Exhibit 10.3



 






Exhibit 10.3







 No Stock or other security shall be delivered, and no option or other right to
acquire any stock or other security shall be exercisable, pursuant to this Award except upon
effective registration under the Securities Act of 1933 as amended and the securities laws of each
applicable state or other jurisdiction or upon acceptance by the Company of an opinion of counsel
in such form and by such counsel as satisfactory to counsel for the Company that such registration
is not required.






ProCentury Corporation

Stock Option Award Agreement

for

Non-Qualified Stock Options

under the

2004 Stock Option and Award Plan




To _____________:1




     Congratulations! ProCentury Corporation is awarding you this Option to purchase shares of
Stock pursuant to its 2004 Stock Option and Award Plan (the “Plan”). All capitalized terms used in
this Award Agreement shall have the same meaning as defined in the Plan. Your Option is subject to
acceptance by your signing a copy of this Award Agreement under the heading “Acceptance” and
returning the signed copy before the close of business on _____, 200___.



     The purpose of this Award Agreement is to summarize some of the terms and conditions of your
Option as well as the shares of Stock purchased upon exercise of the Option. This Award Agreement
makes numerous references to the Plan and is governed by the Plan document. You as the Participant
may obtain a copy of the current Plan document at any time by contacting the Company Secretary at



465 Cleveland Avenue

Westerville, OH 43082

(614)-895-2000.










	1	 The Company entered into this agreement with
the individuals listed on Annex A attached hereto.




 









 










Your Option




     Your
Option entitles you to purchase up to _________ (___) shares of Stock, all of
which are designated as Service Vesting Shares.



     The Exercise Price at which you may purchase each such share is $___, which is the fair
market value of the Stock on the Date of Grant of ____________, 200_. Both the number of shares and
the Exercise Price are subject to adjustment for events such as stock splits, etc. as provided in
the Plan.



Vesting of Your Option




     Your Service Vesting Shares are subject to a Service Vesting Schedule that requires you to
complete a period of Service before you can exercise the Option to purchase those Shares. Pursuant
to your Service Vesting Schedule, 1/36th of the total number of your Service Vesting Shares will
become Vested Shares as of the last day of the calendar month for each full calendar month of your
Service as a Director after the Date of Grant, such that the entire number of your Service Vesting
Shares will become vested on
_________, 200___ (the last day of the 36th calendar month of
Service after the Date of Grant).



     In addition and notwithstanding any provision in the Plan to the contrary, your Unvested
Shares will become Vested Shares upon severance of your Service as a result of your death,
Disability or Retirement within the meaning of the Plan.



     As soon as your Unvested Shares become Vested Shares, you may exercise this Option to purchase
your Vested Shares in any one or more transactions at any time and from time to time during the
remaining term of your Option.



Taxation




     Your Option is designated as a Non-Qualified Stock Option under the Plan. The spread between
the market value and the Exercise Price of the Stock purchased will not be taxable to you until you
exercise the Option, at which time the spread will be taxable to you as compensation at ordinary
income rates. Any additional appreciation in value of the Stock realized upon sale of the stock
after your exercise is taxable as a sale of property at capital gains rates. Although the Company
can give no assurance as to the taxability to you, you may contact the Company Secretary for
further information generally describing the tax aspects of a Non-Qualified Stock Option.



Exercising Your Option




     You may exercise your Option, in the manner described below, from time to time at any time
during the period from the Date of Grant until 5:00 p.m. local time at the Company’s office on the
calendar day immediately preceding the 10th anniversary of the Date of Grant, which is
the



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Date of Expiration of your Option. You may exercise your Option any number of times during this
Exercise Period until you have purchased all of your Vested Shares subject to the Option.
Notwithstanding anything to the contrary in this Award Agreement, this Option shall automatically
expire upon, and no longer be exercisable after, the first to occur of the following:





	 	•  	Date of Expiration;
	 
	 	•  	If you are terminated for Cause, on your last day of Service;
	 
	 	•  	If you resign or are otherwise terminated for any reason other than Cause, or
Retirement, on the first day of the fourth calendar month beginning after your last day of
Service;
	 
	 	•  	If your Service is terminated for Retirement or Disability or death, on the first
anniversary of your last day of Service.





     You may exercise your Option by giving notice in writing (as provided in the Plan) to the
Company to the attention of the Company Secretary (or his or her designee) at the above address.
Your notice must state the number of shares being purchased and must be accompanied with payment of
the Exercise Price for those shares. Unless otherwise agreed with the Company, payment shall be by
check in immediately available funds payable in United States dollars to the order of the Company.
Other methods of payment are allowed under the Plan, and you may discuss the availability of these
to you by contacting the Company Secretary.



Other Terms and Conditions




     Your Option is not transferable except at your death by will or the applicable laws of descent
and distribution. During your lifetime, this Option shall be exercisable only by you or, in the
case of your incapacity, your guardian, or legal representative.



     This Award Agreement and your Option are subject to other terms and conditions set forth in
the Plan, including: (i) withholding requirements for taxes, (ii) immediate termination of this
Option if your Service is terminated for Cause, (iii) certain restrictions in the case of a public
offering, and (iv) certain securities law restrictions.



     One of the restrictions to facilitate any future public offering by the Company is that by
accepting this Option you agree on behalf of yourself and your heirs, legal representatives,
successors, and assigns that in the event of any underwritten public offering of any Company
securities made by the Company pursuant to an effective registration statement filed under the
Securities Act, neither you nor any such heirs, legal representatives, successors, and assigns will
directly or indirectly sell, offer to sell, solicit an offer to buy, grant any option to purchase,
contract to sell (including, without limitation, any short sale), or otherwise dispose or offer to
dispose of any interest, equitable or beneficial, in any of such shares for such period of time
from and after the effective date of such registration statement except as provided in the Plan or
pursuant to such public offering.



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     Finally, in the case of any conflict with the terms of this Award Agreement, the terms of the
Plan shall prevail and govern.



	 	 	 	 	 
	 	 	ProCentury Corporation
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	 
	

	 	Name:
	 	Edward F. Feighan
	

	 	Title:
	 	Chairman, President and Chief Executive Officer






Acceptance




     The Participant is familiar with the terms of this Award Agreement and the terms and
conditions of the Plan. The Participant understands that this Option and any Stock issued upon
exercise of this Option are intended to be held for purposes of investment only and not for further
distribution by the Participant. By signing below, the Participant accepts this Option subject to
all of such terms and conditions and agrees to hold and exercise this Option as well as any Stock
purchased upon exercise of this Option for purposes of investment only and not for further
distribution unless and until the Company advises the Participant such Stock may be distributed
without registration under the Securities Act or such Stock is to be distributed pursuant to such a
registration.



	 	 	 	 
	Dated:
                    , 200  

	 	 
	

	 	Participant Name






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Annex A




	 	 	 	 	 	 	 
	Participant	 	Grant Date	 	Number of
Shares    	 
	 
	Michael J. Endres
	 	March 22, 2005	 	 	1,000                  	 
	 
	Robert F. Fix
	 	March 22, 2005	 	 	1,000                  	 
	 
	Jeffrey A. Maffett
	 	March 22, 2005	 	 	1,000                  	 
	 
	Press C. Southworth III
	 	March 22, 2005	 	 	1,000                  	 
	 
	Alan R. Weiler
	 	March 22, 2005	 	 	1,000                  	 
	 
	Robert J. Woodward, Jr.
	 	March 22, 2005	 	 	1,000                  	 







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