Document:

exv10w11

Exhibit 10.11

PROPERTY EXCESS OF LOSS REINSURANCE CONTRACT

EFFECTIVE JANUARY 1, 2011

issued to

PENN MILLERS INSURANCE COMPANY

AMERICAN MILLERS INSURANCE COMPANY

			
	 	 	 
	TW No. G25573.11/G25574.11/G26233.11

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PENN MILLERS INSURANCE COMPANY

AMERICAN MILLERS INSURANCE COMPANY

PROPERTY EXCESS OF LOSS REINSURANCE CONTRACT

EFFECTIVE JANUARY 1, 2011

INDEX

	 	 	 	 	 	 	 
	ARTICLE	 	SUBJECT	 	PAGE	 
	ARTICLE 1	 	BUSINESS COVERED
	 	 	1	 
	ARTICLE 2	 	COMMENCEMENT AND TERMINATION
	 	 	1	 
	ARTICLE 3	 	SPECIAL TERMINATION
	 	 	1	 
	ARTICLE 4	 	EXCLUSIONS
	 	 	3	 
	ARTICLE 5	 	RETENTION AND LIMIT
	 	 	5	 
	ARTICLE 6	 	REINSTATEMENT
	 	 	5	 
	ARTICLE 7	 	PREMIUM
	 	 	5	 
	ARTICLE 8	 	DEFINITION OF LOSS OCCURRENCE
	 	 	5	 
	ARTICLE 9	 	NET LOSS
	 	 	6	 
	ARTICLE 10	 	EXTRA CONTRACTUAL OBLIGATIONS/LOSS EXCESS OF POLICY LIMITS
	 	 	7	 
	ARTICLE 11	 	TERRORISM RECOVERY
	 	 	8	 
	ARTICLE 12	 	NET RETAINED LINE
	 	 	9	 
	ARTICLE 13	 	NOTICE OF LOSS AND LOSS SETTLEMENT
	 	 	9	 
	ARTICLE 14	 	ERRORS AND OMISSIONS
	 	 	10	 
	ARTICLE 15	 	OFFSET
	 	 	10	 
	ARTICLE 16	 	CURRENCY
	 	 	10	 
	ARTICLE 17	 	FEDERAL EXCISE TAX AND OTHER TAXES
	 	 	10	 
	ARTICLE 18	 	ACCESS TO RECORDS
	 	 	11	 
	ARTICLE 19	 	INSOLVENCY
	 	 	11	 
	ARTICLE 20	 	ARBITRATION
	 	 	12	 
	ARTICLE 21	 	SERVICE OF SUIT
	 	 	14	 
	ARTICLE 22	 	CONFIDENTIALITY
	 	 	15	 
	ARTICLE 23	 	PRIVACY
	 	 	16	 
	ARTICLE 24	 	RESERVES
	 	 	16	 
	ARTICLE 25	 	LATE PAYMENTS
	 	 	19	 
	ARTICLE 26	 	MODE OF EXECUTION
	 	 	20	 
	ARTICLE 27	 	VARIOUS OTHER TERMS
	 	 	20	 
	ARTICLE 28	 	INTERMEDIARY
	 	 	22	 

ATTACHMENTS:

NUCLEAR INCIDENT EXCLUSION CLAUSE — PHYSICAL DAMAGE — REINSURANCE (BRMA 35B)

INFORMATION TECHNOLOGY HAZARDS CLARIFICATION CLAUSE (NMA2912)

EXHIBIT I — PROPERTY FIRST EXCESS OF LOSS REINSURANCE

EXHIBIT II — PROPERTY SECOND EXCESS OF LOSS REINSURANCE

EXHIBIT III — PROPERTY THIRD EXCESS OF LOSS REINSURANCE

			
	 	 	 
	TW No. G25573.11/G25574.11/G26233.11

C11-119542-002

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PENN MILLERS INSURANCE COMPANY

AMERICAN MILLERS INSURANCE COMPANY

PROPERTY EXCESS OF LOSS REINSURANCE CONTRACT

EFFECTIVE JANUARY 1, 2011

ARTICLE 1

BUSINESS COVERED 

A. This Contract applies to all Loss Occurrences that occur with a date of loss during the term of
this Contract and arising from those Policies, except as hereinafter excluded, classified by the
Company as Property, that are in force at the inception of the term of this Contract or written
with a Policy period (new or renewal) effective during the term of this Contract, including
renewals (“Business Covered”).

B. The term “Policies”, whenever used herein, shall mean all binders, policies, contracts,
certificates and other obligations, whether oral or written, of insurance or reinsurance that are
Business Covered.

C. The reinsurance of all Business Covered hereunder shall be subject in all respects to the same
risks, terms, clauses, conditions, interpretations, alterations, modifications, cancellations and
waivers as the respective insurances (or reinsurances) of the Company’s Policies and the Reinsurer
shall pay losses as may be paid thereon, subject to the liability of the Company and the terms and
conditions of this Contract.

ARTICLE 2

COMMENCEMENT AND TERMINATION 

A. This Contract shall incept at 12:01 a.m., Eastern Standard Time, January 1, 2011, and shall
remain in force until 12:01 a.m., Eastern Standard Time, January 1, 2012.

B. Should this Contract terminate while a Loss Occurrence is in progress, Reinsurers shall remain
liable for all losses resulting from such Loss Occurrence as if the entire loss had occurred during
the term of this Contract.

ARTICLE 3

SPECIAL TERMINATION

A. The Company or the Reinsurer may terminate, or commute obligations arising under this Contract
in accordance with Paragraph C. below, upon the happening of any one of the following circumstances
at any time by the giving of thirty (30) days prior written notice to the other party:

1. A party ceases active underwriting operations or a State Insurance Department or other
legal authority orders the Reinsurer to cease writing business in all jurisdictions; or

2. The Reinsurer has filed a plan to enter into a Scheme of Arrangement or similar
procedure. “Scheme of Arrangement” is defined as a legislative or regulatory process that
provides a solvent Reinsurer the opportunity to settle its obligations with the Company
either (i) without the Company’s unrestrained consent or (ii) prior to the
Company having the ability to determine, with exact certainty, the actual amount of the
obligations still outstanding and ultimately due to the Company. or

			
	 	 	 
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3. A party has: a) become insolvent, b) been placed under supervision (voluntarily or
involuntarily), c) been placed into liquidation or receivership, or d) had instituted
against it proceedings for the appointment of a supervisor, receiver, liquidator,
rehabilitator, conservator or trustee in bankruptcy, or other agent known by whatever name,
to take possession of its assets or control of its operations; or

4. A reduction in the Reinsurer’s surplus, risk-based capital or financial strength rating
occurs:

a. As respects Reinsurers domiciled in the United States of America, (i) the
Reinsurer’s policyholders’ surplus (“PHS”) has been reduced by, whichever is
greater, thirty percent (30%) of the amount of PHS at the inception of this
Contract or thirty percent (30%) of the amount of PHS stated in its last filed
quarterly or annual statutory statement with its state of domicile; or (ii) the
Reinsurer’s total adjusted capital is less than two hundred percent (200%) of its
authorized control level risk-based capital; or (iii) the Reinsurer’s A.M. Best’s
insurer financial strength rating becomes less than “A-”.

b. As respects Reinsurers domiciled outside the United States of America, other
than Lloyd’s Syndicates (i) the Reinsurer’s Capital & Surplus (“C&S”) has been
involuntarily reduced by, whichever is greater, thirty percent (30%) of the
published currency amount of C&S at the inception of this Contract or thirty
percent (30%) of the published currency amount of C&S stated in its last filed
financial statement with its local regulatory authority; or (ii) as respects
Lloyd’s Syndicates, the Reinsurer’s total stamp capacity has been reduced by more
than thirty percent (30%) of the amount of total stamp capacity which stood at the
inception of this Contract. (This provision does not apply to any Lloyd’s Syndicate
that voluntarily reduces its total stamp capacity.) or (iii) the Reinsurer’s A.M.
Best’s insurer financial strength rating becomes less than “A-” or the Reinsurer’s
Standard & Poor’s Insurance Rating becomes less than “BBB”. or

5. A party has entered into a definitive agreement to (a) become merged with, acquired or
controlled by any company, corporation or individual(s) not controlling or affiliated with
the party’s operations previously; or (b) directly or indirectly assign all or essentially
all of its entire liability for obligations under this Contract to another party without
the other party’s prior written consent; or

6. There is either:

a. a severance or obstruction of free and unfettered communication and/or normal
commercial or financial intercourse between the United States of America and the
country in which the Reinsurer is incorporated or has its principal office as a
result of war, currency regulations or any circumstances arising out of political,
financial or economic uncertainty; or

b. a severance (of any kind) of any two (2) or more of the following executives of
the Reinsurer from active employment of the Reinsurer during the most recent forty
five (45) day period: chief underwriting officer, chief actuary, chief executive
officer or chief financial officer. This condition does not apply whenever the
severance in employment is for the publicly announced purpose of the individual’s
assuming within thirty (30) days a known position with another identified firm in
the (re)insurance industry or related field.

B. In the event the Company elects to terminate, the Company shall, with the notice of termination,
specify that termination will be on a Cut-Off basis, in which event the Company shall relieve the
Reinsurer for losses occurring subsequent to the specified termination date, and that Reinsurer
shall not receive deposit premium installments beyond the date at which termination of the
Reinsurer is effected. In the event no losses occur prior to the specified

			
	 	 	 
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termination date, the
Reinsurer shall within thirty (30) days of the termination date return a pro rata portion of any
ceded deposit premium paid hereunder, calculated as of the termination date, and cash in that
amount (less applicable ceding commission, if any, allowed thereon) and the minimum premium
provisions, if any, shall be waived. (The fraction of the deposit premium to be returned to the
Company shall equal the number of days from the termination date until the original expiration date
of the Contract period divided by the number of days in the original Contract period.) Upon final
determination of the adjusted premium for the Contract period, the Reinsurer shall be credited with
a portion of premium for this Contract, in the amount equal to the fraction of the number of days
the terminated Reinsurer participated in the Contract period divided by the number of days in the
Contract period multiplied by the reinsurance premium for the Contract period.

C. If both parties agree to commute, then within sixty (60) days after such agreement, the Company
shall submit a statement of valuation of the total of the net present value (“capitalized”) of the
ceded (1) Net Loss Reserves, (2) Loss Adjustment Expense Reserves, and (3) unearned premium
reserve, after deduction for any ceding commission allowed thereon, (the “Valuation Statement”). If
agreement cannot be reached, the effort can be abandoned or alternately the Company and the
Reinsurers may mutually appoint an actuary or appraiser to investigate, determine the capitalized
value of the reserves to be returned to the Company. Such actuary shall be an independent and
neutral actuary, Casualty Actuarial Society, experienced in such matters and the mutually agreed
actuary shall render a decision. In the event that the Company and the Reinsurer are unable to
agree upon a single actuary within thirty (30) days, the parties shall ask the then current
President of the Casualty Actuarial Society to appoint an actuary with those qualifications within
another thirty (30) days. The decision of the actuary will be final and binding on both parties.
The Company and the Reinsurer shall share equally the fees and expenses of the actuary. Upon
payment of the amount so agreed or determined by the actuary to the Company, the Reinsurer and the
Company shall each be completely released from all liability to each other under this Contract.

ARTICLE 4

EXCLUSIONS

A. This Contract shall not cover:

1. Reinsurance treaty business, including pro rata and excess of loss, assumed by the
Company but not to include business from affiliated companies.

2. Business written on a co-indemnity basis not controlled by the Company.

3. Damage to growing and standing crops, not to include nursery stock for wholesale or
retail, and not to include crops, including mushrooms, growing in a building.

4. Policies of Excess of Loss Reinsurance.

5. Financial Guarantee and Insolvency.

6. Liability assumed by the Company as a member of a Syndicate, Pool or Underwriting
Association; however, this does not apply to participation in assigned risk plans.

7. Any liability of the Company arising, by contract, operation of law, or otherwise, from
its participation or membership, whether voluntary or involuntary, in any insolvency fund.
“Insolvency Fund” includes any guaranty fund, insolvency fund, plan, pool, association,
fund or other arrangement, howsoever denominated, established or governed, which provides
for any assessment of or payment or assumption by the Company of part or all of any claim,
debt, charge, fee or other obligation of an insurer,

			
	 	 	 
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or its successors or assigns, which has been declared by any competent authority to be
insolvent, or which is otherwise deemed unable to meet any claim, debt, charge, fee or
other obligation in whole or in part.

8. Policies classified as Personal Accident, Health, Workers’ Compensation, Bodily Injury
Liability (including Medical Payments), Property Damage Liability, Fidelity, Surety, Boiler
and Machinery, Plate Glass and similar classes of insurance or reinsurance customarily
written by casualty insurance companies.

9. Flood, except under Transportation or other Inland Marine or Multiple Peril Policies or
under Automobile Physical Damage Policies or written as a part of the General Property Form
or the Special Property Form.

10. Loss or liability excluded by the provisions of the “Nuclear Incident Exclusion Clause
 — Physical Damage — Reinsurance (BRMA 35B)” attached to and forming part of this Contract.

