Document:

exv10w13

 Exhibit 10.13

SECOND AMENDMENT TO THE

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

DATED AS OF FEBRUARY 5, 2008

BETWEEN LARRY A. FRAKES

AND UNITED AMERICA INDEMNITY, LTD.

EFFECTIVE AS OF JULY 2, 2010

     This second amendment to the Amended Agreement (as defined below) (this “Agreement”) is being
entered into on March 15, 2011 and shall be effective as of the Effective Date (as defined below),
by and among UAI, the Executive and the Company.

RECITALS

     On May 10, 2007, Larry A. Frakes (“Executive”) and United America Indemnity, Ltd. (“UAI”)
entered into an agreement regarding Executive’s employment by UAI in the capacity of President and
Chief Operating Officer (the “Prior Agreement”).

     On June 28, 2007, Executive was promoted to President and Chief Executive Officer of UAI.

     On February 5, 2008, UAI and Executive amended the Prior Agreement in order to, among other
things, provide for the cancellation and re-grant of certain stock options previously granted to
Executive. The Prior Agreement was amended and restated in its entirety and superseded in all
respects by an Amended and Restated Employment Agreement dated as of February 5, 2008 (the “Amended
and Restated Agreement”).

     On August 14, 2009, UAI and Executive executed an amendment to the Amended and Restated
Agreement in order to, among other things, provide for the re-set and extended vesting of certain
stock options previously re-granted to Executive and to make other changes by execution of such
First Amendment to the Amended and Restated Agreement (collectively with the Amended and Restated
Agreement, the “Amended Agreement”).

     UAI entered into a Scheme of Arrangement (the “Scheme of Arrangement”) with Global Indemnity
plc (“GI”) which was consummated on July 2, 2010 and as a result of which all of the shares of UAI
were exchanged for shares of GI, and whereby GI became publicly traded on the NASDAQ Global Select
Market. In light of these transactions, UAI and Executive have agreed to continue the terms of the
Amended Agreement, but with further amendments as set forth herein (the “Second Amendment”),
including, among other things, the substitution of Global Indemnity (Cayman) Limited (the
“Company”) for UAI as Executive’s employer, and such other modifications to the Amended Agreement
as have been agreed upon including modifications that reflect changes in Executive’s position due
to the consummation of the Scheme of Arrangement transactions, all as set forth in more detail in
this Second Amendment. This Second Amendment takes into account that Executive shall, at the same
time, be simultaneously employed both by the Company and by an indirect parent of the Company, GI,
and is structured so as to preserve

 

 

generally the operative provisions of the Amended Agreement. Executive will also be party to
employment agreements or arrangements with GI, pursuant to which separate compensation will be
provided to the Executive. This Second Amendment is effective as of July 2, 2010 (the “Effective
Date”), provided that the Employment Agreement is (i) approved by the affirmative vote of a
majority of the Compensation Committee and the Section 162(m) Committee (the “Section 162(m)
Committee) of the Board of Directors of GI, and (ii) manually executed by Executive and an
authorized person of the Company.

     1. All references to and United America Indemnity, Ltd. (or to the defined term, the
“Company”) are changed to and understood to represent references to Global Indemnity (Cayman)
Limited.

     2. The provisions regarding Executive’s responsibilities are modified by the addition, at the
end thereof, of the following sentence:

“Notwithstanding the foregoing, Executive’s responsibilities are understood as being
consistent with the requirements of Executive’s duties as President and Chief
Executive Officer of Global Indemnity plc (“GI”), and Executive’s responsibilities
hereunder shall be limited or modified to the extent necessary so that Executive’s
duties to GI can be properly carried out.”

     3. A new heading and operative provisions are added following the provisions of the Amended
Agreement regarding its “Term” to read:

			
	“COORDINATION WITH GI:	 	Executive and the Company agree and intend that this
Agreement is coordinated Executive’s employment with GI, such that any
termination of employment under this Agreement shall also constitute a
termination of Executive’s employment with GI, and that any termination of
employment with GI shall also constitute a termination of employment under this
Agreement.”

