Document:

exv4w4

 

Exhibit 4.4

AVERY DENNISON CORPORATION

FORM OF REMARKETING AGREEMENT

     REMARKETING AGREEMENT, dated as of [                    ], 2010 (the “Agreement”) by and between Avery
Dennison Corporation, a Delaware corporation (the “Company”), and [                    ] (the “Remarketing
Agent”), and acknowledged by The Bank of New York Trust Company, N.A., not individually but solely
as Purchase Contract Agent (the “Purchase Contract Agent”) and as attorney-in-fact of the Holders
of Purchase Contracts (as defined in the Purchase Contract and Pledge Agreement (as defined
herein)).

     WHEREAS, the Company issued [8,000,000] of its Corporate HiMEDS Units having an initial
aggregate stated amount of $[400,000,000] (the “Corporate HiMEDS Units”) under the Purchase
Contract and Pledge Agreement (the “Purchase Contract and Pledge Agreement”), dated as of November
20, 2007, by and among the Company, the Purchase Contract Agent, and The Bank of New York Trust
Company, N.A., as Collateral Agent (the “Collateral Agent”), Custodial Agent (the “Custodial
Agent”) and Securities Intermediary; and

     WHEREAS, the 5.350% Senior Notes due 2020 forming a part of the Corporate HiMEDS Units (the
“Senior Notes”) have been pledged pursuant to the Purchase Contract and Pledge Agreement to the
Collateral Agent to secure the obligations of Holders of Corporate HiMEDS Units under the related
Purchase Contracts on the Purchase Contract Settlement Date; and

     WHEREAS, the Remarketing Agent will attempt on November 1, 2010 (the “Remarketing Date”) to
remarket all of (i) the Senior Notes of Holders of Corporate HiMEDS Units and (ii) the Separate
Senior Notes of Holders who elect to participate in the Remarketing, pursuant respectively to the
procedures set forth in Section 5.02 of the Purchase Contract and Pledge Agreement and Sections
5.01 and 5.02 of the First Supplemental Indenture, dated as of November 20, 2007 (the “Supplemental
Indenture”), between the Company and The Bank of New York Trust Company, N.A., as trustee (the
“Trustee”), to the Indenture, dated as of November 20, 2007 (the “Base Indenture” and, together
with the Supplemental Indenture, the “Indenture”), between the Company and the Trustee (each of
which Sections is incorporated herein by reference); and

     WHEREAS, in the event the Remarketing on the Remarketing Date is unsuccessful, the Remarketing
Agent will remarket the Senior Notes to be included in the Remarketing on November 2, 2010, and, if
necessary, will attempt to remarket such Senior Notes on November 3, 2010 and, if necessary, will
attempt to remarket such Senior Notes on November 4, 2010, and, if necessary, will attempt to
remarket such Senior Notes on November 5, 2010 and, if necessary, will attempt to remarket such
Senior Notes on November 8, 2010 and, if necessary, will attempt to remarket such Senior Notes on
November 9, 2010 (the “Remarketing Period”) (any such date after the Remarketing Date on which a
subsequent Remarketing is attempted, a “Subsequent Remarketing Date”); provided, however, that in
the event that any such date falls

 

 

on a date following the third scheduled Trading Day immediately preceding the Purchase
Contract Settlement Date, such date shall not be a Subsequent Remarketing Date; and

     WHEREAS, in the event of a successful Remarketing on the Remarketing Date or any Subsequent
Remarketing Date, as the case may be, the applicable interest rate on the Remarketed Senior Notes
(as defined below) included in such successful Remarketing will be reset on the Purchase Contract
Settlement Date to the fixed interest rate determined by the Remarketing Agent in good faith that
will result in a price per Remarketed Senior Note equal 100.25% of the Remarketing Value of such
Remarketed Senior Notes, as of such Remarketing Date or Subsequent Remarketing Date (the “Reset
Rate”); provided that the Reset Rate shall be limited to the maximum rate permitted by applicable
law; and

     WHEREAS, in the event that there is not a successful Remarketing on the Remarketing Date or
any Subsequent Remarketing Date, the applicable interest rate on the Senior Notes will remain
unchanged; and

     WHEREAS, the Company has requested [                    ] to act as the Remarketing Agent, and as such to
perform the services described herein; and

     WHEREAS, [                    ] is willing to act as the Remarketing Agent and as such to perform such
duties on the terms and conditions expressly set forth herein;

     NOW, THEREFORE, for and in consideration of the covenants herein made, and subject to the
conditions herein set forth, the parties hereto agree as follows:

Section 1. Definitions.

     (a) Capitalized terms used and not defined in this Agreement, in the recitals hereto or in the
paragraph preceding such recitals shall have the meanings assigned to them in the Purchase Contract
and Pledge Agreement or, if not therein defined, the Supplemental Indenture.

     (b) As used in this Agreement, the following terms have the following meanings:

     “Preliminary Prospectus” means any preliminary prospectus relating to the Remarketed
Senior Notes included in the Registration Statement (including any preliminary prospectus
supplement), including the documents incorporated by reference therein as of the date of
such Preliminary Prospectus; and any reference to any amendment or supplement to such
Preliminary Prospectus shall be deemed to refer to and include any documents filed after the
date of such Preliminary Prospectus, under the Exchange Act, and incorporated by reference
in such Preliminary Prospectus.

     “Prospectus” means the prospectus relating to the Remarketed Senior Notes (including
any prospectus supplement), in the form in which first filed, or transmitted for filing,
with the Commission after the effective date of the Registration Statement pursuant to Rule
424(b), including the documents incorporated by reference therein as of the date of such
Prospectus; and any reference to any amendment or supplement to such Prospectus shall be
deemed to refer to and include any documents filed after the date of such Prospectus, under
the Exchange Act, and incorporated by reference in such Prospectus.

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     “Registration Statement” means a registration statement under the Securities Act of
1933, as amended (the “Securities Act”) filed and prepared by the Company covering, inter
alia, the Remarketing of the Remarketed Senior Notes pursuant to Section 5(a) hereunder,
including all exhibits thereto and the documents incorporated by reference in the prospectus
contained in such registration statement, and any post-effective amendments thereto.

     “Remarketing Period” means the seven scheduled Business Day period beginning on the
Remarketing Date; provided, however, that in no event shall the Remarketing Period extend
beyond the third scheduled Trading Day immediately preceding the Purchase Contract
Settlement Date.

     “Remarketed Senior Notes” means the Pledged Senior Notes and the Separate Senior Notes,
if any, subject to Remarketing as identified to the Remarketing Agent by the Collateral
Agent and the Custodial Agent, respectively, on or prior to 6:00 p.m., New York City time,
on the second Business Day immediately preceding the Remarketing Date, and shall include:

     (a) the Senior Notes of the Holders of Corporate HiMEDS Units who have not
notified the Purchase Contract Agent on or prior to 4:00 p.m., New York City time,
on the second Business Day immediately preceding the Remarketing Date of their
intention to effect a Cash Settlement of the related Purchase Contracts pursuant to
the terms of the Purchase Contract and Pledge Agreement or who have so notified the
Purchase Contract Agent but failed to make the required cash payment on or prior to
4:00 p.m., New York City time, on the second Business Day prior to the Remarketing
Date pursuant to the terms of the Purchase Contract and Pledge Agreement, and

     (b) the Separate Senior Notes of the holders of Separate Senior Notes, if any,
who have elected to have their Separate Senior Notes be remarketed in such
Remarketing pursuant to the terms of the Supplemental Indenture.

     “Remarketing” means the remarketing of the Remarketed Senior Notes pursuant to this
Remarketing Agreement.

     “Remarketing Agent” means [                    ] appointed as the Remarketing Agent by the Company
pursuant to Section 2(a) hereof.

     “Remarketing Materials” means the Preliminary Prospectus and the Prospectus furnished
by the Company to the Remarketing Agent for distribution to investors in connection with the
Remarketing.

     “Remarketing Value” means, with respect to any Senior Note, the principal amount of
such Senior Note.

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     “Transaction Documents” means this Agreement, the Purchase Contract and Pledge
Agreement, the Indenture and the Supplemental Indenture, in each case as amended or
supplemented from time to time.

Section 2. Appointment and Obligations of Remarketing Agent.

     (a) The Company hereby appoints [                    ] and [                    ] hereby accepts such appointment:

     (i) as the Remarketing Agent to determine, in consultation with the Company, in the
manner provided for herein, in the Purchase Contract and Pledge Agreement and in the Senior
Notes, the Reset Rate that, in the opinion of the Remarketing Agent, will, when applied to
the Remarketed Senior Notes, enable the price per Remarketed Senior Notes to equal 100.25%
of the Remarketing Value of such Remarketed Senior Notes as of the Remarketing Date or as of
any Subsequent Remarketing Date, as the case may be; and

     (ii) as the exclusive Remarketing Agent (subject to the right of such Remarketing Agent
to appoint additional remarketing agents hereunder as described below) to remarket the
Remarketed Senior Notes to be included in the Remarketing on the Remarketing Date, and, if
necessary, on any Subsequent Remarketing Date.

          The Remarketing Agent shall have the right, on 15 Business Days’ notice to the Company, to
appoint one or more additional remarketing agents so long as any such additional remarketing agents
shall be reasonably acceptable to the Company; provided that any such appointment shall not
increase the Remarketing Fee (as defined in Section 4 hereof). Upon any such appointment, the
parties shall enter into an appropriate amendment to this Agreement to reflect the addition of any
such additional remarketing agent.

     (b) Subject to the terms and conditions set forth herein and in the Purchase Contract and
Pledge Agreement, the Remarketing Agent shall use its reasonable best efforts to:

     (i) remarket on the Remarketing Date the Remarketed Senior Notes at the Reset Rate;

     (ii) in the event the Remarketing Agent cannot establish such a Reset Rate on the
Remarketing Date, attempt to remarket such Senior Notes on each Subsequent Remarketing Date
during the Remarketing Period, as necessary, in each case at the Reset Rate; and

     (iii) in the event of a Last Failed Remarketing, within three Business Days of the date
of the Last Failed Remarketing return the Pledged Senior Notes, if any, included in such
Last Failed Remarketing to the Collateral Agent to be held by the Collateral Agent in
accordance with Sections 5.02(c)(ii) and 11.01 of the Purchase Contract and Pledge Agreement
(which Section is incorporated herein by reference) and return any Separate Senior Notes
included in the Remarketing to the Custodial Agent in accordance with Section 5.02(c)(ii) of
the Purchase Contract and Pledge Agreement and Section 5.02(b) of the Supplemental Indenture
(which Sections are incorporated herein by

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reference), and promptly advise the Trustee of such event, with such notice to be given
not later than two Business Days prior to the Purchase Contract Settlement Date.

          After deducting the fee specified in Section 4 below, the proceeds of any such successful
Remarketing shall be delivered to the Purchase Contract Agent or the Custodial Agent, as
applicable, in accordance with Sections 5.02(c)(i) of the Purchase Contract and Pledge Agreement
(which Section is incorporated herein by reference). The right of each Holder of Corporate HiMEDS
Units or Separate Senior Notes to have Senior Notes included in any Remarketing shall be subject to
the conditions that:

     (i) the Remarketing Agent conducts a Remarketing on such date pursuant to the terms of
this Agreement;

     (ii) the Remarketing Agent is able to find a purchaser or purchasers for the Remarketed
Senior Notes at the Reset Rate; and

     (iii) such purchaser or purchasers deliver the purchase price therefor to the
Remarketing Agent as and when required.

     (c) It is understood and agreed that the Remarketing Agent shall not have any obligation
whatsoever to purchase any Senior Notes, whether in a Remarketing held on the Remarketing Date or
on any Subsequent Remarketing Date or otherwise, and shall in no way be obligated to provide funds
to make payment upon tender of Senior Notes for Remarketing or to otherwise expend or risk its own
funds or incur or be exposed to financial liability in the performance of its duties under this
Agreement, and, without limitation of the foregoing, the Remarketing Agent shall not be deemed an
underwriter of the Remarketed Senior Notes. The Company shall not be obligated in any case to
provide funds to make payment upon delivery of Senior Notes for Remarketing.

     (d) The Remarketing Agent shall also, if required by the Securities Act or the rules and
regulations promulgated thereunder, deliver to each purchaser a Prospectus in connection with the
Remarketing.

     (e) If, by 4:30 p.m., New York City time, on the Remarketing Date or any Subsequent
Remarketing Date, the Remarketing Agent is unable to remarket all Remarketed Senior Notes included
in the Remarketing, a failed Remarketing (the “Failed Remarketing”) shall be deemed to have
occurred, and the Remarketing Agent shall so advise by telephone the Depositary and the Company.

     (f) The Remarketing Agent shall advise, by telephone, the Company of the Reset Rate determined
in a Successful Remarketing (as defined in Section 4 hereof) as soon as practicable after such
determination.

     (g) By approximately 4:30 p.m., New York City time, on the Trading Day following a Successful
Remarketing, the Remarketing Agent shall advise, by telephone:

     (i) the Depositary of the Reset Rate determined in the Remarketing and the aggregate
principal amount of Remarketed Senior Notes sold in the Remarketing;

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     (ii) each purchaser (or the Depositary Participant thereof) of the Reset Rate and the
aggregate principal amount of Remarketed Senior Notes such purchaser is to purchase; and

     (iii) each purchaser to give instructions to its Depositary Participant to pay the
purchase price on the Settlement Date in same day funds against delivery of the Remarketed
Senior Notes purchased through the facilities of the Depositary.

Section 3. Representations and Warranties of the Company.

     The Company represents and warrants to the Remarketing Agent (i) on and as of the
date any Remarketing Materials are first distributed in connection with the Remarketing (the
“Commencement Date”), (ii) on and as of the Remarketing Date or any Subsequent Remarketing Date and
(iii) on and as of the settlement date relating to such Remarketing Date or Subsequent Remarketing
Date (the “Settlement Date”), that:

     (a) Each of the representations and warranties of the Company as set forth in Sections 3(a)
through 3(kk) of the Underwriting Agreement dated November 14, 2007 (the “Underwriting Agreement”)
among the Company and the Underwriters identified in Schedule I thereto, was true and correct when
made on November 14, 2007 and November 20, 2007 [Note: representations and warranties similar to
those contained in the Underwriting Agreement to be included and agreed upon; provided that for
purposes of such representations and warranties, any reference in such sections of the Underwriting
Agreement to (i) the “Registration Statement,” the “Prospectus” or the “Preliminary Prospectus”
shall be deemed to refer to such terms as defined herein and (ii) the “Closing Date” shall be
deemed to refer to the Settlement Date.]

     (b) The Registration Statement, if any, in the form heretofore delivered or to be delivered to
the Remarketing Agent, has been declared effective by the Commission in such form; and no stop
order suspending the effectiveness of the Registration Statement has been issued and no proceeding
for that purpose has been initiated or threatened by the Commission.

     (c) The documents incorporated by reference in the Prospectus, when they were filed with the
Commission, conformed in all material respects to the requirements of the Exchange Act and the
rules and regulations of the Commission thereunder, and none of such documents contained an untrue
statement of a material fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under which they were made,
not misleading; and any further documents so filed and incorporated by reference in the Prospectus
or any further amendment or supplement thereto, when such documents are filed with the Commission,
will conform in all material respects to the requirements of the Exchange Act and the rules and
regulations of the Commission thereunder, and will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made, not misleading.