11. Seepage and/or Pollution as per original Policies. Furthermore, Reinsurers agree that
this exclusion does not apply to overspraying of anhydrous ammonia, fertilizers and
agricultural chemicals.

12. Transmission and Distribution Lines and their supporting structures other than those on
or within one thousand (1,000) feet of the insured premises.

13. Information Technology Hazards Clarification Clause (NMA 2912).

14. Loss resulting from an act of certified or non-certified terrorism, as defined in the
Article entitled RETENTION AND LIMIT of this Contract, that involves the use,
release, or escape of nuclear materials, or directly or indirectly results in nuclear
reaction or radiation or radioactive contamination; or that is carried out by means of the
dispersal or application of pathogenic or poisonous biological or chemical materials that
are released.

15. Regarding interests which at time of loss or damage are on shore, any loss or damage
which is occasioned by war, invasion, hostilities, acts of foreign enemies, civil war,
rebellion, insurrection, military or usurped power, or martial law or confiscation by order
of any government or public authority.

     This War Exclusion Clause shall not, however, apply to interests which at time of loss or
damage are within the territorial limits of the United States of America (comprising the fifty
States of the Union and the District of Columbia and including Bridges between the U.S.A. and
Mexico, provided they are under United States ownership), Canada, St. Pierre and Miquelon, provided
such interests are insured under Policies, endorsements, or binders containing a standard war or
hostilities or warlike operations exclusion clause.

B. As respects Paragraph A. above, if the Company, without the knowledge and consent of its Home
Office, is bound on a risk excluded above (other than Exclusions A(5) Financial Guarantee and
Insolvency, A(6) Syndicates, Pools or Underwriting Associations, A(7) Insolvency Funds Exclusion,
A(9) Flood, A(10) Nuclear Incident Exclusion Clause, A(11) Seepage and/or Pollution Exclusion
Clause, A(12) Transmission and Distribution Lines, A(13) Information Technology Hazards
Clarification Clause (NMA 2912), A(14) NBC Terrorism, and A(15) War) such risk shall be covered
hereunder until the Company receives knowledge thereof.

     The Company agrees to use due diligence in canceling such risk immediately after knowledge
thereof is received by its Home Office. However, if any state regulatory authority or the laws or
regulations of any state prohibit the Company from canceling a risk for any reason,

			
	 	 	 
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such risk shall
remain covered hereunder until the Company is permitted to cancel the risk by the regulatory
authority or the applicable laws or regulations. However, not to exceed eighteen (18) months.

C. Any exclusion listed above (other than exclusions A(5), A(6), A(7), A(9), A(10), A(11), A(12),
A(13), A(14) and A(15)), shall be automatically waived as respects a Policy issued by the Company
on a risk with respect to which only a minor or incidental part of the operations covered involves
the exclusion. An incidental part of an insured’s regular operations shall mean not greater than
ten percent (10%) of the insured’s regular operations.

ARTICLE 5

RETENTION AND LIMIT

     See Exhibits I, II and III attached to and forming part of this Contract.

ARTICLE 6

REINSTATEMENT

     See Exhibits I, II and III attached to and forming part of this Contract.

ARTICLE 7

PREMIUM

     See Exhibits I, II and III attached to and forming part of this Contract.

ARTICLE 8

DEFINITION OF LOSS OCCURRENCE

A. The term “Loss Occurrence” shall mean the sum of all individual losses directly occasioned by
any one disaster, accident or loss or series of disasters, accidents or losses arising out of one
event which occurs within the area of one state of the United States or province of Canada and
states or provinces contiguous thereto and to one another. However, the duration and extent of any
one “Loss Occurrence” shall be limited to all individual losses sustained by the Company occurring
during any period of one hundred sixty eight (168) consecutive hours arising out of and directly
occasioned by the same event except that the term “Loss Occurrence” shall be further defined as
follows:

1. As regards windstorm, hail, tornado, hurricane, cyclone, including ensuing collapse and
water damage, all individual losses sustained by the Company occurring during any period of
seventy two (72) consecutive hours arising out of and directly occasioned by the same
event. However, the event need not be limited to one state or province or states or
provinces contiguous thereto.

2. As regards riot, riot attending a strike, civil commotion, vandalism and malicious
mischief, all individual losses sustained by the Company occurring during any period of
seventy two (72) consecutive hours within the area of one municipality or county and the
municipalities or counties contiguous thereto arising out of and directly occasioned by the
same event. The maximum duration of seventy two (72) consecutive hours may be extended in
respect of individual losses which occur beyond such seventy two (72)
consecutive hours during the continued occupation of an insured’s premises by strikers,
provided such occupation commenced during the aforesaid period.

			
	 	 	 
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3. As regards earthquake (the epicenter of which need not necessarily be within the
territorial confines referred to in the opening paragraph of this Article) and fire
following directly occasioned by the earthquake, only those individual fire losses which
commence during the period of one hundred sixty eight (168) consecutive hours may be
included in the Company’s “Loss Occurrence”.

4. As regards “Freeze”, only individual losses directly occasioned by collapse, breakage of
glass and water damage (caused by bursting of frozen pipes and tanks) may be included in
the Company’s “Loss Occurrence”.

5. As regards firestorms, brush fires and any other fires or series of fires, irrespective
of origin (except as provided in A(2) and A(3) above), which spread through trees,
grassland or other vegetation, all individual losses sustained by the Company which
commence during any period of one hundred sixty eight (168) consecutive hours within a one
hundred (100) mile radius of any fixed point selected by the Company where a claim has
actually been made may be included in the Company’s “Loss Occurrence.” However, an
individual loss subject to this subparagraph cannot be included in more than one Loss
Occurrence.

B. For all “Loss Occurrences”, other than those referred to in A(2) of this Article, the Company
may choose the date and time when any such period of consecutive hours commences provided that it
is not earlier than the date and time of the occurrence of the first recorded individual loss
sustained by the Company arising out of that disaster, accident or loss and provided that only one
such period of one hundred sixty eight (168) consecutive hours shall apply with respect to one
event except for any “Loss Occurrences” referred to in A(1) of this Article where only one such
period of seventy two (72) consecutive hours shall apply with respect to one event.

C. As respects those “Loss Occurrences” referred to in A(2) of this Article, if the disaster,
accident or loss occasioned by the event is of greater duration than seventy two (72) consecutive
hours, then the Company may divide that disaster, accident or loss into two (2) or more “Loss
Occurrences” provided no two (2) periods overlap and no individual loss is included in more than
one such period and provided that no period commences earlier than the date and time of the
occurrence of the first recorded individual loss sustained by the Company arising out of that
disaster, accident or loss.

D. No individual losses occasioned by an event that would be covered by seventy two (72) hours
clauses may be included in any “Loss Occurrence” claimed under the one hundred sixty eight (168)
hours provision.

ARTICLE 9

NET LOSS

A. The term “Net Loss” shall mean the actual loss incurred by the Company from Business Covered
hereunder including (i) sums paid in settlement of claims and suits and in satisfaction of
judgments, (ii) prejudgment interest when added to a judgment, (iii) ninety percent (90%) of any
Extra-Contractual Obligations (iv) ninety percent (90%) of any Losses Excess of Policy Limits, and
(v) any interest on judgments other than prejudgment interest when added to a judgment. In the
event that the Company’s original Policies and/or specific coverage parts of their original
Policies are issued on a cost inclusive basis, such loss adjustment expenses shall be included
within the Company’s Net Loss for the purposes of recovery hereunder.

B. All salvages, recoveries, payments and reversals or reductions of verdicts or judgments whether
recovered, received or obtained prior or subsequent to loss settlement under this Contract,
including amounts recoverable under other reinsurance whether collected or not, shall
be applied as if recovered, received or obtained prior to the aforesaid settlement and shall be

			
	 	 	 
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deducted from the actual losses sustained to arrive at the amount of the Net Loss. Nothing in this
Article shall be construed to mean losses are not recoverable until the Net Loss to the Company
finally has been ascertained.

C. All Loss Adjustment Expenses paid by the Company as a result of Net Losses covered hereunder
shall be divided between the Company and the Reinsurers, without regard to the limit of this
Contract, in proportion to their share of the Net Loss. “Loss Adjustment Expenses” shall mean and
include but not be limited to: (i) expenses sustained in connection with adjustment, defense,
settlement and litigation of claims and suits, satisfaction of judgments, resistance to or
negotiations concerning a loss (which shall include the expenses and the pro rata share of the
salaries of the Company’s field employees according to the time occupied in adjusting such loss and
the expenses of the Company’s employees while diverted from their normal duties to the service of
field adjustment but shall not include any salaries of officers or normal overhead expenses of the
Company), (ii) legal expenses and costs incurred in connection with coverage questions regarding
specific claims and legal actions, including Declaratory Judgment Expenses, connected thereto,
(iii) all interest on judgments other than prejudgment interest when added to a judgment except
when included in Net Loss, and (iv) expenses sustained to obtain recoveries, salvages or other
reimbursements, or to secure the reversal or reduction of a verdict or judgment.

D. “Declaratory Judgment Expenses” as used in this Contract shall mean legal expenses paid by the
Company in the investigation, analysis, evaluation, resolution or litigation of coverage issues
between the Company and its insured(s), under Policies reinsured hereunder, for a specific loss or
losses tendered under such Policies, which loss or losses are not excluded under this Contract.

E. In the event there are any recoveries, salvages, or reimbursements recovered subsequent to a
loss settlement, or in the event a verdict or judgment is reversed or reduced, Loss Adjustment
Expenses incurred in obtaining the recovery, salvage or reimbursement or in securing the reduction
or reversal shall be divided between the Company and the Reinsurers in proportion to their share of
the benefit therefrom, with the expenses incurred up to the time of the loss settlement or the
original verdict or judgment being divided in proportion to the share of the Company and the
Reinsurers in the original loss settlement or verdict or judgment.

ARTICLE 10

EXTRA CONTRACTUAL OBLIGATIONS/LOSS EXCESS OF POLICY LIMITS

A. “Extra-Contractual Obligations” means those liabilities not covered under any other provision of
this Contract, other than Loss Excess of Policy Limits, including but not limited to compensatory,
consequential, punitive, or exemplary damages together with any legal costs and expenses incurred
in connection therewith, paid as damages or in settlement by the Company arising from an allegation
or claim of its insured, its insured’s assignee, or other third party, which alleges negligence,
gross negligence, bad faith or other tortious conduct on the part of the Company in the handling,
adjustment, rejection, defense or settlement of a claim under a Policy that is the Business
Covered.

B. “Loss Excess of Policy Limits” means any amount of loss, together with any legal costs and
expenses incurred in connection therewith, paid as damages or in settlement by the Company in
excess of its Policy Limits, but otherwise within the coverage terms of the Policy, arising from an
allegation or claim of its insured, its insured’s assignee, or other third party, which alleges
negligence, gross negligence, bad faith or other tortious conduct on the part of the Company in the
handling of a claim under a Policy or bond that is the Business Covered, in rejecting a settlement
within the Policy Limits, in discharging a duty to defend or prepare the defense in the trial of an
action against its insured, or in discharging its duty to prepare or
prosecute an appeal consequent upon such an action. For the avoidance of doubt, the decision by the
Company to settle a claim for an amount within the coverage of the Policy but not within the Policy
Limit when the Company has reasonable basis to believe that it may have legal

			
	 	 	 
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liability to its
insured or assignee or other third party on the claim will be deemed a Loss Excess of Policy
Limits. The Company will provide Reinsurers an explanation relating to the Company’s motivation for
settlement and use its best efforts to obtain the Reinsurers’ prior counsel and concurrence in the
Company’s action. A reasonable basis shall mean it is more likely than not a trial would result in
a verdict excess of the Policy Limits, in the opinion of counsel assigned to defend the insured or
otherwise retained by the Company.

C. An Extra-Contractual Obligation or a Loss Excess of Policy Limits shall be deemed to have
occurred on the same date as the loss covered under the Company’s original Policy and shall be
considered part of the original loss (subject to other terms of this Contract).

D. Neither an Extra-Contractual Obligation nor a Loss Excess of Policy Limits shall include a loss
incurred by the Company as the result of any fraudulent or criminal act directed against the
Company by any officer or director of the Company acting individually or collectively or in
collusion with any other organization or party involved in the presentation, defense, or settlement
of any claim under this Contract.

E. Recoveries, whether collectible or not, including any retentions and/or deductibles, from any
other form of insurance or reinsurance which protect the Company against any loss or liability
covered under this Article shall inure to the benefit of the Reinsurers and shall be deducted from
the total amount of any Extra-Contractual Obligation and/or Loss Excess of Policy Limits in
determining the amount of Extra-Contractual Obligation and/or Loss Excess of Policy Limits that
shall be indemnified under this Article.