     4. Provisions of the Amended Agreement regarding Executive’s “base salary,” immediately
following the provisions under the heading “ANNUAL COMPENSATION” are amended in their entirety, to
read:

			
	“Base Salary:	 	The Company agrees to pay
Executive an annual base salary of $413,000 (“Base Salary”) or
$34,416.67 per month (“Monthly Base Salary”), commencing as of
the Effective Date, in accordance with the Company’s normal
payroll practices for executives; provided, however, that for
the period from the Effective Date through December 31, 2010,
the Company, by

2

 

			
		 	agreement with GI, pays Executive at a rate
equal to an annual salary of $600,000, of
which $187,000 is paid on behalf of GI for
services rendered by Executive to GI and
which GI has agreed to reimburse the Company.
Effective on and after January 1, 2011, the
Company shall pay executive his annual base
salary as first set forth above, and GI (or
its designee) shall pay Executive his
compensation for services rendered to GI.
Following a termination by the Company of
Executive’s employment without Cause (as
defined below) or a resignation by
Executive’s from his employment with the
Company for Good Reason (as defined below),
Executive will receive severance payments
equal to the Monthly Base Salary Multiplied
by Months Served (as hereafter defined), less
any amounts paid during the relevant notice
period and any taxes and withholdings,
subject to the conditions described in the
“Termination” Section below. For purposes of
the foregoing sentence, “Months Served” shall
equal the sum of the full calendar months
(capped at 18) of the Term that elapsed prior
to a notice of termination without Cause or
the event giving rise to the resignation with
Good Reason, as the case may be.”

     5. Provisions of the Amended Agreement regarding Executive’s “annual bonus,” immediately
following the provisions regarding “base salary: are amended in their entirety, to read:

			
	“Annual Bonus:	 	Commencing with 2010, and each calendar year
thereafter during the Term (each calendar year being a “Bonus
Year”), the Company shall provide Executive with a bonus
opportunity of $1,500,000 (“Annual Bonus”), subject to the
following and determined, awarded and paid as follows:”

     6. Provisions of the Amended Agreement referencing awards or transfers to Executive of stock
are modified and are to be understood as referencing shares of stock in GI.

3

 

     7. Section F, at the end of the provisions regarding Executive’s “annual bonus” is revised in
its entirety, to read:

	 	“F.	 	Additional Matters: Notwithstanding anything
contained herein to the contrary, all bonus
payments provided for hereunder are intended to
comply with Sections 162(m) of the Internal
Revenue Code of 1986, as amended (the “Code”).
As a consequence, all bonus payments shall be
made only if permitted, and at such time and
manner as is consistent with, and subject in all
regards to, the provisions of the Company’s
shareholder approved performance-based
compensation bonus plan (the “Section 162(m)
Plan”) and shall be paid in a manner and at such
time so as to result in tax deductibility to the
Company. In this regard, to the extent
required, all discretionary actions required to
be taken by the Section 162(m) Committee shall
be taken by that committee alone and any
references herein to determinations, input or
other action by the Board, the board of
directors of GI or any other person shall be
interpreted solely as providing guidance to the
Section 162(m) Committee to seek to obtain
information or assistance that it deems to be
necessary or appropriate, at its sole
discretion, to act as required in connection
with the proper administration of the Section
162(m) Plan and shall not be interpreted as
granting the authority to any person other than
the Section 162(m) Committee take any
discretionary action with regard to the Section
162(m) Plan to the extent such authority would
violate the requirements of the
performance-based compensation requirements set
out in Treasury Regulation Section 1.162-27.”