     (d) The Registration Statement, if any, conforms (and the Prospectus, if any, and any further
amendments or supplements to the Registration Statement or the Prospectus, when they become
effective or are filed with the Commission, as the case may be, will conform) in all material
respects to the requirements of the Securities Act, the Trust Indenture Act of 1939, as

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amended, and the rules and regulations promulgated thereunder, and the Registration Statement
and the Remarketing Materials (and any amendment or supplement thereto) as of their respective
effective or filing dates and as of the Commencement Date, applicable Remarketing Date or
Subsequent Remarketing Date and Settlement Date do not and will not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading; provided that no representation and warranty is made as to
any statement of eligibility on Form T-1 filed or incorporated by reference as part of the
Registration Statement or the Remarketing Materials, or as to information relating to the
Remarketing Agent or the Holders of the Remarketed Senior Notes contained in or omitted from the
Registration Statement or the Remarketing Materials in reliance upon and in conformity with written
information furnished to the Company by the Remarketing Agent expressly for use therein.

     (e) This Agreement has been duly authorized, executed and delivered by the Company.

     (f) The Remarketed Senior Notes will conform to the descriptions thereof contained in the
Prospectus and in any other Remarketing Materials.

     (g) No Event of Default (as defined in the Indenture, as supplemented by the Supplemental
Indenture) has occurred and is continuing.

Section 4. Fees.

     In the event of a successful Remarketing in which the Remarketed Senior Notes are sold for a
price per Remarketed Senior Note equal to 100.25% of the Remarketing Value of such Remarketed
Senior Note (a “Successful Remarketing”), the Remarketing Agent shall retain for itself as a
remarketing fee (the “Remarketing Fee”) from the proceeds of the Remarketing an amount not
exceeding 25 basis points (0.25%) of the Remarketing Value of the Remarketed Senior Notes in
accordance with Section 5.02(c) of the Purchase Contract and Pledge Agreement and Section 5.01 of
the Supplemental Indenture.

Section 5. Covenants of the Company.

     (a) The Company covenants and agrees as follows:

1. If and to the extent the Remarketed Senior Notes are required (in the view of
counsel, which need not be in the form of a written opinion, for either the
Remarketing Agent or the Company) to be registered under the Securities Act as in
effect at the time of the Remarketing,

	 	i.	 	to prepare the Registration Statement and the
Prospectus to file any such Prospectus pursuant to the Securities Act
within the period required by the Securities Act and the rules and
regulations thereunder and to use commercially reasonable efforts to
cause the Registration Statement to be declared effective by the
Commission prior to the second Business Day immediately preceding the
Remarketing Date;

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	 	ii.	 	to file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the
Prospectus that may, in the reasonable judgment of the Company, be
required by the Securities Act or requested by the Commission;
	 
	 	iii.	 	to advise the Remarketing Agent, promptly after it
receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed and
to furnish the Remarketing Agent with copies thereof;
	 
	 	iv.	 	to advise the Remarketing Agent, promptly after it
receives notice thereof, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of the Prospectus,
of the suspension of the qualification of any of the Remarketed Senior
Notes for offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any request by
the Commission for the amending or supplementing of the Registration
Statement or the Prospectus or for additional information, and, in the
event of the issuance of any stop order or of any order preventing or
suspending the use of any Prospectus or suspending any such
qualification, to use promptly its best efforts to obtain its withdrawal;
	 
	 	v.	 	to furnish promptly to the Remarketing Agent such
copies of the following documents as the Remarketing Agent shall
reasonably request: (A) conformed copies of the Registration Statement as
originally filed with the Commission and each amendment thereto (in each
case excluding exhibits); (B) the Preliminary Prospectus and any amended
or supplemented Preliminary Prospectus, (C) the Prospectus and any
amended or supplemented Prospectus; and (D) any document incorporated by
reference in the Prospectus (excluding exhibits thereto); and, if at any
time when delivery of a Prospectus is required in connection with the
Remarketing, any event shall have occurred as a result of which the
Prospectus as then amended or supplemented would include any untrue
statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made when such Prospectus is
delivered, not misleading, or if for any other reason it shall be
necessary during such same period to amend or supplement the Prospectus
or to file under the Exchange Act any document incorporated by reference
in the Prospectus in order to comply with the Securities Act or the
Exchange Act, to notify the Remarketing Agent and, upon its request, to
file such document and to prepare and furnish without charge to the
Remarketing Agent and to any dealer in securities as many copies as the
Remarketing Agent may from time to time reasonably request of an amended
or supplemented Prospectus that will correct such statement or omission
or effect such compliance;

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	 	vi.	 	prior to filing with the Commission (A) any
amendment to the Registration Statement or supplement to the Prospectus
or (B) any Prospectus pursuant to Rule 424 under the Securities Act, to
furnish a copy thereof to the Remarketing Agent and counsel to the
Remarketing Agent;
	 
	 	vii.	 	as soon as practicable, but in any event not later
than eighteen months, after the effective date of the Registration
Statement, to make “generally available to its security holders” an
“earnings statement” (which need not be audited) of the Company and its
subsidiaries complying with Section 11(a) of the Securities Act and the
rules and regulations thereunder (including, at the option of the
Company, Rule 158 under the Securities Act). The terms “Generally
Available to its Security Holders” and “Earnings Statement” shall have
the meanings set forth in Rule 158 under the Securities Act; and
	 
	 	viii.	 	to take such action as the Remarketing Agent may
reasonably request in order to qualify the Remarketed Senior Notes for
offer and sale under the securities or “blue sky” laws of such
jurisdictions as the Remarketing Agent may reasonably request; provided
that in no event shall the Company be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction.

2. To pay: (1) the costs incident to the preparation and printing of the
Registration Statement, if any, any Prospectus and any other Remarketing Materials
and any amendments or supplements thereto; (2) the costs of distributing the
Registration Statement, if any, any Prospectus and any other Remarketing Materials
and any amendments or supplements thereto; (3) any fees and expenses of qualifying
the Remarketed Senior Notes under the securities laws of the several jurisdictions
as provided in Section 5(a)(1)(viii) and of preparing, printing and distributing a
Blue Sky Memorandum, if any (including any related fees and expenses of counsel to
the Remarketing Agent); (4) all other costs and expenses incident to the performance
of the obligations of the Company hereunder and the Remarketing Agent hereunder; and
(5) the reasonable fees and expenses of one counsel to the Remarketing Agent in
connection with their duties hereunder.

3. To furnish the Remarketing Agent with such information and documents as the
Remarketing Agent may reasonably request in connection with the transactions
contemplated hereby, and to make reasonably available to the Remarketing Agent and
any accountant, attorney or other advisor retained by the Remarketing Agent such
information that parties would customarily require in connection with a due
diligence investigation conducted in accordance with applicable securities laws.

     (b) The Remarketing Agent covenants and agrees as follows:

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1. that it will not disseminate any written material for or in connection with the
Remarketing other than the Remarketing Materials and agrees that it will not make
any written statements in connection with the Remarketing, other than statements
that are set forth in the Remarketing Materials unless authorized in advance by the
Company;

2. that it will not distribute the Remarketing Materials if it has been notified by
the Company in writing of (i) the occurrence of any event, or the discovery of any
fact, that could reasonably be expected to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect, (ii)
the issuance of any comment or stop order or the taking of any other action by the
Commission or any other governmental or regulatory agency with respect to the
Remarketing Materials, (iii) the occurrence of any event, or the discovery of any
fact, that could reasonably be expected to cause the Company to amend or supplement
the Remarketing Materials and (iv) the occurrence of any event, or the discovery of
any fact, that would cause the Remarketing Materials to contain any untrue statement
of a material fact or omit to state therein a material fact necessary to make the
statements therein, in light of the circumstances under which they were made, not
misleading; and

3. that if, and for so long as the Senior Notes that are not Separate Senior Notes
are in the possession of the Remarketing Agent prior to the settlement of the
Purchase Contracts, (i) the Remarketing Agent will hold such Senior Notes for the
sole benefit of the Company, (ii) such Senior Notes will continue to constitute
Collateral (as defined in the Purchase Contract and Pledge Agreement) and (iii) the
Company will retain all of the rights, privileges and benefits with respect thereto
as described in the Purchase Contract and Pledge Agreement.

Section 6. Replacement and Resignation of Remarketing Agent.

     (a) The Company may replace [                    ] as the Remarketing Agent by giving notice prior to 3:00
p.m., New York City time, on the fourteenth Business Day immediately preceding the Remarketing
Date. Upon providing such notice, the Company shall use all reasonable best efforts to appoint such
a successor and to enter into a remarketing agreement with such successor as soon as reasonably
practicable.

     (b) [                    ] may resign at any time and be discharged from its duties and obligations
hereunder as the Remarketing Agent by giving notice prior to 3:00 p.m., New York City time, on the
fourteenth Business Day immediately preceding the Remarketing Date. Upon receiving notice from the
Remarketing Agent that it wishes to resign hereunder, the Company shall use all reasonable best
efforts to appoint such a successor and enter into a remarketing agreement with it as soon as
reasonably practicable.

     (c) The Company shall give the Purchase Contract Agent, the Collateral Agent, the Custodial
Agent and the Trustee prompt written notice of any replacement of the Remarketing Agent pursuant to
this section.

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     (d) The Remarketing Agent shall give the Purchase Contract Agent, the Collateral Agent, the
Custodial Agent and the Trustee prompt written notice of its resignation pursuant to this section.

     (e) Notwithstanding the above, no such resignation nor any such removal shall become effective
until the Company shall have appointed (with notice to the Purchase Contract Agent, the Custodial
Agent, the Collateral Agent and the Trustee) at least one nationally recognized broker-dealer as
successor Remarketing Agent and such successor Remarketing Agent shall have entered into a
remarketing agreement with the Company, in which it shall have agreed to conduct the Remarketing in
accordance with this Agreement in all material respects.

Section 7. Dealing in the Securities.

     The Remarketing Agent, when acting hereunder or when acting in its individual or any other
capacity, may, to the extent permitted by law, buy, sell, hold or deal in any of the Senior Notes,
Corporate HiMEDS Units, Treasury HiMEDS Units or any other securities of the Company; provided,
however, that in buying, selling, holding, or dealing in any of the Senior Notes, Corporate HiMEDS
Units, Treasury HiMEDS Units or any other securities of the Company, the Remarketing Agent may not
violate any of its duties under this Agreement. With respect to any Senior Notes, Corporate HiMEDS
Units, Treasury HiMEDS Units or any other securities of the Company owned by it, the Remarketing
Agent may exercise any vote or join in any action with like effect as if it did not act in any
capacity hereunder. The Remarketing Agent, in its individual capacity, either as principal or
agent, may also engage in or have an interest in any financial or other transaction with the
Company as freely as if it did not act in any capacity hereunder.

     The Company or its affiliates may, to the extent permitted by law, purchase any Senior Notes
that are remarketed by the Remarketing Agent.

Section 8. Conditions to the Remarketing Agent’s Obligations.

          The obligations of the Remarketing Agent hereunder shall be subject to the following
conditions:

     (a) The Prospectus, if any, shall have been timely filed with the Commission; no stop order
suspending the effectiveness of the Registration Statement, if any, or any part thereof shall have
been issued and no proceeding for that purpose shall have been initiated or threatened by the
Commission.

     (b) (1) Trading generally shall not have been suspended or materially limited on the New York
Stock Exchange or the NASDAQ Global Select Market, (2) trading of any securities of the Company
shall not have been materially suspended or limited on the New York Stock Exchange or the NASDAQ
Global Select Market, (3) a general moratorium on commercial banking activities in New York shall
not have been declared by the relevant authorities and there shall not have occurred a material
disruption in commercial banking or securities settlement or clearance services in the United
States or other relevant jurisdiction, or (4) there shall not have occurred a material adverse
change in the financial markets, any outbreak or escalation of hostilities involving the United
States or the declaration by the United States of a national

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emergency or war or other calamity or crisis, if the effect of any such event specified in
this clause (4) in the judgment of the Remarketing Agent makes it impracticable or inadvisable to
proceed with the Remarketing or the delivery of the Remarketed Senior Notes on the terms and in the
manner contemplated in the Transaction Documents.

     (c) The representations and warranties of the Company contained herein shall be true and
correct in all material respects on and as of the Remarketing Date, and the Company, the Purchase
Contract Agent and the Collateral Agent shall have performed in all material respects all covenants
and agreements contained herein or in the Purchase Contract and Pledge Agreement to be performed on
their part at or prior to the Remarketing Date.

     (d) The Company shall have furnished to the Remarketing Agent a certificate, dated the
Remarketing Date, of the Chief Executive Officer and the Treasurer satisfactory to the
Remarketing Agent stating that:

     (1) no order suspending the effectiveness of the Registration Statement, if any, or
prohibiting the sale of the Remarketed Senior Notes is in effect, and no proceedings for
such purpose are pending before or, to the knowledge of such officers, threatened by the
Commission; and

     (2) the representations and warranties of the Company in Section 3 of this Agreement
are true and correct on and as of the Remarketing Date and the Company has performed in all
material respects all covenants and agreements contained herein to be performed on its part
at or prior to such Remarketing Date.

     (e) On the Remarketing Date, the Remarketing Agent shall have received a letter addressed to
the Remarketing Agent and dated such date, in form and substance satisfactory to the Remarketing
Agent, from the independent registered certified public accounting firm that are then the auditors
of the Company’s financial statements, containing statements and information of the type ordinarily
included in accountants’ “comfort letters” with respect to certain financial information contained
in the Remarketing Materials, if any.

     (f) Latham & Watkins LLP, counsel to the Company, shall have furnished to the Remarketing
Agent its opinion, addressed to the Remarketing Agent and dated the Remarketing Date, in form and
substance reasonably satisfactory to the Remarketing Agent.

     (g)                     , counsel for the Remarketing Agent, shall have furnished to the Remarketing Agent
its opinion, addressed to the Remarketing Agent and dated the applicable Remarketing Date, in form
and substance satisfactory to the Remarketing Agent.

     (h) There shall not have been, since the respective dates as of which information is given in
the Prospectus, any material adverse change in the condition (financial or otherwise), business,
properties or results of operations of the Company and its subsidiaries taken as a whole.

Section 9. Termination of Remarketing Agreement.

     This Agreement shall automatically terminate:

12

 

     (i) as to the Remarketing Agent on the effective date of the resignation or removal of the
Remarketing Agent pursuant to Section 6; and

     (ii) on the Purchase Contract Settlement Date.

     If this Agreement is terminated pursuant to any of the other provisions hereof, except as
otherwise provided herein, the Company shall not be under any liability to the Remarketing Agent
and the Remarketing Agent shall not be under any liability to the Company, except that if this
Agreement is terminated by the Remarketing Agent because of any failure or refusal on the part of
the Company to comply with the terms or to fulfill any of the conditions of this Agreement, the
Company will reimburse the Remarketing Agent for all of its out-of-pocket expenses (including the
reasonable fees and disbursements of its counsel) reasonably incurred by it. Section 10, Section
11, Section 12 and Section 14 hereof shall survive the termination of this Agreement or the
resignation or removal of the Remarketing Agent.

Section 10. Remarketing Agent’s Performance; Duty of Care.