F. The Company shall be indemnified in accordance with this Article to the extent permitted by
applicable law.

ARTICLE 11

TERRORISM RECOVERY

A. As respects the Insured Losses of the Company for each Program Year, to the extent the Company’s
total reinsurance recoverables for Insured Losses, whether collected or not, when combined with the
financial assistance available to the Company under the Act exceeds the aggregate amount of Insured
Losses paid by the Company, less any other recoveries or reimbursements, (the “Excess Recovery”), a
share of the Excess Recovery shall be allocated to the Company and the Reinsurer. The Company’s
share of the Excess Recovery shall be deemed to be an amount equal to the proportion that the
Company’s Insured Losses bear to the Insurer’s total Insured Losses for each Program Year. The
Reinsurer’s share of the Excess Recovery shall be deemed to be an amount equal to the proportion
that the Reinsurer’s payment of Insured Losses under this Contract bears to the Company’s total
collected reinsurance recoverables for Insured Losses. The Company shall provide the Reinsurer with
all necessary data respecting the transactions covered under this Article.

B. The method set forth herein for determining an Excess Recovery is intended to be consistent with
the United States Treasury Department’s construction and application of Section 103 (g)(2) of the
Act. To the extent it is inconsistent, it shall be amended to conform with such construction and
application, nevertheless the Company shall be the sole judge as to the allocation of TRIA
Recoveries to this or to other reinsurance Contracts.

C. “Act” as used herein shall mean the Terrorism Risk Insurance Act of 2002, the Terrorism Risk
Insurance Extension Act of 2005, and the Terrorism Risk Insurance Program Reauthorization Act of
2007 (“TRIPRA”) and any subsequent amendment thereof or any
regulations promulgated thereunder. “Company” shall have the same meaning as “Insurer” under the
Act and “Insured Losses”, and “Program Year” shall follow the definitions as provided in the Act.

			
	 	 	 
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ARTICLE 12

NET RETAINED LINE

A. This Contract applies only to that portion of any insurance or reinsurance which the Company
retains net for its own account and, in calculating the amount of any loss hereunder and also in
computing the amount or amounts in excess of which this Contract attaches, only loss or losses in
respect of that portion of any insurance or reinsurance which the Company retains net for its own
account shall be included.

B. It is agreed, however, that the amount of the Reinsurers’ liability hereunder in respect of any
loss or losses shall not be increased by reason of the inability of the Company to collect from any
other Reinsurers, whether specific or general, any amounts which may have become due from them,
whether such inability arises from the insolvency of such other Reinsurers or otherwise.

C. Inter-company reinsurance among the companies collectively called the “Company” shall be
entirely disregarded for all purposes of this Contract.

D. Permission is hereby granted the Company to carry (i) underlying reinsurance and (ii) layers of
catastrophe reinsurance both below and above this layer of coverage and recoveries made on the
latter shall be disregarded for all purposes of this Contract and shall inure to the sole benefit
of the Company.

ARTICLE 13

NOTICE OF LOSS AND LOSS SETTLEMENT

A. The Company shall advise the Reinsurers promptly of all Loss Occurrences which, in the opinion
of the Company, may result in a claim hereunder and of all subsequent developments thereto which,
in the opinion of the Company, may materially affect the position of the Reinsurers. Inadvertent
omission or oversight in giving such notice shall in no way affect the liability of the Reinsurers.
However, the Reinsurers shall be informed of such omission or oversight promptly upon its
discovery.

B. Prompt notice shall be given to the Reinsurers by the Company on any Loss Occurrence wherein the
Company’s reserve exceeds fifty percent (50%) of the Company’s loss retention.

C. The Company shall have the right to settle all claims under its Policies. All loss settlements
made by the Company, whether under strict policy conditions or by way of compromise, that are the
Business Covered and that are not an ex-gratia settlement shall be final and binding subject to the
liability of the Company and the terms and conditions of this Contract. The Reinsurer shall follow
the liability of the Company (to the extent provided in this Contract) and shall pay or allow, as
the case may be, its share of each such settlement in accordance with this Contract all amounts for
which it is obligated as soon as possible, but not later than ten (10) business days, of being
furnished by the Company with reasonable evidence of the amount due. Reasonable evidence of the
amount due shall consist of a certification by the Company, accompanied by proof of loss
documentation the Company customarily presents with its claims payment requests, that the amount
requested to be paid and submitted by the certification, is, upon information and belief, due and
payable to the Company by the Reinsurers under the terms and conditions of this Contract.

			
	 	 	 
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ARTICLE 14

ERRORS AND OMISSIONS

     Inadvertent delays, errors or omissions made by the Company in connection with this Contract
shall not relieve the Reinsurer from any liability which would have attached had such error or
omission not occurred, provided always that such error or omission shall be rectified as soon as
possible, provided that the liability of the Reinsurer shall not extend beyond the coverage
provided by this Contract nor to extend coverage to Policies that are not the Business Covered
hereunder. This Article shall not apply to a sunset provision, if any in this Contract, nor to a
commutation made in connection with this Contract.

ARTICLE 15

OFFSET

     The Company and the Reinsurer shall have the right to offset any balance or amounts due from
one party to the other under the terms of this Contract. The party asserting the right of offset
may exercise such right any time whether the balances due are on account of premiums or losses or
otherwise and immediately inform the Intermediary accordingly. In the event of the insolvency of
any party, offset shall be as permitted by applicable law.

ARTICLE 16

CURRENCY

A. Whenever the word “Dollars” or the “$” sign appears in this Contract, they shall be construed to
mean United States Dollars and all transactions under this Contract shall be in United States
Dollars.

B. Amounts paid or received by the Company in any other currency shall be converted to United
States Dollars at the rate of exchange at the date such transaction is entered on the books of the
Company.

ARTICLE 17

FEDERAL EXCISE TAX AND OTHER TAXES

A. To the extent that any portion of the reinsurance premium for this Contract is subject to the
Federal Excise Tax (as imposed under Section 4371 of the Internal Revenue Code) and the Reinsurer
is not exempt therefrom, the Reinsurers shall allow for the purpose of paying the Federal Excise
Tax, a deduction by the Company of the applicable percentage of the premium payable hereon. In the
event of any return of premium becoming due hereunder, the Reinsurers shall deduct the applicable
same percentage from the return premium payable hereon and the Company or its agent shall take
steps to recover the tax from the United States Government. In the event of any uncertainty, upon
the written request of the Company, the Reinsurer will immediately file a certificate signed by a
senior corporate officer of the Reinsurer certifying to its entitlement to the exemption from the
Federal Excise Tax with respect to one or more transactions.

B. In consideration of the terms under which this Contract is issued, the Company undertakes not to
claim any deduction of the premium hereon when making Canadian Tax returns or when making tax
returns, other than Income or Profits Tax returns, to any State or Territory of the United States
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ARTICLE 18

ACCESS TO RECORDS

A. The Company shall place at the disposal of the Reinsurer at all reasonable times, and the
Reinsurer shall have the right to inspect (and make reasonable copies) through its designated
representatives during the term of this Contract and thereafter, all non-privileged books, records
and papers of the Company directly related to any reinsurance hereunder, or the subject matter
hereof, provided that if the Reinsurer has ceased active market operations, this right of access
shall be subject to that Reinsurer being current in all payments owed the Company that are not
currently the subject of a formal dispute (such as the initiation of an Arbitration or Mediation).
For the purposes of this Article, “non-privileged” refers to books, records and papers that are not
subject to the Attorney-client privilege and Attorney-work product doctrine.

B. “Attorney-client privilege” and “Attorney-work product” shall have the meanings ascribed to each
by statute and/or the court of final adjudication in the jurisdiction whose laws govern the
substantive law of a claim arising under a Policy reinsured under this Contract.

C. Notwithstanding anything to the contrary in this Contract, for any claim or loss under a Policy
reinsured under this Contract, should the Reinsurer assert, pursuant to the Common Interest
Doctrine (“Doctrine”), that it has the right to examine any document that the Company alleges is
subject to the Attorney-client privilege or the Attorney-work product privilege, upon the Reinsurer
providing to the Company substantiation of any law which reasonably supports the basis for the
Reinsurer’s conclusion that the Doctrine applies and the Doctrine will be upheld as applying
between the Company and the Reinsurer as against third parties pursuant to the substantive law(s)
which govern the claim or loss, the Company shall give the Reinsurer access to such document.

D. Notwithstanding any other provision to the contrary, once a claim and all directly related
claims are finally settled by the Company, the Reinsurer shall be entitled to review all reasonable
and applicable claims records that support a Company request for payment of a claim hereunder for
Net Loss for Business Covered hereunder. In the event that the Reinsurer shall have paid an amount
for Net Loss to the Company and the records do not support the obligation of the Reinsurer to have
paid the claim, the Company shall promptly return any payment made in error.

ARTICLE 19

INSOLVENCY 

(This Article shall be deemed to read as required to meet the statutory insolvency clause
requirements of the Company.)

A. In the event of insolvency or the appointment of a conservator, liquidator, or statutory
successor of the Company, the portion of any risk or obligation assumed by the Reinsurer shall be
payable to the conservator, liquidator, or statutory successor on the basis of claims allowed
against the insolvent Company by any court of competent jurisdiction or by any conservator,
liquidator, or statutory successor of the Company having authority to allow such claims, without
diminution because of that insolvency, or because the conservator, liquidator, or statutory
successor has failed to pay all or a portion of any claims.

B. Payments by the Reinsurer as above set forth shall be made directly to the Company or to its
conservator, liquidator, or statutory successor, except where this Contract specifically provides
another payee of such reinsurance or except as provided by applicable law and
regulation (such as subsection (a) of section 4118 of the New York Insurance Laws) in the event of
the insolvency of the Company.

C. In the event of the insolvency of the Company, the liquidator, receiver, conservator or
statutory successor of the Company shall give written notice to the Reinsurer of the pendency of

			
	 	 	 
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a claim against the insolvent Company on the Policy or Policies reinsured within a reasonable time
after such claim is filed in the insolvency proceeding and during the pendency of such claim any
Reinsurer may investigate such claim and interpose, at its own expense, in the proceeding where
such claim is to be adjudicated any defense or defenses which it may deem available to the Company
or its liquidator, receiver, conservator or statutory successor. The expense thus incurred by the
Reinsurer shall be chargeable subject to court approval against the insolvent Company as part of
the expense of liquidation to the extent of a proportionate share of the benefit which may accrue
to the Company solely as a result of the defense undertaken by the Reinsurer.

D. Where two (2) or more Reinsurers are involved in the same claim and a majority in interest elect
to interpose defense to such claim, the expense shall be apportioned in accordance with the terms
of this Contract as though such expense had been incurred by the Company.

ARTICLE 20

ARBITRATION 

A. Any and all disputes between the Company and the Reinsurer arising out of, relating to, or
concerning this Contract, whether sounding in contract or tort and whether arising during or after
termination of this Contract, shall be submitted to the decision of a Board of arbitration composed
of two (2) arbitrators and an umpire (“Board”) meeting at a site in the city in which the principal
headquarters of the Company are located. The arbitration shall be conducted under the Federal
Arbitration Act and shall proceed as set forth below.

B. A notice requesting arbitration, or any other notice made in connection therewith, shall be in
writing and be sent certified or registered mail, return receipt requested to the affected parties.
The notice requesting arbitration shall state in particulars all issues to be resolved in the view
of the claimant, shall appoint the arbitrator selected by the claimant and shall set a tentative
date for the hearing, which date shall be no sooner than ninety (90) days and no later than one
hundred fifty (150) days from the date that the notice requesting arbitration is mailed. Within
thirty (30) days of receipt of claimant’s notice, the respondent shall notify claimant of any
additional issues to be resolved in the arbitration and of the name of its appointed arbitrator.

C. The members of the Board shall be impartial, disinterested and not currently representing any
party participating in the arbitration, and shall be current or former senior officers of insurance
or reinsurance concerns, experienced in the line(s) of business that are the subject of this
Contract. The Company and the Reinsurer as aforesaid shall each appoint an arbitrator and the two
(2) arbitrators shall choose an umpire before instituting the hearing. As time is of the essence,
if the respondent fails to appoint its arbitrator within thirty (30) days after having received
claimant’s written request for arbitration, the claimant is authorized to and shall appoint the
second arbitrator. If the two (2) arbitrators fail to agree upon the appointment of an umpire
within thirty (30) days after notification of the appointment of the second arbitrator, within ten
(10) days thereof, the two (2) arbitrators shall request ARIAS U.S. (“ARIAS”) to apply its
procedures to appoint an umpire for the arbitration with the qualifications set forth above in this
Article. If the use of ARIAS procedures fails to name an umpire, either party may apply to a court
of competent jurisdiction to appoint an umpire with the above required qualifications. The umpire
shall promptly notify in writing all parties to the arbitration of his selection and of the
scheduled date for the hearing. Upon resignation or death of any member of the Board, a
replacement shall be appointed in the same fashion as the resigning or deceased member was
appointed.

D. The claimant and respondent shall each submit initial briefs to the Board outlining the facts,
the issues in dispute and the basis, authority, and reasons for their respective positions within
thirty (30) days of the date of notice of appointment of the umpire. The claimant and the
respondent may submit a reply brief to the Board within ten (10) days after filing of the initial
brief(s). Initial and reply briefs may be amended by the submitting party at any time, but not
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than ten (10) days prior to the date of commencement of the arbitration hearing. Reasonable
responses shall be allowed at the arbitration hearing to new material contained in any amendments
filed to the briefs but not previously responded to.

