Document:

exv10w18

 

Exhibit 10.18 Salary Continuation Agreement with Francis J. Evanitsky, as amended

THE JUNIATA VALLEY BANK

SALARY CONTINUATION AGREEMENT

     THIS AGREEMENT is made this 27th day of August, 2001, by and between THE JUNIATA VALLEY
BANK, a state-chartered bank located in Mifflintown, Pennsylvania (the “Bank”)
and FRANCIS J. EVANITSKY (the “Executive”), intending to be legally bound hereby.

INTRODUCTION

     To encourage the Executive to remain an employee of the Bank, the Bank is willing to provide
salary continuation benefits to the Executive. The Bank will pay the benefits from its general
assets.

AGREEMENT

     The Executive and the Bank agree as follows:

Article 1

Definitions

     Whenever used in this Agreement, the following words and phrases shall have the meanings
specified:

     1.1 “Change in Control” means any of the following:

     (A) any person (as such term is used in Sections 13d and 14d-2 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)), other than the Corporation, a
subsidiary of the Corporation, an employee benefit plan (or related trust) of the Corporation
or a direct or indirect subsidiary of the Corporation, or Affiliates of the Corporation (as
defined in Rule 12b-2 under the Exchange Act), becomes the beneficial owner (as determined
pursuant to Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Corporation representing more than 50% of the combined voting power of the Corporation’s then
outstanding securities (other than a person owning 10% or more of the voting power of stock on
the date hereof); or

     (B) the liquidation or dissolution of the Corporation or the occurrence of, or execution
of an agreement providing for a sale of all or substantially all of the assets of the
Corporation to an entity which is not a direct or indirect subsidiary of the Corporation; or

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     (C) the occurrence of, or execution of an agreement providing for a reorganization,
merger, consolidation or other similar transaction or connected series of transactions of the
Corporation as a result of which either (a) the Corporation does not survive or (b) pursuant
to which shares of the Corporation common stock (“Common Stock”) would be converted into cash,
securities or other property, unless, in case of either (a) or (b), the holders of the
Corporation Common Stock immediately prior to such transaction will, following the
consummation of the transaction, beneficially own, directly or indirectly, more than 50% of
the combined voting power of the then outstanding voting securities entitled to vote generally
in the election of directors of the corporation surviving, continuing or resulting from such
transaction; or

     (D) the occurrence of, or execution of an agreement providing for a reorganization,
merger, consolidation or similar transaction of the Corporation, or before any connected
series of such transactions, if upon consummation of such transaction or transactions, the
persons who are members of the Board of Directors of the Corporation immediately before such
transaction or transactions cease or, in the case of the execution of an agreement for such
transaction or transactions, it is contemplated in such agreement that upon consummation such
persons would cease to constitute a majority of the Board of Directors of the Corporation or,
in the case where the Corporation does not survive in such transaction, of the corporation
surviving, continuing or resulting from such transaction or transactions; or

     (E) any other event which is at any time designated as a “Change in Control” for purposes
of this Agreement by a resolution adopted by the Board of Directors of the Corporation with
the affirmative vote of a majority of the non-employee directors in office at the time the
resolution is adopted; in the event any such resolution is adopted, the Change in Control
event specified thereby shall be deemed incorporated herein by reference and thereafter may
not be amended, modified or revoked without the written agreement of the Executive; or

     (F) during any period of two consecutive years during the term of this Agreement,
individuals who at the beginning of such period constitute the Board of Directors of the Bank
or Corporation cease for any reason to constitute at least a majority thereof, unless the
election of each director who was not a director at the beginning of such period has been
approved in advance by directors representing at least two-thirds of the directors then in
office who were directors at the beginning of the period, provided however this provision
shall not apply in the event two-thirds of the Board of Directors at the beginning of a period
no longer are directors due to death, normal retirement, or other circumstances not related to
a Change in Control.

     Notwithstanding anything else to the contrary set forth in this Agreement, if (i) an agreement
is executed by the Corporation providing for any of the transactions or events constituting a
Change in Control as defined herein, and the agreement subsequently expires or is terminated
without the transaction or event being consummated, and (ii) Executive’s

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employment did not
terminate during the period after the agreement and prior to such expiration or termination, for
purposes of this Agreement it shall be as though such agreement was never executed and no Change in
Control event shall be deemed to have occurred as a result of the execution of such agreement.

     1.2 “Code” means the Internal Revenue Code of 1986, as amended.

     1.3 “Corporation” means The Juniata Valley Financial Corp.

     1.4 “Disability” means the Executive suffering a sickness, accident or injury which, in the
judgment of a physician satisfactory to the Bank, permanently prevents the Executive from
performing substantially all of the Executive’s normal duties for the Bank. As a condition to any
benefits, the Bank may require the Executive to submit to such physical or mental evaluations and
tests as the Bank’s Board of Directors deems appropriate.

     1.5 “Early Retirement Age” means the earlier of : (1) the date the Executive reaches age 55 or
older with 20 or more Years of Service, or (2) age 62.

     1.6 “Early Retirement Date” means the month, day and year in which Early Retirement occurs.

     1.7 “Early Termination” means the Termination of Employment before Normal Retirement Age for
reasons other than death, Disability, Termination for Cause or following a Change in Control.

     1.8 “Early Termination Date” means the month, day and year in which Early Termination occurs.

     1.9 “Effective Date” means February 1, 2001.

     1.10 “Normal Retirement Age” means the Executive’s 65th birthday.

     1.11 “Normal Retirement Date” means the later of the Normal Retirement Age or Termination of
Employment.

     1.12 “Plan Year” means each twelve-month period commencing with the Effective Date of this
Agreement.

     1.13 “Termination for Cause” See Section 5.2.

     1.14 “Termination of Employment” means that the Executive ceases to be employed by the
Corporation or any of its subsidiaries for any reason whatsoever other than by reason of a

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leave of
absence which is approved by the Bank. For purposes of this Agreement, if there is a dispute over
the employment status of the Executive or the date of the Executive’s Termination of Employment,
the Bank shall have the sole and absolute right to decide the dispute.

     1.15 “Years of Service” means the total number of continuous years of employment with the
Corporation or any of its subsidiaries, inclusive of any years of employment with Lewistown Trust
Company and inclusive of any approved leaves of absences.

Article 2

Lifetime Benefits

     2.1 Annual Normal Retirement Benefit. Upon Termination of Employment on or after the Normal
Retirement Age for reasons other than death, the Bank shall pay to the Executive the benefit
described in this Section 2.1 in lieu of any other benefit under this Agreement.

     2.1.1 Amount of Benefit. The Annual Normal Retirement Benefit under this Section 2.1 is
$30,000 (thirty thousand dollars). The Bank may increase the annual benefit under this
Section 2.1 at the sole and absolute discretion of the Bank’s Board of Directors. Any
increase in the annual benefit shall require the recalculation of all the amounts on Schedule
A attached hereto. The annual benefit amounts on Schedule A are calculated by amortizing the
annual normal retirement benefit using the interest method of accounting, an 8.00% discount
rate, monthly compounding and monthly payments.

     2.1.2 Payment of Benefit. The Bank shall pay the annual benefit to the Executive in 12
equal monthly installments payable on the first day of each month commencing with the month
following the Executive’s Normal Retirement Date and continuing for 179 additional months.

     2.1.3 Benefit Increases. Commencing on the first anniversary of the first benefit
payment, and continuing on each subsequent anniversary, the Bank’s Board of Directors, in its
sole discretion, may increase the benefit.

     2.2 Early Retirement Annual Benefit. Upon Termination of Employment on or after Early
Retirement Age, but before Normal Retirement Age, the Bank shall pay to the Executive the benefit
described in this Section 2.2 in lieu of any other benefit under this Agreement.

     2.2.1 Amount of Benefit. The benefit under this Section 2.2 is the Early Retirement
Annual Benefit amount set forth in Schedule A for the Plan Year ended immediately prior to the
Early Retirement Date.

     2.2.2 Payment of Benefit. The Bank shall pay the annual benefit to the Executive in 12
equal monthly installments payable on the first day of each month commencing with

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the month
following the Early Retirement Date and continuing for 179 additional months.

     2.2.3 Benefit Increases. Benefit payments may be increased as provided in Section 2.1.3.

     2.3 Early Termination Benefit. If the Executive terminates employment prior to Early
Retirement Age, the Executive will not be entitled to a benefit under this Agreement. However, the
Bank’s Board of Directors, in its sole discretion, may provide a benefit to the Executive upon
Early Termination.

     2.4 Disability Annual Benefit. If the Executive terminates employment due to Disability prior
to Normal Retirement Age, the Bank shall pay to the Executive the benefit described in this Section
2.4 in lieu of any other benefit under this Agreement.

     2.4.1 Amount of Benefit. The benefit under this Section 2.4 is the Disability Annual
Benefit amount set forth in Schedule A for the Plan Year ended immediately prior to the date
in which Termination of Employment occurs.