     The duties and obligations of the Remarketing Agent shall be determined solely by the express
provisions of this Agreement and the Transaction Documents. No implied covenants or obligations of
or against the Remarketing Agent shall be read into this Agreement or any of the Transactions
Documents. In the absence of willful misconduct, bad faith or gross negligence on the part of the
Remarketing Agent, the Remarketing Agent may conclusively rely upon any document furnished to it
which purports to conform to the requirements hereunder as to the truth of the statements expressed
therein. The Remarketing Agent shall be protected in acting upon any document or communication
reasonably believed by it to be signed, presented or made by the proper party or parties. The
Remarketing Agent shall not have any obligation to determine whether there is any limitation under
applicable law on the Reset Rate on the Remarketed Senior Notes or, if there is any such
limitation, the maximum permissible Reset Rate on the Remarketed Senior Notes, and it shall rely
solely upon timely written notice from the Company pursuant to Section 2(a) hereof as to whether or
not there is any such limitation and, if so, the maximum permissible Reset Rate. The Remarketing
Agent shall not incur any liability under this Agreement to any beneficial owner or holder of
Remarketed Senior Notes, or other securities, either in its individual capacity or as Remarketing
Agent, as the case may be, for any action or failure to act in connection with the Remarketing of
the Remarketed Senior Notes or otherwise in connection with the transactions contemplated by this
Agreement, except to the extent that such liability has, by final judicial determination, resulted
from the willful misconduct, bad faith or gross negligence of the Remarketing Agent or from its
failure to fulfill its express obligations hereunder. The provisions of this Section 10 shall
survive any termination of this Agreement and shall also continue to apply to every Remarketing
Agent notwithstanding its resignation or removal. The Remarketing Agent will act as the agent of
the Holders.

Section 11. Indemnification.

     (a) The Company will indemnify and hold harmless the Remarketing Agent, against any losses,
claims, damages or liabilities to which the Remarketing Agent may become subject, under the
Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged untrue

13

 

statement of a material fact contained in the Registration Statement, the Prospectus, or any
amendments or supplement thereto, or any related Preliminary Prospectus or preliminary prospectus
supplement or arise out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Remarketing Agent for any legal expenses of one counsel (in
addition to any local counsel) engaged reasonably incurred by the Remarketing Agent in connection
with investigating or defending any such action or claim as such expenses are incurred; provided,
however, that the Company shall not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission from any of such documents in reliance upon and in
conformity with written information furnished to the Company by the Remarketing Agent specifically
for use therein.

     (b) The Remarketing Agent will indemnify and hold harmless the Company, its directors and
officers and each person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act, against any losses, claims, damages or liabilities to which the Company may become
subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in the Registration Statement, the Prospectus
or any amendment or supplement thereto, or any related Preliminary Prospectus or Preliminary
Prospectus supplement, or any other Remarketing Materials, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information furnished to the Company by
the Remarketing Agent specifically for use therein, and will reimburse any legal or other expenses
reasonably incurred by the Company in connection with investigating or defending any such loss,
claim, damage, liability or action as such expenses are incurred; provided that in no case will the
Remarketing Agent be liable or responsible for any amount in excess of the fee paid to the
Remarketing Agent pursuant to Section 4.

     (c) Promptly after receipt by an indemnified party under this section of notice of the
commencement of any action, such indemnified party shall, if a claim in respect thereof is to be
made against the indemnifying party under subsection (a) or (b) above, notify the indemnifying
party in writing of the commencement thereof; but the omission so to notify the indemnifying party
shall not relieve it from any liability which it may have to any indemnified party otherwise than
under subsection (a) or (b) above. In the case of parties indemnified pursuant to subsection (a)
above, counsel to the indemnified parties shall be selected by the Remarketing Agent. In case any
such action shall be brought against the indemnified party and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be entitled to participate therein
and, to the extent that it shall wish, to assume the defense thereof, with counsel satisfactory to
such indemnified party (who shall not, except with the consent of the indemnified party, be counsel
to the indemnifying party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party under such subsection for any legal expenses of other counsel or any other
expenses, in each case subsequently incurred by such indemnified

14

 

party, in connection with the defense thereof other than reasonable costs of investigation (as
set forth below). Notwithstanding the indemnifying party’s election to appoint counsel to represent
the indemnified party in an action, the indemnified party shall have the right to employ separate
counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs
and expenses of such separate counsel if (i) the use of counsel chosen by the indemnifying party to
represent the indemnified party would present such counsel with a conflict of interest; (ii) the
actual or potential defendants in, or targets of, any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably concluded that
there may be legal defenses available to it and/or the indemnified party which are different from
or additional to those available to the indemnifying party; (iii) the indemnifying party shall not
have employed counsel satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of the institution of such action or (iv) the indemnifying
party shall authorize the indemnified party to employ separate counsel at the expense of the
indemnifying party. In no event shall the indemnifying parties be liable for fees and expenses of
more than one counsel (in addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar or related actions in
the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying
party shall, without the prior written consent of the indemnified parties, settle or compromise or
consent to the entry of any judgment with respect to any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which indemnification or contribution could be sought under this Section 11 (whether or
not the indemnified parties are actual or potential parties thereto), unless such settlement,
compromise or consent (i) includes an unconditional release of each indemnified party from all
liability arising out of such litigation, investigation, proceeding or claim and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to act by or on behalf
of any indemnified party.

Section 12. Contribution.

     (a) If the indemnification provided for in Section 11 is unavailable to or insufficient to
hold harmless an indemnified party under Sections 11(a) or 11(b), then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to in subsection (a) or (b)
above (i) in such proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Remarketing Agent on the other from the offering of the Remarketed
Senior Notes or (ii) if the allocation provided by clause (i) is not permitted by applicable law,
in such proportions as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company on the one hand and the Remarketing
Agent on the other in connection with the statements of omissions which resulted in such losses,
claims, damages or liabilities as well as any relevant equitable considerations. The relative
benefits received by the Company on one hand and the Remarketing Agent on the other hand in
connection with the Remarketing shall be deemed to be in the same proportions as the total net
proceeds of the Remarketed Senior Notes less the fee paid to the Remarketing Agent on the one hand
and the fee paid to the Remarketing Agent on the other hand bear to the total net proceeds of the
Remarketed Senior Notes. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the

15

 

Company on the one hand or the Remarketing Agent on the other hand and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent such statement or
omission. The Company and the Remarketing Agent agree that it would not be just and equitable if
contribution pursuant to this subsection (a) were determined by pro rata allocation or by any other
method of allocation which does not take account of the equitable considerations referred to above
in this subsection (a). The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this
subsection (a) shall be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (a), the Remarketing Agent shall not be required
to contribute any amount in excess of the amount by which the fees received by it under Section 4
exceeds the amount of any damages which the Remarketing Agent has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall
be entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.

     (b) The obligations of the Company under Section 11 and this Section 12 shall be in addition
to any liability which the Company may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Remarketing Agent and to each person, if any, who
controls the Remarketing Agent within the meaning of the Securities Act; and the obligations of the
Remarketing Agent under Section 11 and this Section 12 shall be in addition to any liability which
the Remarketing Agent may otherwise have and shall extend, upon the same terms and conditions, to
each director of the Company, to each officer of the Company who signed the Registration Statement
and to each person, if any, who controls the Company within the meaning of the Securities Act.

     (c) The indemnity and contribution provisions contained in Section 11 and this Section 12 and
the representations, warranties and other statements of the Company contained in this Agreement
shall remain in full force and effect, regardless of any investigation (or any statement as to the
results thereof) made by or on behalf of the Remarketing Agent or any person controlling the
Remarketing Agent, or the Company, its officers or director or any controlling person of the
Company, and the completion of the Remarketing.

Section 13. Persons Entitled to Benefit of Agreement.

     This Agreement shall inure to the benefit of and be binding upon each party hereto and its
respective successors. This Agreement and the terms and provisions hereof are for the sole benefit
of only those persons, except that:

     (x) the representations, warranties, indemnities and agreements of the Company
contained in this Agreement shall also be deemed to be for the benefit of the Remarketing
Agent and the person or persons, if any, who control the Remarketing Agent within the
meaning of Section 15 of the Securities Act; and

     (y) the indemnity agreement of the Remarketing Agent contained in Section 11(b) of this
Agreement shall be deemed to be for the benefit of the Company’s directors

16

 

and officers who sign the Registration Statement, if any, and any person controlling
the Company within the meaning of Section 15 of the Securities Act.

     Nothing contained in this Agreement is intended or shall be construed to give any person,
other than the persons referred to herein, any legal or equitable right, remedy or claim under or
in respect of this Agreement or any provision contained herein.

Section 14. Governing Law; Submission to Jurisdiction. 

     THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK.

     The Company irrevocably:

     (i) agrees that any legal suit, action or proceeding against the Company brought by the
Remarketing Agent or by any person who controls the Remarketing Agent arising out of or
based upon this Agreement or the transactions contemplated hereby or thereby may be
instituted in the federal district court for the Southern District of New York and the New
York County Court;

     (ii) waives, to the fullest extent it may effectively do so, any objection which it may
now or hereafter have to the laying of venue of any such proceeding; and

     (iii) submits to the exclusive jurisdiction of such courts in any such suit, action or
proceeding. The Company has appointed CT Corporation System, New York, New York, as its
authorized agent (the “Authorized Agent”) upon whom process may be served in any such action
arising out of or based on this Agreement or the transactions contemplated hereby or thereby
which may be instituted in the federal district court for the Southern District of New York
and the New York County Court by the Remarketing Agent or by any person who controls the
Remarketing Agent, expressly consents to the jurisdiction of any such court in respect of
any such action, and waives any other requirements of or objections to personal jurisdiction
with respect thereto. Such appointment shall be irrevocable.

     The Company represents and warrants that the Authorized Agent has agreed to act as such agent
for service of process and agrees to take any and all action, including the filing of any and all
documents and instruments, that may be necessary to continue such appointment in full force and
effect as aforesaid. Service of process upon the Authorized Agent and written notice of such
service to the Company shall be deemed, in every respect, effective service of process upon the
Company.

Section 15. Survival.

     The respective indemnities, representations, warranties and agreements of the Company and the
Remarketing Agent contained in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement, shall survive any Remarketing and shall remain in full force and
effect, regardless of any investigation made by or on behalf of any of them or any person
controlling any of them.

17

 

Section 16. Successors and Assigns.

     The rights and obligations of the Company hereunder may not be assigned or delegated to any
other Person without the prior written consent of the Remarketing Agent. The rights and obligations
of the Remarketing Agent hereunder may not be assigned or delegated to any other Person (other than
an affiliate of the Remarketing Agent) without the prior written consent of the Company.

Section 17. Headings.

     Section headings have been inserted in this Agreement as a matter of convenience of reference
only, and such section headings are not a part of this Agreement and will not be used in the
interpretation of any provision of this Agreement.

Section 18. Severability.

     If any provision of this Agreement is invalid, inoperative or unenforceable as applied in any
particular case in any or all jurisdictions because it conflicts with any provisions of any
constitution, statute, rule or public policy or for any other reason, then, to the extent permitted
by law, such circumstances shall not have the effect of rendering the provision in question
invalid, inoperative or unenforceable in any other case, circumstances or jurisdiction, or of
rendering any other provision or provisions of this Agreement, as the case may be, invalid,
inoperative or unenforceable to any extent whatsoever.

Section 19. Counterparts.

     This Agreement may be executed in counterparts, each of which shall be regarded as an original
and all of which shall constitute one and the same document.

Section 20. Amendments.

     This Agreement may be amended only by an instrument in writing signed by the Company and the
Remarketing Agent.

Section 21. Notices.

     Unless otherwise specified, any notices, requests, consents or other communications given or
made hereunder shall be made in writing or transmitted by any standard form of telecommunication,
including telephone or telecopy, and confirmed in writing. All written notices and confirmations
of notices by telecommunication shall be deemed to have been validly given or made when delivered
or mailed, registered or certified mail, return receipt requested and postage prepaid. All such
notices, requests, consents or other communications shall be addressed as follows: if to the
Company, to Avery Dennison Corporation, 150 North Orange Grove Boulevard, Pasadena, California
91103, fax number: (626) 304-2251, Attention: [Richard P. Randall, Esq., Vice President Corporate
Governance, Associate General Counsel and Assistant Secretary]; if to the Remarketing Agent, to
[                    ], [                    ], [                    ], fax number [                    ], Attention: General Counsel; if to the
Collateral Agent, to The Bank of New York Trust Company, N.A., 700 South Flower, Suite 500, Los
Angeles, CA 90017, fax number
[                    ], Attention: Corporate Trust Administration; and if to the Purchase Contract Agent, to
The Bank of New York Trust Company, N.A., 700 South Flower, Suite 500, Los Angeles, CA 90017, fax
number [                    ], Attention: Corporate Trust Administration or to such other address as any of
the above shall specify to the others in writing.

18

 

     IN WITNESS WHEREOF, each of the Company, the Purchase Contract Agent and the Remarketing Agent
has caused this Agreement to be executed in its name and on its behalf by one of its duly
authorized signatories as of the date first above written.

	 	 	 	 	 
	 	AVERY DENNISON CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	
of Avery Dennison Corporation 	 

19

 

	 	 	 	 	 

	 	 	 	 	 
	 	[                    ], as Remarketing Agent

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

ACKNOWLEDGED:

The Bank of New York Trust Company, N.A.,

not individually but solely as Purchase Contract Agent

and as attorney-in-fact for the Holders of the Purchase Contracts

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Name:
	 	 
	 

	 	Title:	 	 

20EX-10.1

 

Exhibit 10.1

PROCENTURY CORPORATION

DEFERRED COMPENSATION PLAN

Amended and Restated

Effective November 14, 2007

 

 

PROCENTURY CORPORATION

DEFERRED COMPENSATION PLAN

(Amended and Restated Effective November 14, 2007)

SUMMARY

     The following is a summary of certain provisions of the Plan. This summary is subject to, and
qualified in its entirety by, the complete text of the Plan below.

	A.	 	This Plan is intended to allow elective deferrals by Key Employees and Directors in the form
of Deferred Amounts out of their Compensation and discretionary contributions by the Employer
in the form of Employer Deferrals on behalf of selected Participants for future payment to
Participants or their Beneficiaries (see Section 1.1).

	B.	 	Any Employer Deferral is discretionary and will only be made on behalf of such Participants
and in such amounts and at such time or times as the Employer determines in its sole
discretion. Any Employer Deferral will be paid upon the elected Entitlement Date and in the
elected Payment Form, as elected by the respective Participant in the initial Participation
Agreement submitted by the Participant to the Administrator upon entry into the Plan, and may
only be changed in accordance with election change rules under Section 3.3 (see Sections 3.3,
3.4).

	C.	 	Only Key Employees designated by the Employer and Directors will be eligible to become
Participants, and the Employer will notify each designated Key Employee and each person who
becomes a Director of his or her eligibility to participate (see Section 3.1).

	D.	 	Each Key Employee and Director will agree to participate for each calendar year by
completing, signing, and delivering to the Employer a Participation Agreement prior to that
calendar year (see Section 3.2). Each Participant will make such elections of a Deferred
Amount for each year and make such other elections as required by the Participation Agreement
(elections as to Entitlement Date and Payment Form must be made under the Participant’s
initial Participation Agreement). Any elections may be changed only as provided in this Plan
(see Section 3.3).

	E.	 	Each Participant’s right to payment of any Deferred Amounts contributed by that Participant
will be fully vested (see Section 3.5(a)). Each Participant’s right to payment of any
Employer Deferrals contributed on behalf of that Participant for any calendar year may be
subject to forfeiture if the Participant experiences a Separation from Service before any
Employer Deferral Vesting Date stated in the Participation Agreement giving notice of the
Employer Deferral (see Sections 3.2 and 3.5(b)). Notwithstanding any vesting pursuant to this
Plan, a Participant may forfeit all rights to Employer Deferrals under this Plan in the event
of certain prohibited activities (see Section 3.6).

	F.	 	On or before the Participant’s elected Entitlement Date, the Employer will make a final
determination of the Participant’s Aggregate Account Balance, debiting any applicable
forfeitures, and the Aggregate Account Balance as so determined will be payable in the elected
Payment Form within 60 days. However, in the event that the Participant is a “Specified
Employee” under section 409A of the Code and the Participant’s elected

 

 

	 	 	Entitlement Date is based upon the Participant experiencing a Separation from Service with
the Employer, payment of that Participant’s Aggregate Account Balance will be delayed until
the date that is six months after such Separation from Service (with such installments as
would normally be paid during the six months after the date that the Participant experienced
a Separation from Service accumulated and paid on the first day of the seventh month
following the date of the Separation from Service) (See Sections 5.1, 5.2).