     8. A new provision is added at the end of the provisions regarding “ANNUAL COMPENSATION” and
before the provisions regarding “EMPLOYEE BENEFIT/EXPENSES” to read:

“Additional Compensation for Foreign Taxes and Tax

Preparation Costs:

4

 

a. Tax Gross-Up Payments. In the event
Executive is subject to taxes or levies that
are greater than those that would be incurred
in the United States (including taxes, if
any, that may be imposed on Executive by any
political subdivision) by reason of
Executive’s services for the Company and/or
by reason of Executive’s services for GI and
the impact of such taxation or levies on
Executive is an increase in Executive’s total
tax liability (inclusive of levies) when
compared with Executive’s tax liability
assuming Executive were subject only to U.S.
federal, state and local taxes on all
compensation earned both under this Agreement
and by reason of his under the GI Employment
Agreement, the Company shall make an
additional cash payment (the “Gross-Up
Payment”) to Executive, as determined
pursuant to the provisions set forth in this
paragraph. For purposes of calculating
Executive’s total tax liability and his
hypothetical U.S. tax liability, as described
in the preceding sentence, and in determining
Executive’s “Excess Tax” (as hereinafter
defined), taxes or levies imposed on payments
made pursuant to this paragraph shall be
disregarded. The Gross-Up Payment shall be
determined as follows: Executive’s “Excess
Tax” shall be equal to Executive’s total tax
liability (taking into account taxes and
levies imposed by any country related to
services performed for Global Indemnity),
reduced (but not below $0) by Executive’s tax
liability calculated as though Executive were
only subject to U.S. federal, state and local
taxes. All such amounts shall be converted
to US$ based on an appropriate exchange rate.
The Tax Gross-Up Payment shall be an
additional cash payment such that, after
payment of all U.S. federal, state and local
income taxes on such payment, and after
payment of all income or similar taxes and
levies, if any, imposed by a non-

5

 

United States country or non-United States
political subdivision, and taking into
account any available tax credits for foreign
taxes paid, Executive will have received a
net amount equal to his Excess Tax. The
intent of this paragraph is that Executive
shall receive, net after all taxes are paid,
including U.S. federal, state and local taxes
and taxes and levies imposed, both from the
Company and for services provided pursuant to
the GI Employment Agreement, an amount that
is equal to the net amount Executive would
have received if all compensation and
payments by the Company (other than payments
made pursuant to this paragraph) and by
reason of Executive’s services under the GI
Employment Agreement had been subject only to
U.S. federal, state and local taxes and are
intended to make Executive whole for any
additional tax burden otherwise imposed.

b. Tax Preparation Reimbursement. In
connection with Executive’s preparation of
required annual income tax returns and
filings, and in recognition that there may be
some unusual complexity and expense that
would otherwise be borne by Executive in
properly complying with annual tax return
filing requirements, Executive shall be
reimbursed for fees and expenses incurred
with respect to annual tax return preparation
and related services for all periods during
which Executive received compensation from
the Company and pursuant to the GI Employment
Agreement. Amounts required to be paid to
Executive under this paragraph shall be paid
as soon as practicable following Executive’s
submission of evidence of such expenditures
in a form reasonably acceptable to the
Company, which documentation must be
submitted no later than 180 days after such
expenses have been incurred. In all cases,
amounts to which Executive is entitled under
this paragraph shall be paid to Executive no
later

6

 

than the period permitted for taxable
reimbursements as set out in Treasury
Regulation Section 1.409A-3(i)(1)(iv).”