E. The Board shall make a decision and award with regard to the terms expressed in this Contract,
the original intentions of the parties to the extent reasonably ascertainable, and the custom and
usage of the insurance and reinsurance business that is the subject of this Contract.
Notwithstanding any other provision of this Contract, the Board shall have the right and obligation
to consider underwriting and submission-related documents in any dispute between the parties.

F. The Board shall be relieved of all judicial formalities and the decision and award shall be
based upon a hearing in which evidence shall be allowed though the formal rules of evidence shall
not strictly apply. Cross examination and rebuttal shall be allowed. The Board may request a
post-hearing brief to be submitted within twenty (20) days of the close of the hearing.

G. The Board shall render its decision and award in writing within thirty (30) days following the
close of the hearing or the submission of post-hearing briefs, whichever is later, unless the
parties consent to an extension. Every decision by the Board shall be by a majority of the members
of the Board and each decision and award by the majority of the members of the Board shall be final
and binding upon all parties to the proceeding. Such decision shall be a condition precedent to any
right of legal action arising out of the arbitrated dispute which either party may have against the
other. However, the Board is not authorized to award punitive, exemplary or enhanced compensatory
damages.

H. The Board may award (i) interest at a rate not in excess of that set forth in the Article
entitled LATE PAYMENTS, calculated from the date the Board determines that any amounts due
the prevailing party should have been paid to the prevailing party, and (ii) applicable Attorneys’
fees and costs.

I. Either party may apply to a court of competent jurisdiction for an order confirming any decision
and the award; a judgment of that Court shall thereupon be entered on any decision or award. If
such an order is issued, the Attorneys’ fees of the party so applying and court costs will be paid
by the party against whom confirmation is sought.

J. Except in the event of a consolidated arbitration, each party shall bear the expense of the one
arbitrator appointed by or for it and shall jointly and equally bear with the other party the
expense of any stenographer requested, and of the umpire. The remaining costs of the arbitration
proceedings shall be finally allocated by the Board.

K. Subject to customary and recognized legal rules of privilege, each party participating in the
arbitration shall have the obligation to produce those documents and as witnesses at the
arbitration those of its employees, and those of its affiliates as any other participating party
reasonably requests, providing always that the same witnesses and documents be obtainable and
relevant to the issues before the arbitration and not be unduly burdensome or excessive in the
opinion of the Board.

L. The parties may mutually agree as to pre-hearing discovery prior to the arbitration hearing and
in the absence of agreement, upon the request of any party, pre-hearing discovery may be conducted
as the Board shall determine in its sole discretion to be in the interest of fairness, full
disclosure, and a prompt hearing, decision and award by the Board.

			
	 	 	 
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M. The Board shall be the final judge of the procedures of the Board, the conduct of the arbitration,
of the rules of evidence, the rules of privilege, discovery and production and of excessiveness and
relevancy of any witnesses and documents upon the petition of any participating party. To the
extent permitted by law, the Board shall have the authority to issue subpoenas and other orders to
enforce their decisions. The Board shall also have the authority to issue interim decisions or
awards in the interest of fairness, full disclosure, and a prompt and orderly hearing and decision
and award by the Board.

N. Upon request made to the Board not later than ten (10) days after the umpire’s appointment, the
Board may order a consolidated hearing as respects common issues between the Company and all
affected Reinsurers participating in this Contract if the Board is satisfied in its discretion that
the issues in dispute affect more than one Reinsurer and a consolidated hearing would be in the
interest of fairness, and a prompt and cost effective resolution of the issues in dispute.

O. If the parties mutually agree to or the Board orders a consolidated hearing, all other affected
participating Reinsurers shall join and participate in the arbitration under time frames
established by the Board and will be bound by the Board’s decision and award unless excused by the
Board in its discretion. A consolidated hearing shall not result in any change or modification of
any Reinsurer’s liability for its participation, that is several, but not joint shall remain the
same.

P. Any Reinsurer may decline to actively participate in a consolidated arbitration if in advance of
the hearing, that Reinsurer shall file with the Board a written agreement in form satisfactory to
the Board to be bound by the decision and award of the Board in the same fashion and to the same
degree as if it actively participated in the arbitration.

Q. In the event of an order of consolidation by the Board, the arbitrator appointed by the original
Reinsurer shall be subject to being, and may be, replaced within thirty (30) days of the decision
to have a consolidated arbitration by an arbitrator named collectively by the Reinsurers or in the
absence of agreement, by the Lead Reinsurer, or if there is no Lead Reinsurer involved in the
dispute, the Reinsurer with the largest participation in this Contract affected by the dispute. In
the event two (2) or more Reinsurers affected by the dispute each have the same largest
participation, they shall agree among themselves as to the replacement arbitrator, if any, to be
appointed. The umpire shall be the final determiner in the event of any dispute over replacement of
that arbitrator. All other aspects of the arbitration shall be conducted as provided for in this
Article provided that (1) each party actively participating in the consolidated arbitration will
have the right to its own attorney, position, and related claims and defenses; (2) each party will
not, in presenting its position, be prevented from presenting its position by the position set
forth by any other party; and (3) the cost and expense of the arbitration, exclusive of Attorneys’
fees (which will be borne exclusively by the respective retaining party unless otherwise determined
by the Board) but including the expense of any stenographer which shall be borne by each party
actively participating in the consolidated arbitration or as the Board shall determine to be fair
and appropriate under the circumstances.

ARTICLE 21

SERVICE OF SUIT

A. This Article only applies to a Reinsurer domiciled outside of the United States and/or
unauthorized in any state, territory or district of the United States having jurisdiction over the
Company. Furthermore, this Article will not be read to conflict with or override any obligations of
the parties to arbitrate their disputes under this Contract. This Article is intended as an aid to
compelling arbitration if called for by this Contract or enforcing any such arbitration or arbitral
award, not as an alternative to any Arbitration provision in this Contract that is applicable for
resolving disputes arising out of this Contract.

			
	 	 	 
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B. In the event of any dispute, the Reinsurer, at the request of the Company, shall submit to the
jurisdiction of a court of competent jurisdiction within the United States. Nothing in this Article
constitutes or should be understood to constitute a waiver of any obligation to arbitrate disputes
arising from this Contract or the Reinsurer’s rights to commence an action in any court of
competent jurisdiction in the United States, to remove an action to a United States District Court,
or to seek a transfer of a case to another court as permitted by the laws of the United States or
of any state in the United States.

C. The Reinsurer, once the appropriate court is selected, whether such court is the one originally
chosen by the Company and accepted by the Reinsurer or is determined by removal, transfer, or
otherwise, as provided above, will comply with all requirements necessary to give said court
jurisdiction and, in any suit instituted against any of them upon this Contract, will abide by the
final decision of such court or any appellate court in the event of an appeal.

D. Service of process in any such suit against the Reinsurer may be made upon Mendes and Mount, 750
Seventh Avenue, New York, New York 10019-6829, — or in substitution therefore, the Firm identified
by the Reinsurer on the Reinsurer’s signature page to this Contract, — (“Firm”) and in any suit
instituted, the Reinsurer shall abide by the final decision of such court or of any appellate court
in the event of an appeal.

E. The Firm is authorized and directed to accept service of process on behalf of the Reinsurer in
any such suit and/or upon the request of the Company to give a written undertaking to the Company
that they shall enter a general appearance upon the Reinsurer’s behalf in the event such a suit
shall be instituted.

F. Further, as required by and pursuant to any statute of any state, territory or district of the
United States which makes provision therefore, the Reinsurer hereby designates the Superintendent,
Commissioner or Director of Insurance or other officer specified for that purpose in the statute,
or his successor or successors in office, as their true and lawful attorney upon whom may be served
any lawful process in any action, suit or proceeding instituted by or on behalf of the Company or
any beneficiary hereunder arising out of this Contract, and hereby designates the above-named as
the person to whom the said officer is authorized to mail such process or a true copy thereof.

ARTICLE 22

CONFIDENTIALITY

A. The information, data, statements, representations and other materials provided by the Company
or the Reinsurer to the other arising from consideration and participation in this Contract whether
contained in the reinsurance submission, this Contract, or in materials or discussions arising from
or related to this Contract, may contain confidential or proprietary information as expressly
indicated by the Disclosing Party (“Disclosing Party”) in writing from time to time to the other
party of the respective parties (“Confidential Information”). This Confidential Information is
intended for the sole use of the parties to this Contract (and their affiliates involved in
management or operation of assumed reinsurance business, retrocessionaires, prospective
retrocessionaires, intermediaries involved in such placements, respective auditors and legal
counsel) as may be necessary in analyzing and/or accepting a participation in and/or executing
their respective responsibilities under or related to this Contract. Disclosing or using
Confidential Information relating to this Contract, without the prior written consent of the
Disclosing Party, for any purpose beyond (i) the scope of this Contract, (ii) the reasonable extent
necessary to perform rights and responsibilities expressly provided for under this Contract, (iii)
the reasonable extent necessary to administer, report to and effect recoveries from retrocessional
Reinsurers, (iv) the reporting to regulatory or other governmental authorities as may be legally
required or (v) persons with a need to know the information, (all of the preceding persons or
entities who are legally obligated by either written agreement or

			
	 	 	 
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otherwise to maintain the confidentiality of the Confidential Information) is expressly forbidden.
Copying, duplicating, disclosing, or using Confidential Information for any purpose beyond this
expressed purpose is forbidden without the prior written consent of the Disclosing Party.

B. Should a party (“Receiving Party”) receive a third party demand pursuant to subpoena, summons,
or court or governmental order, to disclose Confidential Information that has been provided by
another party to this Contract, the Receiving Party shall make commercially reasonable efforts to
provide the Disclosing Party with written notice of any subpoena, summons, or court or governmental
order, at least ten (10) days prior to such release or disclosure. Unless the Disclosing Party has
given its prior permission to release or disclose the Confidential Information, the Receiving Party
shall not comply with the subpoena prior to the actual date required by the subpoena. If a
protective order or appropriate remedy is not obtained, the Receiving Party may disclose only that
portion of the Confidential Information that it is legally obligated to disclose. However,
notwithstanding anything to the contrary in this Contract, in no event, to the extent permitted by
law, shall this Article require the Receiving Party not to comply with the subpoena, summons, or
court or governmental order.

ARTICLE 23

PRIVACY

A. Privacy Awareness. The Company and the Reinsurer are aware of and in compliance with
their responsibilities and obligations under:

1. The Gramm-Leach-Bliley Act of 1999 (the “Act”) and applicable Federal and State laws and
regulations implementing the Act. The Company and the Reinsurer will only use Non-Public
Personal Information as permitted by law; and

2. The applicable provisions of the Health Insurance Portability and Accountability Act
(“HIPAA”) and the related requirements of any regulations promulgated thereunder including
without limitation the Federal Privacy Regulations as contained in 45 CFR Part 160 and 164
(the “Federal Privacy Regulations”). The Company and the Reinsurer will only use protected
health information as permitted by law.

B. Non-Disclosure. To the extent required or prohibited by applicable law or regulation,
the Reinsurer shall not disclose any (a) Non-Public Personal Information or (b) protected health
information (as defined in 45 CFR 164.501) it receives from the Company to anyone other
than:

1. The Reinsurer, the Reinsurer’s affiliates, legal counsel, auditors, consultants,
regulators, rating agencies and any other persons or entities to whom such disclosure is
required to effect, administer, or enforce a reinsurance contract; or any retrocessional
reinsurance contract applicable to the losses that are the subject of this Contract, or

2. Persons or entities to whom disclosure is required by applicable law or regulation.

C. Non-Public Personal Information. “Non-Public Personal Information” shall for the purpose
of this Contract mean financial or health information that personally identifies an individual,
including claimants under Policies reinsured under this Contract, and which information is not
otherwise available to the public.

ARTICLE 24

RESERVES

A. If, at any time during the period of this Contract and thereafter the reinsurance provided by a
Reinsurer participating in this Contract does not qualify for full statutory accounting credit for
reinsurance by regulatory authorities having jurisdiction over the Company (whether by

			
	 	 	 
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reason of lack of license, accreditation or otherwise) such that a financial penalty to the Company would
result on any statutory statement or report the Company is required to make or file with insurance
regulatory authorities (or a court of law in the event of insolvency), the Reinsurer shall secure
the Reinsurer’s share of Obligations for which such full statutory credit is not granted by those
authorities in a manner, form, and amount acceptable to the Company and to all applicable insurance
regulatory authorities in accordance with this Article.

B. The Reinsurer shall secure such Obligations, within thirty (30) days after the receipt of the
Company’s written request regarding the Reinsurer’s share of Obligations under this Contract (but
not later than December 31) of each year by either:

1. Clean, irrevocable, and unconditional evergreen letter(s) of credit issued and
confirmed, if confirmation is required by the applicable insurance regulatory authorities,
by a qualified United States financial institution as defined under the Insurance Law of
the Company’s domiciliary state and acceptable to the Company and to insurance regulatory
authorities;

2. A trust account meeting at least the standards of New York’s Insurance Regulation 114
and the Insurance Law of the Company’s domiciliary state; or

3. Cash advances or funds withheld or a combination of both, which will be under the
exclusive control of the Company (“Funds Deposit”).