	G.	 	Although the intent of this Plan is that a Participant will not be subject to federal or Ohio
income taxation with respect to any Deferred Amount or Employer Deferral until it is paid, it
is anticipated that each Participant will be subject to Social Security and Medicare taxation
and may be subject to local income taxation for each year with respect to each Deferred Amount
and Employer Deferral contributed for that year.

3

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	 
	 	 	 	 	 	 	 	 	 	 
	SECTION 1.	 	INTENT	 	 	1	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	1.1	 	 	Deferred Compensation Plan
	 	 	1	 
	 

	 	 	1.2	 	 	Top-Hat Plan
	 	 	1	 
	 

	 	 	1.3	 	 	Unfunded Plan
	 	 	1	 
	 

	 	 	1.4	 	 	Not A Qualified Plan
	 	 	1	 
	 
	 	 	 	 	 	 	 	 	 	 
	SECTION 2.	 	DEFINITIONS AND CONSTRUCTION	 	 	1	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	2.1	 	 	Definitions
	 	 	1	 
	 

	 	 	2.2	 	 	Construction
	 	 	5	 
	 
	 	 	 	 	 	 	 	 	 	 
	SECTION 3.	 	ELIGIBILITY, PARTICIPATION AND VESTING	 	 	6	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	3.1	 	 	Eligibility
	 	 	6	 
	 

	 	 	3.2	 	 	Participation
	 	 	6	 
	 

	 	 	3.3	 	 	Change In Participation Agreement
	 	 	6	 
	 

	 	 	3.4	 	 	Employer Deferrals
	 	 	7	 
	 

	 	 	3.5	 	 	Vesting
	 	 	7	 
	 

	 	 	3.6	 	 	Forfeiture In Certain Events
	 	 	8	 
	 
	 	 	 	 	 	 	 	 	 	 
	SECTION 4.	 	ACCOUNTING AND INVESTMENTS	 	 	9	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	4.1	 	 	Separate Accounting
	 	 	9	 
	 

	 	 	4.2	 	 	Investment
	 	 	10	 
	 
	 	 	 	 	 	 	 	 	 	 
	SECTION 5.	 	PAYMENT OF AGGREGATE ACCOUNT BALANCE	 	 	10	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	5.1	 	 	Entitlement
	 	 	10	 
	 

	 	 	5.2	 	 	Payment
	 	 	10	 
	 

	 	 	5.3	 	 	Unforeseeable Emergency
	 	 	10	 
	 

	 	 	5.4	 	 	Designated Beneficiaries
	 	 	10	 
	 
	 	 	 	 	 	 	 	 	 	 
	SECTION 6.	 	ADMINISTRATION	 	 	11	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	6.1	 	 	Administrator
	 	 	11	 
	 

	 	 	6.2	 	 	Committee
	 	 	11	 
	 

	 	 	6.3	 	 	Authority
	 	 	12	 
	 

	 	 	6.4	 	 	Fees
	 	 	12	 
	 

	 	 	6.5	 	 	Bonding
	 	 	12	 
	 
	 	 	 	 	 	 	 	 	 	 
	SECTION 7.	 	CLAIMS PROCEDURE	 	 	12	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	7.1	 	 	Claims
	 	 	12	 
	 

	 	 	7.2	 	 	Denials
	 	 	12	 
	 

	 	 	7.3	 	 	Appeals
	 	 	12	 
	 
	 	 	 	 	 	 	 	 	 	 
	SECTION 8.	 	MISCELLANEOUS	 	 	13	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	8.1	 	 	Amendment And Termination
	 	 	13	 
	 

	 	 	8.2	 	 	Addresses
	 	 	13	 
	 

	 	 	8.3	 	 	Subject To Claims Of Employer Creditors
	 	 	13	 

-i-

 

TABLE
OF CONTENTS
 (continued)

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page
	 
	 
	 	 	8.4	 	 	No Special Employment Rights
	 	 	14	 
	 

	 	 	8.5	 	 	Tax Withholding
	 	 	14	 
	 

	 	 	8.6	 	 	Non-Assignment
	 	 	14	 
	 

	 	 	8.7	 	 	Miscellaneous
	 	 	14	 

-ii-

 

THE PROCENTURY CORPORATION

DEFERRED COMPENSATION PLAN DOCUMENT

(As Amended and Restated Effective November 14, 2007)

     WHEREAS, ProCentury Corporation (the “Company”) maintains the ProCentury Corporation Deferred
Compensation Plan pursuant to the plan document adopted effective October 29, 2003; and

     WHEREAS, it is desired to amend and restate the Plan to comply with the requirements of
section 409A of the Code;

     NOW, THEREFORE, effective November 14, 2007, the Plan is hereby amended and restated in its
entirety to provide as follows:

SECTION 1.

INTENT

     1.1 DEFERRED COMPENSATION PLAN. The Plan is intended to allow elective deferrals by Key
Employees and Directors who become Participants in the form of Deferred Amounts out of their
Compensation and discretionary contributions by the Employer in the form of Employer Deferrals on
behalf of selected Participants for future payment to Participants or their Beneficiaries. It is
also intended that, in order to have the right to future payment of any Employer Deferral,
Participants may, at the discretion of the Employer, have to remain in Service until that Employer
Deferral becomes vested. It is additionally intended that Participants will not be subject to
federal or Ohio income taxation with respect to any Deferred Amount or Employer Deferral until it
is paid, although it is anticipated that such amounts for each year will be subject to Medicare and
Social Security taxation and may be subject to local income taxation for that year.

     1.2 TOP-HAT PLAN. Participation in the Plan is limited to a select group of key management or
highly compensated employees as such group is described under sections 201(2), 301(a)(3), and
401(a)(1) of ERISA with the intent that the Plan will constitute a “top-hat” deferred compensation
plan within the meaning of the regulations promulgated by the Department of Labor under section
3(2)(B)(i) of ERISA.

     1.3 UNFUNDED PLAN. The Plan is intended to be unfunded for purposes of the Code and Title I
of ERISA in that, although the assets securing the obligations of the Employer hereunder shall be
held in a Rabbi Trust,

	 	(a)	 	the Plan constitutes a mere promise by the Employer to pay in the future; and
	 
	 	(b)	 	in the event of the Employer’s insolvency, Participants will have only the
rights of unsecured creditors with respect to such Employer’s obligation to make such
payments. “Insolvency” means, for this purpose, that the Employer is unable to

 

 

	 	 	 	pay its debts as they become due or the Employer is subject to a pending proceeding
as a debtor under the United States Bankruptcy Code.

     1.4 NOT A QUALIFIED PLAN. The Plan is not intended to be a plan described in section 401(a)
or 403(b) of the Code or in section 3(2)(A) of ERISA.

     1.5 CODE SECTION 409A. The Plan is intended to be operated in compliance with and shall be
construed in a manner so as to comply with the requirements of section 409A of the Code and the
regulations thereunder.

SECTION 2.

DEFINITIONS AND CONSTRUCTION

     2.1 DEFINITIONS. The capitalized terms used in this Agreement shall, unless the context
otherwise requires, have the following meaning:

	 	(a)	 	“ADMINISTRATOR” means such person or persons designated by the Employer to
administer this Plan; if the Employer fails to make such a designation, the Employer
shall be the Administrator.
	 
	 	(b)	 	“AFFILIATE” means a corporation, partnership, joint venture, sole
proprietorship or other trade or business that is considered a single employer with the
Employer by application of section 414 of the Code, such that it (1) is part of a
“controlled group of corporations” (within the meaning of Code section 414(b)) with the
Employer, (2) is “under common control” (within the meaning of Code section 414(c))
with the Employer, or (3) is a member of an “affiliated service group” (within the
meaning of Code section 414(m)) with the Employer.
	 
	 	(c)	 	“AGGREGATE ACCOUNT BALANCE” means at any time with respect to any Participant
the balance to the credit of the Participant at such time pursuant to all of the
separate accountings of the Participant’s Deferred Amounts and Employer Deferrals,
together with receipts and expenditures attributable to the investment thereof through
such time, within the meaning of Section 4.1.
	 
	 	(d)	 	“ANNUAL EMPLOYER DEFERRAL ACCOUNT BALANCE” for any calendar year means at any
time with respect to any Participant the balance to the credit of the Participant at
such time of the separate accounting of the Employer Deferrals contributed for that
calendar year, together with receipts and expenditures attributable to the investment
thereof through such time, within the meaning of Section 4.1.
	 
	 	(e)	 	“BENEFICIARY” means the person or persons designated by the Participant to
receive payments under this Plan.
	 
	 	(f)	 	“BOARD” means the Employer’s Board of Directors or, to the extent it delegates
authority to the Committee, the Committee.

2

 

	 	(g)	 	The term “CALENDAR YEAR” means the 12-month period ending December 31 of each
year.
	 
	 	(h)	 	“CHANGE IN CONTROL” of the Employer means: (1) the purchase or other
acquisition by any person, entity or group of persons (within the meaning of section
13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
directly or indirectly, which results in the beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of such person, entity or group of
persons equaling a majority or more of the combined voting power of the then
outstanding voting securities of the Employer entitled to vote generally in the
election of Directors, excluding, however, any acquisition by the Employer or by any
employee benefit plan or related trust sponsored or maintained by the Employer; (2) a
merger, reorganization or consolidation to which the Employer is a party or a sale or
other disposition of all or substantially all of the assets of the Employer (each, a
“corporate transaction”), excluding, however, any corporate transaction pursuant to
which persons who were security holders of the Employer immediately prior to such
corporate transaction (solely because of their voting securities owned immediately
prior to such corporate transaction) own immediately thereafter more than 50 percent of
the combined voting power entitled to vote in the election of the Board of the then
outstanding securities of the company surviving the corporate transaction; or (3)
approval by the security-holders of the Employer of a plan of complete liquidation or
dissolution of the Employer.
	 
	 	(i)	 	“CODE” means the Internal Revenue Code of 1986 (or the corresponding provisions
of any succeeding law regarding the taxation of income by the United States), as
amended and in effect at such time.
	 
	 	(j)	 	“COMMITTEE” means the compensation committee, if any, or other committee of the
Board duly appointed to administer the Plan and having such powers as shall be
specified by the Board. Notwithstanding anything to the contrary contained in this
Plan, if the Employer is subject to section 162(m) of the Code, the Committee shall be
composed of, or otherwise any determination regarding any Employer Deferral with
respect to, any person constituting a “covered employee” within the meaning of section
162(m) of the Code shall be made by, not less than two Directors, each of whom is
intended to be an “outside director” within the meaning of section 162(m) of the Code.
	 
	 	(k)	 	“COMPENSATION” means with respect to any Key Employee for any calendar year all
compensation, including wages, salary, and any other benefit of monetary value, whether
paid in the form of cash or otherwise, that is required to be reported on a Form W-2
with respect to the Key Employee’s Services for the calendar year before reduction for
any Deferred Amount contributed by or on behalf of the Key Employee for the year.
Compensation means with respect to any Director all compensation, including retainer
and meeting fees and any other benefit of a monetary value, whether paid in the form of
cash or otherwise, that is required to be reported on a Form 1099 or W-2 with respect
to the Director’s

3

 

	 	 	 	Services for the calendar year before reduction for any Deferred Amount contributed
by or on behalf of the Director for the year.

	 	(l)	 	“DEFERRED AMOUNT” means, with respect to any Participant for any calendar year,
the amount of Compensation that the Participant timely elects for that calendar year
for deferral pursuant to Section 3.2.
	 
	 	(m)	 	“DEFERRED AMOUNT ACCOUNT BALANCE” means at any time with respect to any
Participant the balance to the credit of the Participant at such time of the separate
accounting of all Deferred Amounts contributed, together with receipts and expenditures
attributable to the investment thereof through such time, within the meaning of Section
4.1.
	 
	 	(n)	 	“DIRECTOR” means each person who serves as a Director of the Employer’s Board
of Directors.
	 
	 	(o)	 	“DISABILITY RETIREMENT” shall mean that (1) a Participant is, by reason by any
medically determinable physical or mental impairment that can be expected to result in
death or can be expected to last for a continuous period of not less than 12 months,
receiving income replacement benefits for a period of not less than three months under
the Employer’s long-term disability plan, or (2) to the extent that there is no such
Employer long-term disability plan in effect at the applicable time, a Participant is
unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to result in death or
can be expected to last for a continuous period of not less than 12 months (which shall
be evidenced by the written determination of a qualified medical doctor selected by the
Employer specifying the date upon which such disability commenced).
	 
	 	(p)	 	“ELECTION DATE” means the date by which a Key Employee or a Director must elect
to participate by delivering to the Administrator a completed and signed Participation
Agreement for that calendar year or portion thereof beginning after the Election Date.
For each calendar year, the Election Date for each Participant participating in the
Plan as of the first day of such calendar year shall be December 31st of the
immediately preceding calendar year, or such earlier date as required by the
Administrator in its discretion. Notwithstanding the foregoing to the contrary, for
the calendar year in which a Key Employee or Director first becomes eligible to
participate in the Plan (but only if such Key Empoyee or Director has never been
eligible to participate in another account balance plan of the Employer or an Affiliate
that is aggregated with the Plan under section 409A of the Code), the Participant’s
Election Date shall be 30 days following the date that the Participant becomes eligible
to participate in the Plan, and the elections made in such Participation Agreement
shall apply to Compensation paid for services to be performed subsequent to the
Election Date by the Key Employee or Director. The date that a Participant becomes
eligible to participate in the Plan shall be the date that such Participant is first
eligible to accrue Deferred Amounts or Employer Deferrals under Section 3.1 of this
Plan; for a Key Employee, this

4

 

	 	 	 	date shall be the date set forth in the notice of eligibility from the Employer; for
a Director, this date shall be the first date of the Director’s Services.
	 
	 	(q)	 	“EMPLOYER” means ProCentury Corporation and any successor thereto.
	 
	 	(r)	 	“EMPLOYER DEFERRAL” means, with respect to any Participant for any calendar
year, the amount of Employer Deferral made by the Employer on behalf of that
Participant for that calendar year pursuant to Section 3.4.
	 
	 	(s)	 	“EMPLOYER DEFERRAL VESTING DATE” means, with respect to any Participant’s
Employer Deferral contributed for any calendar year, (1) the date designated by the
Employer in notice to the Participant as the Employer Deferral Vesting Date for the
Employer Deferral for that calendar year, or (2), if earlier, a Triggering Severance;
provided, however, if no date or similar restriction is set forth in such Participation
Agreement, the Employer Deferral shall be deemed 100 percent vested when made except
for forfeitures in certain events pursuant to Section 3.6.
	 
	 	(t)	 	“ENTITLEMENT DATE” means, with respect to any Participant, the date elected by
the Participant in the initial Participation Agreement submitted by the Participant to
the Administrator upon entry into the Plan (or, as changed by the submission of a new
Participation Agreement in accordance with Section 3.3). Such date may include (1) the
date that the Participant experiences a Separation from Service, or (2) a date
specified by the Participant in the Participation Agreement. If no date is so elected
or if any date elected is not valid, the Entitlement Date shall be the date upon which
the Participant experiences a Separation from Service with the Employer.
	 
	 	(u)	 	“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
and in effect at such time.
	 
	 	(v)	 	“KEY EMPLOYEE” means any member of a select group of management or highly
compensated employees of the Employer, as such group is described in sections 201(2),
301(a)(3), and 401(a)(1) of ERISA.
	 