7

 

     9. The provisions of the Amended Agreement regarding “COMPLIANCE WITH CODE SECTION 409A” are
restated in their entirety, to read:

			
	“Compliance with
 Section 409A:	 	The parties intend that any payments provided for in this
Agreement that constitute benefits in the nature of nonqualified deferred
compensation subject to Code Section 409A are to be paid in a time and manner
that is permitted under that section of the Code. In connection with this
intent, and notwithstanding any provision of the Agreement to the contrary,
payments of severance that are treated as deferred compensation subject to
Code Section 409A shall be made in installments over the relevant period of
months corresponding to the number of months used to determine the amount of
severance payable and paid on the basis of the Company’s normal, periodic
payroll practices, and any payments of deferred compensation that would violate
the prohibition on certain nonqualified deferred compensation payments being
made to specified employees during the six (6) month period following
separation from service under Code Section 409A(a)(2)(B)(i) shall be paid on
the date that is six months following Executive’s separation from service. In
addition, any payments hereunder that are payable by reason of Executive’s
termination of employment shall only be paid upon Executive’s “separation from
service” (as that term is defined in regulations issued pursuant to Code
Section 409A), and any payments that are in the nature of reimbursements or
payments of a “tax gross-up” shall be paid at the time and in the manner
provided in applicable Treasury Regulations pursuant to which reimbursements or
tax gross-up payments may be treated as being paid at a specified time or on a
fixed schedule so as to be compliant with Code Section 409A.”

8

 

     10. The provisions of the Amended Agreement regarding “Termination” are amended by the
addition of the following two sentences at the end thereof:

	 	 	“Notwithstanding anything to the contrary herein, to the extent any payments
following Executive’s termination of employment are, under the terms of this
Agreement, payable only if Executive executes (and does not revoke) a general
release, such payments shall not be paid immediately upon satisfaction of these
conditions, but rather shall be paid ninety (90) days following Executive’s
termination of employment. In all events, the Company shall provide Executive with
the appropriate release within a time frame that permits Executive to sign such
release (and not thereafter revoke such release during any applicable revocation
period) so that such release becomes irrevocable prior to the ninetieth (90th) day
following Executive’s termination of employment.”

     11. The provisions of the Amended Agreement regarding “Affiliates” and “Company Affiliates” is
modified by the addition of the following sentence at the end thereof:

	 	 	“Notwithstanding the foregoing, the term “Affiliate(s)” shall not include any entity
that is not treated as a United States person for purposes of federal income taxes.”

     12. In all other respects, the Amended Agreement remains in full force and effect.

(The remainder of this page is intentionally left blank.)

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     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above
written.

	 	 	 	 	 

	GLOBAL INDEMNITY (CAYMAN) LIMITED	 	 
	 
	 	 	 	 
	By:

	 	/s/ Thomas M. McGeehan	 	 
	 

	 	 	 	 
	Title: Director	 	 
	 
	 	 	 	 
	UNITED AMERICA INDEMNITY LIMITED	 	 
	 
	 	 	 	 
	By:

	 	/s/ Thomas M. McGeehan	 	 
	 

	 	 	 	 
	Title: Director	 	 
	 
	 	 	 	 
	EXECUTIVE	 	 
	 
	 	 	 	 
	/s/ Larry A. Frakes	 	 
	 	 	 
	Larry Frakesexv10w19

 Exhibit 10.19

RETENTION AGREEMENT

     This retention agreement, dated March 15, 2011 (this “Agreement”), is made by and between
Penn-America Insurance Company (the “Employer”) and Matthew B. Scott (the “Employee”). Capitalized
terms used but not concurrently defined herein shall have the meanings set forth in Sections 2 and
4 below.

1. Qualifying Period Employment. Subject to Section 2 below, the Employee agrees to remain
employed by the Employer for the Qualifying Period. Nothing in this Agreement alters or modifies
the Employee’s employment relationship with the Employer. This Agreement does not constitute an
agreement by the Employer to continue to employ the Employee during the entire, or any portion of
the, term of this Agreement.

2. Payment of Bonus. If eligible, the Employee will receive the Bonus on the first regular pay
date following the end of the Qualifying Period. Subject to the provisions of the following
paragraph, payment of the Bonus is contingent upon the Employee’s continued employment with the
Employer for the entire Qualifying Period. Payment of the Bonus is also subject to all applicable
payroll withholdings and deductions.