     2.4.2 Payment of Benefit. The Bank shall pay the annual benefit amount to the Executive
in 12 equal monthly installments payable on the first day of each month commencing with the
month following Normal Retirement Age and continuing for 179 additional months.

     2.4.3 Benefit Increases. Benefit payments may be increased as provided in Section 2.1.3.

     2.5 Change in Control Annual Benefit. If the Executive is in the active service of the Bank
at the time of a Change in Control, and does not resign his employment with the Bank prior to the
consummation of the transaction which constitutes the Change in Control, the Bank shall pay to the
Executive the benefit described in this Section 2.5 in lieu of any other benefit under this
Agreement.

     2.5.1  Amount of Benefit. The benefit is the Change in Control Annual Benefit amount set
forth in Schedule A for the Plan Year ended immediately prior to the Plan Year in which the
Termination of Employment occurs.

     2.5.2  Payment of Benefit. The Bank shall pay the annual benefit amount to the Executive
in 12 equal monthly installments payable on the first day of each month commencing with the
month following the Termination of Employment and continuing for 179 additional months.

     2.5.3  Benefit Increases. Benefit payments may be increased as provided in Section 2.1.3.

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Article 3

Death Benefits

     3.1 Death During Active Service. If the Executive dies while in the active service of the
Bank, the Bank shall pay to the Executive’s beneficiary the benefit described in this Section 3.1.
This benefit shall be paid in lieu of the Lifetime Benefits of Article 2.

     3.1.1 Amount of Benefit. The amount of Annual Death Benefit under this Section 3.1 is
set forth on Schedule A.

     3.1.2 Payment of Benefit. The Bank shall pay the annual benefit to the beneficiary in 12
equal monthly installments payable on the first day of each month commencing with the month
following the Executive’s death and continuing for 179 additional months.

     3.2 Death During Lifetime Benefit Period. If the Executive dies after the Bank has commenced
paying any of the Lifetime Benefits described in Article 2 of this Agreement but before all such
payments have been made, the Bank shall pay the remaining benefits to the Executive’s beneficiary
at the same time and in the same amounts they would have been paid to the Executive had the
Executive survived.

     3.3 Death Following Termination of Employment But Before Benefits Commence. If the Executive
is entitled to Lifetime Benefits under this Agreement, but dies before the Bank has commenced
paying any of the Lifetime Benefits described in Article 2 of this Agreement, the Bank shall pay to
the Executive’s beneficiary the same benefits, in the same manner, they would have been paid to the
Executive had the Executive survived; however, said benefit payments will commence upon the
Executive’s death.

Article 4

Beneficiaries

     4.1 Beneficiary Designations. The Executive shall designate a beneficiary by filing a written
designation with the Bank. The Executive may revoke or modify the designation at any time by
filing a new designation. However, designations and revocation or modifications of designations
shall only be effective if they are filed with the Bank as a written document, signed by the
Executive and accepted by the Bank during the Executive’s lifetime. The Executive’s beneficiary
designation shall be deemed automatically revoked if the beneficiary predeceases the Executive, or
if the Executive names a spouse as beneficiary and the marriage is subsequently dissolved. If the
Executive dies without a valid beneficiary designation, all payments shall be made to the
Executive’s estate.

     4.2 Facility of Payment. If a benefit is payable to a minor, to a person declared

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incapacitated, or to a person incapable of handling the disposition of his or her property, the
Bank may pay such benefit to the guardian, legal representative or person having the care or
custody of such minor, incapacitated person or incapable person. The Bank may require proof of
incapacity, minority or guardianship as it may deem appropriate prior to distribution of the
benefit. Such distribution shall completely discharge the Bank from all liability with respect to
such benefit.

Article 5

General Limitations

     5.1 Excess Parachute or Golden Parachute Payment. Notwithstanding any provision of this
Agreement to the contrary, the Bank shall not pay any benefit under this Agreement to the extent
the benefit would be an excess parachute payment under Section 280G of the Code or would be a
prohibited golden parachute payment pursuant to 12 C.F.R. §359.2 and for which the appropriate
federal banking agency has not given written consent to pay pursuant to 12 C.F.R. §359.4.

     5.2 Termination for Cause. Notwithstanding any provision of this Agreement to the contrary,
the Bank shall not pay any benefit under this Agreement, if the Bank terminates the Executive’s
employment for:

     5.2.1 Gross negligence or gross neglect of duties;

     5.2.2 Commission of a felony or of a gross misdemeanor involving moral turpitude; or

     5.2.3 Fraud, disloyalty, dishonesty or willful violation of any law or significant Bank
policy committed in connection with the Executive’s employment and resulting in an adverse
effect on the Bank.

     5.3 Removal. Notwithstanding any provision of this Agreement to the contrary, the Bank shall
not pay any benefit under this Agreement if the Executive is subject to a final removal or
prohibition order issued by an appropriate federal banking agency pursuant to Section 8(e) of the
Federal Deposit Insurance Act.

     5.4 Competition. No benefits shall be payable if the Executive, without the prior written
consent of the Bank, violates the following described restrictive covenants.

     5.4.1 Non-compete Provision. The Executive shall not, for the term of this Agreement
and until all benefits have been distributed, directly or indirectly, either as an individual
or as a proprietor, stockholder, partner, officer, director, employee, agent, consultant or
independent contractor of any individual, partnership, corporation or other entity (excluding
an ownership interest of one percent (1%) or less in the stock of a publicly traded company):

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	 	(i)	 	become employed by, participate in, or be connected in any manner
with the ownership, management, operation or control of any bank, savings and
loan or any financial institution, as that term is defined in the
Gramm-Leach-Bliley Act of 1999, Pub. L. 106-102, that has its main office, a
branch office, or conducts any business within a forty (40) mile radius of
Mifflintown, Pennsylvania; or
	 
	 	(ii)	 	participate in any way in hiring or otherwise engaging, or
assisting any other person or entity in hiring or otherwise engaging, on a
temporary, part-time or permanent basis, any individual who was employed by the
Corporation or any of its subsidiaries during the three (3) year period
immediately prior to the termination of the Executive’s employment; or
	 
	 	(iii)	 	assist, advise, or serve in any capacity, representative or
otherwise, any third party in any action against the Corporation or any of its
subsidiaries or transaction involving the Corporation or any of its subsidiaries;
or
	 
	 	(iv)	 	sell, offer to sell, provide banking or other financial services,
assist any other person in selling or providing banking or other financial
services, or solicit or otherwise compete for, either directly or indirectly, any
orders, contract, or accounts for services of a kind or nature like or
substantially similar to the services performed or products sold by the
Corporation or any of its subsidiaries (the preceding hereinafter referred to as
“Services”), to or from any person or entity from whom the Executive or the
Corporation or any of its subsidiaries provided banking or other financial
services, sold, offered to sell or solicited orders, contracts or accounts for
Services during the three (3) year period immediately prior to the termination of
the Executive’s employment; or
	 
	 	(v)	 	divulge, disclose, or communicate to others in any manner
whatsoever, any confidential information of the Corporation or any of its
subsidiaries, including, but not limited to, the names and addresses of customers
of the Corporation or any of its subsidiaries, as they may have existed from time
to time or of any of the Corporation’s or any of its subsidiaries’ prospective
customers, work performed or services rendered for any customer, any method
and/or procedures relating to projects or other work developed for the
Corporation or any of its subsidiaries, earnings or other information concerning
the Corporation or any of its subsidiaries. The restrictions contained in this
subparagraph (v) apply to all information regarding the Corporation or any of its
subsidiaries unless and until it becomes known to the general public from sources
other than the Executive.

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     5.4.2 Judicial Remedies. In the event of a breach or threatened breach by the Executive
of any provision of these restrictions, the Executive recognizes the substantial and immediate
harm that a breach or threatened breach will impose upon the Corporation or any of its
subsidiaries, and further recognizes that in such event monetary damages may be inadequate to
fully protect the Corporation or any of its subsidiaries. Accordingly, in the event of a
breach or threatened breach of this Agreement, the Executive consents to the Corporation’s or
any of its subsidiaries’ entitlement to such ex parte, preliminary,
interlocutory, temporary or permanent injunctive, or any other equitable relief, protecting
and fully enforcing the Corporation’s or any of its subsidiaries’ rights hereunder and
preventing the Executive from further breaching any of his or her obligations set forth
herein. The Executive expressly waives any requirement, based on any statute, rule of
procedure, or other source, that the Corporation or any of its subsidiaries post a bond as a
condition of obtaining any of the above-described remedies. Nothing herein shall be construed
as prohibiting the Corporation or any of its subsidiaries from pursuing any other remedies
available to the Corporation or any of its subsidiaries at law or in equity for such breach or
threatened breach, including the recovery of damages from the Executive. The Executive
expressly acknowledges and agrees that: (i) the restrictions set forth in Section 5.4.1 are
reasonable, in terms of scope, duration, geographic area, and otherwise, (ii) the protections
afforded the Corporation or any of its subsidiaries in Section 5.4.1 are necessary to protect
its legitimate business interest, (iii) the restrictions set forth in Section 5.4.1 will not
be materially adverse to the Executive’s employment with the Bank, and (iv) his or her
agreement to observe such restrictions forms a material part of the consideration for this
Agreement.

