Section E.d (9)
                                                    (250,000 )            
112,500       112,500       500,000       500,000       372,500       372,500  
Deemed Investment Return (10) — Section E.b.3
                                                            —       17,733      
17,733       78,813       78,813       58,715       58,715  
Payment for Tax liability on restricted share vesting (11) — Section B.c
            —               46,250               92,500               92,500    
          154,167               169,584               185,000  
Total Bonus Paid or Awarded (8)
          $ 1,000,000             $ 1,183,750             $ 92,500             $
1,320,000             $ 1,309,400             $ 1,560,896             $
1,618,716  
 
                                                                               
                               
Cumulative Retained Cash Bonus (7):
                                                                               
                               
Cumulative Retained Cash Bonus as of the Prior Year
    —       —       500,000       1,137,500       1,137,500       1,137,500    
  1,137,500       1,115,000       1,115,000       1,115,000       1,002,500    
  1,315,000       1,315,000       1,462,500  
Current Year Retained Cash Bonus
    500,000       500,000       637,500       —       —       —       727,500  
    —       525,000       —       312,500       —       502,500       —  
Retained Cash Bonus which is paid out (E.b or E.d) or used to reduce other held
Retained Cash Bonues (E.d)
    —       —       —       —       —       —       (750,000 )            
(525,000 )     (112,500 )     —       —       (355,000 )     (372,500 )
Cumulative Retained Cash Bonus (7)
    500,000       500,000       1,137,500       1,137,500       1,137,500      
1,137,500       1,115,000       1,115,000       1,115,000       1,002,500      
1,315,000       1,315,000       1,462,500       1,090,000  
 
                                                                               
                               
Restricted Stock Vesting Schedule (12)
                                                                               
                               
2007 (Granted on March 15, 2008)
            —               125,000               125,000               125,000
              125,000                                  
2008 (Granted on March 15, 2009)
                            —               125,000               125,000      
        125,000               125,000                  
2009 no shares granted due to original performance score of 90%
                                            —               —               —  
            —                  
2010 (Granted on March 15, 2011) (13)
                                                            —              
166,667               166,667               166,667  
2011 (Granted on March 15, 2012)
                                                                            —  
            166,667               166,667  
2012 (Granted on March 15, 2013)
                                                                               
            —               166,667  
2013 (Granted on March 15, 2014)
                                                                               
                            —  
 
                                                                               
                               
Value of shares vesting per calendar year
            —               125,000               250,000               250,000
              416,667               458,334               500,001  

 

(1)   Restricted stock grant is made as of March 15. Paid Cash Bonus is made
within 30 days of the Board’s determination, which is due within 75 days of the
start of the year.   (2)   (Performance Score -90)x50,000   (3)   (Performance
Score <=100-95)x200,000   (4)   Full $500,000 payment assumes goals/milestones
fully achieved.   (5)   Restricted stock component is deducted because it is not
impacted by true-up feature.   (6)   Retained Cash Bonus is paid within 45 days
of completion of audited financial statements, which are expected on March 1.  
(7)   Cumulative Retained Cash Bonus equals annual Retained Cash Bonus, less
payouts of retained bonus or deficits after the true-up period has ended.   (8)
  Calendar year bonus paid consists of restricted stock and 50% of Target Year
Annual Cash Bonus, plus payout of trued-up remainder for the Target Year close
out scheduled for that year.   (9)   The Retained Cash Bonus for 2007 upon
true-up was depleted, and therefore no Retained Cash Bonus is paid, and the
remaining deficit is netted against the cumulative Retained Cash Bonus.   (10)  
CEO earns interest on the Retained Cash Bonus at the invested asset earned rate
of the Company over the 3-year period. For purposes of this example, a 5% return
on invested assets is assumed.   (11)   As per the employment contract, the CEO
receives cash funding of the tax liability generated by the scheduled vesting of
his restricted stock shares. A 37% effective tax rate (assuming a PA/non-Phila —
resident (35% federal, 3.07% state)) has been used for the purpose of this
example.   (12)   Assumes flat share value over vesting period.   (13)  
Payments and grants in 2011 and thereafter are based on CEO/Company reaching
agreement on continued employment. True-ups for 2011 and beyond are not shown.