Exhibit 10.2

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

THIS AGREEMENT (“Agreement”), made as of the 14th day of October, 2004,
effective on the Effective Date (as defined herein), between Penn-America Group,
Inc. and its insurance subsidiaries (the “Company” or “Penn-America”), a
Pennsylvania corporation, having its principal place of business at 420 South
York Road, Hatboro, Pennsylvania, and                              (the
“Executive”).

 

W I T N E S S E T H:

 

WHEREAS, the importance of Executive’s contributions to the Company is hereby
acknowledged;

 

WHEREAS, the Company desires to secure the continuing services of Executive
beyond the date on which a merger agreement between the Company and United
National Group, Ltd. and its affiliates (“UNGL”) (such agreement, the “Merger
Agreement”) is signed, and Executive is willing to continue in the employment of
the Company, upon the terms and subject to the conditions set forth in this
Agreement;

 

WHEREAS, Executive possesses knowledge and skills that will contribute to the
continued success of the Company’s business;

 

WHEREAS, the Company believes that Executive’s knowledge and skills will prove
to be crucial in both effectuating a successful merger and integrating the
operations of UNGL and the operations of the Company;

 

WHEREAS, the Company is prepared to enhance the terms and conditions of
employment currently applicable to Executive; and

 

WHEREAS, the recitals set forth above are hereby incorporated into and made a
part of this Agreement.

 

NOW, THEREFORE, intending to be legally bound, the Company agrees to employ
Executive, and Executive hereby agrees to be employed by the Company, upon the
following terms and conditions:

 

ARTICLE I

EMPLOYMENT

 

1.01. Position and Duties. Executive is hereby employed as the
                             of the Company, and will use his/her best energies
and abilities in the performance of his/her duties, related to and consistent
with his/her position, as may be assigned to his/her from time to time by the
Board of Directors of the Company (the “Board”), or by the Chief Executive
Officer of the Company. Executive’s duties shall include managing the legal
affairs for the Company and duties of comparable status and responsibility that
the Board determines are necessary to conduct the business of the Company.

 

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1.02. Location. Executive’s place of work shall be in Hatboro, Pennsylvania,
provided that Executive shall be obligated to travel as business needs require.

 

1.03. Term. This Agreement shall be effective as of the “Closing” (as defined
below) (the date on which the Closing occurs, the “Effective Date”); provided
that in the event the Closing does not occur on or before                     
    , 2005 (or                          , 2005, as may be required by applicable
regulatory bodies) (the “Deadline Date”), the Company may elect to terminate
this Agreement. The initial term of this Agreement shall commence on the
Effective Date and shall continue for an initial term (the “Initial Term”) of
three years from the Effective Date. The Initial Term will extend automatically
for one three year period and then for consecutive one year periods thereafter
(each such extension, an “Extension Term”) unless either Executive or the
Company provides at least 90 days’ advance written notice prior to the
expiration of the Initial Term or an Extension Term, as applicable, to the other
stating that the term will not be extended.

 

1.04. Compensation.

 

1.04.1. Salary. Executive shall receive an annual base salary in the gross
amount of $                     , subject to applicable tax and payroll
withholding, which may be adjusted upward or downward from time to time at the
Company’s sole discretion, subject to the provisions of Section 2.06(iii). The
base salary shall be payable in accordance with the Company’s generally
applicable payroll practices and policies.

 

1.04.2. Bonus Opportunity. Executive shall be eligible to participate in the
Company’s 2004 KEIC Bonus Plan, a copy of which is attached as Exhibit A, which
Plan was established for 2004 performance and payable in 2005. The Company may
not amend such Plan as respects any 2004 bonus compensation to which Executive
is entitled. Commencing in 2005, Executive shall be eligible to participate in a
key employee cash bonus incentive plan to be adopted by the Company and similar
to the 2004 KEIC Bonus Plan, pursuant to the terms of which Executive shall be
eligible to receive 30% of her then annual base salary as a cash bonus for each
calendar year during which Executive is employed by the Company.

 

The Company and its affiliates reserve the right to amend or substitute the plan
referenced in Section 1.04.2 for any fiscal years after fiscal year 2004, and
except as provided below, to make any other adjustments deemed necessary by the
Chairman of the Board, as approved by the Compensation Committee, to account for
the consummation of the Merger Agreement and business activities after the
Effective Date. In any case, the Board, in its reasonable discretion, shall
determine that such adjustments shall (x) not impose any burden or reduce any
benefits, bonuses or awards that otherwise would be provided or paid to
Executive as a result of any costs or expenses incurred by the Company and its
affiliates in connection with (i) any out-of-pocket expenses directly incurred
in 2004 by Penn-America or its affiliates in any registration or sale of
securities related to (I) the Closing (as defined below) or (II) the withdrawal
or cessation of registrations or sales that were a direct result of the Merger
Agreement, (ii) any out-of-pocket expenses directly incurred by Penn-America
and/or the Company or their respective affiliates related to the Merger
Agreement, the transactions provided for in the Merger Agreement, or the closing
and consummation of the transactions provided for in the Merger Agreement
(“Closing”), or (iii) payment of the Annual Integration Bonuses, the Signing
Bonuses, and any

 

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other expenses or extraordinary charges incurred in connection with the Merger
Transaction (the expenses and payments set forth in subclauses (i)-(iii)
collectively referred to as the “Excluded Expenses”), and (y) exclude the
Excluded Expenses from the actual performance results associated with any
performance cycles underlying any applicable bonus arrangements or awards.