If the Employee’s employment with the Employer terminates before the end of the Qualifying Period
for any reason, including, without limitation, the death or disability of the Employee, other than
solely resulting from (a) the Employee’s resignation with Good Reason or (b) the termination of the
Employee’s employment without Cause, the Employee will not earn and will not be entitled to receive
the Bonus (or any portion thereof), and the Employer shall have no further obligations under this
Agreement. However, notwithstanding any other provision of this Agreement, if the Employee’s
employment terminates before the end of the Qualifying Period because the Employee resigns for Good
Reason or because the Employee’s employment has been terminated without Cause, the Employee will be
entitled to the payment of the Bonus on the first regular pay date following the end of the
Qualifying Period; provided, however, that the Bonus shall be reduced (but not
below zero) by any cash severance payments made to the Employee due to such termination of
employment pursuant to the terms of the Employee’s employment agreement (if any) with the
Employer as of the date hereof or as it may be amended (the “Employment Agreement”). If the Bonus
is paid hereunder, then following the payment of such Bonus, the Employee agrees that he or she
shall forfeit any right to receive cash severance payments under the Employment Agreement upon any
subsequent termination of employment.

     Solely for purposes of determining the Employee’s Bonus eligibility under the terms of
this Agreement:

     (a) “Cause” shall mean each of the following; provided, however, that written
notice to the Employee of a condition constituting Cause has been delivered by the Employer to the
Employee and such condition remains uncured by the Employee for at least thirty (30) days after
receipt of such notice; provided further that any condition otherwise
constituting Cause hereunder that is described under clauses (i) through (iv) below shall only
constitute Cause to the extent it is reasonably expected to have a material adverse economic impact
on the Employer and Global Indemnity plc (the “Company”) and the Company’s controlled affiliates on
a consolidated

 

 

Matthew B. Scott

March 15, 2011

Page 2

basis: (i) the engaging by the Employee in any fraud, dishonesty or gross misconduct adverse to the
interests of the Employer or any of its subsidiaries or affiliates; (ii) the material violation by
the Employee of any restrictive covenants contained in the Employment Agreement or any
other agreement with the Employer or any of its subsidiaries or affiliates to which the Employee is
a party; (iii) a breach by the Employee of any material representation or warranty made in the
Employee’s Employment Agreement or any other agreement with the Employer or any of its subsidiaries
or affiliates to which the Employee is a party; (iv) the determination by at least a majority of
the members of the Board of Directors of the Company (the “Board”) that the Employee has exhibited
gross negligence in the performance of the Employee’s duties; (v) receipt of a final written
directive or order of any governmental or regulatory body or authority having jurisdiction over the
Employer requiring the Employee’s termination or removal; or (vi) the Employee being convicted of a
felony or other crime involving moral turpitude.

     (b) “Good Reason” shall mean:

          (i) the Employee’s termination of employment within thirty (30) days following
a written notice from the Employer that its principal executive offices are being relocated more
than thirty (30) miles from their current location or that the Employee’s principal place of
employment is transferred to an office location more than thirty (30) miles from the Employee’s
then current principal place of employment (unless in either case the effect of such relocation
results in the Employee’s principal place of employment being less than twenty (20) miles from the
Employee’s principal residence); 

          (ii) a reduction in the Employee’s annual base salary as in effect on the date hereof or as
the same may be increased from time to time; or

          (iii) the failure by the Employer or its subsidiaries or affiliates to continue to provide
the Employee with benefits substantially similar to those enjoyed by the Employee under any of the
benefit plans in which the Employee participates on the date hereof or as the same may be increased
from time to time.

3. Grantor Trust. Prior to the consummation of a Qualifying Transaction, the Employer shall
contribute an amount equal to the Bonus to an irrevocable “rabbi trust” (which shall be a grantor
trust within the meaning of Sections 671-678 of the United States Internal Revenue Code, as amended
(the “Code”)) for the Employee’s benefit.