     5.4.3 Overbreadth of Restrictive Covenant. It is the intention of the parties that if
any restrictive covenant in this Agreement is determined by a court of competent jurisdiction
to be overly broad, then the court should enforce such restrictive covenant to the maximum
extent permitted under the law as to area, breadth and duration.

     5.4.4 The non-compete provision detailed in Section 5.4.1 shall not be enforceable
following a Change in Control.

     5.5  Suicide or Misstatement. No benefits shall be payable if the Executive commits suicide
within two years after the date of this Agreement, or if the insurance company denies coverage for
material misstatements of fact made by the Executive on any application for life insurance
purchased by the Bank, or any other reason; provided, however that the Bank shall evaluate the
reason for the denial, and upon advice of legal counsel and in its sole discretion, consider
judicially challenging any denial. The Bank shall have no liability to the Executive for any
denial of coverage by the insurance company.

Article 6

Claims Procedure

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     Any dispute, controversy or claim arising out of or under this agreement or its performance
shall first be negotiated by the parties, and if an acceptable resolution does not result, shall be
submitted to arbitration which shall be exclusive, final, binding and conducted in accordance with
the Commercial Arbitration Rules of the American Arbitration Association (''AAA’’). Each party
shall bear the fees and expenses of its counsel and witnesses, and the cost of the arbitration
shall be borne as set forth in the award, or in the absence of an award or a specific determination
by the arbitrator or agreement of the parties, shall be borne equally by the parties. At any time
before the arbitrator has served upon the parties a written award, the parties may resolve the
dispute by settlement, whereupon they shall direct the arbitrator to cease his or her deliberations
and render a final accounting of fees and expenses to be paid by the parties in accordance with the
foregoing. Any decision of the arbitrator may be entered as a judgment in any court of competent
jurisdiction and may be enforced as such in accordance with the provisions of the award. This
agreement to arbitrate shall be specifically enforceable by the parties, and they confirm that they
intend that all disputes, controversies or claims of any kind shall be arbitrated. Arbitration
proceedings shall be held in Mifflintown, Pennsylvania, or in such other locale on which the
parties may mutually agree.

Article 7

Amendments and Termination

     This Agreement may be amended or terminated only by a written agreement signed by the Bank and
the Executive, except as provided in Article 5.

Article 8

Miscellaneous

     8.1 Binding Effect. This Agreement shall bind the Executive and the Bank, and their
successors, beneficiaries, survivors, executors, successors, administrators and transferees.

     8.2 No Guarantee of Employment. This Agreement is not an employment policy or contract. It
does not give the Executive the right to remain an employee of the Bank, nor does it interfere with
the Bank’s right to discharge the Executive. It also does not require the Executive to remain an
employee nor interfere with the Executive’s right to terminate employment at any time.

     8.3 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned,
pledged, attached or encumbered in any manner.

     8.4 Tax Withholding. The Bank shall withhold any taxes that are required to be withheld from
the benefits provided under this Agreement.

     8.5 Applicable Law. The Agreement and all rights hereunder shall be governed by the

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laws of
the Commonwealth of Pennsylvania, except to the extent preempted by the laws of the United States
of America.

     8.6 Reorganization. The Bank shall not merge or consolidate into or with another company, or
reorganize, or sell substantially all of its assets to another company, firm or person unless such
succeeding or continuing company, firm or person agrees to assume and discharge the obligations of
the Bank.

     8.7 Unfunded Arrangement. The Executive and beneficiary are general unsecured creditors of
the Bank for the payment of benefits under this Agreement. The benefits represent the mere promise
by the Bank to pay such benefits. The rights to benefits are not subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or
garnishment by creditors. Any insurance on the Executive’s life is a general asset of the Bank to
which the Executive and beneficiary have no preferred or secured claim.

     8.8 Recovery of Estate Taxes. If the Executive’s gross estate for federal estate tax purposes
includes any amount determined by reference to and on account of this Agreement, and if the
beneficiary is other than the Executive’s estate, then the Executive’s estate shall be entitled to
recover from the beneficiary receiving such benefit under the terms of the Agreement, an amount by
which the total estate tax due by the Executive’s estate, exceeds the total estate tax which would
have been payable if the value of such benefit had not been included in the Executive’s gross
estate. If there is more than one person receiving such benefit, the right of recovery shall be
against each such person. In the event the beneficiary has a liability hereunder, the beneficiary
may petition the Bank for a lump sum payment in an amount not to exceed the beneficiary’s liability
hereunder.

     8.9 Entire Agreement. This Agreement constitutes the entire agreement between the Bank and
the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of
this Agreement other than those specifically set forth herein. This Agreement does not supersede
the Employment Agreement between the Executive and the Bank dated                                         .

     8.10 Administration. The Bank shall have powers which are necessary to administer this
Agreement, including but not limited to:

     8.10.1 Interpreting the provisions of the Agreement;

     8.10.2 Establishing and revising the method of accounting for the Agreement;

     8.10.3 Maintaining a record of benefit payments; and

     8.10.4 Establishing rules and prescribing any forms necessary or desirable to administer
the Agreement.

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     IN WITNESS WHEREOF, the Executive and a duly authorized Bank officer have signed this
Agreement.

	 	 	 	 	 	 	 	 	 
	EXECUTIVE:

	 	 	 	 	 	BANK:	 	 
	 

	 	 	 	 	 	THE JUNIATA VALLEY BANK	 	 
	 
	 	 	 	 	 	 	 	 
	  /s/ Francis J. Evanitsky
 

Francis J. Evanitsky

	 	 	 	By
	 	/s/ Martin L. Dreibelbis
 

	 	 
	 

	 	 	 	Title
	 	Chairman	 	 

     By execution hereof, The Juniata Valley Financial Corp. consents to and agrees to be bound by
the terms and condition of this Agreement.

	 	 	 	 	 	 	 	 	 
	ATTEST:	 	 	 	CORPORATION:	 	 
	 	 	 	 	THE JUNIATA VALLEY FINANCIAL CORP.	 	 
	 
	 	 	 	 	 	 	 	 
	/s/ Judy E. Robinson
 

	 	 	 	By
	 	/s/ Martin L. Dreibelbis
 

	 	 
	 

	 	 	 	Title
	 	Chairman	 	 

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BENEFICIARY DESIGNATION

THE JUNIATA VALLEY BANK

SALARY CONTINUATION AGREEMENT

Francis J. Evanitsky

I designate the following as beneficiary of any death benefits under the Salary Continuation
Agreement:

	 	 	 
	Primary:
	 	 
	 

	 	 
	 
	 	 
	 
	 
	 	 
	Contingent:
	 	 
	 

	 	 
	 
	 	 
	 

			
	Note:	 	To name a trust as beneficiary, please provide the name of the trustee(s) and the
exact name and date of the trust agreement.

I understand that I may change these beneficiary designations by filing a new written designation
with the Bank. I further understand that the designations will be automatically revoked if the
beneficiary predeceases me, or, if I have named my spouse as beneficiary, in the event of the
dissolution of our marriage.

Signature ______________________________

Date __________________________________

Accepted by the Bank this ___day of                     , 2001.

By ____________________________________

Title __________________________________

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FIRST AMENDMENT

TO

THE JUNIATA VALLEY BANK

SALARY CONTINUATION AGREEMENT

FOR FRANCIS J. EVANITSKY

     THIS AMENDMENT is adopted this 15th day of October 2002, by and between THE JUNIATA
VALLEY BANK, a state-chartered commercial bank located in Mifflintown, Pennsylvania (the ”Company”)
and FRANCIS J. EVANITSKY (the “Executive”), amending THE JUNIATA VALLEY BANK SALARY CONTINUATION
AGREEMENT dated August 27, 2001, between the Company and the Executive (the “Agreement”).

The undersigned hereby amend, in part, said Agreement to update the Disability definition and
Claims and Review provisions pursuant to ERISA regulatory changes. Therefore, the following
sections shall be amended:

Section 1.4 of the Agreement shall be replaced by Section 1.4 below.

	 	1.4	 	“Disability” means the Executive suffering a sickness, accident or injury which
has been determined by the carrier of any individual or group disability insurance
policy covering the Executive, or by the Social Security Administration, to be a
disability rendering the Executive totally and permanently disabled. The Executive must
submit proof to the company of the carrier’s or Social Security Administration’s
determination upon the request of the Company.

Article 6 of the Agreement shall be replaced by Article 6 below.

	 	6.1	 	Claims Procedure. Any person or entity who has not received benefits under this
Agreement that he or she believes should be paid (“claimant”) shall make a claim for
such benefits as follows:

	 	6.1.1	 	Initiation – Written Claim. The claimant initiates a claim by
submitting to the Company a written claim for the benefits.
	 