 

1.04.3. Equity Compensation. Executive shall be eligible to participate in the
Company’s Performance Based Long-Term Equity Compensation Plan (the “Restricted
Share Plan”), a copy of which is attached as Exhibit B, which Plan was
established and adopted for 2004 performance and provides for awards of
restricted stock under certain circumstances in 2005. The Company may not amend
such Restricted Share Plan with respect to any 2004 bonus award to which
Executive is entitled; provided however that grants of shares under the
Restricted Share Plan shall be grants of Class A common shares of UNGL (“UNGL
Shares”), and the number of UNGL Shares to be awarded shall be based on the
number of Penn-America shares that would otherwise be due to Executive, with an
adjustment based on the price of UNGL Shares, as provided for in the Merger
Agreement ($15.375 per share) (such price, the “Merger Price”). Commencing in
2005, Executive shall be eligible to participate in a performance-based
restricted share plan to be adopted by the Company prior to or at the time of
the Closing that is similar to the Restricted Share Plan, and which shall
provide that the achievement of mid-point performance objectives (as such
objectives are specified in Exhibit B) shall result in a target opportunity of
30% of Executive’s then current base salary, payable in UNGL Shares, valued at
the closing price of UNGL Shares on the date of grant.

 

The Company and its affiliates reserve the right to amend or substitute the
Restricted Share Plan for any fiscal years after fiscal year 2004, and except as
provided below, to make any other adjustments deemed necessary by the Chairman
of the Board, as approved by the Compensation Committee, to account for the
consummation of the Merger Agreement and business activities after the Effective
Date. In any case, the Board, in its reasonable discretion, shall determine that
such adjustments shall (x) not impose any burden or reduce any benefits, bonuses
or awards that otherwise would be provided or paid to Executive as a result of
any out-of-pocket costs or expenses incurred by the Company and its affiliates
in connection with any Excluded Expenses, and (y) exclude the Excluded Expenses
from the actual performance results associated with any performance cycles
underlying any applicable awards under the Restricted Share Plan and any
successor thereto.

 

1.04.4. Car Allowance. Executive shall receive a car allowance of
$                 per month. The car allowance shall be payable, or credited to,
Executive in accordance with the Company’s applicable practices and policies.

 

1.04.5. Signing Bonus. Upon Closing, Executive shall receive a cash payment in
the amount of $                 (the “Signing Bonus”) subject to applicable tax
and payroll withholding.

 

1.04.6. Successful Integration Bonus. Upon the completion of each of the
Company’s 2005 and 2006 fiscal years, Executive shall, to the extent then
actively employed, be paid a total (over two years) of $                    
(the “Target Integration Bonus”), but only upon the satisfaction of those
integration milestones set forth in Exhibit C hereto, as determined in good
faith by the Chairman of the Board of Directors of UNGL and approved by UNGL’s

 

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Compensation Committee (such resulting figure, the “Annual Integration Bonus”).
If Executive is not actively employed at the time such Annual Integration Bonus
would be payable, Executive nonetheless shall be entitled to receive the Annual
Integration Bonus, if any, that is payable to her under the provisions of
Section 3.05. The Target Integration Bonus shall be payable in UNGL Shares as
provided for below. The UNGL Shares comprising the Annual Integration Bonus
shall be subject to a shareholder-approved plan, which plan shall have been
approved prior to or at the time of the approval of the Merger Transaction, and
available for resale under an S-8 filed with the Securities and Exchange
Commission. Payment of such UNGL Shares shall be made in two installments, the
first installment on or before April 1, 2006, and the second installment on or
before April 1, 2007; or with respect to each such year at such later date as
the financial statements for such years have been completed and certified by the
Company’s outside auditors. The UNGL Shares comprising the Annual Integration
Bonus shall be subject to Stock Ownership Guidelines, in the form attached
hereto as Exhibit D, and shall otherwise be free of any and all restrictions on
sale or resale, except as such sale or resale may be restricted under applicable
securities laws and regulations. The conversion of the Target Integration Bonus
into UNGL Shares shall be based on the Merger Price. Notwithstanding any other
provision of this Agreement to the contrary, UNGL Shares paid in satisfaction of
the Annual Integration Bonus shall not be sold, transferred or otherwise
disposed of by Executive for a period of eighteen (18) months following the
payment of such shares, except to the extent necessary to satisfy any tax
liability associated with such payment.

 

1.04.7. Equity Rollover.

 

(i) Any options (whether vested or unvested) held by Executive in Penn-America
prior to the Effective Date (“Old Options”) shall be cancelled as of the
Effective Date and Executive shall be issued and fully vested in an aggregate
number of options in UNGL Shares with the same aggregate value as the Old
Options, as determined in accordance with the Merger Agreement. Executive may
exercise the options to be granted under this Section 1.04.7(i) at any time
after the Closing. Executive shall be solely responsible for any taxes payable
by reason of such issuance and/or exercise. Executive may, prior to the Closing
and consistent with the Company’s policies and applicable securities
regulations, exercise any vested Old Options and/or sell securities issued
thereunder prior to the Closing.