4. Definitions. For purposes of this Agreement:

     (a) “Qualifying Transaction” means, whether effected directly or indirectly or in one or a
series of transactions: (i) any merger, amalgamation, scheme of arrangement, consolidation or other
business combination transaction pursuant to which the business, assets or divisions of the
Employer or any direct or indirect parent of the Employer is combined with that of a
third party not affiliated with the Employer or any of its subsidiaries or affiliates; or
(ii) any sale, transfer, exchange or other disposition of 50% or more of the outstanding shares of
capital stock of the Employer, any direct or indirect parent of the Employer, or all or
substantially all of the Employer’s assets or the assets of any direct or indirect parent of the
Employer is transferred to a third party not affiliated with the Employer or any of its
subsidiaries or affiliates, including, without limitation, by means of a purchase or exchange of
capital stock or assets, a merger,

 

 

Matthew B. Scott

March 15, 2011

Page 3

amalgamation, scheme of arrangement, consolidation, other business combination, a tender or
exchange or takeover offer, a leveraged buy-out, lease or license, the formation of a partnership,
joint or collaborative venture or similar arrangement or otherwise; provided,
however, that the Compensation Committee of the Board (the “Committee”) shall have
sole discretion with respect to the determination as to whether a Qualifying Transaction has
occurred.

     (b) “Bonus” means a cash bonus in the pre-tax amount of US$450,000; and

     (c) “Qualifying Period” means the twelve (12)-month period following the consummation of
a Qualifying Transaction.

5. Governing Law. This Agreement shall be governed by and construed in accordance with the
laws of the State of Pennsylvania, without regard to its conflict of laws provisions;
provided, however, that if the Employee’s Employment Agreement (if any) provides
for a different choice of law, then the provision in the Employee’s Employment Agreement shall
govern this Agreement.

6. Dispute Resolution; Venue. In the event that any disagreement or dispute whatsoever shall arise
between the parties concerning this Agreement, such disagreement or dispute shall be exclusively
submitted to the Judicial and Mediation Services Inc. (“JAMS”) for resolution in a confidential
private arbitration in accordance with the comprehensive rules and procedures of JAMS, including
the internal appeal process provided for in Rule 34 of the JAMS rules with respect to any initial
judgment rendered in an arbitration. Any such arbitration proceeding shall take place in
Philadelphia, Pennsylvania or another location agreed upon in writing by the parties, before a
single arbitrator (rather than a panel of arbitrators). Subject to applicable law, the parties
agree that the arbitrator shall have no authority to award any punitive or exemplary damages and
waive, to the full extent permitted by applicable law, any right to recover such damages in such
arbitration. Each party shall each bear their respective costs (including attorneys’ fees, and
there shall be no award of attorney’s fees) and shall split the fees and expenses of the
arbitrator. Judgment upon the final award rendered by such arbitrator, after giving effect to the
JAMS internal appeal process, may be entered in any court having jurisdiction thereof. If JAMS is
not in business or is no longer providing arbitration services, then the American Arbitration
Association shall be substituted for JAMS for the purposes of the foregoing provisions. Each party
agrees that, except to the extent otherwise required by applicable law, it shall maintain absolute
confidentiality in respect to any dispute between them under this Agreement.

7. Successors. This Agreement shall inure to the benefit of, and be binding upon, any successor or
assign of the Employer, specifically including, without limitation, the purchaser of the stock or
assets of the Employer or the survivor upon any other Qualifying Transaction. In the event of the
Employee’s death, this Agreement shall inure to the benefit of, and be binding upon, any executor,
personal representative or heirs of the Employee and, in the event of the Employee’s Disability,
this Agreement shall inure to the benefit of, and be binding upon, any personal representative or
guardian of the Employee.