	 	6.1.2	 	Timing of Company Response. The Company shall respond to such
claimant within 90 days after receiving the claim. If the Company determines
that special circumstances require additional time for processing the claim,
the Company can extend the response period by an additional 90 days by
notifying the claimant in writing, prior to the end of the initial 90-day
period, that an additional period is required. The notice of extension must set
forth the special circumstances and the date by which the Company expects to
render its decision.
	 
	 	6.1.3	 	Notice of Decision. If the Company denies part or all of the
claim, the Company shall notify the claimant in writing of such denial. The
Company

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	 	 	 	shall write the notification in a manner calculated to be understood by
the claimant. The notification shall set forth:

	 	(a)	 	The specific reasons for the denial,
	 
	 	(b)	 	A reference to the specific provisions of the
Agreement on which the denial is based,
	 
	 	(c)	 	A description of any additional information or
material necessary for the claimant to perfect the claim and an
explanation of why it is needed,
	 
	 	(d)	 	An explanation of the Agreement’s review
procedures and the time limits applicable to such procedures, and
	 
	 	(e)	 	A statement of the claimant’s right to bring a
civil action under ERISA Section 502(a) following an adverse benefit
determination on review.

	6.2	 	Review Procedure. If the Company denies part or all of the claim, the claimant
shall the opportunity for a full and fair review by the Company of the denial, as
follows:

	 	6.2.1	 	Initiation – Written Request. To initiate the review, the
claimant, within 60 days after receiving the Company’s notice of denial, must
file with the Company, a written request for review.
	 
	 	6.2.2	 	Additional Submissions – Information Access. The claimant
shall then have the opportunity to submit written comments, documents, records
and other information relating to the claim. The Company shall also provide the
claimant, upon request and free of charge, reasonable access to, and copies of,
all documents, records and other information relevant (as defined in applicable
ERISA regulations) to the claimant’s claim for benefits.
	 
	 	6.2.3	 	Considerations on Review. In considering the review, the
Company shall take into account all materials and information the claimant
submits relating to the claim, without regard to whether such information was
submitted or considered in the initial benefit determination.
	 
	 	6.2.4	 	Timing of Company Response. The Company shall respond in
writing to such claimant within 60 days after receiving the request for review.
If the Company determines that special circumstances require additional time
for processing the claim, the Company can extend the response period by an
additional 60 days by notifying the claimant in writing, prior to the end of
the initial 60-day period, that an additional period is requir4ed. The notice
of extension must set forth the special circumstances and the date by which the
Company expects to render its decision.
	 
	 	6.2.5	 	Notice of Decision. The Company shall notify the claimant in
writing of its decision on review. The Company shall write the notification in
a manner calculated to be understood by the claimant. The notification shall
set forth:

	 	(a)	 	The specific reasons for the denial,

15

 

	 	(b)	 	A reference to the specific provisions of the
Agreement on which the denial is based,
	 
	 	(c)	 	A statement that the claimant is entitled to
receive, upon request and free of charge, reasonable access to, and
copies of, all documents, records and other information relevant (as
defined in applicable ERISA regulations) to the claimant’s claim for
benefits, and
	 
	 	(d)	 	A statement of the claimant’s right to bring a
civil action under ERISA Section 502(a).

IN WITNESS OF THE ABOVE, the Executive and the Company hereby consent to this First
Amendment.

	 	 	 	 	 	 	 	 	 
	EXECUTIVE	 	 	 	THE JUNIATA VALLEY BANK	 	 
	 
	 	 	 	 	 	 	 	 
	/s/ Francis J. Evanitsky
 

	 	 	 	By
	 	/s/ Marin L. Dreibelbis
 

	 	 
	Francis J. Evanitsky

	 	 	 	Title
	 	Chairman	 	 

16exv10w28

 

Exhibit 10.28

Execution Copy

EXECUTIVE EMPLOYMENT AGREEMENT

     THIS AGREEMENT (“Agreement”), made as of the 15th day of February, 2006, (the
“Effective Date”), between United America Indemnity Group, Inc. (“UAIGI”) and Joseph Morris (the
“Executive”).

W I T N E S S E T H:

     WHEREAS, Executive is employed by Penn-America Group, Inc. and its insurance subsidiaries
(“PNG”) pursuant to an executive employment agreement dated as of October 14, 2004 (the “Prior
Agreement”);

     WHEREAS, Executive will resign from PNG effective as of the Effective Date in order to accept
employment with UAIGI;

     WHEREAS, UAIGI is an indirect subsidiary of United America Indemnity, Ltd. (the “Company”)
with the authority to enter into this Agreement and provide the services of the Executive to the
Company as set forth herein;

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

     WHEREAS, UAIGI is prepared to employ Executive pursuant to the following terms and conditions;
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, UAIGI agrees to employ Executive, and Executive
hereby agrees to be employed by UAIGI, upon the following terms and conditions:

ARTICLE I

EMPLOYMENT

     1.01. Position and Duties. Executive is hereby employed by UAIGI to serve as the
President of the Company. In such role he will also serve as President of UAIGI, and will use his
best energies and abilities in the performance of his duties, related to and consistent with his
positions, as may be assigned to him from time to time by the Board of Directors of the Company (or
a committee thereof) (the “Board”) or the Board of Directors of UAIGI or the Chief Executive
Officer of the Company and/or UAIGI (“CEO”). Executive’s duties shall include working with the
Board and/or CEO in (i) overseeing the operations of the United America Insurance Group and Penn
Independent Corporation and providing stewardship to the offshore operations of Wind River
Insurance Company and Wind River Services, Ltd.

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(collectively, “Wind River”) and the Company generally by attending regular meetings with the
respective management of each operation, (ii) establishing and maintaining the strategic direction
of and financial plans for UAIGI and the Company, (iii) communicating with shareholders and the
investment community on all matters, including the direction and financial plans of UAIGI and the
Company, and (iv) directly overseeing and managing the Company’s and UAIGI’s Chief Financial
Officer, General Counsel and General Auditor and Wind River’s President(s). Executive may also
provide services to affiliates of UAIGI from time to time, as requested by the Board.

     1.02. Term. This Agreement shall be effective as of the Effective Date. 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 UAIGI 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.

     1.03. Compensation.

          1.03.1. Salary. Effective as of January 1, 2006, Executive’s annualized annual base
salary shall be $400,000 (the “Annual Salary”), subject to applicable tax and payroll withholding,
which may be adjusted upward or downward from time to time at UAIGI’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.

          1.03.2. Bonus Opportunity. Commencing as of January 1, 2006, Executive shall be
eligible for an annual cash bonus to be awarded under the 2005 United America Indemnity, Ltd.
Annual Incentive Awards Program, as such program is amended from time to time, or such program’s
successor (the “Program”). Such bonus shall be based on achievement by the Company and its
consolidated subsidiaries of certain “Operating Income” (defined as GAAP net income less after-tax
extraordinary gains (losses) and after-tax investment gains (losses)) targets, as established by
the Board in its sole discretion (the “Operating Income Bonus”). The Operating Income Bonus shall
range from 37.5% of the Annual Salary if 85% of such targets are achieved to a maximum of 87.5% of
the Annual Salary if 120% (or greater) of such targets are achieved. Achievement at 100% of such
targets shall result in an award of 62.5% of the Annual Salary. Achievement between 85% and 100%
of the targets shall result in an award determined on a straight-line basis between 37.5% and 62.5%
of the Annual Salary, and achievement between 100% and 120% of the targets shall result in an award
determined on a straight-line basis between 62.5% and 87.5% of the Annual Salary. Achievement of
the Operating Income Bonus, and any adjustments relating thereto, shall be as determined by the
Board in its sole discretion, and notwithstanding the foregoing, the Board shall reserve its right
under the Program to change the Operating Income Bonus prospectively for periods not yet served by
the Executive, provided that the Program as modified shall include targets and a bonus opportunity
that shall provide the Executive with a reasonably equivalent bonus opportunity. Executive’s annual
cash bonus with respect to 2005 performance of PNG, as provided under the Prior Agreement, shall be
payable in 2006 in accordance with such agreement’s terms, as well as the terms of the applicable
bonus program.