 

(ii) Any vested, and unvested restricted, shares held by Executive in
Penn-America prior to the Effective Date (“Old Shares”) shall be converted as of
the Effective Date into vested UNGL Shares and the fixed cash payment in
accordance with the Merger Agreement. The shares shall be subject to the Stock
Ownership Guidelines.

 

1.05. Benefits and Expenses.

 

1.05.1. Benefits. Until the first anniversary of the Effective Date, Executive
will be covered by such group insurance and other benefit plans (including life
insurance policies issued to the Executive for the benefit of a named
beneficiary) and shall be eligible for such paid vacation and holidays, at least
equal to those benefits afforded Executive through Penn-America. A list of the
current benefits to be provided to Executive is attached to this Agreement as
Exhibit E. Such benefits may be amended from time to time by the Company to
increase or add benefits during the first year following the Effective Date, and
thereafter for any reason in connection

 

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with across-the-board modifications, or to comply with any legal requirements
applicable to such benefits, or necessary to maintain the deductibility for tax
purposes of amounts paid by the Company to provide or maintain such benefits.
During the first year following the Effective Date, the Company shall not
terminate or eliminate any such benefit plans or reduce benefits provided under
such plans, unless a change in the law applicable to such benefits shall cause
the continued provision of such benefits to be contrary to applicable law, or
shall cause the amounts paid by the Company to provide or maintain such
benefits, which amounts formerly were deductible for tax purposes by the
Company, to no longer be deductible for such purposes under applicable law;
provided however that the Company shall continue the existing payment
arrangements for supplemental life insurance policies purchased for Executive
and in effect as of the date of the execution of this Agreement during the
Initial Term and the Extension Terms (if any).

 

1.05.2. Business Expenses. The Company shall pay or reimburse Executive for all
reasonable expenses incurred or paid by Executive in the performance of
Executive’s duties hereunder, upon presentation of expense statements or
vouchers and such other information as the Company may require in accordance
with the generally applicable policies and procedures of the Company.

 

ARTICLE II

TERMINATION

 

2.01. Incapacity. If during the term of Executive’s employment, Executive is
prevented from effectively performing the essential functions of his/her job,
with reasonable accommodation (if such reasonable accommodation can be provided
by Company), for a period of 180 days within any twelve (12) month period by
reason of illness or Disability, the Company, by written notice to Executive,
may terminate Executive’s employment. Upon delivery to Executive of such notice,
together with payment of any salary accrued under Section 1.04.1, any awarded
but unpaid bonuses applicable to any prior period, and any other amounts as may
be due under Sections 1.04 and 1.05 up to the date of termination, Executive’s
employment and all obligations of the Company will terminate and this Agreement
shall end. For purposes of this Agreement, “Disability” is defined as Executive
being eligible for disability insurance benefits under the Company’s long term
disability insurance policy, or in the absence of such disability insurance
coverage, “Disability” shall be defined as the inability to provide the
executive level services provided for hereunder, as determined by an outside
physician selected by the Company.

 

2.02. Retirement. This Agreement shall end, without notice to terminate being
required, upon Executive’s voluntary election to retire at any time after
Executive reaches age 65. Upon retirement, Executive’s employment shall
terminate and Executive shall be entitled to payment of any salary accrued under
Section 1.04.1, and any awarded but unpaid bonuses applicable to any prior
period, together with any other amounts as may be due under Sections 1.04 and
1.05 up to the date of termination, following which all obligations of the
Company will terminate.

 

2.03. Death. If Executive dies during the term of her employment, Executive’s
employment will terminate, the Agreement shall end, and all Company’s
obligations, other than any obligations with respect to the payment of accrued
but unpaid salary under Section 1.04.1,

 

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and any awarded but unpaid bonuses applicable to any prior period, together with
any other amounts as may be due under Sections 1.04 and 1.05 up to the date of
death, will cease.

 

2.04. Termination For Cause. If the Company terminates Executive for Cause, this
Agreement and all obligations of the Company shall terminate effective upon
notice of termination for Cause, other than (x) any obligations with respect to
the payment of accrued but unpaid salary under Section 1.04.1, (y) in the case
of a termination under Section 2.04(i) only, certain Limited Severance Benefits
(as provided in Section 3.07), and (z) any other amounts as may be due under
Section 1.05 up to the date of termination. For purposes of this Agreement,
“Cause” shall mean:

 

(i) Executive’s failure to perform duties (other than as a result of incapacity
as described in Section 2.01) in any material respect that remains uncured for
30 days after written notice thereof is given to Executive, such written notice
will be provided to the extent that the Board reasonably determines such failure
is curable;

 

(ii) Executive’s willful misconduct or gross negligence or any willful material
misrepresentation to the directors or officers of the Company (including any
willful material misrepresentation made in this Agreement);

 

(iii) Executive’s willful failure to conduct the business of the Company in
accordance with the lawful directives of the Board or Company officers to whom
Executive reports;

 

(iv) any material breach by Executive of any of the covenants, terms or
conditions of this Agreement that remains uncured for 30 days after written
notice thereof is given to Executive, such written notice will be provided to
the extent that the Board reasonably determines such failure is curable;

 

(v) Executive’s engagement in conduct which is dishonest or disloyal, which has
injured or would injure the business or reputation of the Company or otherwise
adversely affects its interests in any material respect; or

 

(vi) Executive’s engagement in fraud or embezzlement, or a good faith
determination by the Board that Executive’s arraignment for a felony charge or
other serious crime involving moral turpitude is based on facts and actions of
Executive that are likely to result in the successful criminal prosecution of
Executive and that such arraignment and prosecution would be likely to adversely
affect the business, operations or prospects of the Company or its affiliates,
or Executive’s plea of nolo contendre to a felony. This provision shall not
apply to any arraignment, conviction or plea of nolo contendre to any traffic
(driving) offenses.