	 	(w)	 	“NORMAL RETIREMENT AGE” means, at any time, a Participant’s Separation from
Service after the date of the Participant’s 65th birthday.
	 
	 	(x)	 	“PARTICIPANT” means each eligible Key Employee designated for participation in
the Plan and each Director who has elected to participate in this Plan by delivering a
completed and signed Participation Agreement as provided in Section 3.2.
	 
	 	(y)	 	“PARTICIPATION AGREEMENT” means, for any calendar year for any Participant, the
form of Participation Agreement prepared for completion and execution by an eligible
Key Employee or a Director to have deferrals made to this Plan for such calendar year
as provided in Section 3.2.

5

 

	 	(z)	 	“PAYMENT FORM” means, with respect to any Participant, the form of payment of
the Aggregate Account Balance elected by the Participant in the initial Participation
Agreement submitted to the Administrator upon entry into the Plan (or, as changed by
the submission of a new Participation Agreement in accordance with Section 3.3). If no
other form of payment is so elected, or if any form of payment elected is not valid,
the Payment Form shall be a lump sum. The available Payment Forms shall be lump sum
and monthly or quarterly installment payments for period of five, 10 or 15 years.
	 
	 	(aa)	 	“PLAN” means The ProCentury Corporation Deferred Compensation Plan established
pursuant to this document, as amended from time to time.
	 
	 	(bb)	 	“RABBI TRUST” means any trust created pursuant to a separate trust agreement as
set forth in Section 8.3 for the purpose of irrevocably holding assets for the purpose
of paying the Aggregate Account Balance to Participants and Beneficiaries.
	 
	 	(cc)	 	“SEPARATION FROM SERVICE” means the Participant’s termination from employment
with the Employer and all Affiliates on account of Participant’s death, retirement or
other such termination of employment, as determined in accordance with section 409A of
the Code and the regulations thereunder. A Participant will not be deemed to have
experienced a Separation from Service if the Participant is on military leave, sick
leave or other bona fide leave of absence, to the extent such leave does not exceed a
period of six months or, if longer, such longer period of time as is protected by
either statute or contract. A Participant will not be deemed to have experienced a
Separation from Service if the Participant provides continuing services that average
more than 20 percent of the services provided by the Participant to the Employer or its
Affiliates (whether as an employee or an independent contractor) during the immediately
preceding 36-month period of services (or full period of services to the Employer and
its Affiliates if the Participant has provided services to the Employer or its
Affiliates for less than 36 months). If a Participant provides services both as an
employee and as an independent contractor of the Employer, the Participant must
separate from service both as an employee and as an independent contractor to be
treated as having experienced a Separation from Service. If a Participant ceases
providing services as an independent contractor and begins providing services as an
employee, or ceases providing services as an employee and begins providing services as
an independent contractor, the Participant will not be considered to have a Separation
from Service until the Participant has ceased providing services in both capacities.
If a Participant provides services both as an employee of the Employer and a member of
the Board, the services provided as an employee are not taken into account in
determining whether the Participant has a Separation from Service as a Director for
purposes of a nonqualified deferred compensation plan in which the service provider
participates as a Director that is not aggregated with any plan in which the service
provider participates as an employee under section 409A of the Code and the regulations
thereunder.

6

 

	 	(dd)	 	“SERVICE” means with respect to any person all periods for which such person is
entitled to Compensation for services in the employment, or as a Director, of the
Employer or its Affiliates.
	 
	 	(ee)	 	“SPECIFIED EMPLOYEE” means a Key Employee who meets the requirements of section
416(i)(1)(A)(i), (ii) or (iii) of the Code (applied in accordance with the Treasury
Regulations thereunder and disregarding section 416(i)(5)) of the Code at any time
during the 12-month period ending on a specified employee identification date, as
described under section 409A of the Code and the regulations thereunder. If a
Participant is a Specified Employee as of a specified employee identification date, the
Participant is treated as a Specified Employee for the entire 12-month period beginning
on the specified employee effective date.
	 
	 	(ff)	 	“TRIGGERING SEVERANCE” means, with respect to any Participant, the
Participant’s Separation from Service (1) for reason of death or Disability Retirement,
or (2) at any time on or after the Participant’s Normal Retirement Age, or (3) within
three years after a Change in Control.
	 
	 	(gg)	 	“UNFORESEEABLE EMERGENCY” means a severe financial hardship to a Participant
resulting from: (1) an illness or accident of the Participant, the Participant’s
spouse, the Participant’s Beneficiary, or the Participant’s dependent (as defined in
section 152 of the Code, without regard to section 152(b)(1), (b)(2), and (d)(1)(B));
(2) loss of the Participant’s property due to casualty; or (3) other similar
extraordinary and unforeseeable circumstances arising as a result of events beyond the
control of the Participant.

     2.2 CONSTRUCTION. Captions and titles contained herein are for convenience only and shall not
affect the meaning or interpretation of any provision of this Plan. Terms defined in the singular
shall include the plural, and vice versa, and pronouns in any gender shall include the masculine,
feminine, and neuter, as the context requires. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. The word “including” means including, without
limitation, and use of the term “or” is not intended to be exclusive, unless the context clearly
requires otherwise. All references to a “Section” refer to this Plan, unless the context otherwise
requires.

SECTION 3.

ELIGIBILITY, PARTICIPATION AND VESTING

     3.1 ELIGIBILITY. The Employer shall have the sole discretion to designate those, if any, of
its Key Employees that are eligible for participation in this Plan. No person other than a
Director shall be eligible to participate in this Plan for a given calendar year unless the person
receives notice of eligibility to participate in this Plan and of the Election Date by which to
deliver a completed and signed Participation Agreement to participate in this Plan for such
calendar year or portion thereof beginning after the Election Date pursuant to Section 3.2. Each
Director shall be eligible to participate in this Plan for each calendar year or portion thereof of
the Director’s Services.

7

 

     3.2 PARTICIPATION. In order for an eligible Key Employee or a Director to participate in this
Plan for any calendar year or portion thereof beginning after the Election Date, the eligible Key
Employee or Director shall deliver to the Employer by the applicable Election Date a completed and
signed Participation Agreement stating the Deferred Amount elected for such calendar year (or
portion thereof) and other elections as may be required by such Participation Agreement with
respect to such Deferred Amount or Employer Deferral or any account balance thereof. The
Participant’s election as to Entitlement Date and Payment Form with respect to the Participant’s
Aggregate Account Balance shall be selected by the Participant in the initial Participation
Agreement submitted by the Participant to the Administrator upon entry into the Plan and may only
be changed in accordance with Section 3.3 below.

     3.3 CHANGE IN PARTICIPATION AGREEMENT.

	 	(a)	 	Except as otherwise provided in Section 3.3(b), after the applicable Election
Date for any calendar year, a Participant may not change or revoke any election made in
the Participation Agreement in effect for that calendar year (notwithstanding any
designation of Beneficiary, which may be made any time before the payment of the
respective portion of the Participant’s Aggregate Account Balance has begun), and may
not change the election as to Entitlement Date and Payment Form with respect to the
Participant’s Aggregate Account Balance as established by the Participant’s initial
Participation Agreement upon entry into the Plan, except in the case of circumstances
found by the Administrator to constitute an Unforeseeable Emergency, in which event the
Participant shall be permitted to cancel the Participation Agreement prospectively as
deemed appropriate by the Administrator in its sole discretion. Any such revocation
shall take effect as soon as administratively practicable but not earlier than the
first pay period commencing after finding of the Unforeseeable Emergency. No such
revocation shall have any effect on any Deferred Amount prior thereto.
	 
	 	(b)	 	With the consent of the Administrator, a Participant may delay or change the
method of payment of Deferred Amounts and/or Employer Deferrals set forth in the
applicable Participation Agreement subject to the following requirements:

	 	(1)	 	The new election, as memorialized under a new Participation
Agreement, may not take effect until at least 12 months after the date upon
which the new election is made;
	 
	 	(2)	 	If the new election relates to payment on an Entitlement Date
other than a date relating to the Participant’s death, Disability Retirement or
Unforeseeable Emergency, the new election and Participation Agreement must
provide for the deferral of the payment to a new Entitlement Date that is at
least five years from the original Entitlement Date such payment otherwise
would have been made; and
	 
	 	(3)	 	The new election must be made at least 12 months prior to the
original Entitlement Date.

8

 

     3.4 EMPLOYER DEFERRALS.

	 	(a)	 	DISCRETIONARY EMPLOYER DEFERRALS. The Employer shall in its sole discretion
have the right to make a contribution in the form of an Employer Deferral on behalf of
any Participant. The amount and timing of any Employer Deferral to be contributed on
the Participant’s behalf, as well as any Employer Deferral Vesting Date with respect to
the Participant’s Annual Employer Deferral Account for that calendar year, shall be
established by the Employer and communicated to the Participant via notice no later
than December 31st of the calendar year preceding the calendar year in which
such Employer Deferral is to be made. The Employer has the sole discretion to
determine separately with respect to each Employer Deferral made on behalf of each
Participant for any calendar year whether the Employer Deferral will be subject to a
Employer Deferral Vesting Date, and if so, the Employer Deferral Vesting Date will be
so stated in the Participation Agreement with respect to that Employer Deferral.
	 
	 	(b)	 	NOT A REDUCTION OF COMPENSATION. Any Employer Deferral on behalf of a
Participant for any calendar year shall not reduce the Compensation otherwise payable
to the Participant for that calendar year.
	 
	 	(c)	 	BOARD APPROVAL. Notwithstanding any provision in this Plan to the contrary, no
Employer Deferral shall be made on behalf of any Participant who is a Director or
officer of the Company or who is a “covered employee” within the meaning of section
162(m) of the Code unless such Employer Deferral is determined by the Committee and is
approved or otherwise authorized by the Board. Notwithstanding anything to the
contrary contained in this Plan, if the Company is subject to section 162(m) of the
Code, any determination regarding any Employer Deferral with respect to any person
constituting a “covered employee” within the meaning of section 162(m) of the Code
shall be made by the Committee.

     3.5 VESTING.

	 	(a)	 	DEFERRED AMOUNTS. The rights of a Participant to payment of the Participant’s
Aggregate Account Balance consisting of Deferred Amounts and all receipts and
expenditures attributable to the investment thereof shall at all times be and remain
100 percent vested.
	 
	 	(b)	 	EMPLOYER DEFERRALS. To the extent that any Employer Deferral contributed on
behalf of any Participant for any calendar year is subject to an Employer Deferral
Vesting Date that has not occurred, there shall be separate accounting pursuant to
Section 4.1 of any Employer Deferral on behalf of that Participant for that calendar
year and all receipts and expenditures attributable to the investment thereof, and the
rights of the Participant to payment of the Annual Employer Deferral Account Balance
for such calendar year shall remain zero percent vested until the Employer Deferral
Vesting Date designated for such calendar year at which time the Annual Employer
Deferral Account Balance for

9

 

	 	 	 	such calendar year maintained pursuant to Section 4.1 shall automatically become 100
percent vested. To the extent that any Employer Deferral contributed for any
calendar year is not subject to an Employer Deferral Vesting Date (including if the
Employer Deferral Vesting Date has occurred), the rights of a Participant to payment
of the Participant’s Aggregate Account Balance consisting of Employer Deferrals for
those calendar years and all receipts and expenditures attributable to the
investment thereof shall at all times be and remain 100 percent vested. If a
Participant experiences a Separation from Service with the Employer for reason other
than a Triggering Severance before any Annual Employer Deferral Account Balance
becomes 100 percent vested, the Participant shall forfeit all rights to the unvested
portion of each such Annual Employer Deferral Account Balance that is not fully
vested. The Employer shall redetermine the Participant’s Aggregate Account Balance
debiting the unvested portion therefrom pursuant to Section 4.1(d), and the unvested
portion debited from the Participant’s account shall be distributed to the order of
Employer, including if the Employer so directs, being returned to it from any Rabbi
Trust.

     3.6 FORFEITURE IN CERTAIN EVENTS.

	 	(a)	 	EVENTS OF FORFEITURE. Notwithstanding any vesting of Employer Deferrals
pursuant to or language to the contrary contained in this Plan, each Participant shall
forfeit all rights to receive or retain, and shall reimburse the Employer for, all
payments received of, all of the Participant’s accounts accounting for Employer
Deferrals and all with all receipts and expenditures attributable to the investment of
such Employer Deferrals, including, but not limited to, income, expenses, gains, and
losses, upon a finding by the Board or any court of competent jurisdiction that the
Participant, during any period of Service as a Key Employee or at any time thereafter
without the written consent of the Employer, whether in the capacity of a trustee,
Director, employee, agent, consultant or otherwise, has breached any covenant against
competition, any covenant against non-solicitation or any covenant otherwise protecting
Employer property or its confidentiality contained in any valid agreement with the
Employer regarding the employment or compensation of the Participant.
	 
	 	(b)	 	REALLOCATION AND REIMBURSEMENT. Upon a finding of an event of forfeiture
pursuant to Section 3.6(a) with respect to any Participant, the Employer shall
redetermine the Participant’s Aggregate Account Balance debiting all Employer Deferrals
and all receipts and expenditures attributable to the investment thereof, and the
amount debited from the Participant’s accounts shall be distributed to the order of
Employer, including if the Employer so directs, being returned to it from the Rabbi
Trust. In addition, if directed by the Board, the Employer shall, with and subject to
the advice of legal counsel, take appropriate proceedings, including legal proceedings
before a court of competent jurisdiction, to require reimbursement to the Employer by
the Participant for all payments received by the Participant of the Participant’s
accounts consisting of Employer Deferrals and all receipts and expenditures
attributable to the investment thereof.

10

 

	 	(c)	 	TERMINATION OF OPERATION OF SECTION 3.6. Notwithstanding any provision to the
contrary contained in this Plan, no activity by any Participant that occurs after the
Participant’s Separation from Service following a Change in Control shall be found as
an event of forfeiture or otherwise result in any forfeiture under this Section 3.6,
with the intent being that the Participant shall retain all rights under this Plan
notwithstanding any activities of the Participant after the Participant’s Separation
from Service following a Change in Control even if in breach of any covenant against
competition otherwise applicable to the Participant.

SECTION 4.

ACCOUNTING AND INVESTMENTS

     4.1 SEPARATE ACCOUNTING. The Employer shall cause to be maintained with respect to each
Participant a separate accounting of all Deferred Amounts and Employer Deferrals as follows:

	 	(a)	 	DEFERRED AMOUNT ACCOUNT. There shall be a separate accounting of all Deferred
Amounts made by the Participant together with all receipts and expenditures
attributable to the investment thereof, including, but not limited to, income,
expenses, gains, and losses, the balance of which at any time shall be known as the
Participant’s “Deferred Amount Account Balance.”
	 
	 	(b)	 	ANNUAL EMPLOYER DEFERRAL ACCOUNTS. To the extent that any Employer Deferral
contributed on behalf of any Participant for any calendar year is subject to an
Employer Deferral Vesting Date that has not occurred, there shall be separate
accounting for each such calendar year of all Employer Deferrals made on behalf of the
Participant for that calendar year together with all receipts and expenditures
attributable to the investment thereof for that calendar year and each period
thereafter, including, but not limited to, income, expenses, gains, and losses, the
balance of which at any time shall be known as the Participant’s “Annual Employer
Deferral Account Balance” for that calendar year. Notwithstanding the foregoing, to
the extent that any Employer Deferral contributed for any calendar year is not subject
to an Employer Deferral Vesting Date or the Employer Deferral Vesting Date has
occurred, the separate Annual Employer Deferral Account Balances for each such calendar
year that are or become 100 percent vested may be combined and accounted for in the
aggregate rather than on a separate basis for each such calendar year.
	 