C. The “Obligations” referred to herein means, subject to the preceding paragraphs, the then
current (as of the end of each calendar quarter) sum of any:

1. amount of the ceded unearned premium reserve for which the Reinsurer is responsible to
the Company;

2. amount of Net Losses and Loss Adjustment Expenses and other amounts paid by the Company
for which the Reinsurer is responsible to the Company but has not yet paid;

3. amount of ceded reserves for Net Losses and Loss Adjustment Expenses for which the
Reinsurer is responsible to the Company;

4. amount of return and refund premiums paid by the Company for which the Reinsurer is
responsible to the Company but has not yet paid.

D. The Company, or its successors in interest, may draw, at any time and from time to time, upon
the:

1. Established letter of credit (or subsequent cash deposit);

2. Established trust account (or subsequent cash deposit); or

3. Funds Deposit;

without diminution or restriction because of the insolvency of either the Company or the Reinsurer
for one or more of the following purposes set forth below.

			
	 	 	 
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E. Draws shall be made only for the following purposes:

1. To make payment to and reimburse the Company for the Reinsurer’s share of Net Loss and
Loss Adjustment Expense and other amounts paid by the Company under its Policies and for
which the Reinsurer is responsible under this Contract that is due to the Company but
unpaid by the Reinsurer including but not limited to the Reinsurer’s share of premium
refunds and returns; and

2. To obtain a cash advance of the entire amount of the remaining balance under any letter
of credit in the event that the Company:

a. has received notice of non-renewal or expiration of the letter of credit or
trust account;

b. has not received assurances satisfactory to the Company of any required increase
in the amount of the letter of credit or trust account, or its replacement or other
continuation of the letter of credit or trust account at least thirty (30) days
before its stated expiration date;

c. has been made aware that others may attempt to attach or otherwise place in
jeopardy the security represented by the letter of credit or trust account; or

d. has concluded that the trustee or issuing (or confirming) bank’s financial
condition is such that the value of the security represented by the letter of
credit or trust account may be in jeopardy;

and under any of those circumstances where the Reinsurer’s entire Obligations, or part
thereof, under this Contract remain unliquidated and undischarged at least thirty (30) days
prior to the stated expiration date or at the time the Company learns of the possible
jeopardy to the security represented by the letter of credit or trust account.

F. If the Company draws on the letter of credit or trust account to obtain a cash advance, the
Company will hold the amount of the cash advance so obtained in the name of the Company in any
qualified United States financial institution as defined under the Insurance Law of the Company’s
domiciliary state in trust solely to secure the Obligations referred to above and for the use and
purposes enumerated above and to return any balance thereof to the Reinsurer:

1. Upon the complete and final liquidation and discharge of all of the Reinsurer’s
Obligations to the Company under this Contract; or

2. In the event the Reinsurer subsequently provides alternate or replacement security
consistent with the terms hereof and acceptable to the Company.

G. The Company will prepare and forward at annual intervals or more frequently as determined by the
Company, but not more frequently than quarterly to the Reinsurer a statement for the purposes of
this Article, showing the Reinsurer’s share of Obligations as set forth above. If the Reinsurer’s
share thereof exceeds the then existing balance of the security provided, the Reinsurer will,
within fifteen (15) days of receipt of the Company’s statement, but never later than December 31 of
any year, increase the amount of the letter of credit, (or subsequent cash deposit), trust account
or Funds Deposit to the required amount of the Reinsurer’s share of Obligations set forth in the
Company’s statement, but never later than December 31 of any year. If the Reinsurer’s share thereof
is less than the then existing balance
of the security provided, the Company will release the excess thereof to the Reinsurer upon the
Reinsurer’s written request. The Reinsurer will not attempt to prevent the Company from holding the
security provided or Funds Deposit so long as the Company is acting in accordance with this
Article. The Company shall pay interest earned on the deposited amounts to the Reinsurers as the
parties shall have agreed at the time of the deposit.

			
	 	 	 
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H. Any assets deposited to a trust account will be valued according to their current fair market
value and will consist only of cash (U.S. legal tender), certificates of deposit issued by a
qualified United States financial institution as defined under the Insurance Law of the Company’s
domiciliary state and payable in cash, and investments of the types no less conservative than those
specified in Section 1404 (a)(1)(2)(3)(8) and (10) of the New York Insurance Law and which are
admitted assets under the Insurance Law of the Company’s domiciliary state. Investments issued by
the parent, subsidiary, or affiliate of either the Company or the Reinsurer will not be eligible
investments. All assets so deposited will be accompanied by all necessary assignments, endorsements
in blank, or transfer of legal title to the trustee in order that the Company may negotiate any
such assets without the requirement of consent or signature from the Reinsurer or any other entity.

I. All settlements of account between the Company and the Reinsurer will be made in cash or its
equivalent. All income earned and received by the amount held in an established trust account will
be added to the principal.

J. The Company’s “successors in interest” will include those by operation of law, including without
limitation, any liquidator, rehabilitator, receiver, or conservator.

K. The Reinsurer will take any other reasonable steps that may be required for the Company to take
full credit on its statutory financial statements for the reinsurance provided by this Contract.

ARTICLE 25

LATE PAYMENTS

A. Payments from the Reinsurer to the Company for coverage providing pro rata forms of reinsurance
shall have a due date as expressed in the Article entitled NOTICE OF LOSS AND LOSS
SETTLEMENT. Payments from the Reinsurer to the Company for coverage providing excess of loss
reinsurance shall have as a due date the date on which the proof of loss or demand for payment is
received by the Reinsurer. Payment not received within sixty (60) days of the due date shall be
deemed overdue (the “Overdue Date”). Payments due from the Reinsurer to the Company will not be
considered overdue if the Reinsurer requests, in writing, that such payment be made by drawing on a
letter of credit or other similar method of funding that has been established for this Contract,
provided that there is an adequate balance in place, and further provided that such advice to draw
is received by the Company within the sixty (60) day deadline set forth above. Payments from the
Company to the Reinsurer will have a due date as the date specified in this Contract and will be
overdue sixty (60) days thereafter. Premium adjustments will be overdue sixty (60) days from the
Contract due date or one hundred twenty (120) days after the expiration or renewal date, whichever
is greater.

B. In the event that this Contract provides excess of loss reinsurance, the Company will provide
the Reinsurer with a reasonable proof of loss and a copy of the claim adjuster’s report(s) or any
other reasonable evidence of indemnification. If subsequent to receipt of this evidence, the
information contained therein is unreasonably insufficient or not in substantial accordance with
the contractual conditions of this Contract, then the payment due date as specified above will be
deemed to be the date upon which the Reinsurer received the additional information necessary to
approve payment of the claim and the claim is presented in a reasonably acceptable manner. This
paragraph is only for the purpose of establishing when a
claim payment is overdue, and will not alter the provisions of the Article entitled NOTICE OF
LOSS AND LOSS SETTLEMENT or other pertinent contractual stipulations of this Contract.

C. If payment is made of overdue amounts within thirty (30) days of the Overdue Date, overdue
amounts will bear simple interest from the Overdue Date at a rate determined by the annualized one
month London Interbank Offered Rate for the first business day of the calendar month in which the
amount becomes overdue, as published in The Wall Street Journal, plus two hundred (200)
basis points to be calculated weekly. If payment is made of overdue amounts

			
	 	 	 
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more than thirty (30)
days after the Overdue Date, overdue amounts will bear simple interest from the Overdue Date at a
rate determined by the annualized one month London Interbank Offered Rate for the first business
day of the calendar month in which the amount becomes overdue, as published in The Wall Street
Journal, plus four hundred (400) basis points to be calculated on a weekly basis, but in no
event less than eight percent (8%) simple interest. If the sum of the compensating additional
amount computed in respect of any overdue payment is less than one quarter of one percent (0.25%)
of the amount overdue, or one thousand dollars ($1,000), whichever is greater, and/or the overdue
period is one week or less, then the interest amount shall be waived. The basis point standards
referred to above shall be doubled if the late payment is due from a Reinsurer who is no longer an
active reinsurance market. Interest shall cease to accrue upon the party’s payment of an overdue
amount to the Intermediary.

ARTICLE 26

MODE OF EXECUTION

A. This Contract may be executed by:

1. an original written ink signature of paper documents;

2. an exchange of facsimile copies showing the original written ink signature of paper
documents;

3. electronic signature technology employing computer software and a digital signature or
digitizer pen pad to capture a person’s handwritten signature in such a manner that the
signature is unique to the person signing, is under the sole control of the person signing,
is capable of verification to authenticate the signature and is linked to the document
signed in such a manner that if the data is changed, such signature is invalidated.

B. The use of any one or a combination of these methods of execution shall constitute a legally
binding and valid signing of this Contract.

ARTICLE 27

VARIOUS OTHER TERMS

A. This Contract shall be binding upon and inure to the benefit of the Company and Reinsurer and
their respective successors and assigns provided, however, that this Contract may not be assigned
by either party without the prior written consent of the other which consent may be withheld by
either party in its sole unfettered discretion. This provision shall not be construed to preclude
the assignment by the Company of reinsurance recoverables to another party for collection.

B. The territorial limits of this Contract shall be identical with those of the Company’s Policies.

C. This Contract shall constitute the entire agreement between the parties with respect to the
Business Covered hereunder. There are no understandings between the parties other than as expressed
in this Contract. Any change or modification of this Contract shall be null and void unless made by
amendment to the Contract and signed by both parties.

D. Except as may be provided in the Article entitled ARBITRATION, this Contract shall be governed
by and construed according to the laws of the Commonwealth of Pennsylvania, exclusive of that
state’s rules with respect to conflicts of law.

			
	 	 	 
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E. The headings preceding the text of the Articles and paragraphs of this Contract are intended and
inserted solely for the convenience of reference and shall not affect the meaning, interpretation,
construction or effect of this Contract.

F. This Contract is solely between the Company and the Reinsurer, and in no instance shall any
insured, claimant or other third party have any rights under this Contract.

G. If any provision of this Contract should be invalid under applicable laws, the latter shall
control but only to the extent of the conflict without affecting the remaining provisions of this
Contract.

H. The failure of the Company or Reinsurer to insist on strict compliance with this Contract or to
exercise any right or remedy shall not constitute a waiver of any rights contained in this Contract
nor estop the parties from thereafter demanding full and complete compliance nor prevent the
parties from exercising any remedy.

I. Each party shall be excused for any reasonable failure or delay in performing any of its
respective obligations under this Contract, if such failure or delay is caused by Force Majeure.
“Force Majeure” shall mean any act of God, strike, lockout, act of public enemy, any accident,
explosion, fire, storm, earthquake, flood, drought, peril of sea, riot, embargo, war or foreign,
federal, state or municipal order or directive issued by a court or other authorized official,
seizure, requisition or allocation, any failure or delay of transportation, shortage of or
inability to obtain supplies, equipment, fuel or labor or any other circumstance or event beyond
the reasonable control of the party relying upon such circumstance or event; provided, however,
that no such Force Majeure circumstance or event shall excuse any failure or delay beyond a period
exceeding thirty (30) days from the date such performance would have been due but for such
circumstance or event.

J. All Articles of this Contract shall survive the termination of this Contract until all
Obligations between the parties have been finally settled.

K. This Contract may be executed by the parties hereto in any number of counterparts, and by each
of the parties hereto in separate counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.

L. Whenever the word “Company” is used in this Contract, such term shall mean each and all
affiliated companies which are or may hereafter be under common control provided notice be given to
the Reinsurers of any newly affiliated companies which may hereafter come under common control as
soon as practicable, with full particulars as to how such affiliation is likely to affect this
Contract. In the event that either party maintains that such affiliation calls for altering the
terms of this Contract and an agreement for alteration not being arrived at, then the Business
Covered of such newly affiliated company is covered at existing terms for a period not to exceed
(90) ninety days after notice by either party that it does not wish to cover the business of the
newly affiliated company at the existing terms.

M. The term “Reinsurer” shall refer to each Reinsurer participating severally and not jointly in
this Contract. The subscribing (Re)insurers’ obligations under contracts of (re)insurance to which
they subscribe are several and not joint and are limited solely to the extent of their individual
subscriptions. The subscribing (Re)insurers are not responsible for the subscription of any
co-subscribing (Re)insurer who for any reason does not satisfy all or part of its obligations.

N. For purposes of sending and receiving notices and payments required by this Contract other than
in respect of the Articles entitled SERVICE OF SUIT and RESERVES herein, the
reinsured company that is set forth first in the definition of “Company” is deemed the agent of
all other reinsured companies referenced herein. In no event, however, shall any reinsured

			
	 	 	 
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company be deemed the agent of another with respect to the terms of the Article entitled
INSOLVENCY.

O. Whenever the content of this Contract requires, the gender of all words shall include the
masculine, feminine and neuter, and the number of all words shall include the singular and the
plural. This Contract shall be construed without regard to any presumption or other rule requiring
construction against the party causing this Contract to be drafted.