2

 

          1.03.3. Equity Compensation. Executive shall be eligible for two different equity
compensation opportunities beginning in 2006, each of which shall be administered through the
United America Indemnity, Ltd. Share Incentive Plan, as such plan is amended from time to time, or
such plan’s successor. With respect to each accident year that Executive is employed pursuant to
this Agreement, Executive shall be eligible for a grant of Class A common shares of the Company
(“Shares”) equal to, at target achievement, 50% of the Annual Salary, based on whether the Company
(and, for purposes of the targets described in this paragraph, its consolidated subsidiaries)
achieves certain Operating Income targets with respect to such accident year as such targets are
established by, and achievement is determined by, the Board in its sole discretion. Shares awarded
pursuant to this paragraph shall be granted and vest in full as of March 1 of the fourth year
following the relevant accident year (the “Grant Date”) if and only if (a) the Company’s Operating
Income, as presented by the Company’s management and approved by the Board by March 1 of the year
following the relevant accident year and as adjusted to reflect Tillinghast’s indicated point
estimate as of December 31 of the third year following the relevant accident year, was at least 85%
of target and no less than the Operating Income results for the relevant accident year originally
reported by management, (b) Executive is employed by UAIGI or one of its affiliates or successors
as of the Grant Date and (c) following the readjustment of the relevant accident year’s losses and
loss adjustment expenses (including paid and estimated unpaid amounts) to Tillinghast’s indicated
point estimate as of December 31 of the third year following the relevant accident year (as
prepared by Tillinghast), such readjustment results in accident year losses and loss adjustment
expenses with respect to such accident year which are no greater than those which were originally
presented by the Company’s management and approved by the Board on or before March 1 of the year
following such accident year. The number of Shares to be awarded to Executive pursuant to this
paragraph, if any, shall be determined by the Board in its sole discretion following Tillinghast’s
aforementioned determinations, as follows: (1) no Shares will be awarded if the Company’s
achievement of the Operating Income targets is less than 85%; (2) Shares worth 30% of the Annual
Salary shall be awarded if the Company’s achievement of the Operating Income targets is 85%; (3)
Shares worth 50% of the Annual Salary will be awarded if the Company’s achievement of the Operating
Income targets is Target or greater; and (4) the Company’s achievement of Operating Income targets
between 85% and 100% shall result in an award of Shares worth between 30% and 50% of the Annual
Salary, as determined on a straight-line basis. The price per Share as of December 31 of the
relevant accident year shall be used in calculating the award of Shares hereunder; provided that to
the extent that any additional portion of the Annual Salary becomes eligible for the award of
Shares as a result of the favorable impact on Operating Income of the Tillinghast adjustments, the
price per share as of the Grant Date shall be used with respect to Shares attributable to such
increased portion. The Annual Salary used in making any determinations hereunder shall be the
Annual Salary as of the last day of the relevant accident year. Any successor to UAIGI with
respect to this Agreement shall be bound by the terms of this award. If Tillinghast is unable to
perform the calculations hereunder, then the Board may select a comparable service provider with
experience in the insurance industry to perfor
m such calculations.

     Executive shall also be eligible for an award of restricted Shares on the basis of the
Company’s return on equity (as determined by dividing the aggregate Operating Income of the Company
and its consolidated subsidiaries by the Company’s “Average Shareholders’ Equity” (as defined
below)) (“ROE”) for (a) 2006, (b) the two-year period ending December 31, 2007,

3

 

(c) the three-year period beginning on January 1, 2006 and (d) each three-year period beginning on
each January 1 thereafter (each, a “ROE Measuring Period”). “Average Shareholders’ Equity” shall
mean the quotient of (i) the sum of UAI’s shareholders’ equity on each of (A) the December 31
immediately prior to the ROE Measuring Period and (B) the last day of each calendar quarter within
such ROE Measuring Period and (ii) the number of the measuring dates used in calculating the sum in
subclause (i) (i.e., 5, 9 or 13 measuring dates). If the Company achieves a ROE in a ROE Measuring
Period of 10%, 12% or 15%, then Executive shall be granted Shares with a value equal to 17.5%, 50%
or 100% of the Annual Salary as of the March 1 following the ROE Measuring Period, respectively,
subject to Executive being employed as of such date by UAIGI or one of its affiliates or successors
as of such grant date. Achievement of ROE shall be determined by the Board in its sole discretion.
Such award shall vest in three equal installments, with the first tranche vesting on January 1 of
the year following the year in which the award is granted and the second and third tranches vesting
on January 1 of each of the next two years, respectively, subject to Executive’s being employed by
UAIGI or one of its affiliates or successors as of each such vesting date, provided that this
condition shall be satisfied, and Executive will be permitted to continue to vest in the award, if
Executive’s employment is terminated without Cause or for Good Reason (as both such terms are
defined in Article II). The Annual Salary used in making any determinations pursuant to this
paragraph shall be the Annual Salary as of the last day of the relevant ROE Measuring Period.

     The Company and its affiliates (including UAIGI) reserve the right to amend or substitute the
foregoing plans for any fiscal years following 2006, prospectively for periods not yet served by
the Executive, provided that to the extent that such plans are amended they shall include targets
and a bonus opportunity that provides the Executive with a reasonably equivalent bonus opportunity.
Executive shall remain entitled to receive a restricted share grant with respect to 2005 as
further provided in the Prior Agreement and the terms of any applicable share incentive plan.

          1.03.4. Successful Integration Bonus. An integration bonus (the “Annual Integration
Bonus”) shall be awarded to Executive on the basis of 2005 performance. The Annual Integration
Bonus shall be equal to a whole number of the Shares equal to the quotient of $780,000 and $17.89
and shall be granted as of April 1, 2006. Half of the Annual Integration Bonus shall vest
immediately upon grant (the “First Tranche”). The other half of the Annual Integration Bonus shall
vest as follows:

	 	 	 
	April 1, 2007

	 	20% of such Shares shall fully vest
	April 1, 2008

	 	20% of such Shares shall fully vest
	April 1, 2009

	 	60% of such Shares shall fully vest

In each case above, in order to vest in a particular tranche of Shares relating to the Annual
Integration Bonus, Executive must either (a) be employed by UAIGI or one of its affiliates as of
the relevant vesting date or (b) have been terminated without Cause or terminated Executive’s
employment for Good Reason in accordance with Article II hereof prior to such vesting date.

     The Shares awarded pursuant to the foregoing sentences of this Section 1.03.4 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. Notwithstanding any other provision

4

 

of this Agreement to the contrary, the Shares paid in satisfaction of the First Tranche 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. There shall be no such restrictions on any Shares granted pursuant
to the foregoing sentences of this Section 1.03.4 which are not part of the First Tranche.

     Executive shall be eligible for an integration award of Shares based on the compounded annual
growth in the book value per share of the Company (“Book Value Growth”) in the event that a “Change
in Control” (as defined below) occurs on or prior to December 31, 2010. For purposes of this
paragraph, a “Change in Control” is a transaction or a series of related transactions such that,
following such transaction(s), a person or entity, or a group of persons or entities acting in
concert, unaffiliated with Fox Paine Capital International GP, L.P. controls shares representing
more than fifty percent of the voting power of the Company. As soon as practical following a
Change in Control, the Board shall determine Book Value Growth for the period beginning on January
1, 2006 and ending as of the date the Change in Control occurred (the “CiC Date”). Book Value
Growth of at least 10% (but less than 12%) shall result in a preliminary determination of 25,000
Shares, at least 12% (but less than 13%) in 37,500 Shares, at least 13% (but less than 15%) in
50,000 Shares and 15% or more in 75,000 Shares. Such Share figure shall then be multiplied by a
fraction, the numerator of which is the consideration provided to former Company shareholders in
connection with the Change in Control and the denominator of which is the book value of the stake
acquired of the Company, determined as of the CiC Date, by the unaffiliated persons or entities in
connection with the Change in Control (the resulting figure, the “CiC Share Determination”).
Executive shall then be awarded, and shall vest in full, in a number of Shares equal to the CiC
Share Determination, subject to Executive being employed by UAIGI or one of its affiliates
immediately prior to the Change in Control. Any calculation or determination pursuant to the
foregoing shall be made by the Board in its sole discretion. For purposes of the foregoing, the
book value of the Company as of December 31, 2005 was $17.51 per share. In the event that no
Change in Control occurs on or prior to December 31, 2010, the Board may elect, in its sole
discretion, to award Executive Shares in lieu of an award pursuant to the foregoing.

          1.03.5. Ownership Guidelines / Sale of Shares / Adjustment of Share Price. The Shares
comprising Executive’s equity compensation under this Section 1.03 shall be subject to Stock
Ownership Guidelines, as set forth in Exhibit A hereto. Executive may sell Shares in which he is
vested in order to satisfy any corresponding tax liabilities. The Board may make any adjustments
it deems appropriate in its sole discretion to adjust the number of Shares awarded to Executive
pursuant to this Section 1.03.3 to account for share splits, share dividends, a Change in Control
or a similar transaction affecting the Company’s capital structure.

     1.04. Benefits and Expenses.

          1.04.1. Benefits. Executive shall be entitled to participate in or receive benefits
under all corporate employment benefit plans, including, but not limited to, any pension or
retirement plan, savings plan, medical or health-and-accident plan, life and disability and other
insurance plans or arrangements generally made available by UAIGI to its executives and key
management employees as a group, subject to and on a basis consistent with the terms, conditions
and overall administration of such plans and arrangements.

5

 

          1.04.2. Business Expenses. UAIGI 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 UAIGI may require in
accordance with the generally applicable policies and procedures of the UAIGI.