	 	(c)	 	AGGREGATE ACCOUNT BALANCE. A Participant’s Aggregate Account Balance at any
time shall be the sum of the Participant’s Deferred Amount Account Balance and Annual
Employer Deferral Account Balances for all years at such time.
	 
	 	(d)	 	DEBITING FOR FORFEITURE. Notwithstanding the foregoing, upon any cessation of
the Participant’s Service or other event resulting in forfeiture of all or any portion
of any Annual Employer Deferral Account Balance of the Participant

11

 

	 	 	 	for any year, the Employer shall debit from each applicable account balance the
portion of any Employer Deferral, including all receipts and expenditures
attributable to the investment thereof, that is not vested pursuant to Section
3.5(b) or that is forfeited in certain events pursuant to Section 3.6.

     4.2 INVESTMENT. The Employer may permit each Participant to give instructions as to the
investment of the Participant’s Aggregate Account Balance pursuant to such rules as the Employer
or, with the Employer’s approval, the Administrator or Trustee of the Rabbi Trust or its investment
agents may from time to time adopt. Any investment instruction shall be in writing (including
electronic communication) and meet the requirements of any rules in effect at that time. As long
as consistent with such rules, neither the Administrator nor the Employer nor any Trustee of the
Rabbi Trust nor any investment agent shall be under any duty to question any such direction or
investment or to review any securities or other property, real or personal, or to make any
suggestions to the Participant in connection therewith. Neither the Plan nor the Employer nor the
Administrator nor any such Trustee nor investment agent shall be responsible or liable for any loss
or expense that may arise from or result from compliance with any direction or from any investment
directed by the Participant. Any costs and expenses related to compliance with any such
directions, including any brokerage fees or commissions broker’s commissions, mark-ups, and
discounts, and other transaction costs, shall be debited against the Participant’s Aggregate
Account Balance.

SECTION 5.

PAYMENT OF AGGREGATE ACCOUNT BALANCE

     5.1 ENTITLEMENT. On or before a Participant’s Entitlement Date, the Employer shall determine
the Participant’s Aggregate Account Balance pursuant to Section 4.1, including any debiting for
forfeitures pursuant to Section 4.1(d), and the Participant shall become entitled to payment of
that Aggregate Account Balance on the Participant’s Entitlement Date.

     5.2 PAYMENT. Payment of a Participant’s Aggregate Account Balance to which the Participant
has become entitled pursuant to Section 5.1 shall be made or begin in the Participant’s elected
Payment Form within 60 days after the Participant’s Entitlement Date on such date as shall be
determined solely by the Administrator; provided, however, that if the Participant is a Specified
Employee, payment of such Participant’s Aggregate Account Balance shall in no event begin before
the date that is six months after the date that the Participant experienced a Separation from
Service (other than due to the Participant’s death or Disability Retirement). In the event that a
Participant who is a Specified Employee has elected installment payments of any portion of his or
her Aggregate Account Balance, such installments that would normally be paid during the six months
after the date that the Participant experienced a Separation from Service shall be accumulated and
paid on the first day of the seventh month following the date of the Separation from Service.
Distributions shall be subject to such uniform rules and procedures as may be adopted by the
Administrator. If, at the time of the Participant’s death, installments payments of the
Participant’s Aggregate Account Balance have commenced pursuant to this Section 5.2, such payments
shall continue to the Participant’s Beneficiary in the same time and the same form as if the
Participant had remained alive until the last installment payment was scheduled to be made.

12

 

     5.3 UNFORESEEABLE EMERGENCY. A Participant may petition the Administrator for payment of all
or any portion of the Participant’s Aggregate Account Balance earlier than the Entitlement Date
upon circumstances found by the Administrator to constitute an Unforeseeable Emergency, in which
event the Participant shall be permitted to receive payment of the portion or amount of the
Aggregate Account Balance as petitioned upon such conditions as the Administrator may reasonably
determine in its sole discretion (in a manner that complies with section 409A of the Code and the
regulations thereunder), provided that the amount of payment for an Unforeseeable Emergency shall
not exceed that reasonably needed to satisfy the financial hardship (plus such amounts as are
necessary to pay any federal, state, local, or foreign income taxes or penalties reasonably
anticipated to result from such payment). Any such payment shall be made as soon as
administratively practicable but not earlier than the finding of the Unforeseeable Emergency.
Notwithstanding the foregoing, payment may not be made for an Unforeseeable Emergency to the extent
that resulting financial hardship is or may be relieved (a) through reimbursement or compensation
by insurance or otherwise, (b) by liquidation of the Participant’s assets, to the extent the
liquidation of such assets would not itself cause severe financial hardship, or (c) by cessation of
deferrals under this Plan pursuant to Section 3.3.

     5.4 DESIGNATED BENEFICIARIES. A Participant may designate one or more Beneficiaries to
receive all or any part of the payments of the Participant’s Aggregate Account Balance in the event
of the Participant’s death. The designation shall be effective by filing a written notification
with the Administrator in such form as the Administrator may from time to time make available for
such designation. The Participant’s beneficiary designation may be changed from time to time by
similar action. If no such designation is made by the Participant, payments of the deceased
Participant’s Aggregate Account Balance not otherwise determined by the Payment Form shall be paid
to, in the following order of priority, the Participant’s:

	 	(a)	 	Surviving spouse, or if none;
	 
	 	(b)	 	Children, per stirpes, or if none;
	 
	 	(c)	 	Estate.

SECTION 6.

ADMINISTRATION

     6.1 ADMINISTRATOR. This Plan shall be administered by the Employer or such other person or
persons designated by the Employer. Each person so designated shall serve until the earliest of
death, if a natural person; or resignation or removal as follows:

	 	(a)	 	Any person may resign at any time by giving written notice, stating the
effective date of such resignation, to each other person who at such time is serving
and to the Employer; and
	 
	 	(b)	 	Any person may be removed at any time by Employer’s giving such person written
notice, stating the effective date of such removal.

The successor to fill any vacancy resulting from death, resignation, or removal pursuant to this
Section shall be filled by designation of another person by the Employer in its sole discretion.

13

 

     6.2 COMMITTEE. If more than one person is designated by the Employer as a committee to
administer this Plan, any action that may be authorized or taken, including any determination to be
made, by the committee may be taken either at a meeting of the committee or without a meeting by
written consent or by a combination thereof. Proceedings of the committee shall be held, and
action authorized or taken thereat, from time to time as may be called by any committee member.
The place of any meeting shall be the principal office of the Employer or such other place as
reasonably designated by the person calling the meeting. Attendance of any committee member at any
meeting may be by personal presence, or by personal participation by telephone or other
communications equipment through which all participating can hear each other or by presence of the
member’s written consent on any matter being considered. Those members who are present in person
or whose written consents on any matter being considered are present at any meeting of the
committee shall constitute a quorum for the transaction of business at the meeting, and the act of
the majority in number of the committee by vote at any meeting or by written consent at or without
a meeting or by any combination thereof shall be the act of the committee. Any one or more members
of the committee may certify or otherwise state in writing any action authorized by the committee,
and any person may act in reliance upon any instrument or signature reasonably believed by such
person to be genuine of any member of such committee and may assume that each committee member
signing such certificate or other writing has been duly authorized to do so.

     6.3 AUTHORITY. The Administrator shall have all authority to exercise each of its
responsibilities set forth in this Plan and for proper administration hereof except to the extent
that such authority is reserved to, or delegated to another person by, the Employer.

     6.4 FEES. No fee or compensation shall be paid to any person for services provided as a
member of the committee.

     6.5 BONDING. No person serving as Administrator and no agents and advisors employed by it
shall be required to be bonded, except as otherwise required by ERISA.

SECTION 7.

CLAIMS AND APPEAL PROCEDURES

     7.1 CLAIMS. Any claim by a Participant or Beneficiary (“claimant”) for payments or other
rights under this Plan shall be presented in writing delivered to the Administrator on such forms
and in such manner as the Administrator shall prescribe. Unless and until a claimant makes proper
application for benefits in accordance with the rules and procedures established by the
Administrator, such claimant shall have no right to receive any distribution from or under the
Plan.

     7.2 DENIALS. Any denial in whole or part to any claim presented pursuant to Section 7.1 shall
be in writing given to the claimant within 90 days after receipt of delivery of the claim. The
written notice of the claim denial shall be written in a manner calculated to be understood by the
claimant, and shall contain at least the following information:

	 	(a)	 	The specific reason or reasons for the denial;

14

 

	 	(b)	 	A specific reference to pertinent Plan provisions upon which the denial is
based;
	 
	 	(c)	 	A description of any additional material or information necessary for the
claimant to perfect his or her claim, and an explanation of why the material or
information is necessary; and
	 
	 	(d)	 	A description of the Plan’s appeal procedures describing the steps to be taken
by the claimant and time limits applicable to such procedures, including a statement of
the claimant’s right to bring a civil action under ERISA in the event of the denial of
the appeal.

     7.3 APPEALS. The claimant may request an appeal of any denial in whole or part of a claim
insofar as it relates to the Payment Form, Entitlement Date, any vesting date, the accounting of
the Aggregate Account Balance and any Annual Employer Deferral Account Balances, or the validity of
any Participation Agreement or election made therein of any Participant as follows:

	 	(a)	 	The claimant shall make such request in writing delivered to the Administrator
not later than 60 days after the claimant’s receipt of the written denial of the claim
given pursuant to Section 7.2;
	 
	 	(b)	 	The claimant may include with such request such documents and other information
as the claimant deems reasonable; and
	 
	 	(c)	 	Any decision on appeal of a denied claim shall be made not later than 60 days
after receipt of delivery of the request, unless special circumstances require an
extension of time for processing, in which case a decision shall be rendered within a
reasonable period of time, but not later than 120 days after receipt of delivery of the
request. Any such decision by the Administrator upon its review of the appeal shall be
in writing and shall include at least the following information:

	 	(1)	 	The specific reason or reasons for the denial of the appeal;
	 
	 	(2)	 	A specific reference to pertinent Plan provisions upon which
the appeal denial is based;
	 
	 	(3)	 	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 to the claim and appeal; and
	 
	 	(4)	 	A statement describing the procedures for voluntary dispute
resolution offered by the Plan (if any) and the claimant’s right to obtain
information regarding such procedures, along with a statement of the claimant’s
right to bring a civil action under ERISA.

15

 

SECTION 8.

MISCELLANEOUS

     8.1 AMENDMENT AND TERMINATION. The Employer has the right at any time to amend or otherwise
modify any of the provisions of this Plan in any manner that it deems advisable and reserves the
right to terminate and liquidate the Plan at any time in its sole discretion. These rights do not
require the consent of any Participant, Beneficiary, or other person. In the event of termination,
the Employer shall specify whether termination will change the time at which distributions are
made; provided that any acceleration of a distribution is consistent with section 409A of the Code
and the regulations thereunder. In the absence of such specification, the timing of distributions
shall be unaffected by the termination of the Plan.

     8.2 ADDRESSES. For purpose of any payments and notices under this Plan, each Participant and
each Beneficiary of the Participant shall have the obligation to notify the Administrator of his or
her addresses and of any changes therein. The address for any notice to the Employer or
Administrator shall be the address of the Employer’s principal office.

	 	(a)	 	All payments and notices shall, unless otherwise expressly provided, be deemed
to have been properly given (1) if delivered by messenger, when delivered; (2) if
mailed, when deposited in the United States Mail, certified or registered, postage
prepaid, return receipt requested; (3) if e-mailed, telexed, telegraphed or faxed, when
dispatched by e-mail, telex, telegram or fax; or (4) if delivered by commercial
overnight express courier, freight prepaid, when delivered to such courier, in every
case addressed to the party at the address provided in this Section.
	 
	 	(b)	 	All notices required to be delivered shall be deemed to have been delivered (1)
if delivered by messenger, when delivered; (2) if mailed, on the third business day
after deposit in the United States Mail, certified or registered, postage prepaid,
return receipt requested; (3) if e-mailed, telexed, telegraphed or faxed, two hours
after being dispatched by e-mail, telex, telegram or fax if such second hour falls on a
business day within the hours of 9:00 a.m. through 5:00 p.m. of the time in effect at
the place of receipt, or at 9:00 a.m. on that business day if the second hour is before
9:00 a.m., or at 9:00 a.m. on the next business day thereafter if such second hour is
later than 5:00 p.m. or other than on a business day; or (4) if delivered by commercial
overnight express courier, freight prepaid, the next business day after delivery to
such courier in every case addressed to the party at the address provided in this
Section.

     8.3 SUBJECT TO CLAIMS OF EMPLOYER CREDITORS. To satisfy its obligations for payment of
Aggregate Account Balance to Participants and Beneficiaries, the Employer shall cause all Deferred
Amounts and Employer Deferrals by or on behalf of all Participants to be paid to the trustee (the
“Trustee”) of a certain “Rabbi” trust (the “Rabbi Trust”) created by the Employer to hold such
assets for such purpose. Notwithstanding the assets held by the Trustee under the Rabbi Trust, the
Employer shall remain liable to make, or cause to made, all payments of such Aggregate Account
Balance as they become due. Notwithstanding any accounting to the credit of Participants pursuant
to Section 4.1 or transfer to the Trustee of

16

 

the Rabbi Trust pursuant to this Section, neither the Participant nor any Beneficiary shall
have any claim to any assets of the Employer other than as a general unsecured creditor, and any
assets held by the Rabbi Trust shall remain subject to claims of the Employer’s creditors.

     8.4 NO SPECIAL EMPLOYMENT RIGHTS. Nothing contained in this Plan shall be construed as a
contract of employment or deemed to give any Participant the right to be retained in the employ of
the Employer or any equity or other interest in the assets, business, or affairs of the Employer.
A Participant hereunder shall not have a security interest in assets of the Employer used to make
contributions or pay benefits.

     8.5 TAX WITHHOLDING. The Employer shall make or cause to be made provision for the reporting
and withholding of any federal, state, local, or foreign taxes that may be required to be withheld
with respect to any payment of Aggregate Account Balance pursuant to this Plan with the appropriate
taxing authorities.

     8.6 NON-ASSIGNMENT. Neither any Participant nor Beneficiary shall have any right to assign,
transfer, pledge, or otherwise convey the right to receive any amount or payments which may become
due under this Plan. Any such attempted assignment, transfer, pledge, or other conveyance shall
not be recognized by the Employer.

     8.7 MISCELLANEOUS. If any provision of this Plan is or becomes invalid, illegal, or
unenforceable in any jurisdiction for any reason, such invalidity, illegality, or unenforceability
shall not affect the remainder of this Plan, and the remainder of this Plan shall be construed and
enforced as if such invalid, illegal, or unenforceable portion were not contained herein. This
agreement shall be governed by and construed in English language under the laws of the State of
Ohio, United States of America.

SIGNATURE

     IN WITNESS WHEREOF, the Employer has caused this Plan to be executed as of this____day of
______________, 2007.

	 	 	 	 	 
	 	PROCENTURY CORPORATION

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	Title:  	 	 
	 

17

 

Form A

(For Participants who will NOT receive an Employer Deferral for the calendar year and

who have NOT previously executed a Participation Agreement)

INITIAL PARTICIPATION AGREEMENT

FOR

PROCENTURY CORPORATION DEFERRED COMPENSATION PLAN

          
                                                             (the “Participant”) is either an eligible Key Employee (as designated by ProCentury
Corporation (the “Employer”)) or a Director eligible for participation in the ProCentury
Corporation Deferred Compensation Plan (the “Plan”). This Participation Agreement evidences the
Participant’s participation in the Plan for the calendar year ending December 31, ___. All
capitalized terms defined in the Plan shall have the same meaning as used herein.