P. The Company shall furnish the Reinsurer, in accordance with regulatory requirements, periodic
reporting of premiums and losses that relate to the Business Covered in this Contract as may be
needed for Reinsurers’ completion of financial statements to regulatory authorities.

Q. When so requested in writing, the Company shall afford the Reinsurer or its representatives an
opportunity to be associated with the Company, at the expense of the Reinsurer, in the defense of
any claim, suit or proceeding involving this reinsurance, and the Company and the Reinsurer shall
cooperate in every respect in the defense of such claim, suit or proceeding, provided the Company
shall have the right to make any decision in the event of disagreement over any matter of defense
or settlement.

ARTICLE 28

INTERMEDIARY 

A. Towers Watson Pennsylvania Inc. (“Towers Watson”) is hereby recognized as the Intermediary
negotiating this Contract for all business hereunder. All communications (including but not limited
to notices, statements, premium, return premium, commissions, taxes, losses, loss adjustment
expense, salvages and loss settlements) relating thereto shall be transmitted to the Company or the
Reinsurer through Towers Watson, Centre Square East, 1500 Market Street, Philadelphia,
Pennsylvania, 19102-4790. Payments by the Company to the Intermediary shall be deemed to constitute
payment to the Reinsurer. Payments by the Reinsurer to the Intermediary shall be deemed to
constitute payment to the Company only to the extent that such payments are actually received by
the Company. In acting as Intermediary for this Contract, the Intermediary shall (i) comply with
all aspects of New York Regulation 98 and shall (ii) be entitled to withdraw funds in accordance
with section 32.3(a)(3) of that Regulation including commissions, excise tax and interest received
on its premium and loss accounts, and shall also (iii) return to the Reinsurer any brokerage
allowed by the Reinsurer and taken on premium ceded to the Reinsurer but refunded or returned to
the Company.

B. Whenever notice is required within this Contract, such notice may be given by certified mail,
registered mail, or overnight express mail. Notice shall be deemed to be given on the date received
by the receiving party.

			
	 	 	 
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NUCLEAR INCIDENT EXCLUSION CLAUSE — PHYSICAL DAMAGE — REINSURANCE

(BRMA 35B)

	1.	 	This reinsurance does not cover any loss or liability accruing to the Company, directly or
indirectly, and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers
formed for the purpose of covering Atomic or Nuclear Energy risks.
	 
	2.	 	Without in any way restricting the operation of paragraph (1) of this Clause, this
reinsurance does not cover any loss or liability accruing to the Company, directly or
indirectly, and whether as Insurer or Reinsurer, from any insurance against Physical Damage
(including business interruption or consequential loss arising out of such Physical Damage)
to:

	 	I.	 	Nuclear reactor power plants including all auxiliary property on the site, or
	 
	 	II.	 	Any other nuclear reactor installation, including laboratories handling
radioactive materials in connection with reactor installations and “critical
facilities” as such, or
	 
	 	III.	 	Installations for fabricating complete fuel elements or for processing
substantial quantities of “special nuclear material” and for reprocessing, salvaging,
chemically separating, storing or disposing of “spent” nuclear fuel or waste
materials, or
	 
	 	IV.	 	Installations other than those listed in paragraph (2) III above using
substantial quantities of radioactive isotopes or other products of nuclear fission.

	3.	 	Without in any way restricting the operations of paragraphs (1) and (2) hereof, this
reinsurance does not cover any loss or liability by radioactive contamination accruing to the
Company, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on
property which is on the same site as a nuclear reactor power plant or other nuclear
installation and which normally would be insured therewith except that this paragraph (3)
shall not operate:

	 	(a)	 	where Company does not have knowledge of such nuclear reactor
power plant or nuclear installation, or
	 
	 	(b)	 	where said insurance contains a provision excluding coverage
for damage to property caused by or resulting from radioactive contamination,
however caused. However, on and after 1st January 1960, this sub-paragraph (b)
shall only apply provided the said radioactive contamination exclusion
provision has been approved by the Governmental Authority having jurisdiction
thereof.

	4.	 	Without in any way restricting the operations of paragraphs (1), (2) and (3) hereof, this
reinsurance does not cover any loss or liability by radioactive contamination accruing to the
Company, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive
contamination is a named hazard specifically insured against.
	 
	5.	 	It is understood and agreed that this Clause shall not extend to risks using radioactive
isotopes in any form where the nuclear exposure is not considered by the Company to be the
primary hazard.
	 
	6.	 	The term “special nuclear material” shall have the meaning given it in the Atomic Energy Act
of 1954 or by any law amendatory thereof.
	 
	7.	 	Company to be sole judge of what constitutes:

	 	(a)	 	substantial quantities, and
	 
	 	(b)	 	the extent of installation, plant or site.

			
	Notes:	 	Without in any way restricting the operation of paragraph (1) hereof, it is understood and
agreed that:

	 	(a)	 	All Policies issued by the Company on or before 31st December 1957 shall be
free from the application of the other provisions of this Clause until expiry date or
31st December 1960 whichever first occurs whereupon all the provisions of this Clause
shall apply.
	 
	 	(b)	 	With respect to any risk located in Canada Policies issued by the Company on
or before 31st December 1958 shall be free from the application of the other
provisions of this Clause until expiry date or 31st December 1960 whichever first
occurs whereupon all the provisions of this Clause shall apply.

			
	 	 	 
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INFORMATION TECHNOLOGY HAZARDS CLARIFICATION CLAUSE

Losses arising directly or indirectly, out of:

	 	(i)	 	loss of, alteration of, or damage to

	 	 	or

	 	(ii)	 	a reduction in the functionality, availability or operation of
	 
	 	 	 	a computer system, hardware, program, software, data, information repository,
microchip, integrated circuit or similar device in computer equipment or
non-computer equipment, whether the property of the policyholder of the reinsured
or not, do not in and of themselves constitute an event unless arising out of one
or more of the following perils:

	 	 	 	fire, lightning, explosion, aircraft or vehicle impact, falling objects,
windstorm, hail, tornado, cyclone, hurricane, earthquake, volcano,
tsunami, flood, freeze or weight of snow.

23/11/00

NMA2912

			
	 	 	 
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EXHIBIT I — Page 1.

TW No. G25573.11

EXHIBIT I

PROPERTY FIRST EXCESS OF LOSS REINSURANCE CONTRACT

EFFECTIVE JANUARY 1, 2011

issued to

PENN MILLERS INSURANCE COMPANY

AMERICAN MILLERS INSURANCE COMPANY

ARTICLE 5

RETENTION AND LIMIT

A. The Reinsurers shall be liable to, indemnify and reinsure the Company for each and every Risk,
in each and every Loss Occurrence for one hundred percent (100%) of the excess Net Loss above an
initial Net Loss to the Company of one million dollars ($1,000,000) but the Reinsurers shall not be
liable for more than four million dollars ($4,000,000) of Net Loss in each and every Risk, in each
and every Loss Occurrence, nor shall Reinsurers be liable for more than eight million dollars
($8,000,000) of Net Loss in excess loss from any one Loss Occurrence.

B. The Reinsurers shall be liable to, indemnify and reinsure the Company for each and every Risk,
each and every Loss Occurrence, involving a certified or non certified Act of Terrorism,
irrespective of the number and kinds of perils involved, for one hundred percent (100%) of the
excess Net Loss above an initial Net Loss to the Company of one million dollars ($1,000,000) each
and every Risk; but the Reinsurers shall not be liable for more than four million dollars
($4,000,000) of Net Loss for each and every Risk, and not more than four million dollars
($4,000,000) of Net Loss during the term of this Contract.

C. Coverage for loss caused by Mold, as defined within the terms of the Company’s Policy, shall be
limited to an annual amount not to exceed eight hundred thousand dollars ($800,000), namely twenty
percent (20%) of the layer limit.

D. The Company shall be the sole judge of what constitutes “one risk” and the Probable Maximum Loss
applicable to such risk.

E. An “Act of Terrorism” shall mean any act, including both Certified Acts of Terrorism in
accordance with the Terrorism Risk Insurance Act of 2002 (“TRIA”), the Terrorism Risk Insurance
Extension Act of 2005 (“TRIEA”) and the Terrorism Risk Insurance Program Reauthorization Act of
2007 (“TRIPRA”) and any subsequent extension and those not so certified, or preparation in respect
of action, or threat of action designed to influence the government de jure or de facto of any
nation or any political division thereof, or in pursuit of any political, religious, ideological,
or similar purpose to intimidate the public or a section of the public of any nation by any person
or group(s) of persons whether acting alone or on behalf of or in connection with any
organization(s) or government(s) de jure or de facto, and which:

	 	1.	 	involves violence against one or more persons; or
	 
	 	2.	 	involves damage to property; or
	 
	 	3.	 	endangers life other than that of the person committing the action; or
	 
	 	4.	 	creates a risk to health or safety of the public or a section of the public; or

			
	 	 	 
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EXHIBIT I — Page 2.

TW No. G25573.11

	 	5.	 	is designed to interfere with or to disrupt an electronic system; or
	 
	 	6.	 	involves loss, damage, cost, or expense directly or indirectly caused by, contributed to
by, resulting from, or arising out of or in connection with any action in controlling,
preventing, suppressing, retaliating against, or responding to any Act of Terrorism.

Loss or damage occasioned by riot, strikes, civil commotion, vandalism or malicious mischief as
those terms have been interpreted by United States Courts to apply to insurance Policies shall not
be construed to be an “Act of Terrorism”.

ARTICLE 6

REINSTATEMENT

A. Each claim hereunder shall reduce the amount of the Reinsurers’ limit of liability from the time
of the occurrence of the loss by the sum paid, but the sum so exhausted shall be reinstated
immediately from the time of the occurrence of the Loss.

B. For the first four million dollars ($4,000,000) so reinstated, there shall be no additional
premium. For the next four million dollars ($4,000,000) so reinstated thereafter, there shall be no
additional premium. For the next four million dollars ($4,000,000) so reinstated thereafter, the
Company agrees to pay an additional premium calculated by multiplying one hundred percent (100%) of
the annual reinsurance premium hereon by the product of the percentage that the amount reinstated
bears to the limit (i.e., four million dollars ($4,000,000)) of this Contract. Nevertheless, the
liability of the Reinsurers shall never be more than four million dollars ($4,000,000) in respect
of any one Loss, eight million dollars ($8,000,000) in respect of any one Loss Occurrence, nor more
than sixteen million dollars ($16,000,000) in all in respect of all losses occurring during the
Contract period.

C. A provisional statement of reinstatement premium due the Reinsurers shall be prepared by the
Company and submitted to the Reinsurers as soon as practicable after payment of a claim hereunder.
The provisional reinstatement premium shall be based on one hundred percent (100%) of the estimated
annual reinsurance premium hereunder. The amount of reinstatement premium due Reinsurers shall be
offset against the loss payment due the Company with only the net amount due to be remitted by the
debtor party.

D. As promptly as possible after the annual reinsurance premium hereunder has been finally
determined, the Company shall prepare and submit to the Reinsurers a final statement of
reinstatement premium due. Any reinstatement premium shown to be due the Reinsurers (less prior
payments, if any) shall be remitted by the Company with its statement. Any return reinstatement
premium shown to be due the Company shall be remitted by the Reinsurers as promptly as possible
after receipt of the Company’s final statement.

E. In the event there are any mid-term terminations in the participation of any Reinsurer in this
Contract, payment of any such reinstatement premium in full shall be paid to the Reinsurer who
incurred the loss that generates the reinstatement premium.

ARTICLE 7

PREMIUM

A. The premium payable to Reinsurers shall be calculated by applying a rate of thirteen point two
zero percent (13.20%) to the Company’s Subject Matter Premium Income.

			
	 	 	 
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EXHIBIT I — Page 3.

TW No. G25573.11

B. The term “Subject Matter Premium Income” shall mean the Company’s gross net premiums earned on
the Business Covered hereunder less premiums paid on reinsurance, if any, recoveries under which
would reduce the Net Loss to this Contract.

C. The Company shall pay the Reinsurers a deposit premium of four million eight hundred six
thousand three hundred seventy six dollars ($4,806,376) shall be paid to Reinsurers in
four (4) equal installments of one million two hundred one thousand five hundred ninety four
dollars ($1,201,594) each on January 1, April 1, July 1 and October 1, 2011. As promptly as
possible after the termination of this Contract, however no longer than sixty (60) days, the
Company shall render a report to the Reinsurers showing the actual reinsurance premium due
hereunder, calculated as provided in Paragraph A. of this Article; and, if the premium so
calculated is greater than the previously paid deposit premium, the balance shall be remitted by
the Company with its report. However, in no event shall the premium to the Reinsurers for the
Contract be less than three million eight hundred forty five thousand one hundred dollars
($3,845,100).

			
	 	 	 
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EXHIBIT II — Page 1.