ARTICLE II

TERMINATION

     2.01. Disability. If during the term of Executive’s employment, Executive is
prevented from effectively performing the essential functions of his job, with reasonable
accommodation (if such reasonable accommodation can be provided by UAIGI), for a period of 180 days
within any twelve (12) month period by reason of illness or Disability, UAIGI, 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 1.03.1, any awarded but unpaid bonuses
applicable to any prior period, and any other amounts as may be due under Sections 1.03 and 1.04 up
to the date of termination, Executive’s employment and all obligations of UAIGI will terminate and
this Agreement shall end. For purposes of this Agreement, “Disability” is defined as Executive
being eligible for disability insurance benefits under UAIGI’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 Board.

     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 1.03.1, and any awarded but unpaid bonuses applicable to any
prior period, together with any other amounts as may be due under Sections 1.03 and 1.04 up to the
date of termination, following which all obligations of UAIGI will terminate.

     2.03. Death. If Executive dies during the term of his employment, Executive’s
employment will terminate, the Agreement shall end, and all of UAIGI’s obligations, other
than any obligations with respect to the payment of accrued but unpaid salary under Section 1.03.1,
and any awarded but unpaid bonuses applicable to any prior period, together with any other amounts
as may be due under Sections 1.03 and 1.04 up to the date of death, will cease.

     2.04. Termination For Cause. If UAIGI terminates Executive for Cause, this Agreement
and all obligations of UAIGI 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
1.03.1, (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 1.04
up to the date of termination. For purposes of this Agreement, “Cause” shall mean:

6

 

     (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, to the extent that the
Board reasonably determines such failure is curable;

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

     (iii) Executive’s willful failure to conduct the business of the Company or
UAIGI in accordance with the lawful directives of the Board or Company or UAIGI
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, 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 contendere to a felony. This provision shall not apply to any
arraignment, conviction or plea of nolo contendere to any traffic (driving)
offenses.

          2.04.1. Any notice given by UAIGI under the subsections of Section 2.04 shall specifically
state the manner in which Executive has not performed his 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 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 his action or omission was in the best interest of
the Company or UAIGI. Failure of the Company or Executive to achieve or satisfy any target,
milestone or other performance goal or hurdle, in and of itself and without regard to any other
factors, shall not be deemed Cause for termination under Sections 2.04(ii) through (vi) above.

          2.04.2. Notwithstanding the foregoing, termination by UAIGI for Cause shall not be effective
until and unless a notice to terminate for Cause has been given by UAIGI within (i) 180 days after
UAIGI 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)

7

 

90 days after UAIGI 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 UAIGI’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 notice of termination, at UAIGI’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 UAIGI without Cause upon 30 days’ notice to Executive.
If UAIGI terminates Executive without Cause hereunder, UAIGI shall pay to Executive accrued but
unpaid salary under Section 1.03.1, together with any other amounts as may have been due and
payable under Sections 1.03 and 1.04 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, subject to
the length of the remainder of the applicable option term. 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. UAIGI’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 UAIGI without Cause hereunder.

     2.06. Executive Termination. Executive may terminate his employment with UAIGI with
or without Good Reason following thirty days’ written notice to UAIGI. If Executive terminates his
employment for Good Reason, this Agreement and all obligations of UAIGI 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 him 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 UAIGI (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 (x) a good faith assignment by the Board to a
position within the Company with similar responsibility, title and compensation is not
considered to be Good Reason nor shall the hiring of a CEO of the Company or UAIGI
constitute Good Reason and (y) a modification in the Executive’s Section 1.01(iv)
oversight responsibilities in the context of an acquisition or other business
transaction involving the Company or UAIGI shall not in and of itself constitute Good
Reason so long as the Executive has been

8

 

	 	 	 	provided with other duties and oversight responsibilities that in the aggregate are
comparable to those in effect for the Executive as of the Effective Date;
	 	(ii)	 	any removal of Executive from the officer positions with the Company (or its
successor) held by him as of the Effective Date; provided that (x) a good faith
assignment by the Board to a position within the Company with similar responsibility,
title and compensation is not considered to be Good Reason and (y) it shall not be
considered Good Reason if the Executive ceases to hold the title of President of the
Company because of material adverse effects on the tax strategies of the Company, and
the Company and UAIGI have exercised reasonable efforts so as to permit the Executive
to continue to perform at UAIGI or its affiliates the material duties otherwise
associated with the position of President of the Company;
	 
	 	(iii)	 	a reduction by UAIGI (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 his
express written consent, to a location more than 35 miles from the location of his
principal place of business while employed by PNG immediately preceding the Effective
Date; or
	 
	 	(v)	 	any failure of UAIGI 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 UAIGI.

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) UAIGI terminates Executive
without Cause, (ii) in connection with the expiration of the Initial Term or any Extension Term,
UAIGI gives notice of non-renewal of this Agreement, or (iii) Executive terminates his 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 B.

     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

9

 

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
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)	 	1.5 times either the Annual Salary set forth in Section 1.03.1 or, if greater, the
Annual Salary as in effect immediately prior to Executive’s termination of employment, to be
paid in equal monthly installments over an 18-month period;
	 
	 	(ii)	 	the pro-rated amount of any cash bonus which Executive otherwise would have
received under the Program, as set forth in Section 1.03.2, 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 the Program are achieved for
the year in which termination of employment occurs;
	 
	 	(iii)	 	with respect to the opportunity set forth in the second paragraph of Section
1.03.3, the pro-rated amount of any performance based long-term equity compensation award
which Executive would have otherwise received 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 with respect to such opportunity 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 eighteen (18) months of Executive’s then current medical and dental
benefits, or the cash equivalent payment thereof, as set forth in Section 1.04.1;
	 
	 	(vi)	 	provision of eighteen (18) 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 1.04.1; and
	 
	 	(vii)	 	vesting of any unvested Annual Integration Bonus on the dates specified in
Section 1.03.4.

     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 his position for any reason other than for Good
Reason in accordance with Section 2.06;

10

 

          3.06.2. Executive’s employment is terminated for reasons described in Section 2.01
(“Disability”), 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 UAIGI 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 eighteen (18) months of Executive’s
then current Annual Salary and medical and dental benefits (such salary and benefits, “Limited
Severance Benefits”) in lieu of any 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 his estate or legal
representative shall have) thirty (30) days from the date of such termination to exercise such
options, subject to the length of the remainder of the applicable option term); 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 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 his 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 his employment with UAIGI, he shall devote his full business time, energies and
talents to the business of UAIGI and the Company, and comply with each of UAIGI’s and the Company’s
corporate governance and ethics guidelines, conflict of interests policies and code of conduct
applicable to all UAIGI employees or senior Executives as adopted by the 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 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

11

 

personal investments and affairs, provided such activities do not, in the reasonable judgment of
the Board, materially interfere with the proper performance of his duties and responsibilities
hereunder. Executive also agrees that he will advise the Board of any corporate opportunities and
not usurp such opportunities.

     4.02. Non-competition. Executive acknowledges and agrees that the insurance business
and operations of the Company are international 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 employment with UAIGI (or its successor or assignee), and for a period
of eighteen (18) months following the termination of such employment for any reason (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 UAIGI or any of
its affiliates 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 UAIGI or its affiliates, was, a customer of the Company or its
affiliates; provided that Executive shall not be subject to the above restrictions if UAIGI 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 Non-solicitation. 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 employment with UAIGI
or its affiliates, (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 than the Company; except in the proper performance of Executive’s duties as instructed
by UAIGI, the Company and/or the Board.

12

 

          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. 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.

     4.05. 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 UAIGI (or its affiliates), or
within six months after termination of Executive’s employment, if based on or related to
proprietary information of the Company or its affiliates 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 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.

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

     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 UAIGI and the Company from time to time to answer questions or provide
information relating to Company matters that he worked on during his employment at UAIGI or its
affiliates. 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, UAIGI shall advance any such travel or other costs reasonably incurred by
Executive to comply with and perform his obligations under this Section 4.06.

13

 

     4.07. Review by Counsel. Executive represents and warrants that he 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 UAIGI 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
UAIGI (or any of its predecessors or affiliates), including without limitation the Prior Agreement
(except as explicitly provided herein). This Agreement may be amended only by a writing
signed by each of the parties. This Agreement may be assigned by UAIGI, provided that UAIGI
complies with the provisions of Section 5.09. This Agreement may not be assigned by Executive.

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

14

 

     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 address as set forth on
the signature page of this Agreement.

     5.07. Venue. Executive irrevocably waives any objection which he 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 or UAIGI to bring any action or proceeding against Executive or his
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 employment with UAIGI for any reason, to the extent provided
herein, and will be binding on his heirs, executors, legal representatives, and assigns.