 

2.04.1. Any notice given by the Company under the subsections of Section 2.04
shall specifically state the manner in which Executive has not performed her
duties, or has breached any of the covenants, terms or conditions of this
Agreement, that the notice is given under this Section 2.04, and that failure to
correct such breach will result in termination of

 

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employment under this Agreement. For the purpose of the above definition of
Cause, no act, or failure to act, on Executive’s part shall be deemed “willful”
unless done, or omitted to be done, by Executive not in good faith and without
reasonable belief that her action or omission was in the best interest of the
Company. Failure of the Company, the Penn-America business or Executive to
achieve or satisfy any target, milestone or other performance goal or hurdle, in
and of itself, shall not be deemed Cause for termination under Sections 2.04(ii)
through (vi) above.

 

2.04.2. Notwithstanding the foregoing, termination by the Company for Cause
shall not be effective until and unless a notice to terminate for Cause has been
given by the Company within (i) 180 days after the Company learns of the act,
failure or event constituting “Cause” under Section 2.04(i) (which is not cured
by Executive within any time period permitted for such cure) or (ii) 90 days
after the Company learns of the act, failure or event constituting “Cause” under
any of Sections 2.04(ii)-(vi) (which is not cured by Executive within any time
period permitted for such cure), and other than in connection with any activity
by Executive that has been concealed or is of a fraudulent nature. If Executive
has commenced arbitration in the manner prescribed in this Agreement within 15
days after receipt of such notice of termination, disputing the Company’s right
under this Agreement to terminate for Cause, and the Arbitrator shall thereafter
have determined that Executive was not terminated for Cause, Executive shall be
entitled, in addition to any amount otherwise due to Executive under this
Agreement, to receive interest on any payments that should have otherwise been
due him, commencing from the date of the Company’s notice of termination, at the
Company’s then long term borrowing rate.

 

2.05. Termination Without Cause. Executive’s employment is at-will, and this
Agreement may be terminated at any time by the Company without Cause upon 30
days’ notice to Executive. If the Company terminates Executive without Cause
hereunder, the Company shall pay to Executive accrued but unpaid salary under
Section 1.04.1, together with any other amounts as may have been due and payable
under Sections 1.04 and 1.05 up to the date of termination, any awarded but
unpaid bonuses applicable to any prior period, together with Severance Benefits
in accordance with Article III, and Executive shall be entitled to retain all
restricted stock awards and options that were vested as of such termination
date, and unless a longer period is otherwise provided for in the underlying
award or plan or under any Company policy or applicable securities laws, shall
have thirty (30) days from the date of such termination to exercise and/or sell
such shares or options. Executive’s right to receive Severance Benefits listed
in Section 3.05 or Limited Severance Benefits under Section 3.07 is subject to
Executive’s complying with the obligations set forth in Section 3.02. The
Company’s provision of written notice not to extend either the Initial Term or
an Extension Term of this Agreement pursuant to Section 1.03 shall be deemed to
be a termination of Executive by the Company without Cause hereunder.

 

2.06. Executive Termination for Good Reason. If Executive terminates her
employment for Good Reason, this Agreement and all obligations of the Company
shall terminate effective upon Executive’s provision of notice of termination,
and Executive shall receive the same salary, benefits and Severance Benefits as
would be provided or payable to her in connection with a termination without
Cause under Section 2.05 hereof. For purposes of this Agreement, “Good Reason”
shall mean:

 

(i) an assignment to Executive of any duties or responsibilities that comprise a
significant reduction or change by the Company (or its successor) in the nature
or scope of the authority of, such duties or responsibilities assigned to or
held by Executive as of the Effective Date; provided that a good faith
assignment by the Board to a position within the Company or one of its
affiliates with similar responsibility, title and compensation is not considered
to be Good Reason;

 

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(ii) any removal of Executive from the officer positions with the Company (or
its successor) and its affiliates held by her as of the Effective Date; provided
that a good faith assignment by the Board to a position within the Company or
one of its affiliates with similar responsibility, title and compensation is not
considered to be Good Reason;

 

(iii) a reduction by the Company (or its successor) and its subsidiaries in
Executive’s base salary as of the Effective Date or, if greater, at any time
thereafter;

 

(iv) a transfer or relocation of the site of employment of Executive, without
her express written consent, to a location more than 35 miles from the location
of her principal place of business immediately preceding the Effective Date; or

 

(v) any failure of the Company to comply with and satisfy its material
obligations under this Agreement (other than those specified in clauses (i)
through (iv) above, as to which no notice and opportunity to cure shall be
provided) that remains uncured for 30 days after written notice thereof is given
to the Company.