TW No. G25574.11

EXHIBIT II

PROPERTY SECOND EXCESS OF LOSS REINSURANCE CONTRACT

EFFECTIVE JANUARY 1, 2011

issued to

PENN MILLERS INSURANCE COMPANY

AMERICAN MILLERS INSURANCE COMPANY

ARTICLE 5

RETENTION AND LIMIT

A. The Reinsurers shall be liable to, indemnify and reinsure the Company for each and every Risk,
in each and every Loss Occurrence for one hundred percent (100%) of the excess Net Loss above an
initial Net Loss to the Company of five million dollars ($5,000,000) but the Reinsurers shall not
be liable for more than five million dollars ($5,000,000) of Net Loss in each and every Risk in
each and every Loss Occurrence, nor shall Reinsurers be liable for more than ten million dollars
($10,000,000) of Net Loss in excess loss from any one Loss Occurrence.

B. The Reinsurers shall be liable to, indemnify and reinsure the Company for the Company’s Net
Loss, each and every Risk, involving a certified or non certified Act of Terrorism, irrespective of
the number and kinds of perils involved, for one hundred percent (100%) of the excess Net Loss
above an initial Net Loss to the Company of five million dollars ($5,000,000) of Net Loss each and
every Risk; but the Reinsurers shall not be liable for more than five million dollars ($5,000,000)
of Net Loss for each and every Risk, and not more than five million dollars ($5,000,000) of Net
Loss during the term of this Contract.

C. Coverage for loss caused by Mold, as defined within the terms of the Company’s Policy, shall be
limited to an annual amount not to exceed one million dollars ($1,000,000), namely twenty percent
(20%) of the layer limit.

D. The Company shall be the sole judge of what constitutes “one risk” and the Probable Maximum Loss
applicable to such risk.

E. An “Act of Terrorism” shall mean any act, including both Certified Acts of Terrorism in
accordance with the Terrorism Risk Insurance Act of 2002 (“TRIA”), the Terrorism Risk Insurance
Extension Act of 2005 (“TRIEA”) and Terrorism Risk Insurance Program Reauthorization Act of 2007
(“TRIPRA”) and the and any subsequent extension and those not so certified, or preparation in
respect of action, or threat of action designed to influence the government de jure or de facto of
any nation or any political division thereof, or in pursuit of any political, religious,
ideological, or similar purpose to intimidate the public or a section of the public of any nation
by any person or group(s) of persons whether acting alone or on behalf of or in connection with any
organization(s) or government(s) de jure or de facto, and which:

	 	1.	 	involves violence against one or more persons; or
	 
	 	2.	 	involves damage to property; or
	 
	 	3.	 	endangers life other than that of the person committing the action; or
	 
	 	4.	 	creates a risk to health or safety of the public or a section of the public; or

			
	 	 	 
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EXHIBIT II — Page 2.

TW No. G25574.11

	 	5.	 	is designed to interfere with or to disrupt an electronic system; or
	 
	 	6.	 	involves loss, damage, cost, or expense directly or indirectly caused by, contributed to
by, resulting from, or arising out of or in connection with any action in controlling,
preventing, suppressing, retaliating against, or responding to any Act of Terrorism.

Loss or damage occasioned by riot, strikes, civil commotion, vandalism or malicious mischief as
those terms have been interpreted by United States Courts to apply to insurance Policies shall not
be construed to be an “Act of Terrorism”.

ARTICLE 6

REINSTATEMENT

A. Each claim hereunder shall reduce the amount of the Reinsurers’ limit of liability from the time
of the Occurrence of the loss by the sum paid, but the sum so exhausted shall immediately be
reinstated from the time of the occurrence of the loss.

B. For the first five million dollars ($5,000,000) so reinstated, the Company agrees to pay an
additional premium calculated by multiplying fifty percent (50%) of the annual reinsurance premium
hereon by the product of the percentage that the amount reinstated bears to the limit (i.e., five
million dollars ($5,000,000)) of this Contract. For the next five million dollars ($5,000,000) so
reinstated thereafter, the Company agrees to pay an additional premium calculated by multiplying
one hundred percent (100%) of the annual reinsurance premium hereon by the product of the
percentage that the amount reinstated bears to the limit (i.e., five million dollars ($5,000,000))
of this Contract. Nevertheless, the liability of the Reinsurers shall never be more than five
million dollars ($5,000,000) in respect of any one loss, ten million dollars ($10,000,000) in
respect of any one Loss Occurrence, nor more than fifteen million dollars ($15,000,000) in all in
respect of all losses occurring during the Contract period.

C. A provisional reinstatement premium shall be paid by the Company at the time the Reinsurers pay
the loss giving rise to the reinstatement premium through an offset of the provisional
reinstatement premium due the Reinsurers against the loss payment due the Company, with only the
net amount due to be remitted by the debtor party. The amount of this provisional reinstatement
premium shall be based on one hundred percent (100%) of the estimated annual reinsurance premium
hereunder.

D. As promptly as possible after the loss has been paid by the Reinsurers and the annual
reinsurance premium hereunder has been finally determined, the Company shall prepare and submit to
the Reinsurers a final statement of reinstatement premium due. Any reinstatement premium shown to
be due the Reinsurers (less prior payments, if any) shall be remitted by the Company with its
statement. Any return reinstatement premium shown to be due the Company shall be remitted by the
Reinsurers as promptly as possible after receipt of the Company’s final statement.

E. In the event there are any mid-term terminations in the participation of any Reinsurer in this
Contract, payment of any such reinstatement premium in full shall be paid to the Reinsurer who
incurred the loss that generates the reinstatement premium.

			
	 	 	 
	TW No. G25573.11/G25574.11/G26233.11

FINAL
	 	

 

 

EXHIBIT II — Page 3.

TW No. G25574.11

PREMIUM

A. The premium payable to Reinsurers shall be calculated by applying a rate of one point eight zero
percent (1.80%) to the Company’s Subject Matter Premium Income.

B. The term “Subject Matter Premium Income” shall mean the Company’s gross net premiums earned on
the business covered hereunder less premiums paid on reinsurance, if any, recoveries under which
would reduce the Net Loss to this Contract.

C. The Company shall pay the Reinsurers a deposit premium of six hundred fifty five thousand four
hundred sixteen dollars ($655,416) shall be paid to Reinsurers in four (4) equal installments of
one hundred sixty three thousand eight hundred fifty four dollars ($163,854) each on January 1,
April 1, July 1 and October 1, 2011. As promptly as possible after the termination of this
Contract, however no longer than sixty (60) days, the Company shall render a report to the
Reinsurers showing the actual reinsurance premium due hereunder, calculated as provided in
Paragraph A. of this Article; and, if the premium so calculated is greater than the previously paid
deposit premium, the balance shall be remitted by the Company with its report. However, in no event
shall the premium to the Reinsurers for the Contract be less than five hundred twenty four thousand
three hundred thirty two dollars ($524,332).

			
	 	 	 
	TW No. G25573.11/G25574.11/G26233.11

FINAL
	 	

 

 

EXHIBIT III — Page 1.

TW No. G25574.11

EXHIBIT III

PROPERTY THIRD EXCESS OF LOSS REINSURANCE CONTRACT

EFFECTIVE JANUARY 1, 2011

issued to

PENN MILLERS INSURANCE COMPANY

AMERICAN MILLERS INSURANCE COMPANY

ARTICLE 5

RETENTION AND LIMIT

A. The Reinsurers shall be liable to, indemnify and reinsure the Company for each and every risk,
in each and every Loss Occurrence, for one hundred percent (100%) of the excess Net Loss above an
initial Net Loss to the Company of ten million dollars ($10,000,000) but the Reinsurers shall not
be liable for more than ten million dollars ($10,000,000) of Net Loss in each and every risk, in
each and every Loss Occurrence, nor shall Reinsurers be liable for more than ten million dollars
($10,000,000) Net Loss in excess loss from any one Loss Occurrence.

B. The Reinsurers shall be liable to, indemnify and reinsure the Company for each and every Risk,
each and every Loss Occurrence, involving a Certified or Non Certified Act of Terrorism,
irrespective of the number of kinds of perils involved, for one hundred percent (100%) of the
excess Net Loss above an initial Net Loss to the Company of ten million dollars ($10,000,000) of
Net Loss each and every Risk; but the Reinsurers shall not be liable for more than ten million
dollars ($10,000,000) of Net Loss for each and every Risk, and not more than ten million dollars
($10,000,000) of Net Loss during the term of this Contract.

C. Coverage for loss caused by Mold, as defined within the terms of the Company’s Policy, shall be
limited to an annual amount not to exceed two million dollars ($2,000,000), namely twenty percent
(20%) of the layer limit.

D. The Company shall be the sole judge of what constitutes “one risk” and the Probable Maximum Loss
applicable to such risk.

E. An “Act of Terrorism” shall mean any act, including both Certified Acts of Terrorism in
accordance with the Terrorism Risk Insurance Act of 2002 (“TRIA”), the Terrorism Risk Insurance
Extension Act of 2005 (“TRIEA”) and the Terrorism Risk Insurance Program Reauthorization Act of
2007 (“TRIPRA”) and any subsequent extension and those not so certified, or preparation in respect
of action, or threat of action designed to influence the government de jure or de facto of any
nation or any political division thereof, or in pursuit of any political, religious, ideological,
or similar purpose to intimidate the public or a section of the public of any nation by any person
or group(s) of persons whether acting alone or on behalf of or in connection with any
organization(s) or government(s) de jure or de facto, and which:

	 	1.	 	involves violence against one or more persons; or
	 
	 	2.	 	involves damage to property; or
	 
	 	3.	 	endangers life other than that of the person committing the action; or

			
	 	 	 
	TW No. G25573.11/G25574.11/G26233.11

FINAL
	 	

 

 

EXHIBIT III — Page 2.

TW No. G25574.11

	 	4.	 	creates a risk to health or safety of the public or a section of the public; or
	 
	 	5.	 	is designed to interfere with or to disrupt an electronic system; or
	 
	 	6.	 	involves loss, damage, cost, or expense directly or indirectly caused by, contributed to
by, resulting from, or arising out of or in connection with any action in controlling,
preventing, suppressing, retaliating against, or responding to any Act of Terrorism.

Loss or damage occasioned by riot, strikes, civil commotion, vandalism or malicious mischief as
those terms have been interpreted by United States Courts to apply to insurance Policies shall not
be construed to be an “Act of Terrorism”.

ARTICLE 6

REINSTATEMENT

A. Each claim hereunder shall reduce the amount of the Reinsurers’ limit of liability from the time
of the occurrence of the loss by the sum paid, but the sum so exhausted shall be reinstated
immediately from the time of the occurrence of the loss.

B. For each amount so reinstated, the Company shall pay an additional premium calculated by
multiplying one hundred percent (100%) of the reinsurance premium earned by the Reinsurer hereon by
the percentage that the amount reinstated bears to the limit (i.e., ten million dollars
($10,000,000)) of this Contract. Nevertheless, the liability of the Reinsurers shall never be more
than ten million dollars ($10,000,000) of Net Loss in respect of any one Loss Occurrence, nor more
than twenty million dollars ($20,000,000) in Net Loss in all in respect of all losses occurring
during the Contract period.

C. A provisional statement of reinstatement premium due the Reinsurers shall be prepared by the
Company and submitted to the Reinsurers as soon as practicable after payment of a claim hereunder.
The provisional reinstatement premium shall be based on one hundred percent (100%) of the estimated
annual reinsurance premium earned by the Reinsurer hereunder. The amount of reinstatement premium
due Reinsurers shall be offset against the loss payment due the Company with only the net amount
due to be remitted by the debtor party.

D. As promptly as possible after the annual reinsurance premium earned hereunder has been finally
determined, the Company shall prepare and submit to the Reinsurers a final statement of
reinstatement premium due. Any reinstatement premium shown to be due the Reinsurers (less prior
payments, if any) shall be remitted by the Company with its statement. Any return reinstatement
premium shown to be due the Company shall be remitted by the Reinsurers as promptly as possible
after receipt of the Company’s final statement.

E. In the event there are any mid-term terminations in the participation of any Reinsurer in this
Contract, payment of any such reinstatement premium in full shall be paid to the Reinsurer who
incurred the loss that generates the reinstatement premium.

ARTICLE 7

PREMIUM

A. The premium payable to Reinsurers shall be calculated by applying a rate of one point three
eight percent (1.38%) to the Company’s Subject Matter Premium Income.

B. The term “Subject Matter Premium Income” shall mean the Company’s gross net premiums earned on
the Business Covered hereunder less premiums paid on reinsurance, if any, recoveries under which
would reduce the Net Loss to this Contract.

			
	 	 	 
	TW No. G25573.11/G25574.11/G26233.11

FINAL
	 	

 

 

EXHIBIT III — Page 3.

TW No. G25574.11

C. The Company shall pay the Reinsurers a deposit premium of five hundred two thousand four hundred
eighty four dollars ($502,484) shall be paid to Reinsurers in four (4) equal installments of one
hundred twenty five thousand six hundred twenty one dollars ($125,621) each on January 1, April 1,
July 1 and October 1, 2011. As promptly as possible after the termination of this Contract, however
no longer than sixty (60) days, the Company shall render a report to the Reinsurers showing the
actual reinsurance premium due hereunder, calculated as provided in Paragraph A. of this Article;
and, if the premium so calculated is greater than the previously paid deposit premium, the balance
shall be remitted by the Company with its report. However, in no event shall the premium to the
Reinsurers for the Contract be less than four hundred one thousand nine hundred eighty eight
dollars ($401,988).