     5.09. Successor Corporation. UAIGI shall require any successor or successors (whether
direct or indirect, by purchase, merger, consolidation, assignment or otherwise) to all or
substantially all of the business and/or assets of UAIGI, by agreement in form and substance
satisfactory to Executive, to acknowledge expressly that this Agreement is binding upon and
enforceable against UAIGI in accordance with the terms hereof, and to become jointly and severally
obligated with UAIGI to perform this Agreement in the same manner and to the same extent that UAIGI
would be required to perform if no such succession or successions had taken place. Failure of
UAIGI 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, UAIGI shall mean UAIGI 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.

     5.011. Arbitration. In the event that any disagreement or dispute whatsoever shall
arise between Executive and the Company or its affiliates 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

15

 

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 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 UAIGI 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, UAIGI shall pay or reimburse Executive for all reasonable attorneys’ fees incurred by
Executive in such matter. Nothing herein shall prevent the Company or UAIGI from seeking
injunctive relief as provided for in Article IV 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:

	 	Joseph Morris

1324 Cinnamon Drive

Fort Washington, PA 19034
	 
	 	 
	If to UAIGI:

	 	Board of Directors

United America Indemnity Group, Inc.

3 Bala Plaza East, Suite 300

Bala Cynwyd, PA 19004

Attn: General Counsel
	 
	 	 
	With a copy to:

	 	Board of Directors

United America Indemnity, 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.

16

 

     5.013. Condition of Effectiveness. Delivery by Executive of an executed resignation
letter with respect to his prior employment at PNG, the form of which is attached hereto as Exhibit D,
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 UAIGI 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 UAIGI (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. UAIGI shall, to the fullest extent permitted by law
and its by-laws and charter, defend and indemnify Executive. UAIGI 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. UAIGI 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 UAIGI, 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 UAIGI or with any affiliated company. Such obligations shall be
binding upon UAIGI’s successors and assigns and shall inure to the benefit of Executive’s heirs and
personal representatives.

     5.016. 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 Internal Revenue Code
of 1986, as amended, 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 UAIGI in good faith. Furthermore, this Agreement may be amended (after consulting with
Executive) to the extent reasonably necessary or desirable to comply with Section 409A in light of
further guidance, legislation or new understandings or interpretations of that law.

     EXECUTIVE ACKNOWLEDGES THAT HE 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 15th day of
February, 2006.

17

 

	 	 	 	 	 	 	 
	EXECUTIVE UNITED	 	 	 	AMERICA INDEMNITY GROUP, INC.
	 
	 	 	 	 	 	 
	/s/ Joseph Morris

	 	 
	 	By:
	 	/s/ Kevin L. Tate
	 	 	 	 	 
	Joseph Morris

	 	 	 	 	 	Kevin L. Tate
	 

	 	 	 	 	 	Chief Financial Officer

18

 

EXHIBIT A

STOCK OWNERSHIP GUIDELINES

A-1. Beginning on March 31, 2007, Executives who hold the position of Vice President with the
Company or its affiliates, shall own Shares equal in value to one-half times Executive’s then
current annual base salary.

A-2. Executives who hold the position of Assistant Vice President with the Company or its
affiliates or any position that is similar or less prestigious in stature shall not be subject to
this Exhibit A.

A-3. For all other Executives of the Company or its affiliates:

     (1) As of the Effective Date, Executive shall own Shares equal in value to one (1) times
Executive’s then current annual base salary.

     (2) By March 31, 2007, Executive shall own Shares equal in value to two (2) times Executive’s
then current annual base salary.

2

 

EXHIBIT B

POST-EMPLOYMENT RELEASE

     R-1. Pursuant to the executive employment agreement made as of February 15, 2006 between
Joseph F. Morris (“Executive”) and United America Indemnity Group, Inc. (“UAIGI”), as such
agreement may be amended from time to time (the “Employment Agreement”), Executive on behalf of
himself and his affiliates, heirs, executors and successors, hereby remises, releases and forever
discharges, and by these present does release and forever discharge UAIGI and its subsidiaries,
parents, affiliates and their respective heirs, divisions, parents, affiliates and related
entities, including without limitation, United America Indemnity, Ltd. (“UAI”), Fox Paine &
Company, LLC (“Fox Paine”), Fox Paine Capital Fund, L.P., FPC Investors, L.P., Fox Paine Capital,
LLC, Fox Paine Capital Fund II GP, LLC, Fox Paine Capital Fund II, L.P., Fox Paine Capital Fund II
International, L.P., Fox Paine Capital Fund II Co-Investors International, L.P., FPC Investment GP,
and each of their past and present directors, members, managers, officers, employees, divisions and
successors (including, without limitation, Saul A. Fox, W. Dexter Paine, III, Troy W. Thacker and
Justin Reyna) (for purposes of this Release, collectively, the “Company”) from any and all claims,
charges, complaints, liens, demands, causes of action, obligations, damages and liabilities
(including legal expenses) (all hereinafter referred to as “Claims”), known or unknown, arising
through the date of this Release with respect to any matter whatsoever, including without
limitation, any Claims arising directly or indirectly out of, or in any way connected with, based
upon, or related to, Executive’s employment with the Company, Executive’s rights as a shareholder
of UAI in a derivative action, or any claim to compensation or benefits from Executive’s employment
with the Company, including any Claims, under local, state, or federal law based on:

(i)     claims of discrimination on the basis of race, age, religion, sex, sexual harassment,
sexual orientation, national origin, marital status, or disability including without
limitation, any claims arising under the Age Discrimination in Employment Act of 1967
(“ADEA”), as amended, the Older Workers Benefit Protection Act, the Civil Rights Act of
1866, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Americans
with Disabilities Act of 1990, the Family and Medical Leave Act of 1993, the Pennsylvania
Human Relations Act, Pennsylvania Human Relations Commission rules, including, without
limitation, the Handicap Discrimination rules, the Pennsylvania Wage Payment and Collection
Law, the Pennsylvania Equal Pay Law, the Pennsylvania Minimum Wage Act, the Pennsylvania
Whistleblower Law, the Pennsylvania Labor Relations Act, and the Pennsylvania Worker and
Community Right to Know Act, each as amended;

	 	(ii)	 	infliction of any tort (including wrongful discharge);
	 
	 	(iii)	 	breach of contract, whether actual or implied, written or oral; and
	 
	 	(iv)	 	any violation of any pension or welfare plans or any other benefit plan or arrangement
(including without limitation, ERISA);

provided that the foregoing release shall not apply to claims by Executive
to enforce the Agreement with respect to any obligations which survive the termination of
Executive’s

3

 

employment (e.g., any severance payments to which Executive may be entitled), claims for
Executive’s vested benefits under any pension or welfare plan maintained by the Company or
its affiliates, claims with respect to Executive’s rights with respect to outstanding equity
awards or incentives held by Executive, any right Executive may have to receive unemployment
compensation and Executive’s right to be indemnified by the Company pursuant to charter,
certificate, by-laws or other constituent documents of the Company, or under any insurance
maintained by or for the benefit of the Company (and/or its predecessor), for any liability,
cost or expense for which Executive would have been indemnified for actions taken by
Executive on behalf of the Company prior to the date of this Release.

     R-2. Executive further represents that Executive has not, at any time up to and including the
date Executive executed this Release, commenced, and will not in the future commence, to the full
extent permitted by law, any action or proceeding, or file any charge or complaint, of any nature
against the Company relating to the matters released above and Executive waives to the full extent
permitted by law, any right to any monetary or equitable relief in any proceeding that may relate
to the matters released above. Notwithstanding the foregoing, Executive understands and confirms
that Executive is entering into this Release (with its covenant not to sue and waiver and release)
voluntarily and knowingly, and the foregoing covenant not to sue shall not affect Executive’s right
to claim otherwise with respect to Executive’s rights under ADEA.

     R-3. Executive agrees that in the event of a breach by Executive or Executive’s heirs or
executors of this Release, and in addition to any other rights or remedies the Company may have
hereunder or otherwise: (i) the Company will be irreparably damaged and will have no adequate
remedy at law, and will be entitled to request an injunction restraining any further breach of this
Release; and (ii) the Company will be indemnified and held harmless from and against any and all
damages or losses incurred by the Company (including reasonable attorneys’ fees and expenses) as a
result of such breach; and (iii) the Company may offset against any amounts otherwise owed
Executive damages or losses incurred as a result of a breach of this Release. Executive further
agrees that this Release may and shall be pleaded as a full and complete defense to any action,
suit or other proceeding covered by the terms of this Release that is or may be instituted,
prosecuted or maintained by Executive or Executive’s heirs or executors.