 

ARTICLE III

SEVERANCE BENEFITS

 

3.01 Benefits Payable Upon Termination without Cause, Non-Renewal or Termination
for Good Reason. If, during the Initial Term or any Extension Term, (i) the
Company terminates Executive without Cause, (ii) in connection with the
expiration of the Initial Term or any Extension Term, the Company gives notice
of non-renewal of this Agreement, or (iii) Executive terminates her employment
for Good Reason, Executive shall be paid Severance Benefits, as hereafter
defined, in addition to all other amounts payable to Executive as referenced in
Section 2.05.

 

3.02 Release/Compliance with Obligations. Notwithstanding the foregoing
provisions, payment of Severance Benefits or Limited Severance Benefits is
conditioned upon Executive’s execution of the form of release in Exhibit F-2.

 

3.03 Limitation on Payments. Notwithstanding anything to the contrary in this
Agreement, in no event shall Severance Benefits be paid more than once to
Executive under this Agreement.

 

3.04 Timing of Payments. Severance Benefits shall be paid or provided in monthly
installments, with the first monthly installment payable within 10 days after
the release referenced in Section 3.02 becomes irrevocable; provided, however,
that the portion of any Severance Benefits representing the pro-rated amount of
any cash bonus or performance-based

 

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long-term equity compensation award shall not be paid until such amounts are
otherwise normally payable pursuant to the plan or arrangement under which such
amounts are paid.

 

3.05 Severance Benefits. “Severance Benefits” means amounts and/or benefits as
follows:

 

(i) Executive’s annual base salary set forth in Section 1.04.1 or, if greater,
the annual base salary as in effect immediately prior to Executive’s termination
of employment, to be paid in equal monthly installments over a 12-month period;

 

(ii) the pro-rated amount of any cash bonus which Executive otherwise would have
received under the Company’s KEIC bonus plan, or its successor, as set forth in
Section 1.04.2, for each whole or partial calendar quarter of employment during
the partial year in which Executive’s employment is terminated, provided that
any Company performance goals under such plan are achieved for the year in which
termination of employment occurs;

 

(iii) the pro-rated amount of any performance based long-term equity
compensation award which Executive would have otherwise received, as set forth
in Section 1.04.3, for each whole or partial calendar quarter of employment
during the partial year in which Executive’s employment is terminated, provided
that any Company performance goals under such plan are achieved for the year in
which termination of employment occurs;

 

(iv) vesting of any awarded but unvested restricted stock and non-qualified
stock options in accordance with the vesting schedule established in the
applicable plan or agreement, which vesting will continue in accordance with its
terms following termination of employment until fully vested;

 

(v) provision of twelve (12) months of Executive’s then current medical and
dental benefits, or the cash equivalent payment thereof, as set forth in Section
1.05.1;

 

(vi) provision of twelve (12) months of Executive’s life insurance premiums on
any policy of life insurance issued to Executive on Executive’s life for the
benefit of a named beneficiary, as set forth in Section 1.05.1;

 

(vii) any earned but unpaid Annual Integration Bonus (the Annual Integration
Bonus shall be deemed earned if Executive is employed with the Company or its
affiliates on the last day of the fiscal year for which such Annual Integration
Bonus is payable), which shall be payable within 90 days after the close of the
Company’s fiscal year to which it relates, provided that any Company performance
goals listed under Exhibit C have been achieved for the year for which such
bonus relates.

 

3.06. No Severance Payable. Notwithstanding any contrary provision herein, no
Severance Benefits or Limited Severance Benefits (as defined below) shall be
payable (except as otherwise specifically provided in Sections 2.01, 2.02 and
2.03) if:

 

3.06.1 Executive voluntarily resigns from her position for any reason other than
for Good Reason in accordance with Section 2.06;

 

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3.06.2 Executive’s employment is terminated for reasons described in Section
2.01 (“Incapacity”), Section 2.02 (“Retirement”), or Section 2.03 (“Death”);

 

3.06.3. Executive violates the applicable provisions of Sections 4.02, 4.03,
4.04 and 4.05 in any material respect after the date of termination of
Executive’s employment under this Agreement. If Executive violates the
applicable provisions of Sections 4.02, 4.03, 4.04 and 4.05 in any material
respect after any Severance Benefits or Limited Severance Benefits have been
paid, no further payments will be due to Executive and Executive shall be
required to reimburse the Company for any and all such payments previously made;
or

 

3.06.4. Executive’s employment is terminated for Cause, other than under Section
2.04(i).

 

3.07. Limited Severance Benefits. If Executive’s employment is terminated for
Cause under Section 2.04(i), Executive shall be entitled to receive
                     months of Executive’s then current annual base salary and
medical and dental benefits (such salary and benefits, “Limited Severance
Benefits”). Executive shall not be entitled to any other Severance Benefits
listed in Section 3.05.

 

3.08. Preservation of Vested Equity Awards. Upon Executive’s termination of
employment for any reason hereunder, Executive shall (i) retain all restricted
stock awards and options that were vested as of such termination date; and (ii)
have (or her estate or legal representative shall have) thirty (30) days from
the date of such termination to exercise such options; provided that such time
period may be extended by provisions in the underlying award or plan or under
any Company policy or applicable securities laws.