			
	 	 	 
	TW No. G25573.11/G25574.11/G26233.11

FINALexv10w1

EXHIBIT 10.1

Ixia

2011 Executive Officer Bonus Plan

Ixia (“Ixia” or the “Company”) believes that a portion of each executive officer’s annual
compensation should be directly related to the Company’s financial performance, and that a portion
of such compensation should be directly related to such officer’s achievement of individual
objectives. The 2011 Executive Officer Bonus Plan (“2011 Bonus Plan” or “the Plan”) is designed to
motivate Ixia’s executive officers and to reward them for their continuing contributions to the
Company’s business if, in 2011, the Company achieves certain financial results and/or such officers
achieve their individual objectives. The Company believes that the achievement of these results
and objectives is essential for the Company’s success. The effective date of the 2011 Bonus Plan
is March 22, 2011 (the “Effective Date”).

Except as otherwise set forth herein, the Compensation Committee of the Company’s Board of
Directors (the “Committee”) will administer and have final authority on all matters relating to the
Plan. The Committee may interpret and construe the Plan, decide any and all matters arising under
or in connection with the Plan, and correct any defect, supply any omission, or reconcile any
inconsistency in the Plan. Additionally, the Committee may amend, suspend, revoke, or terminate
the Plan at any time. All bonus payouts under the Plan are subject to the prior approval of the
Committee. All decisions by the Committee regarding the Plan will be made in the Committee’s sole
discretion and will be final and binding on all persons having or claiming any interest in the
Plan.

2011 Bonus Plan Components

Each Eligible Officer (as defined below), by virtue of his or her continuing employment with Ixia,
will be eligible to receive:

	(i)	 	Annual Bonus: a bonus based on the Company’s financial performance in 2011 as
measured by the degree to which the Company achieves two pre-set financial targets for 2011
approved by the Committee; and
	 
	(ii)	 	Individual Bonus: a bonus based on his/her achievement in 2011 of individual
business or strategic objectives approved by the Committee (upon the recommendation of the
Company’s Chief Executive Officer in the case of all Eligible Officers other than the Chief
Executive Officer and the Chief Innovation Officer).

An Eligible Officer will not be entitled to receive, and the Company will not be obligated to pay,
either an Annual Bonus or an Individual Bonus if the Company’s 2011 Operating Income (as defined
herein) does not exceed $42.7 million. Except as otherwise provided below, the Annual Bonus and
the Individual Bonus payable to an Eligible Officer will be calculated, in part, as a percentage of
such Eligible Officer’s annual base salary of record in effect at December 31, 2011 (his/her
“Annual Base Salary”). In determining an Eligible Officer’s Annual Base Salary, certain
compensation and payments (e.g., reimbursement for moving expenses, bonus payments received under
this Plan or otherwise, stock option or other equity incentive compensation, discretionary bonuses,
disability benefits, sign-on bonuses, 401(k) Plan matching contributions, vacation/PTO cash outs,
on call pay, and similar payments) will be excluded.

If an executive officer commences his/her employment as an Eligible Officer after January 1, 2011,
or if there is a period in 2011 when an executive officer does not serve as an Eligible Officer,
then, for purposes of determining the amount payable as an Annual Bonus or an Individual Bonus,
that

 

 

individual’s Annual Base Salary will be prorated based on the ratio of (i) the number of days that
he/she serves as an Eligible Officer during 2011 to (ii) 365. Notwithstanding the foregoing, an
executive officer who commences his/her employment as an Eligible Officer during the fourth
calendar quarter of 2011 will not be eligible to receive either an Annual Bonus or an Individual
Bonus under the Plan. An Eligible Officer who is on an approved leave of absence from the Company
at any time during 2011 will, for purposes of determining eligibility under the 2011 Bonus Plan, be
treated as being employed by the Company as an Eligible Officer during such leave of absence.

Eligible Officers

The following executive officers have been designated by the Committee as Eligible Officers for
purposes of the 2011 Bonus Plan and will be eligible to participate in the 2011 Bonus Plan (all
titles are positions with Ixia unless otherwise specified):

Chief Executive Officer and President

Chief Innovation Officer

Chief Financial Officer

Senior Vice President, Corporate Affairs and General Counsel

Senior Vice President, Product Development

Senior Vice President, Worldwide Sales

Vice President, Global Customer Delight

Vice President, Human Resources

Vice President, Operations

A person appointed as an executive officer after the Effective Date will be eligible to participate
in the 2011 Bonus Plan if he/she is expressly designated as an Eligible Officer under the 2011
Bonus Plan pursuant to a duly adopted resolution by the Committee or the Company’s Board of
Directors.

An Eligible Officer whose title changes after the Effective Date will be entitled to continue to
participate in the 2011 Bonus Plan on the same terms and conditions as applied immediately prior to
such title change unless either (i) the terms of such Eligible Officer’s participation in the 2011
Bonus Plan are changed pursuant to a duly adopted Committee resolution; or (ii) the Committee
amends the Plan to add the new title as an Eligible Officer in the Eligible Officer table above, in
which case such individual will participate at the bonus participation level corresponding to
his/her new title.

In order to earn and be eligible to receive bonuses payable under the 2011 Bonus Plan, an Eligible
Officer must be employed by Ixia or one of its subsidiaries as an Eligible Officer on the date on
which such bonuses are paid, unless such requirement is waived by the Committee pursuant to a duly
adopted Committee resolution. An Eligible Officer who is on an approved leave of absence from the
Company on the date on which such bonuses are paid and thereafter returns to active status as an
Eligible Officer upon the end of such leave of absence will be paid the bonus to which he/she is
otherwise entitled within 30 days following his/her return to active status as an Eligible Officer.
An Eligible Officer who is on an approved leave of absence from the Company on the date on which
such bonuses are paid and thereafter fails to return to active status as an Eligible Officer upon
the end of such leave of absence will not be eligible to receive any such bonus.

2

 

Annual Bonuses

The Company’s consolidated revenues and Operating Income (as defined herein) for 2011 will be the
two financial measures used for calculating the amount of Annual Bonuses payable under the 2011
Bonus Plan. For purposes of the 2011 Bonus Plan, “Operating Income” means the Company’s operating
income from continuing operations calculated on a consolidated basis for the year ending December
31, 2011 after any bonuses payable under the 2011 Bonus Plan and the Company’s 2011
employee bonus plan (as adjusted to exclude the effects of equity incentive compensation expense,
restructuring charges, officer severance compensation, impairment charges, acquisition-related
amortization and other M&A-related charges or income, and similar charges or income). If, prior to
January 1, 2012, any of the Company’s existing business units become a discontinued operation or
the Company acquires another company or business (e.g., through a merger or acquisition of stock or
assets), then the consolidated revenue and/or Operating Income targets under the Plan may be
amended by the Committee in its sole discretion.

The amount of an Eligible Officer’s Annual Bonus will be calculated by multiplying (i) the product
of such Eligible Officer’s Annual Base Salary (prorated, if applicable) and the applicable Annual
Bonus Percentage listed opposite such Eligible Officer’s title in the Bonus Participation Table
below by (ii) the applicable Bonus Factor (as defined herein). The Bonus Factor will be equal to
the average of the Revenue Bonus Factor and the Operating Income Bonus Factor as determined in
accordance with Schedule A. Stated mathematically, the amount of an Annual Bonus payable
to an Eligible Officer equals (AxBxC), where A = an Eligible Officer’s Annual Base Salary
(prorated, if applicable); B = the applicable Annual Bonus Percentage for such Eligible Officer;
and C = the applicable Bonus Factor.

The amounts of the Company’s 2011 consolidated revenues and Operating Income will determine the
applicable Bonus Factor. As indicated on Schedule A, the Revenue Bonus Factor will be 0%
if the Company’s consolidated revenues are at or below the minimum revenue target, while revenues
exceeding the minimum revenue target will result in higher Revenue Bonus Factors as set forth in
Schedule A, up to a maximum Revenue Bonus Factor of 180%. As also indicated on
Schedule A, the Operating Income Bonus Factor will be 0% if the Company’s 2011 Operating
Income is at or below the minimum Operating Income target, while higher Operating Income will
result in higher Operating Income Bonus Factors as set forth in Schedule A, up to a maximum
Operating Income Bonus Factor of 180%. The percentage amount of the Revenue Bonus Factor will be
determined by linear interpolation if the dollar amount of 2011 consolidated revenues falls between
any two of the listed amounts. Similarly, the percentage amount of the Operating Income Bonus
Factor will be determined by linear interpolation if the dollar amount of 2011 Operating Income
falls between any two of the listed amounts.

Except as otherwise provided herein, an Annual Bonus will be payable in one lump sum (subject to
applicable withholding taxes and other deductions) on or before March 15, 2012, on a date
determined by the Compensation Committee in its sole discretion. In the event the Company’s
consolidated financial statements for 2011 are restated, or the Company announces that such
statements will be restated, to reflect a less favorable financial condition or less favorable
results of operations than previously determined and/or reported, the Committee has the absolute
right in its discretion not to pay, to delay the payment of, or to recover all or a portion of any
bonus awarded to any Eligible Officer pursuant to the terms of the 2011 Bonus Plan.

Individual Bonuses

The percentage degree (0% to 100%) to which an Eligible Officer achieves his/her objectives for
2011 will be the measure for his/her 2011 Individual Bonus. The determination of the percentage

3

 

degree to which an Eligible Officer achieves his/her objectives will be made by the Committee not
later than March 1, 2012.

The amount of a bonus payable as an Individual Bonus will be calculated by multiplying (i) the
product of an Eligible Officer’s Annual Base Salary (prorated, if applicable) and the Individual
Bonus Percentage listed opposite such Officer’s title in the Bonus Participation Table below by
(ii) the percentage degree to which it is determined that such Eligible Officer has achieved
his/her objectives for 2011.

Except as otherwise provided herein, an Individual Bonus will be payable in one lump sum (subject
to applicable withholding taxes and other deductions) on or before March 15, 2012, on a date
determined by the Compensation Committee in its sole discretion.

Bonus Participation Levels

For purposes of determining an Eligible Officer’s Annual Bonus or Individual Bonus under the 2011
Bonus Plan, the 2011 Bonus Opportunity, Annual Bonus Percentage, and Individual Bonus Percentage
for each of the Eligible Officers identified below will be as follows:

Bonus Participation Table (% of Base Salary)

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Annual	 	Individual
	 	 	2011 Bonus	 	Bonus	 	Bonus
	Title	 	Opportunity	 	Percentage	 	Percentage
	Chief Executive Officer and President
	 	 	100	%	 	 	75	%	 	 	25	%
	Chief Innovation Officer
	 	 	70	 	 	 	52.5	 	 	 	17.5	 
	Chief Financial Officer
	 	 	60	 	 	 	45	 	 	 	15	 
	Senior Vice President, Corporate Affairs
and General Counsel
	 	 	60	 	 	 	45	 	 	 	15	 
	Senior Vice President, Product Development
	 	 	60	 	 	 	45	 	 	 	15	 
	Senior Vice President, Worldwide Sales
	 	 	60	 	 	 	45	 	 	 	15	 
	Vice President, Global Customer Delight
	 	 	60	 	 	 	45	 	 	 	15	 
	Vice President, Human Resources
	 	 	60	 	 	 	45	 	 	 	15	 
	Vice President, Operations
	 	 	60	 	 	 	45	 	 	 	15	 

Additional Bonuses

In addition to bonuses payable under the 2011 Bonus Plan, additional bonuses may also be paid by
the Company, but only upon the express approval of the independent members of the Company’s Board
of Directors in their sole discretion.

* * * *

4

 

Schedule A

2011 Revenue Bonus Factor Matrix

	 	 	 	 	 	 	 	 	 
	 	 	Revenue Targets(1)	 	Revenue
	 	 	(in thousands)	 	Bonus Factor(1)
	Maximum
	 	$	(2	)	 	 	180	%
	 
	 	 	(2	)	 	 	140	 
	Target
	 	 	(2	)	 	 	100	 
	 
	 	 	(2	)	 	 	60	 
	 
	 	 	(2	)	 	 	20	 
	Minimum
	 	 	(2	)	 	 	0	 
	2011 Operating Income Bonus Factor Matrix

	 	 	Operating Income Targets(1)	 	Operating Income
	 	 	(in thousands)	 	Bonus Factor(1)
	Maximum
	 	$	(2	)	 	 	180	%
	 
	 	 	(2	)	 	 	140	 
	Target
	 	 	(2	)	 	 	100	 
	 
	 	 	(2	)	 	 	60	 
	 
	 	 	(2	)	 	 	20	 
	Minimum
	 	 	(2	)	 	 	0	 

 

			
	(1)	 	For performance between two Revenue or Operating Income Targets, the
Revenue Bonus Factor and the Operating Income Bonus Factor will be interpolated linearly.
	 
	(2	 	The Compensation Committee has supplementally established levels of Revenue
and Operating Income for purposes of this Schedule A.

A-1

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