          There are five different areas in which the Participant must make an election regarding
participation in the Plan. Please be sure to make an election in each of the following areas:

	(1)	 	DEFERRED AMOUNT. The Participant hereby irrevocably elects that the following amount of
Compensation for the calendar year be withheld for deferral pursuant to Section 3.2 of the
Plan as follows:

	 	 	 	You may elect to have the Deferred Amount withheld from either
salary or any separate bonus or incentive pay or both by completing
the following:
	 
	 	(a)	 	SALARY. From periodic payments of my Compensation over the calendar year:
	 
	 	 	 	Please complete only ONE of the following salary withholdings, if applicable:
	 
	 	 	 	The fixed amount of $                     from the gross amount of each periodic payment of
such Compensation,

or

	 	 	 	The fixed percentage of percent of                      the gross amount of each periodic payment of such
Compensation.
	 
	 	(b)	 	BONUS OR INCENTIVE PAY. From any bonus or incentive pay that may be earned
during the calendar year separately from the periodic payments of my Compensation for
the year, the fixed amount of $                     from, or the fixed percentage of                     
percent of, the gross amount of any such bonus or incentive pay.

 

 

	 	 	You may not change your Deferred Amount in effect for a given calendar year.
	 
	(2)	 	INVESTMENT FUNDS. I understand that I must elect the investment funds that will be used to
determine the income, expenses, gains, and losses credited to my Aggregate Account Balance
under the Plan. I understand that my election at this time supersedes any previous investment
election or instruction that I have made under the Plan. I hereby elect that my account
balances under the Plan shall be credited as if invested in the following percentages in the
following investments:

	 	 	 	Please complete the following in increments of 1%. The sum of the column
“Percentage” must total 100%

	 	 	 	 	 
	Investment Funds	 	Percentage
	 
	 	 	 	%
	 
	 	 	 	%
	 
	 	 	 	%
	 
	 	 	 	%
	 
	 	 	 	%
	 
	 	 	 	 
	TOTAL
	 	 	100	%
	 
	 	 	 	 

	 	 	Your investment election will remain in effect until this election is changed. You may
change your election by completing, executing and returning another Participation Agreement
to the Administrator or other form provided for this purpose by the Administrator. The
investment funds available for you to elect under the Plan may be changed from time to time.
In such event that the investment funds available for election are changed, you will be
notified if any investment fund that you elected is no longer available, and you will have
the opportunity to change your election. If you do not timely change your election or if
any investment fund elected is no longer available, the Employer reserves the right to
reallocate money designated for that elected investment fund among other available funds.
	 
	(3)	 	ENTITLEMENT DATE. I elect the following date as the Entitlement Date on which I or my
Beneficiary become entitled to payment of my vested Aggregate Account Balance, and I
understand that the Entitlement Date that I elect here will be my Entitlement Date for my
ENTIRE AGGREGATE ACCOUNT BALANCE accrued under the

2

 

	 	 	Plan (and may only be changed in accordance with the restrictions described on page 4 of
this Participation Agreement):

	 	 	 	I elect my Entitlement Date as:

(Please mark and complete only ONE of the following:)

	 	 	 	 	 
	 

	 	___	 	My Separation from Service for any reason (including death)
	 
	 	 	 	 
	 

	 	___
	 	Regardless of when my Separation from Service occurs, upon
the following date:                     , or if I die
before such date, upon my death
	 
	 	 	 	 
	 

	 	___
	 	Regardless of when my Separation from Service occurs or
death occurs, upon the following date:                     

	(4)	 	PAYMENT FORM. I elect the following Payment Form for payment of my vested Aggregate Account
Balance under the Plan, and I understand that the Payment Form that I elect here will be my
Payment Form for my ENTIRE AGGREGATE ACCOUNT BALANCE accrued under the Plan (and may
only be changed in accordance with the restrictions described on page 4 of this Participation
Agreement):

	 	 	 	I elect as the Payment Form of my vested Aggregate Account Balance:

(Please mark and complete only ONE of the following:)

	 	 	 	 	 	 	 
	 	 	___	 	Lump sum to be paid within 60 days after my Entitlement Date
	 
	 	 	 	 	 	 
	 	 	___	 	In the form, as specified below, payment of which will begin within 60 days after my Entitlement Date:
	 
	 	 	 	 	 	 
	 

	 	 	 	___
	 	Monthly installments for 5 years
	 
	 	 	 	 	 	 
	 

	 	 	 	___
	 	Monthly installments for 10 years
	 
	 	 	 	 	 	 
	 

	 	 	 	___
	 	Monthly installments for 15 years
	 
	 	 	 	 	 	 
	 

	 	 	 	___
	 	Quarterly installments for 5 years
	 
	 	 	 	 	 	 
	 

	 	 	 	___
	 	Quarterly installments for 10 years
	 
	 	 	 	 	 	 
	 

	 	 	 	___
	 	Quarterly installments for 15 years

3

 

	 	 	If you are a Specified Employee, and you experience a Separation from Service (other
than due to death or Disability Retirement), payment of your vested Aggregate
Account Balance under the Plan will not be made or begin before the date that is six
months after the date of your Separation from Service. If you are a Specified
Employee and elect installment payments, the installments that would normally be
paid during the six months after the date that you experienced a Separation from
Service shall be accumulated and paid on the first day of the seventh month
following the date of your Separation from Service.
	 
	 	 	Any Payment Form elected must conform to all limitations in the definition of
“Payment Form” contained in the Plan. If no Entitlement Date is elected or if any
Entitlement Date is not valid, the Entitlement Date shall be the date of your
Separation from Service. If Payment Form is elected or if any Payment Form is not
valid, the Payment Form shall be lump sum.
	 
	 	 	You may change your “Entitlement Date” or “Payment Form” election by completing,
executing, and returning another form of Participation Agreement to the
Administrator completed to show the Entitlement Date or Payment Form as so changed;
provided, however that such Entitlement Date and Payment Form must satisfy the
following requirements to be effective:

	 	1.	 	The new election, as memorialized under a new
Participation Agreement, may not take effect until at least twelve
months after the date upon which the new election is made;
	 
	 	2.	 	If the new election relates to payment on an
Entitlement Date other than a date relating to your death, the new
election and Participation Agreement must provide for the deferral of
the payment to a new Entitlement Date that is at least five years from
the original Entitlement Date; and
	 
	 	3.	 	The new election must be made at least twelve months
prior to the original Entitlement Date.

	(5)	 	BENEFICIARY. I hereby designate the following as my Beneficiary in the event of my death:

	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	(1	)	 	 

	 

	 	 	 

	 

	 	 	 

	 
	 	 	 	 	 	 
	 

	 	 	(2	)	 	If the Beneficiary (Beneficiaries) named in (1) above is not living on the date
payments become payable to such Beneficiary:

4

 

	 	 	 	 	 	 	 
	 

	 	 			 	 

	 

	 	 			 	 

	 

	 	 			 	 

	 	 	 	This Beneficiary designation revokes all prior designations made by the undersigned
and is subject to all the terms of the Plan.
	 
	 	 	 	You may change your “Beneficiary” by completing, executing, and returning another
form of Participation Agreement to the Administrator completed to show the
Beneficiary as so changed as long as it is received before your Entitlement Date.

ELECTION DATE. The due date by which you must return this Participation Agreement completed and
signed by you in order to be effective for the calendar year ending December 31, ___. Return
your completed and signed Participation Agreement to:

 

 

 

AUTHORIZATION. I acknowledge that I have knowingly and voluntarily decided to participate in the
Plan and to have Deferred Amounts contributed to the Plan. I understand that:

	(a)	 	My Aggregate Account Balance and the other assets of the Plan remain subject to the claims of
the Employer’s general creditors until received by me or my Beneficiary.
	 
	(b)	 	The Plan is a defined contribution plan, and my benefit will be my vested Aggregate Account
Balance and whatever Payment Form can be purchased with that Aggregate Account Balance on my
Entitlement Date.
	 
	(c)	 	The Employer is not responsible for any loss that may be sustained as a result of any
elections made by me pursuant to this Participation Agreement or that may be sustained by my
Aggregate Account Balance as a result of any investment thereof.

5

 

	(d)	 	My rights to Employer Deferrals under this Plan, even if vested, are subject to forfeiture
for certain prohibited activities as provided in Section 3.6 of the Plan.

Dated:                               

	 	 	 	 	 
	 	 	 
	 	Signature of Participant 	 
	 	 	 
	 	 	 
	 	Printed Name of Participant 	 
	 

This Participation Agreement is not valid or binding until it is accepted as properly completed and
signed by the Administrator.

	 	 	 	 	 
	 	ACCEPTED:

 	 
	Dated:                                	 	 
	 	Signature on behalf of the Administrator 	 
	 	 	 
	 

6

 

Form B

(For Participants who WILL receive an Employer Deferral for the calendar year and

who have NOT previously executed a Participation Agreement)

NOTICE AND PARTICIPATION AGREEMENT

REGARDING EMPLOYER DEFERRAL FOR

PROCENTURY CORPORATION DEFERRED COMPENSATION PLAN

NOTICE OF EMPLOYER DEFERRAL

TO BE COMPLETED BY THE EMPLOYER

DATE OF NOTICE:                     

     ProCentury Corporation is pleased to announce that it will be making a contribution in the
form of an Employer Deferral for the account of                                          (the “Participant”), who is
either an eligible Key Employee (as designated by ProCentury Corporation (the “Employer”)) or is a
Director eligible for participation in the ProCentury Corporation Deferred Compensation Plan (the
“Plan”) for the calendar year ending
                    , ___ pursuant to the following terms:

AMOUNT OF EMPLOYER DEFERRAL. The amount of the Employer Deferral is

.

EMPLOYER DEFERRAL VESTING DATE: The date upon which your rights to payment of the Employer Deferral
for this calendar year becomes vested is                                          (which is known as your Employer Deferral Vesting
Date for this year’s Employer Deferral). Notwithstanding the foregoing, your Employer Deferral
shall automatically become 100 percent vested upon your Separation from Service (a) for reason of
death or Disability Retirement, (b) at any time on or after your Normal Retirement Age, or (c)
within three years after a Change in Control.

All capitalized terms defined in the Plan shall have the same meaning as used herein.

 

 

INITIAL PARTICIPATION AGREEMENT

TO BE COMPLETED BY THE PARTICIPANT

          This Participation Agreement evidences the Participant’s elections regarding the Employer
Deferral for the calendar year as described above, as well as the Deferred Amounts described below
(collectively, the “Aggregate Account Balance”).

                                                                       (the “Participant”) is either a
n eligible Key Employee (as designated by ProCentury
Corporation (the “Employer”)) or a Director eligible for participation in the ProCentury
Corporation Deferred Compensation Plan (the “Plan”). This Participation Agreement evidences the
Participant’s participation in the Plan for the calendar year
ending December 31, 20__. All
capitalized terms defined in the Plan shall have the same meaning as used herein.

          There are five different areas in which the Participant must make an election regarding
participation in the Plan. Please be sure to make an election in each of the following areas:

	(1)	 	DEFERRED AMOUNT. The Participant hereby irrevocably elects that the following amount of
Compensation for the calendar year shall be withheld for deferral pursuant to Section 3.2 of
the Plan as follows:

	 	 	 	You may elect to have the Deferred Amount withheld from either
salary or any separate bonus or incentive pay or both by completing
the following:
	 
	 	(a)	 	SALARY. From periodic payments of my Compensation over the calendar year:
	 
	 	 	 	Please complete only ONE of the following salary withholdings, if
applicable:
	 
	 	 	 	The fixed amount of $                     from the gross amount of each periodic payment of
such Compensation,

or

	 	 	 	The fixed percentage of                                          percent of the gross amount of each periodic payment of such
Compensation.
	 
	 	(b)	 	BONUS OR INCENTIVE PAY. From any bonus or incentive pay that may be earned
during the calendar year separately from the periodic payments of my Compensation for
the year, the fixed amount of $                     from, or the

2

 

	 	 	 	fixed percentage of                      percent of, the gross amount of any such bonus or incentive pay.

	 	 	 	You may not change your Deferred Amount in effect for a given calendar year.

	(2)	 	INVESTMENT FUNDS. I understand that I must elect the investment funds that will be used to
determine the income, expenses, gains, and losses credited to my Aggregate Account Balance
under the Plan. I understand that my election at this time supersedes any previous investment
election or instruction that I have made under the Plan. I hereby elect that my account
balances under the Plan shall be credited as if invested in the following percentages in the
following investments:

	 	 	 	Please complete the following in increments of 1%. The sum of the column
“Percentage” must total 100%

	 	 	 	 	 
	Investment Funds	 	Percentage
	 

	 	 	 	%
	 

	 	 	 	%
	 

	 	 	 	%
	 

	 	 	 	%
	 

	 	 	 	%
	 

	 	 	 	 
	TOTAL

	 	 	100	%
	 

	 	 	 	 

	 	 	Your investment election will remain in effect until this election is changed. You may
change your election by completing, executing and returning another Participation Agreement
to the Administrator or other form provided for this purpose by the Administrator. The
investment funds available for you to elect under the Plan may be changed from time to time.
In such event that the investment funds available for election are changed, you will be
notified if any investment fund that you elected is no longer available, and you will have
the opportunity to change your election. If you do not timely change your election or if
any investment fund elected is no longer available, the Employer reserves the right to
reallocate money designated for that elected investment fund among other available funds.
	 
	(3)	 	ENTITLEMENT DATE. I elect the following date as the Entitlement Date on which I or my
Beneficiary become entitled to payment of my vested Aggregate Account Balance,

3

 

	 	 	and I understand that the Entitlement Date that I elect here will be my Entitlement Date for
my ENTIRE AGGREGATE ACCOUNT BALANCE accrued under the Plan (and may only be changed
in accordance with the restrictions described on pages 5 and 6 of this Notice and
Participation Agreement):

	 	 	 	I elect my Entitlement Date as:

(Please mark and complete only ONE of the following:)

	 	 	 	 	 
	 

	 	___
	 	My Separation from Service for any reason (including death)
	 
	 	 	 	 
	 

	 	___
	 	Regardless of when my Separation from Service occurs, upon
the following date:                     , or if I die
before such date, upon my death
	 
	 	 	 	 
	 

	 	___
	 	Regardless of when my Separation from Service occurs or
death occurs, upon the following date:                                         

	(4)	 	PAYMENT FORM. I elect as the following Payment Form for payment of my vested Aggregate
Account Balance under the Plan, and I understand that the Payment Form that I elect here will
be my Payment Form for my ENTIRE AGGREGATE ACCOUNT BALANCE accrued under the Plan (and
may only be changed in accordance with the restrictions described on pages 5 and 6 of this
Notice and Participation Agreement):

	 	 	 	I elect as the Payment Form of my vested Aggregate Account Balance:

(Please mark and complete only ONE of the following:)

	 	 	 	 	 	 	 
	 	 	___	 	Lump sum to be paid within 60 days after my Entitlement Date
	 
	 	 	 	 	 	 
	 	 	___	 	In the form, as specified below, payment of which will begin within 60 days after my Entitlement Date:
	 
	 	 	 	 	 	 
	 

	 	 	 	___
	 	Monthly installments for 5 years
	 
	 	 	 	 	 	 
	 

	 	 	 	___
	 	Monthly installments for 10 years
	 
	 	 	 	 	 	 
	 

	 	 	 	___
	 	Monthly installments for 15 years
	 
	 	 	 	 	 	 
	 

	 	 	 	___
	 	Quarterly installments for 5 years
	 
	 	 	 	 	 	 
	 

	 	 	 	___
	 	Quarterly installments for 10 years
	 
	 	 	 	 	 	 
	 

	 	 	 	___
	 	Quarterly installments for 15 years

4

 

	 	 	If you are a Specified Employee, and you experience a Separation from Service (other
than due to death or Disability Retirement), payment of your vested Aggregate
Account Balance under the Plan will not be made or begin before the date that is six
months after the date of your Separation from Service. If you are a Specified
Employee and elect installment payments, the installments that would normally be
paid during the six months after the date that you experienced a Separation from
Service shall be accumulated and paid on the first day of the seventh month
following the date of your Separation from Service.
	 