     R-4. In full and complete settlement of any claims that the Company may have against
Executive, other than the fulfillment of Executive’s obligations hereunder and Executive’s
surviving obligations under the Employment Agreement, including, without limitation, Executive’s
obligations under Article IV of the Employment Agreement, and in consideration of the undertakings
of Executive, the Company does hereby remise, release, and forever discharge Executive and
Executive’s heirs and executors, of and from any and all manner of actions and causes of actions,
suits, debts, liabilities, claims and demands whatsoever in law or in equity, which the Company
ever had, now has, or hereafter may have, by reason of any civil (but specifically not any criminal
act or fraud, embezzlement, or dishonest conduct) matter, cause or thing within the scope of
Executive’s employment by the Company from the beginning of Executive’s employment with the Company
and its affiliates to the date of this Release; and particularly, but without limitation of the
foregoing general terms, any claims arising from or relating in any way to actions taken by
Executive within the scope of Executive’s employment

4

 

relationship and the termination of that employment relationship with the Company and its
affiliates.

     R-5. Executive understands that any payments and benefits provided to Executive under the
terms of this Release and/or the Employment Agreement do not constitute an admission by the Company
or any affiliate that they have violated any law or legal obligation with respect to Executive’s
employment or its termination and, similarly, the Company understands that nothing in this Release
is intended to or constitutes an admission by Executive that Executive has violated any law or
legal obligation, including any law or legal obligation with respect to Executive’s employment or
its termination.

     R-6. Executive agrees that Executive will not at any time disparage or encourage or induce
others to disparage the Company or call into question the business operations, status or reputation
of the Company. For the purposes of this paragraph R-6, the term “disparage” includes, without
limitation, comments or statements to the press and/or media or any individual or entity with whom
the Company has a business relationship that may adversely affect in any manner (a) the conduct of
the business of the Company (including, without limitation, any business plans or prospects) or (b)
the business reputation of the Company or the quality, standing or character of any of the
Company’s products or services. Similarly, the members of the Company’s “Designated Group” (as
defined below) agrees that they will not at any time disparage or encourage or induce others to
disparage Executive or call into question Executive’s status or reputation. For purposes of this
Release, “Designated Group” shall mean the representatives of Fox Paine who were specifically
listed in paragraph R-1, the directors of UAI, and each member of the senior management team of
UAIGI and UAI with the title of senior vice-president or above as of the date of this Release, to
the extent actively employed or in active service as a member or director by such entities
following the date hereof.

     R-7. Executive has reviewed the terms of this Release and confirms that Executive has had the
opportunity to confer with an attorney of Executive’s own choosing with respect to the terms of
this Release. Executive acknowledges that Executive was advised that Executive could take up to
twenty-one (21) days from the date this Release was given to Executive to review this Release and
decide whether Executive would enter into this Release. To the extent that Executive has elected
to enter into this Release prior to such time, Executive has done so voluntarily, and has knowingly
waived such twenty-one (21) day review period. Executive may revoke Executive’s assent to the
terms of this Release for a period of seven (7) calendar days after its execution (the “Revocation
Period”), by hand or Federal Express delivery of a written notice of revocation prior to 5:00 p.m.
EST on the last day comprising the Revocation Period to the Company. This Release shall become
irrevocable automatically upon the expiration of the Revocation Period if Executive does not revoke
it in the aforesaid manner.

IN WITNESS WHEREOF, THIS RELEASE IS EXECUTED AS OF ___, 20_.

	 	 	 
	 

	 	UNITED AMERICA INDEMNITY GROUP, INC.
	 
	 	 
	 

	 	 
	Joseph Morris

	 	By:

5

 

EXHIBIT C

WORK FOR HIRE AGREEMENT

As a condition of my employment with United America Indemnity Group, Inc. and its affiliates,
successors or assigns (collectively, “UAIGI”), and in consideration of my employment with UAIGI and
my receipt of the compensation and benefits now and hereafter provided to me by UAIGI, I agree to
the following:

1. Inventions

     (a) Assignment of Inventions. I shall disclose to UAIGI, and hereby sell, transfer
and assign to UAIGI, or its designee, all right, title and interest in and to any and all
inventions, original works of authorship, developments, concepts, improvements or trade secrets,
whether or not patentable or registrable under copyright or similar laws, and other intellectual
property which I have or may solely or jointly conceive or develop or reduce to practice during the
period of time I have been and shall remain in the employ of UAIGI (collectively referred to as
“Inventions”), except as provided in Section 1(c) below. All original works of authorship which
have been or are made by me within the scope of and during the period of my employment with the
Company and which are protectable by copyright are “works made for hire” and UAIGI or its designee
shall own all rights therein. Any Invention relating to the business of UAIGI and its affiliates
that is developed or disclosed by me within six months following the termination of my employment
with UAIGI shall be deemed to fall within the provisions of this Section 1(a) unless proved to have
been first conceived and made following such termination.

     (b) Patent and Copyright Registrations. I shall assist UAIGI or its designee, at
UAIGI’s expense, in every proper way to secure UAIGI’s or its designee’s rights in the Inventions
and any copyrights, patents or other intellectual property rights relating thereto in any and all
countries. I further agree that my obligation to execute or cause to be executed, when it is in my
power to do so, any such instrument or papers shall continue after the termination of this
Agreement. If UAIGI is unable because of my mental or physical incapacity or for any other reason
to secure my signature to apply for or to pursue any application for any United States or foreign
patents or copyright registrations covering Inventions assigned to UAIGI as above, then I hereby
irrevocably designate and appoint UAIGI and its duly authorized officers and agents as my agent and
attorney in fact, to do all lawfully permitted acts to protect Inventions with the same legal force
and effect as if executed by me.

     (c) Exception to Assignments. I understand that the provisions of this Agreement
requiring assignment of Inventions to UAIGI do not apply to any Inventions made by me prior to my
employment with UAIGI and that is not used with my permission by UAIGI or any of its designees. I
also shall retain ownership of any Inventions made by me while employed by UAIGI if such Inventions
are made without use of any UAIGI equipment, supplies, facilities or trade secret information and
are developed entirely on my own time and (a) do not relate (1) to the business of UAIGI or (2) to
UAIGI’s actual or demonstrably anticipated research or development, or (b) do not result from any
work performed by me for UAIGI or its clients.

 

 

     2. Representations. I agree to execute or verify any proper document required to carry out
the terms of this Agreement. I represent that my performance of all the terms of this Agreement
will not breach any agreement to keep in confidence proprietary information acquired by me in
confidence or in trust prior to my employment by UAIGI. I have not entered into, and I agree I
will not enter into, any oral or written agreement in conflict with this Agreement.

     3. Injunctive Relief and Other Remedies. I acknowledge and agree that my failure to comply
with any of the terms of this Agreement shall irreparably harm the business of UAIGI and that UAIGI
shall not have an adequate remedy at law in the event of such non-compliance. I further
acknowledge and agree that, notwithstanding any arbitration provision in any agreement that I may
otherwise have with UAIGI, UAIGI shall be entitled to obtain a court order preventing me from
committing, threatening, or continuing any acts of material non-compliance with this Agreement.
All of UAIGI’s remedies for breach of this Agreement shall be cumulative and the pursuit of one
remedy shall not be deemed to exclude any other remedies.

     4. Successors and Assigns. This Agreement shall be binding upon, and shall inure to the
benefit of, UAIGI and me, and our respective successors and assigns. UAIGI shall have the right to
assign its rights hereunder to any successor in interest, whether by merger, consolidation, sale of
assets or otherwise.

     5. Entire Agreement. This Agreement is the complete agreement between the parties
concerning the subject matter hereof and supersedes any prior such agreements. This Agreement may
not be amended or in any way modified except in writing signed by both parties.

     6. Severability. If one or more of the provisions in this Agreement are deemed void by
law, then the remaining provisions shall continue in full force and effect.

     7. Governing Law; Consent to Jurisdiction. I hereby expressly agree that the validity,
interpretation, construction and performance of this Agreement shall be governed by the laws of the
State of Pennsylvania without regard to its conflicts of law principles.

     8. Effect of Waiver. No waiver by UAIGI of any breach by me of any provision of this
Agreement shall be deemed a waiver of similar or dissimilar provisions at the same or at any prior
or subsequent time.

Effective Date: February 15, 2006

	 	 	 
	 
	 	 
	 

Name:

	 	 

 

 

EXHIBIT D

RESIGNATION LETTER

As of February 15, 2006

Board of Directors

Penn-America Group, Inc.

c/o Saul Fox

Dear Saul:

Reference is made to the executive employment agreement between Penn-America Group, Inc. and its
insurance subsidiaries (“PNG”) and me dated as of October 14, 2004 (the “PNG Agreement”) and to the
executive employment agreement between United America Indemnity Group, Inc. (“UAIGI”) and me dated
as of February 15, 2006 (the “UAIGI Agreement”).

Effective as of the date hereof, and in connection with my acceptance of the positions of President
of UAIGI and United America Indemnity, Ltd. (“UAI”), I hereby resign my positions as Chief
Executive Officer and President of Penn-America Group, Inc. and consent to the termination of the
PNG Agreement. Such resignation is not for “Good Reason” (as such term is defined under the PNG
Agreement) nor does my agreement to be assigned to the positions of President of UAIGI and UAI
pursuant to the UAIGI Agreement constitute Good Reason under the PNG Agreement.

Sincerely,

Joseph F. Morris

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