8. Entire Agreement; Amendment; Termination; Waiver, etc. This Agreement contains all the
terms and conditions of the Employee’s Agreement. The Employee’s

 

 

Matthew B. Scott

March 15, 2011

Page 4

signature below acknowledges that the Employee has not relied on any promises or representations
concerning the subject matter hereof not contained in this Agreement. No provision of this
Agreement may be amended or modified, in whole or in part, nor any waiver or consent given, unless
approved in writing by the Employer and the Employee in the case of an amendment or modification or
by the party to be charged in the case of a waiver or consent, which writing specifically refers to
this Agreement and the provision so amended or modified or for which such waiver or consent is
given. This Agreement and all of the rights, benefits and obligations hereunder shall terminate
and be of no further force and effect if a Qualifying Transaction has not been effected or entered
into within two years from the date of this Agreement; provided that if a
Qualifying Transaction is entered into within such two-year period, and after the cessation of such
two-year period such Qualifying Transaction is not subsequently consummated, this Agreement and all
of the rights, benefits and obligations hereunder shall terminate and be of no further force and
effect; provided further that the Committee may terminate this Agreement
prior to a Qualifying Transaction upon the recommendation of the Chief Executive Officer of the
Company.

9. Other Matters. The invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provisions of this Agreement, which shall remain
in full force and effect. It is understood and agreed that no failure or delay by a party in
exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise thereof preclude any other or further exercise thereof or the exercise
of any right, power or privilege hereunder. This Agreement may be executed in counterparts, each
such counterpart shall be deemed an original and all such counterparts shall together constitute
one instrument. The headings contained in this Agreement are for reference purposes only and shall
not modify, expand, define or otherwise affect, in any way, the meaning or interpretation of the
terms and provisions of this Agreement.

10. Section 280G. Notwithstanding any other provisions of this Agreement, in the event that any
payment or benefit received or to be received by the Employee (including any payment or benefit
received or to be received in connection with a Qualifying Transaction or the termination of the
Employee’s employment, whether pursuant to the terms of this Agreement or any other plan,
arrangement or agreement) (all such payments and benefits being hereinafter referred to as the
“Total Payments”) would be subject (in whole or part), to any excise tax imposed under Section 4999
of the Code (the “Excise Tax”), then, after taking into account any reduction in the Total Payments
provided by reason of Section 280G of the Code in such other plan, arrangement or agreement, the
cash Total Payments that do not constitute deferred compensation within the meaning of Section 409A
of the Code (“Section 409A”) shall first be reduced, all other Total Payments that do not
constitute deferred compensation within the meaning of Section 409A shall be next reduced, and all
other Total Payments that do constitute deferred compensation within the meaning of Section 409A
shall thereafter be reduced (beginning with those payments last to be paid), to the extent
necessary so that no portion of the Total Payments is subject to the Excise Tax but only if (a) the
net amount of such Total Payments, as so reduced (and after subtracting the net amount of foreign,
federal, state and local income taxes on such reduced Total Payments and after taking into account
the phase out of itemized deductions and personal exemptions attributable to such reduced Total
Payments) is greater than or equal to (b) the net amount of such Total Payments without such
reduction (but after subtracting the net amount of foreign, federal, state and local income taxes
on such Total Payments and the amount of Excise Tax to which the

 

 

Matthew B. Scott

March 15, 2011

Page 5

Employee would be subject in respect of such unreduced Total Payments and after taking into account
the phase out of itemized deductions and personal exemptions attributable to such unreduced Total
Payments).

(The remainder of this page is intentionally left blank.

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first set
forth above.

PENN-AMERICA INSURANCE COMPANY

	 	 	 	 	 
	 	 	 
	 	By:  	/s/ Linda C. Hohn
 	 
	 	 	Name:  	Linda C. Hohn 	 
	 	 	Title:  	Vice President 	 
	 

EMPLOYEE

	 	 	 	 	 
	 	 	 
	 	/s/ Matthew B. Scott
 	 
	 	Matthew B. Scott

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