 

3.09. Damage Limitation. Executive understands and agrees that he/she is
entitled exclusively to the compensation and benefits as stated in Article II
and Article III (as applicable) in the event of a termination and that any claim
for damages by Executive arising out of this Agreement and her employment by
Employer will be limited exclusively to the compensation and benefits as set
forth in Article II and Article III (as applicable) in the event of termination;
provided that this Section 3.09 shall not limit Executive’s entitlement, if any,
to attorneys’ fees under Section 5.011.

 

ARTICLE IV

EXECUTIVE’S REPRESENTATIONS AND WARRANTIES

 

4.01. Duties. Executive agrees that, in addition to all other obligations
commensurate with her employment with the Company, he/she shall devote his/her
full business time, energies and talents to the business of the Company, and
comply with each of the Company’s corporate governance and ethics guidelines,
conflict of interests policies and code of conduct applicable to all Company
employees or senior Executives as adopted by the Board and by the UNGL Board
from time-to-time. Executive first shall obtain the consent of the Board in
writing before engaging in any other business or commercial activities, duties
or pursuits. Notwithstanding the foregoing, nothing shall preclude Executive
from (i) engaging in charitable activities and

 

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community affairs, (ii) acting as a member, director or officer of any industry
trade association or group, (iii) serving as a trustee, director or advisor to
any family companies or trusts, and (iv) managing his/her personal investments
and affairs, provided such activities do not, in the reasonable judgment of the
Board, materially interfere with the proper performance of his/her duties and
responsibilities hereunder. Executive also agrees that he/she will advise the
Board of any corporate opportunities and not usurp such opportunities.

 

4.02. Noncompetition. Executive acknowledges and agrees that the insurance
business and operations of the Company are national in scope, and that the
Company operates in multiple locations and business segments in the course of
conducting its business. In consideration of this Agreement and the equity
interests being made available to Executive hereunder, Executive covenants and
agrees that during his/her employment with the Company, and for a period of
                     months following the termination of such employment for any
reason, unless if the termination entitles the Executive to receive Severance
Benefits from the Company under Section 3.01, in which case such period shall be
                     months (such period, the “Restrictive Period”), Executive
shall not (i) engage, whether as owner, manager, operator or otherwise, directly
or indirectly, in any property and/or casualty insurance company (or holding
company which controls such company) that is based in the United States or does
a substantial amount of its business in the United States and that writes more
than 15% of its written premium by issuing commercial insurance policies for
businesses through a network of wholesale general agents on a binding authority
basis; provided however that the restrictions herein shall not prohibit or
prevent Executive from acting as an owner, manager, operator or employee of any
wholesale general agent, (ii) use any information obtained in the course of
Executive’s employment by the Company for the purpose of notifying individuals
of Executive’s willingness to provide services after such termination in
competition with the Company or in breach of this Agreement, or (iii) otherwise
solicit for competitive purposes any person who is, or at any time during the
term of Executive’s employment by the Company was, a customer of the Company;
provided that Executive shall not be subject to the above restrictions if the
Company fails to pay (i) Severance Benefits due to Executive, if any, pursuant
to Section 3.01 (other than as provided for under Section 3.06.3). Ownership of
less than 5% of the securities of any publicly traded company will not violate
this Section 4.02. In the event that this paragraph shall be determined by any
court of competent jurisdiction to be unenforceable in part by reason of its
being too great a period of time or covering too great a geographical area, it
shall be in full force and in effect as to that period of time or geographical
area determined to be reasonable by the court.

 

4.03. Executive Nonsolicitation. Executive covenants and agrees that during the
Restrictive Period, Executive shall not solicit or induce, or attempt to solicit
or induce, any employee of the Company or its affiliates, other than any
administrative assistant, to terminate such employment for any reason whatsoever
or hire any employee of the Company or its affiliates, other than any
administrative assistant.

 

4.04. Non-Disclosure. Executive shall not, during or after his/her employment
with the Company, (i) disclose, in whole or in part, any Company Confidential
Information, as hereinafter defined, to any person, firm, corporation,
association or other entity for any reason or purpose whatsoever unless
authorized in writing to do so by the Company or required by law, order of any
court or court process, or (ii) use any Company Confidential Information for
Executive’s own purpose or for the benefit of any person, firm, corporation,
association or other entity other

 

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than the Company; except in the proper performance of Executive’s duties as
instructed by the Company. Company Confidential Information shall not include
(x) information in the public domain or generally known in the industry (unless
Executive 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
Executive from experience in the industry generally and not specific to Company,
and (z) information disclosed by the Company to third parties without any duty
or obligation of confidentiality or non-disclosure.

 

4.04.1. Confidential Information. For purposes of this Agreement, Company
Confidential Information shall mean the knowledge and information acquired by
Executive concerning the Company’s confidential and proprietary information
regarding its business plans, software, formatting, programs, client prospects,
client lists, supplier and vendor information, client contacts, client
information and data, marketing plans, data processing systems and information
contained therein, products, proposals to clients and potential clients, account
reports, plans, studies, 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 which is not already available to the public
or known generally in the industry.