	 	 	Any Payment Form elected must conform to all limitations in the definition of
“Payment Form” contained in the Plan. If no Entitlement Date is elected or if any
Entitlement Date is not valid, the Entitlement Date shall be the date of your
Separation from Service. If Payment Form is elected or if any Payment Form is not
valid, the Payment Form shall be lump sum.
	 
	 	 	You may change your “Entitlement Date” or “Payment Form” election by completing,
executing, and returning another form of Participation Agreement to the
Administrator completed to show the Entitlement Date or Payment Form as so changed;
provided, however that such Entitlement Date and Payment Form must satisfy the
following requirements to be effective:

	 	1.	 	The new election, as memorialized under a new
Participation Agreement, may not take effect until at least twelve
months after the date upon which the new election is made;
	 
	 	2.	 	If the new election relates to payment on an
Entitlement Date other than a date relating to your death, the new
election and Participation Agreement must provide for the deferral of
the payment to a new Entitlement Date that is at least five years from
the original Entitlement Date; and
	 
	 	3.	 	The new election must be made at least twelve months
prior to the original Entitlement Date.

	(5)	 	BENEFICIARY. I hereby designate the following as my Beneficiary in the case of my death:

	 	(1) 	 	 

	 	 	 	 

	 	 	 	 

	 
	 	(2)	 	If the Beneficiary (Beneficiaries) named in (1) above is not living on the date
payments become payable to such Beneficiary:

5

 

	 	 	 	 

	 	 	 	 

	 	 	 	 

	 	 	This Beneficiary designation revokes all prior designations made by the undersigned
and is subject to all the terms of the Plan.
	 
	 	 	You may change your “Beneficiary” by completing, executing, and returning another
form of Participation Agreement to the Administrator completed to show the
Beneficiary as so changed as long as it is received before your Entitlement Date.

ELECTION DATE. The due date by which you must return this Participation Agreement completed and
signed by you in order to be effective for the calendar year ending December 31, ___. Return
your completed and signed Participation Agreement to:

 

 

 

AUTHORIZATION. I acknowledge that I have knowingly and voluntarily decided to participate in the
Plan. I understand that:

	(a)	 	My Aggregate Account Balance and the other assets of the Plan remain subject to the claims of
the Employer’s general creditors until received by me or my Beneficiary.
	 
	(b)	 	The Plan is a defined contribution plan, and my benefit will be my vested Aggregate Account
Balance and whatever Payment Form can be purchased with that Aggregate Account Balance on my
Entitlement Date.
	 
	(c)	 	The Employer is not responsible for any loss that may be sustained as a result of any
elections made by me pursuant to this Notice and Participation Agreement or that may be
sustained by my Aggregate Account Balance as a result of any investment thereof.
	 
	(d)	 	My rights under this Plan, even if vested, are subject to forfeiture for certain prohibited
activities as provided in Section 3.6 of the Plan.

6

 

Dated:                               

	 	 	 	 	 
	 	 	 
	 	Signature of Participant 	 
	 	 	 
	 	 	 
	 	Printed Name of Participant 	 

This Participation Agreement is not valid or binding until it is accepted as properly completed and
signed by the Administrator.

	 	 	 	 	 
	 	ACCEPTED:

 	 
	Dated:                                	 	 
	 	Signature on behalf of the Administrator 	 
	 	 	 

7

 

Form C

(For Participants who will NOT receive an Employer Deferral for the calendar year and

who have previously executed a Participation Agreement)

PARTICIPATION AGREEMENT

FOR

PROCENTURY CORPORATION DEFERRED COMPENSATION PLAN

                                                                       (the “Participant”) is either a
n eligible Key Employee (as designated by ProCentury
Corporation (the “Employer”)) or a Director eligible for participation in the ProCentury
Corporation Deferred Compensation Plan (the “Plan”). This Participation Agreement evidences the
Participant’s participation in the Plan for the calendar year ending December 31, ___. All
capitalized terms defined in the Plan shall have the same meaning as used herein.

          There are three different areas in which the Participant must make an election regarding
participation in the Plan. Please be sure to make an election in each of the following areas:

	(1)	 	DEFERRED AMOUNT. The Participant hereby irrevocably elects that the following amount of
Compensation for the calendar year be withheld for deferral pursuant to Section 3.2 of the
Plan as follows:

	 	 	 	You may elect to have the Deferred Amount withheld from either
salary or any separate bonus or incentive pay or both by completing
the following:
	 
	 	(a)	 	SALARY. From periodic payments of my Compensation over the calendar year:
	 
	 	 	 	Please complete only ONE of the following salary withholdings, if
applicable:
	 
	 	 	 	The fixed amount of $                     from the gross amount of each periodic payment of
such Compensation,

or

	 	 	 	The fixed percentage of                      percent of the gross amount of each periodic payment of such
Compensation.
	 
	 	(b)	 	BONUS OR INCENTIVE PAY. From any bonus or incentive pay that may be earned
during the calendar year separately from the periodic payments of my Compensation for
the year, the fixed amount of $                     from, or the

 

 

	 	 	 	fixed percentage of                      percent of, the gross amount of any such bonus or incentive pay.

	 	 	You may not change your Deferred Amount in effect for a given calendar year.
	 
	(2)	 	INVESTMENT FUNDS. I understand that I must elect the investment funds that will be used to
determine the income, expenses, gains, and losses credited to my Aggregate Account Balance
under the Plan. I understand that my election at this time supersedes any previous investment
election or instruction that I have made under the Plan. I hereby elect that my account
balances under the Plan shall be credited as if invested in the following percentages in the
following investments:

	 	 	 	Please complete the following in increments of 1%. The sum of the column
“Percentage” must total 100%

	 	 	 	 	 
	Investment Funds	 	Percentage
	 

	 	 		%
	 

	 	 		%
	 

	 	 		%
	 

	 	 		%
	 

	 	 		%
	 

	 	 	 	 
	TOTAL

	 	 	100	%
	 

	 	 	 	 

	 	 	Your investment election will remain in effect until this election is changed. You may
change your election by completing, executing and returning another Participation Agreement
to the Administrator or other form provided for this purpose by the Administrator. The
investment funds available for you to elect under the Plan may be changed from time to time.
In such event that the investment funds available for election are changed, you will be
notified if any investment fund that you elected is no longer available, and you will have
the opportunity to change your election. If you do not timely change your election or if
any investment fund elected is no longer available, the Employer reserves the right to
reallocate money designated for that elected investment fund among other available funds.
	 
	(3)	 	BENEFICIARY. I hereby designate the following as my Beneficiary in the case of my death:

2

 

	 	(1) 	 	 

	 	 

	 	 

	 
	 	(2)	 	If the Beneficiary (Beneficiaries) named in (1) above is not living on the date
payments become payable to such Beneficiary:
	 	 

	 	 

	 	 

	 
	 	 	This Beneficiary designation revokes all prior designations made by the undersigned
and is subject to all the terms of the Plan.
	 
	 	 	You may change your “Beneficiary” by completing, executing, and returning another
form of Participation Agreement completed to show the Beneficiary as so changed as
long as it is received before your Entitlement Date (which has been established by
your Initial Participation Agreement).

ELECTION DATE. The due date by which you must return this Participation Agreement completed and
signed by you in order to be effective for the calendar year ending December 31, ___. Return
your completed and signed Participation Agreement to:

 

 

 

AUTHORIZATION. I acknowledge that I have knowingly and voluntarily decided to participate in the
Plan. I understand that:

	(a)	 	My Aggregate Account Balance and the other assets of the Plan remain subject to the claims of
the Employer’s general creditors until received by me or my Beneficiary.
	 
	(b)	 	The Plan is a defined contribution plan, and my benefit will be my vested Aggregate Account
Balance and whatever Payment Form can be purchased with that Aggregate Account Balance on my
Entitlement Date (both of which have been established by your Initial Participation
Agreement).
	 
	(c)	 	The Employer is not responsible for any loss that may be sustained as a result of any
elections made by me pursuant to this Participation Agreement or that may be sustained by my
Aggregate Account Balance as a result of any investment thereof.

3

 

Dated:                               

	 	 	 	 	 
	 	
 	 
	 	Signature of Participant 	 
	 	 	 
	 	
 	 
	 	Printed name of Participant 	 

This Participation Agreement is not valid or binding until it is accepted as properly completed and
signed by the Administrator.

	 	 	 	 	 
	 	ACCEPTED:

 	 
	Dated:                                	 	 
	 	Signature on behalf of the Administrator 	 
	 	 	 

4

 

	 	 	 	 	 

Form D

(For Participants who WILL receive an Employer Deferral for the calendar year and

who have previously executed a Participation Agreement)

NOTICE AND PARTICIPATION AGREEMENT

REGARDING EMPLOYER DEFERRAL FOR

PROCENTURY CORPORATION DEFERRED COMPENSATION PLAN

NOTICE OF EMPLOYER DEFERRAL

TO BE COMPLETED BY THE EMPLOYER

DATE OF NOTICE:                     

     ProCentury Corporation is pleased to announce that it will be making a contribution in the
form of an Employer Deferral for the account of                                                              (the “Participant”), who is
either an eligible Key Employee (as designated by ProCentury Corporation (the “Employer”)) or is a
Director eligible for participation in the ProCentury Corporation Deferred Compensation Plan (the
“Plan”) for the calendar year ending
                    , ___ pursuant to the following terms:

AMOUNT OF EMPLOYER DEFERRAL.
The amount of the Employer Deferral is 

.

EMPLOYER DEFERRAL VESTING DATE: The date upon which your rights to payment of the Employer Deferral
for this calendar year becomes vested is                                                              (which is known as your Employer Deferral Vesting Date for
this year’s Employer Deferral). Notwithstanding the foregoing, your Employer Deferral shall
automatically become 100 percent vested upon your Separation from Service (a) for reason of death
or Disability Retirement, (b) at any time on or after your Normal Retirement Age, or (c) within
three years after a Change in Control.

All capitalized terms defined in the Plan shall have the same meaning as used herein.

 

 

PARTICIPATION AGREEMENT

TO BE COMPLETED BY THE PARTICIPANT

     This Participation Agreement evidences the Participant’s elections regarding the Employer
Deferral described for the calendar year as described above as well as the Deferred Amounts
described below (collectively, the “Aggregate Account Balance”).

                                                                  (the “Participant”) is either a
n eligible Key Employee (as designated by ProCentury
Corporation (the “Employer”)) or a Director eligible for participation in the ProCentury
Corporation Deferred Compensation Plan (the “Plan”). This Participation Agreement evidences the
Participant’s participation in the Plan for the calendar year ending December 31, ___. All
capitalized terms defined in the Plan shall have the same meaning as used herein.

     There are three different areas in which the Participant must make an election regarding
participation in the Plan. Please be sure to make an election in each of the following areas:

	(1)	 	DEFERRED AMOUNT. The Participant hereby irrevocably elects that the following amount of
Compensation for the calendar year shall be withheld for deferral pursuant to Section 3.2 of
the Plan as follows:

	 	 	 	You may elect to have the Deferred Amount withheld from either
salary or any separate bonus or incentive pay or both by completing
the following:
	 
	 	(a)	 	SALARY. From periodic payments of my Compensation over the calendar year:
	 
	 	 	 	Please complete only ONE of the following salary withholdings, if
applicable:
	 
	 	 	 	The fixed amount of $                     from the gross amount of each periodic payment of
such Compensation,

or

	 	 	 	The fixed percentage of                      percent of the gross amount of each periodic payment of such
Compensation.
	 
	 	(b)	 	BONUS OR INCENTIVE PAY. From any bonus or incentive pay that may be earned
during the calendar year separately from the periodic payments of my Compensation for
the year, the fixed amount of $                     from, or the

2

 

	 	 	 	fixed percentage of                      percent of, the gross amount of any such bonus or incentive pay.

	 	 	You may not change your Deferred Amount in effect for a given calendar year.
	 
	(2)	 	INVESTMENT FUNDS. I understand that I must elect the investment funds that will be used to
determine the income, expenses, gains, and losses credited to my Aggregate Account Balance
under the Plan. I understand that my election at this time supersedes any previous investment
election or instruction that I have made under the Plan. I hereby elect that my account
balances under the Plan shall be credited as if invested in the following percentages in the
following investments:

	 	 	 	Please complete the following in increments of 1%. The sum of the column
“Percentage” must total 100%

	 	 	 	 	 
	Investment Funds	 	Percentage
	 

	 	 		%
	 

	 	 		%
	 

	 	 		%
	 

	 	 		%
	 

	 	 		%
	 

	 	 	 	 
	TOTAL

	 	 	100	%
	 

	 	 	 	 

	 	 	Your investment election will remain in effect until this election is changed. You may
change your election by completing, executing and returning another Participation Agreement
to the Administrator or other form provided for this purpose by the Administrator. The
investment funds available for you to elect under the Plan may be changed from time to time.
In such event that the investment funds available for election are changed, you will be
notified if any investment fund that you elected is no longer available, and you will have
the opportunity to change your election. If you do not timely change your election or if
any investment fund elected is no longer available, the Employer reserves the right to
reallocate money designated for that elected investment fund among other available funds.
	 
	(3)	 	BENEFICIARY. I hereby designate the following as my Beneficiary in the case of my death:

3

 

	 	(1) 	 	 

	 	 	 	 

	 	 	 	 

	 
	 	(2)	 	If the Beneficiary (Beneficiaries) named in (1) above is not living on the date
payments become payable to such Beneficiary:
	 	 	 	 

	 	 	 	 

	 	 	 	 

	 
	 	 	This Beneficiary designation revokes all prior designations made by the undersigned
and is subject to all the terms of the Plan.
	 
	 	 	You may change your “Beneficiary” by completing, executing, and returning another
form of Participation Agreement completed to show the Beneficiary as so changed as
long as it is received before your Entitlement Date (which has been established by
your Initial Participation Agreement).

ELECTION DATE. The due date by which you must return this Participation Agreement completed and
signed by you in order to be effective for the calendar year ending December 31, ___. Return
your completed and signed Participation Agreement to:

 

 

 

AUTHORIZATION. I acknowledge that I have knowingly and voluntarily decided to participate in the
Plan. I understand that:

	(a)	 	My Aggregate Account Balance and the other assets of the Plan remain subject to the claims of
the Employer’s general creditors until received by me or my Beneficiary.
	 
	(b)	 	The Plan is a defined contribution plan, and my benefit will be my vested Aggregate Account
Balance and whatever Payment Form can be purchased with that Aggregate Account Balance on my
Entitlement Date (both of which have been established by your Initial Participation
Agreement).
	 
	(c)	 	The Employer is not responsible for any loss that may be sustained as a result of any
elections made by me pursuant to this Participation Agreement or that may be sustained by my
Aggregate Account Balance as a result of any investment thereof.

4

 

	(d)	 	My rights under this Plan, even if vested, are subject to forfeiture for certain prohibited
activities as provided in Section 3.6 of the Plan.

Dated:                               

	 	 	 	 	 
	 	 	 
	 	Signature of Participant 	 
	 	 	 
	 	 	 
	 	Printed name of Participant 	 

This Participation Agreement is not valid or binding until it is accepted as properly completed and
signed by the Administrator.

	 	 	 	 	 
	 	ACCEPTED:

 	 
	Dated:                                	 	 
	 	Signature on behalf of the Administrator 	 
	 	 	 
	 

5

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