 

4.05. Inventions. Executive 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 Executive during employment
with the Company, or within six months after termination of Executive’s
employment, if based on or related to proprietary information of the Company
known by Executive, provided such invention, discovery, concepts and ideas
relate in some manner to the business or activities of the Company.

 

4.05.1. Assignment of Invention. Executive agrees that in connection with any
invention covered by Section 4.05, Executive shall, on request of the Company,
promptly execute a specific assignment of title to the Company and do anything
else reasonably necessary to enable the Company to secure a patent therefor in
the United States and foreign countries.

 

4.05.2. Work For Hire. If the Company deems such execution to be necessary,
Executive shall execute and deliver the Company’s standard “work for hire”
agreement regarding ownership by the Company of all rights in its confidential
and business materials. A copy of such “work for hire” agreement is attached
hereto as Exhibit G.

 

4.06. Duty to Cooperate after Termination. In the event of Executive’s
termination of employment during the twelve (12) month period immediately
following the Effective Date, Executive agrees to be available to Company from
time to time to answer questions or provide information relating to Company
matters that he/she worked on during his/her employment at the Company. The
Company shall make reasonable efforts to minimize any burden placed on Executive
by reason of the provisions of this Section 4.06, and shall not unreasonably
interfere in Executive’s obligations to any subsequent employer. In the event
that Executive would reasonably be required to incur any cost or expense to
communicate with the Company or travel to any location requested by the Company,
Company shall advance any such travel or other costs reasonably incurred by
Executive to comply with and perform his/her obligations under this Section
4.06.

 

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4.07. Review by Counsel. Executive represents and warrants that he/she has been
provided a full and otherwise fair opportunity to have legal counsel for
Executive review this Agreement and to verify from counsel that the terms and
provisions of this Agreement are reasonable and enforceable.

 

4.08. Acknowledgment. Executive acknowledges and agrees that the terms of this
Article IV: (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 Executive; and (iv) are not
injurious to the public. Executive further acknowledges and agrees that (x)
Executive’s breach of the provisions of this Article IV will cause the Company
irreparable harm, which cannot be adequately compensated by money damages, and
(y) if the Company elects to prevent Executive from breaching such provisions by
obtaining an injunction against Executive, there is a reasonable probability of
the Company’s eventual success on the merits. Executive consents and agrees that
if Executive commits any such breach or threatens to commit any breach, the
Company shall (at its election and notwithstanding Section 5.011 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.

 

ARTICLE V

GENERAL PROVISIONS

 

5.01. Authorization to Modify Restrictions. The provisions of this Agreement
will be enforceable to the fullest extent permissible under applicable law, and
the unenforceability (or modification to conform to law) of any provision will
not render unenforceable, or impair, the remainder of this Agreement. If any
provision will be found invalid or unenforceable, in whole or in part, this
Agreement will be considered amended to delete or modify, as necessary, the
offending provision or provisions and to alter its bounds to render it valid and
enforceable.

 

5.02. No Waiver. The failure of either the Company or Executive to insist upon
the performance of any term in this Agreement, or the waiver of any breach of
any such term, shall not waive any such term or any other term of this
Agreement. Instead, this Agreement shall remain in full force and effect as if
no such forbearance or waiver had occurred.

 

5.03. Entire Agreement. This Agreement represents the entire agreement of the
parties with respect to the subject matter hereof and supersedes any prior
agreement between Executive and the Company (or any of its predecessors or
affiliates). Executive acknowledges that he/she has executed a letter agreement
under which he/she has waived any rights to any payments and benefits under any
change of control agreements with respect to the Closing that were in effect
prior to the Closing, and acknowledges that upon the Closing, such change of
control agreements shall be null and void, and without force and effect. This
Agreement may be amended only by a writing signed by each of the parties. This
Agreement may be assigned by Company, provided that Company complies with the
provisions of Section 5.09. This Agreement may not be assigned by Executive.

 

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5.04. Governing Law. This Agreement will be governed by and construed in
accordance with the law of the Commonwealth of Pennsylvania.

 

5.05. Consent to Jurisdiction. Executive hereby irrevocably submits to the
personal jurisdiction of the United States District Court for the Eastern
District of Pennsylvania or any Pennsylvania state court with jurisdiction in
any action or proceeding seeking to enforce or interpret this Agreement.

 

5.06. Service of Process. Executive irrevocably consents to the service of any
summons and complaint and any other process which may be served in any action or
proceeding arising out of or related to this Agreement brought in the United
States District Court for the Eastern District of Pennsylvania or any
Pennsylvania state court with jurisdiction by the mailing by certified or
registered mail of copies of such process to Executive at his/her address as set
forth on the signature page of this Agreement, so long as said action or
proceeding does not conflict with Section 5.011.

 

5.07. Venue. Executive irrevocably waives any objection which he/she now or
hereafter may have to the laying of venue of any action or proceeding arising
out of or relating to this Agreement brought in the United States District Court
for the Eastern District of Pennsylvania or any Pennsylvania state court and any
objection on the ground that any such action or proceeding in either of such
courts has been brought in an inconvenient forum. Nothing in this Section 5.07
will affect the right of the Company to bring any action or proceeding against
Executive or his/her property in the courts of other jurisdictions.

 

5.08. Agreement Binding. The obligations of Executive under this Agreement will
continue after the termination of his/her employment with the Company for any
reason, to the extent provided herein, and will be binding on his/her heirs,
executors, legal representatives, and assigns.

 

5.09. Successor Corporation. The Company shall require any successor or
successors (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company, by agreement in form and substance satisfactory to Executive, to
acknowledge expressly that this Agreement is binding upon and enforceable
against the Company in accordance with the terms hereof, and to become jointly
and severally obligated with the Company to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform if
no such succession or successions had taken place. Failure of the Company to
obtain such agreement prior to the effectiveness of any such succession, and to
the extent that Executive resigns as a result thereof, shall entitle Executive
to all Severance Benefits referenced in Section 3.05. As used in this Agreement,
the Company shall mean the Company as hereinbefore defined and any such
successor or successors to its business and/or assets, jointly and severally.

 

5.010. Counterparts, Section Headings. This Agreement may be executed in any
number of counterparts. Each will be considered an original, but all will
constitute one and the same instrument. The section headings of this Agreement
are for convenience of reference only and will not affect the construction or
interpretation of any of its provisions.

 

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5.011. Arbitration. In the event that any disagreement or dispute whatsoever
shall arise between the parties concerning this Agreement, such disagreement or
dispute shall be submitted to the Judicial Arbitration and Mediation Services,
Inc (“JAMS”) for resolution in a confidential private arbitration 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. Any such arbitration proceeding
shall take place in Philadelphia, Pennsylvania, New York, New York or
Washington, D.C. (as selected by Executive) before a single arbitrator (rather
than a panel of arbitrators). The parties 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 such arbitration.
Each party shall each bear their respective costs (including attorney’s fees,
and there shall be no award of attorney’s fees); provided that the Company shall
bear the cost of any arbitrator selected by the parties (unless such arbitrator
shall determine that Executive has commenced a frivolous action, in which case
arbitrator fees shall be split between the parties), except in the case of an
appeal, in which case the appealing party shall bear the costs of the appeal. To
the extent that Executive is the prevailing party in any final judgment by the
arbitrator on any case commenced in arbitration by Executive the Company shall
pay or reimburse Executive for all reasonable attorneys’ fees incurred by
Executive in such matter. Nothing herein shall prevent the Company from seeking
injunctive relief as provided for in Article 4 of this Agreement. Judgment upon
the final award rendered by such arbitrator, after giving effect to the JAMS
internal appeal process, may be entered in any court having jurisdiction
thereof. If JAMS is not in business or is no longer providing arbitration
services, then the American Arbitration Association shall be substituted for
JAMS for the purposes of the foregoing provisions. Each party agrees that it
shall maintain absolute confidentiality in respect to any dispute between them.

 

5.012. Notice. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified mail, return receipt requested, postage prepaid, addressed as follows:

 

If to Executive:

    

If to the Company:

  

Board of Directors

Penn-America Group, Inc.

420 South York Road

Hatboro, PA 19040

With a Copy To:

  

United National Group, Ltd.

Walker House

87 Mary Street

P.O. Box 908GT

George Town

Grand Cayman

Cayman Islands

Attn: General Counsel

 

or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.

 

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5.013. Condition of Effectiveness. The occurrence of the Closing on or before
the Deadline Date and the execution and delivery by Executive of the Release
attached hereto as Exhibit F-1 shall be a condition precedent for the
effectiveness and enforceability of this Agreement.

 

5.014. Employee Manuals and Handbooks. Executive acknowledges that from time to
time the Company or its affiliates may establish, maintain and distribute
employee manuals or handbooks or personnel policy manuals, and officers or other
representatives of the Company shall be expected to comply fully with the
policies and procedures provided for therein, to the extent not inconsistent
with the provisions of this Agreement. No policies, procedures or statements of
any nature by or on behalf of the Company (whether written or oral, and whether
or not contained in any employee manual or handbook, as the same may exist from
time to time, or personnel policy manual), and no acts or practices of any
nature, shall be construed to modify the terms of this Agreement.

 

5.015. Insurance and Indemnity. The Company shall, to the fullest extent
permitted by law and its by-laws and charter, defend and indemnify Executive.
The Company shall also provide Executive with coverage as a named insured under
a directors and officers liability insurance policy to be maintained for the
Company’s directors and officers. The Company shall continue to maintain
directors and officers liability insurance for the benefit of Executive during
the term of this Agreement and for at least six (6) years following the
termination of Executive’s employment with the Company, provided that such
insurance is available on commercially reasonable terms. This obligation to
provide insurance and indemnify Executive shall survive expiration or
termination of this Agreement with respect to proceedings or threatened
proceedings based on acts or omissions of Executive occurring during Executive’s
employment with the Company or with any affiliated company. Such obligations
shall be binding upon the Company’s successors and assigns and shall inure to
the benefit of Executive’s heirs and personal representatives.

 

EXECUTIVE ACKNOWLEDGES THAT HE/SHE HAS READ AND UNDERSTANDS THE FOREGOING
PROVISIONS AND THOSE SUCH PROVISIONS ARE REASONABLE AND ENFORCEABLE.

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of
14th day of October, 2004.

 

EXECUTIVE

     

PENN-AMERICA GROUP, INC.

        By: