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EXHIBIT 10.2

NEUROCRINE BIOSCIENCES, INC.

2003 INCENTIVE STOCK PLAN

as amended May 25, 2005, November 7, 2005 and January 12, 2006

1. Purpose of the Plan. The purposes of this Incentive Stock Plan are to attract and
retain the best available personnel, to provide additional incentive to the employees of Neurocrine
Biosciences, Inc. (the “Company”) and to promote the success of the Company’s business.
Options granted hereunder may be either Incentive Stock Options or Nonstatutory Stock Options, at
the discretion of the Board and as reflected in the terms of the written option agreement. The
Board also has the discretion to grant Restricted Stock awards, Restricted Stock Unit awards and
Stock Bonus awards.

2. Definitions.

               (a) “Award” shall mean any right granted under the Plan, including an Option, a
Restricted Stock award, Restricted Stock Unit award, and a Stock Bonus award.

               (b) “Board” shall mean the Committee, if one has been appointed, or the Board of
Directors of the Company, if no Committee is appointed.

               (c) “Code” shall mean the Internal Revenue Code of 1986, as amended.

               (d) “Committee” shall mean the Committee appointed by the Board in accordance with
Section 4(a) of the Plan, if one is appointed.

               (e) “Common Stock” shall mean the common stock of the Company, par value $.001 per
share.

               (f) “Company” shall mean Neurocrine Biosciences, Inc.

               (g) “Consultant” shall mean any natural person who is engaged by the Company or any
Parent or Subsidiary to render bona fide consulting services and is compensated for such consulting
services, and any Director whether compensated for such services or not.

               (h) “Continuous Status as an Employee or Consultant” shall mean the absence of any
interruption or termination of service as an Employee or Consultant, as applicable. Continuous
Status as an Employee or Consultant shall not be considered interrupted in the case of sick leave,
military leave, or any other leave of absence approved by the Board; provided, that such leave is
for a period of not more than ninety (90) days or reemployment upon the expiration of such leave is
guaranteed by contract or statute.

               (i) “Director” means a member of the Board of Directors of the Company.

 

 

               (j) “Employee” shall mean any persons, including officers and directors, employed by
the Company or any Parent or Subsidiary of the Company. The payment of a director’s fee by the
Company shall not be sufficient to constitute “employment” by the Company.

               (k) “Holder” shall mean a person who has been granted or awarded an Award pursuant to
the Plan.

               (l) “Incentive Stock Option” shall mean an Option intended to qualify as an incentive
stock option within the meaning of Section 422 of the Code.

               (m) “Nonstatutory Stock Option” shall mean an Option not intended to qualify as an
Incentive Stock Option.

               (n) “Option” shall mean a stock option granted pursuant to the Plan. An Option may be
either an Incentive Stock Option or a Nonstatutory Stock Option.

               (o) “Option Agreement” shall mean any written or electronic agreement, contract, or
other instrument or document evidencing an Option.

               (p) “Optioned Stock” shall mean the Common Stock subject to an Option.

               (q) “Optionee” shall mean an Employee or Consultant who receives an Option.

               (r) “Outside Director” means a Director who is not an Employee.

               (s) “Parent” shall mean a “parent corporation,” whether now or hereafter existing, as
defined in Section 424(e) of the Code.

               (t) “Performance Criteria” shall mean the following business criteria with respect to
the Company, any Subsidiary or any division or operating unit: (a) net income, (b) pre-tax income,
(c) operating income, (d) cash flow, (e) earnings per share, (f) return on equity, (g) return on
invested capital or assets, (h) cost reductions or savings, (i) funds from operations, (j)
appreciation in the fair market value of Common Stock, and (k) earnings before any one or more of
the following items: interest, taxes, depreciation or amortization; each as determined in
accordance with generally accepted accounting principles or subject to such adjustments as may be
specified by the Board.

               (u) “Plan” shall mean this 2003 Incentive Stock Plan, as amended.

               (v) “Restricted Stock” shall mean a right to purchase Common Stock pursuant to Section
11 of the Plan.

               (w) “Restricted Stock Unit” shall mean a right to receive a specified number of shares
of Common Stock during specified time periods pursuant to Section 12 of the Plan.

               (x) “Section 162(m) Participant” shall mean any key Employee designated by the Board
as a key Employee whose compensation for the fiscal year in which the key Employee is so

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designated or a future fiscal year may be subject to the limit on deductible compensation
imposed by Section 162(m) of the Code.

               (y) “Share” shall mean a share of the Common Stock, as adjusted in accordance with
Section 15 of the Plan.

               (z) “Stock Bonus” shall mean the right to receive a bonus of Common Stock for past
services pursuant to Section 13 of the Plan.

               (aa) “Subsidiary” shall mean a “subsidiary corporation,” whether now or hereafter
existing, as defined in Section 424(f) of the Code.

3. Stock Subject to the Plan.

     (a) Subject to the provisions of Section 15 of the Plan, the maximum aggregate number of
shares under the Plan is three million three hundred thousand (3,300,000) shares of Common Stock.
The Shares may be authorized but unissued, or reacquired Common Stock. If an Award should expire
or become unexercisable for any reason without having been exercised in full, then the unpurchased
Shares which were subject thereto shall, unless the Plan shall have been terminated, become
available for future grant or sale under the Plan. Notwithstanding any other provision of the
Plan, shares issued under the Plan and later repurchased by the Company shall not become available
for future grant or sale under the Plan.

     (b) The following limitations shall apply to grants of Awards to Employees:

     (i) No Employee shall be granted, in any fiscal year of the Company, Awards
pursuant to which more than an aggregate of two hundred and fifty thousand (250,000)
Shares are issuable to such Employee.

     (ii) In connection with his or her initial employment, an Employee may be
granted Awards to purchase and/or receive up to an additional two hundred and fifty
thousand (250,000) Shares which shall not count against the limit set forth in
subsection (i) above.

     (iii) The foregoing limitations shall be adjusted proportionately in connection
with any change in the Company’s capitalization as described in Section 15.

     (iv) If an Option is canceled in the same fiscal year of the Company in which it
was granted (other than in connection with a transaction described in Section 15),
the canceled Option shall be counted against the limit set forth in subsection (i)
above.

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4. Administration of the Plan.

     (a) Procedure.

     (i) Multiple Administrative Bodies. The Plan may be administered by
different Committees with respect to different groups of Employees and Consultants.

     (ii) Section 162(m). To the extent that the Board determines it to be
desirable to qualify Awards granted hereunder as “performance-based compensation”
within the meaning of Section 162(m) of the Code, the Plan shall be administered by a
Committee of two or more “outside directors” within the meaning of Section 162(m) of
the Code.

     (iii) Rule 16b-3. To the extent desirable to qualify transactions
hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder shall
be structured to satisfy the requirements for exemption under Rule 16b-3.

     (iv) Other Administration. Other than as provided above, the Plan shall
be administered by (A) the Board or (B) a Committee, which committee shall be
constituted to satisfy applicable laws.

     (b) Powers of the Board. Subject to the provisions of the Plan, the Board shall have
the authority, in its discretion: (i) to grant Incentive Stock Options, Nonstatutory Stock Options,
Restricted Stock awards, Restricted Stock Unit awards, or Stock Bonus awards; (ii) to determine,
upon review of relevant information and in accordance with Section 7 of the Plan, the fair market
value of the Common Stock; (iii) to determine the exercise price per share of each Award to be
granted, if any, which exercise price shall be determined in accordance with Section 7 of the Plan;
(iv) to determine the Employees or Consultants to whom, and the time or times at which, Awards
shall be granted and, subject to the limitations of Section 3(b) above, the number of shares to be
represented by each Award; (v) to interpret the Plan; (vi) to prescribe, amend and rescind rules
and regulations relating to the Plan; (vii) to determine the terms and provisions of each Award
granted (which need not be identical) and, with the consent of the holder thereof, modify or amend
any provisions (including provisions relating to exercise price) of any Award; (viii) to accelerate
or defer (with the consent of the Optionee) the exercise date of any Option, consistent with the
provisions of Section 6 of the Plan; (ix) to authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of an Award previously granted by the
Board; (x) to allow Optionees to satisfy withholding tax obligations by electing to have the
Company withhold from the Shares to be issued upon exercise of an Award that number of Shares
having a fair market value equal to the statutory minimum amount required to be withheld (the fair
market value of the Shares to be withheld shall be determined on the date that the amount of tax to
be withheld is to be determined; and, all elections by an Award holder to have Shares withheld for
this purpose shall be made in such form and under such conditions as the Board may deem necessary
or advisable); and (xi) to make all other determinations deemed necessary or advisable for the
administration of the Plan.

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     (c) Effect of Board’s Decision. All decisions, determinations and interpretations of
the Board shall be final and binding on all Holders of any Awards granted under the Plan.

     (d) Provisions Applicable to Section 162(m) Participants.

     (i) The Board, in its discretion, may determine whether an Award is to qualify
as performance-based compensation as described in Section 162(m)(4)(C) of the Code.

     (ii) Notwithstanding anything in the Plan to the contrary, the Board may grant
any Award to a Section 162(m) Participant, including a Restricted Stock award,
Restricted Stock Unit award, or Stock Bonus award the restrictions with respect to
which lapse upon the attainment of performance goals which are related to one or more
of the Performance Criteria.

     (iii) To the extent necessary to comply with the performance-based compensation
requirements of Section 162(m)(4)(C) of the Code, with respect to any Restricted
Stock award, Restricted Stock Unit award, or Stock Bonus award granted under the Plan
to one or more Section 162(m) Participants, no later than ninety (90) days following
the commencement of any fiscal year in question or any other designated fiscal period
or period of service (or such other time as may be required or permitted by Section
162(m) of the Code), the Board shall, in writing, (i) designate one or more Section
162(m) Participants, (ii) select the Performance Criteria applicable to the fiscal
year or other designated fiscal period or period of service, (iii) establish the
various performance targets, in terms of an objective formula or standard, and
amounts of such Restricted Stock awards, Restricted Stock Unit awards, and Stock
Bonus awards, as applicable, which may be earned for such fiscal year or other
designated fiscal period or period of service, and (iv) specify the relationship
between Performance Criteria and the performance targets and the amounts of such
Restricted Stock awards, Restricted Stock Unit awards, and Stock Bonus awards, as
applicable, to be earned by each Section 162(m) Participant for such fiscal year or
other designated fiscal period or period of service. Following the completion of
each fiscal year or other designated fiscal period or period of service, the Board
shall certify in writing whether the applicable performance targets have been
achieved for such fiscal year or other designated fiscal period or period of service.
In determining the amount earned by a Section 162(m) Participant, the Board shall
have the right to reduce (but not to increase) the amount payable at a given level of
performance to take into account additional factors that the Board may deem relevant
to the assessment of individual or corporate performance for the fiscal year or other
designated fiscal period or period of service.

     (iv) Furthermore, notwithstanding any other provision of the Plan, any Award
which is granted to a Section 162(m) Participant and is intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the Code shall
be subject to any additional limitations set forth in Section 162(m) of the Code

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(including any amendment to Section 162(m) of the Code) or any regulations or
rulings issued thereunder that are requirements for qualification as
performance-based compensation as described in Section 162(m)(4)(C) of the Code, and
the Plan shall be deemed amended to the extent necessary to conform to such
requirements.

5. Eligibility.

     (a) Awards may be granted to Employees and Consultants; provided, that Incentive Stock Options
may only be granted to Employees. An Employee or Consultant who has been granted an Award may, if
such Employee or Consultant is otherwise eligible, be granted additional Awards. Each Outside
Director shall be eligible to be automatically granted Options at the times and in the manner set
forth in Section 10.

     (b) Each Option shall be designated in the written Option Agreement as either an Incentive
Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the
extent that the aggregate fair market value of the Shares with respect to which Options designated
as Incentive Stock Options are exercisable for the first time by any Optionee during any calendar
year (under all plans of the Company) exceeds one hundred thousand dollars ($100,000), such Options
shall be treated as Nonstatutory Stock Options.

     (c) For purposes of Section 5(b), Options shall be taken into account in the order in which
they were granted, and the fair market value of the Shares shall be determined as of the time the
Option with respect to such Shares is granted.

     (d) The Plan shall not confer upon any Holder any right with respect to continuation of
employment by or the rendition of consulting services to the Company, nor shall it interfere in any
way with his or her right or the Company’s right to terminate his or her employment or services at
any time, with or without cause.

6. Term of Plan. The Plan shall become effective upon the earlier to occur of its adoption
by the Board or its approval by vote of holders of a majority of the outstanding shares of the
Company entitled to vote on the adoption of the Plan. It shall continue in effect until terminated
under Section 17 of the Plan. Notwithstanding the foregoing, no Incentive Stock Option may be
granted under this Plan after the first to occur of (a) the expiration of ten (10) years from the
date the Plan is adopted by the Board or (b) the expiration of ten (10) years from the date the
Plan is approved by the Company’s stockholders under Section 21.

7. Exercise Price and Consideration.

     (a) The per Share exercise price for the Shares to be issued pursuant to exercise of an Option
shall be no less than one hundred percent (100%) of the fair market value per Share on the date of
grant; provided, however, that in the case of an Incentive Stock Option granted to an Employee who,
at the time of grant of such Incentive Stock Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the
per Share exercise price shall be no less than one hundred and ten percent (110%) of the fair
market value per Share on the date of grant. Notwithstanding the foregoing, Options may be

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granted with a per Share exercise price of less than one hundred percent (100%) of the fair
market value per Share on the date of grant pursuant to a merger or other corporate transaction.

     (b) The fair market value shall be determined by the Board in its discretion; provided,
however, that where there is a public market for the Common Stock, the fair market value per Share
shall be the mean of the bid and asked prices (or the closing price per share if the Common Stock
is listed on the National Association of Securities Dealers Automated Quotation (“NASDAQ”)
National Market System) of the Common Stock for the date of grant, as reported in the Wall Street
Journal (or, if not so reported, as otherwise reported by the NASDAQ System) or, in the event the
Common Stock is listed on a stock exchange, the fair market value per Share shall be the closing
price on such exchange on the date of grant of the Option, Restricted Stock award, Restricted Stock
Unit award or Stock Bonus award, as reported in the Wall Street Journal.

     (c) The consideration to be paid for the Shares to be issued upon exercise of an Award,
including the method of payment, shall be determined by the Board (and in the case of an Incentive
Stock Option, shall be determined at the time of grant) and to the extent permitted under
applicable laws may consist entirely of cash, check, promissory note, other Shares of Common Stock
which (i) either have been owned by the Optionee for more than six (6) months on the date of
surrender or were not acquired directly or indirectly, from the Company, and (ii) have a fair
market value on the date of surrender equal to the aggregate exercise price of the Shares as to
which said Award shall be exercised, or any combination of such methods of payment, or such other
consideration and method of payment for the issuance of Shares to the extent permitted under
applicable law.

8. Term of Option. The term of each Option shall be the term stated in the Option
Agreement; provided, however, that the term shall be no more than seven (7) years from the date of
grant thereof. In the case of an Incentive Stock Option granted to an Optionee who, at the time
the Option is granted, owns stock representing more than ten percent (10%) of the voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the Option shall be
five (5) years from the date of grant thereof or such shorter term as may be provided in the Option
Agreement.

9. Exercise of Option.

     (a) Procedure for Exercise; Rights as a Stockholder.

     (i) Any Option granted hereunder shall be exercisable at such times and under
such conditions as determined by the Board, including performance criteria with
respect to the Company and/or the Optionee, and as shall be permissible under the
terms of the Plan.

     (ii) An Option may not be exercised for a fraction of a Share.

     (iii) An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the Option by
the person entitled to exercise the Option and full payment for the Shares with
respect to which the Option is exercised has been received by the Company. Full
payment may, as authorized by the Board, consist of any consideration and

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method of payment allowable under Section 7 of the Plan. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing such
Shares, no right to vote or receive dividends or any other rights as a stockholder
shall exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. Upon an Optionee’s request, the Company shall issue (or cause to be issued)
such stock certificate promptly upon exercise of the Option. To the extent an Option
designated as an Incentive Stock Option at grant that is treated as the exercise of a
Nonstatutory Stock Option pursuant to Section 5(b), the Company shall issue a
separate stock certificate evidencing the Shares treated as acquired upon exercise of
an Incentive Stock Option and a separate stock certificate evidencing the Shares
treated as acquired upon exercise of a Nonstatutory Stock Option and shall identify
each such certificate accordingly in its stock transfer records. No adjustment will
be made for a dividend or other right for which the record date is prior to the date
the stock certificate is issued, except as provided in Section 15 of the Plan.

     (iv) Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the Plan and
for sale under the Option, by the number of Shares as to which the Option is
exercised.

     (b) Termination of Status as an Employee or Consultant. In the event of termination
of an Optionee’s Continuous Status as an Employee or Consultant (as the case may be), such Optionee
may, but only within such period of time as is determined by the Board, with such determination in
the case of an Incentive Stock Option not exceeding three (3) months and in the case of
Nonstatutory Stock Option not exceeding six (6) months after the date of termination (provided,
that such period shall be three (3) months in the case of an Option granted to an Outside Director
pursuant to Section 10), with such determination in the case of an Incentive Stock Option being
made at the time of grant of the Option, exercise the Option to the extent that such Employee or
Consultant was entitled to exercise it at the date of such termination (but in no event later than
the date of expiration of the term of such Option as set forth in the Option Agreement). To the
extent that such Employee or Consultant was not entitled to exercise the Option at the date of such
termination, or if such Employee or Consultant does not exercise such Option (which such Employee
or Consultant was entitled to exercise) within the time specified herein, the Option shall
terminate.

     (c) Disability of Optionee. Notwithstanding the provisions of Section 9(b) above, in
the event of termination of an Optionee’s Continuous Status as an Employee or Consultant as a
result of such Employee’s or Consultant’s total and permanent disability (as defined in Section
22(e)(3) of the Code), such Employee or Consultant may, but only within six (6) months (twelve (12)
months in the case of an Option granted to an Outside Director pursuant to Section 10) (or such
other period of time not exceeding twelve (12) months as is determined by the Board, with such
determination in the case of an Incentive Stock Option being made at the time of grant of the
Option) from the date of such termination (but in no event later than the date of expiration of the
term of such Option as set forth in the Option Agreement), exercise the Option to the extent the
right to exercise would have accrued had the Optionee continued Continuous Status as an Employee or
Consultant for a period of

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six (6) months following termination of Continuous Status as an Employee or Consultant by
reason of disability. To the extent that such Employee or Consultant was not entitled to exercise
an Option in this period, or if such Employee or Consultant does not exercise such Option (which
such Employee or Consultant was entitled to exercise) within the time specified herein, the Option
shall terminate.

     (d) Retirement of Employee. Notwithstanding the provisions of Section 9(b) above, in
the event of termination of an Employee’s Continuous Status as an Employee as a result of such
Employee’s retirement from the Company at age fifty-five (55) or greater after having Continuous
Status as an Employee for (5) years or more, all Awards held by such Employee shall vest and such
Employee may, but only within three (3) years from the date of such termination (but in no event
later than the date of expiration of the term of such Award), exercise the Award to the extent such
Employee was entitled to exercise it at the date of such termination.

     (e) Death of Optionee. In the event of the death of an Optionee:

     (i) during the term of the Option who is at the time of his or her death an
Employee or Consultant of the Company and who shall have been in Continuous Status as
an Employee or Consultant since the date of grant of the Option, the Option may be
exercised, at any time within six (6) months (twelve (12) months in the case of an
Option granted to an Outside Director pursuant to Section 10) (or at such later time
as may be determined by the Board but in no event later than the date of expiration
of the term of such Option as set forth in the Option Agreement), by the Optionee’s
estate or by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent that the right to exercise would have accrued had
the Optionee continued living and remained in Continuous Status as an Employee or
Consultant six (6) months (or such other period of time as is determined by the
Board) after the date of death; or

     (ii) within thirty (30) days (or such other period of time not exceeding three
(3) months as is determined by the Board, with such determination in the case of an
Incentive Stock Option being made at the time of grant of the Option) after the
termination of Continuous Status as an Employee or Consultant, the Option may be
exercised, at any time within six (6) months (twelve (12) months in the case of an
Option granted to an Outside Director pursuant to Section 10) (or such other period
of time as is determined by the Board at the time of grant of the Option) following
the date of death (but in no event later than the date of expiration of the term of
such Option as set forth in the Option Agreement), by the Optionee’s estate or by a
person who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent that the right to exercise that had accrued at the date of
termination.

10. Automatic Granting of Options to Outside Directors.

     (a) First Option Grants. Unless otherwise determined by the Board, each new Outside
Director shall be automatically granted an Option to purchase twenty five thousand (25,000) Shares

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(a “First Option”) on the date on which such person first becomes a Director, whether
through election by the stockholders of the Company or appointment by the Board to fill a vacancy.

     (b) Subsequent Option Grants. Unless otherwise determined by the Board, each Outside
Director and the Chairman of the Board of Directors of the Company shall be automatically granted
an annual Option (a “Subsequent Option”) to purchase, in the case of an Outside Director,
twelve thousand (12,000) Shares, and in the case of the Chairman of the Board of Directors of the
Company, fifteen thousand (15,000) Shares, each on the date of each annual meeting of the
stockholders of the Company, if on such date, he or she shall have served on the Board for at least
six (6) months.

     (c) Terms of Options Granted to Outside Directors. Options granted to Outside
Directors pursuant to this Section 10 shall have a per Share exercise price of no less than one
hundred percent (100%) of the fair market value per Share on the date of grant. Subject to Section
9, the term of each Option granted to an Outside Director pursuant to this Section 10 shall be seven
(7) years from the date of grant thereof. First Options and Subsequent Options shall become
exercisable in cumulative monthly installments of 1/12 of the Shares subject to such Option on each
of the monthly anniversaries of the date of grant of the Option, commencing with the first such
monthly anniversary, such that each such Option shall be one hundred percent (100%) vested on the
first anniversary of its date of grant.

11. Restricted Stock Awards.

     (a) Rights to Purchase. After the Board determines that it will offer an Employee or
Consultant a Restricted Stock award, it shall deliver to the offeree a stock purchase agreement
setting forth the terms, conditions and restrictions relating to the offer. Such agreement shall
further specify the number of Shares which such person shall be entitled to purchase, and the time
within which such person must accept such offer, which shall in no event exceed six (6) months from
the date upon which the Board made the determination to grant the Restricted Stock award. The
offer shall be accepted by execution of a stock purchase agreement in the form determined by the
Board.

     (b) Purchase Price. The Board shall establish the purchase price, if any, and form of
payment for each Restricted Stock award; provided, however, that such purchase price shall be no
less than one hundred percent (100%) of the fair market value per Share on the date of grant;
provided, further, however, that the purchase price per Share may be reduced on a dollar-for-dollar
basis to the extent the Restricted Stock award is granted to the Holder in lieu of cash
compensation otherwise payable to the Holder. In all cases, legal consideration shall be required
for each issuance of a Restricted Stock award.

     (c) Issuance of Shares. Forthwith after payment therefor, the Shares purchased shall
be duly issued; provided, however, that the Board may require that the Holder make adequate
provision for any Federal and State withholding obligations of the Company as a condition to the
Holder purchasing such Shares.

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     (d) Repurchase Option. Unless the Board determines otherwise, the stock purchase
agreement shall grant the Company a repurchase option exercisable upon the voluntary or involuntary
termination of the Holder’s employment with the Company for any reason (including death or
disability). Subject to applicable laws, if the Board so determines, the purchase price for shares repurchased may be paid by cancellation of any indebtedness of the Holder to the
Company. Subject to Section 4(d) with respect to Restricted Stock awards granted to Section 162(m)
Participants, the repurchase option shall lapse at such rate as the Board may determine.

     (e) Other Provisions. The stock purchase agreement shall contain such other terms,
provisions and conditions not inconsistent with the Plan as may be determined by the Board.

12. Restricted Stock Unit Awards.

     (a) Grant of Restricted Stock Units. Any Employee or Consultant selected by the Board
may be granted an Award of Restricted Stock Units in the manner determined from time to time by the
Board.

     (b) Vesting of Restricted Stock Units. The vesting of Restricted Stock Units shall be
determined by the Board and may be linked to specific performance criteria determined to be
appropriate by the Board, in each case on a specified date or dates or over any period or periods
determined by the Board. Common Stock underlying a Restricted Stock Unit award will not be issued
until the Restricted Stock Unit award has vested, pursuant to a vesting schedule or performance
criteria set by the Board.

     (c) No Rights as a Stockholder. Unless otherwise provided by the Board, a Holder
awarded Restricted Stock Units shall have no rights as a Company stockholder with respect to such
Restricted Stock Units until such time as the Restricted Stock Units have vested and the Common
Stock underlying the Restricted Stock Units has been issued.

     (d) Purchase Price. The Board shall establish the purchase price, if any, and form of
payment for each Restricted Stock Unit award; provided, however, that such purchase price shall be
no less than one hundred percent (100%) of the fair market value per Share on the date of grant;
provided, further, however, that the purchase price per Share may be reduced on a dollar-for-dollar
basis to the extent the Restricted Stock Unit award is granted to the Holder in lieu of cash
compensation otherwise payable to the Holder. In all cases, legal consideration shall be required
for each issuance of a Restricted Stock Unit award.

     (e) Other Provisions. The restricted stock unit award agreements shall contain such
other terms, provisions and conditions not inconsistent with the Plan as may be determined by the
Board.

13. Stock Bonus Awards.

     (a) Terms of Award. After the Board determines that it will offer an Employee or
Consultant a Stock Bonus award, it shall deliver to the offeree a stock bonus agreement setting
forth the terms, conditions and restrictions relating to the offer and the number of shares to be
awarded.

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The offer shall be accepted by execution of a stock bonus agreement in the form
determined by the Board.

     (b) Purchase Price. The Board shall establish the purchase price, if any, and form of
payment for each Stock Bonus award; provided, however, that such purchase price shall be no less
than one hundred percent (100%) of the fair market value per Share on the date of grant; provided,
further, however, that the purchase price per Share may be reduced on a dollar-for-dollar
basis to the extent the Stock Bonus award is granted to the Holder in lieu of cash compensation
otherwise payable to the Holder.

     (c) Issuance of Shares. Forthwith after payment therefor, the Shares purchased shall
be duly issued; provided, however, that the Board may require that the Holder make adequate
provision for any Federal and State withholding obligations of the Company as a condition to the
Holder purchasing such Shares.

     (d) Repurchase Option. Unless the Board determines otherwise, the stock bonus
agreement shall grant the Company a repurchase option exercisable upon the voluntary or involuntary
termination of the Holder’s employment with the Company for any reason (including death or
disability). Subject to applicable laws, if the Board so determines, the purchase price for shares
repurchased may be paid by cancellation of any indebtedness of the Holder to the Company. Subject
to Section 4(d) with respect to Stock Bonus awards granted to Section 162(m) Participants, the
repurchase option shall lapse at such rate as the Board may determine.

     (e) Other Provisions. The stock bonus agreement shall contain such other terms,
provisions and conditions not inconsistent with the Plan as may be determined by the Board.

14. Non-Transferability of Awards. Unless determined otherwise by the Board, an Award may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than
by will or by the laws of descent or distribution and may be exercised, during the lifetime of the
Holder, only by the Holder. If the Board makes an Award transferable, such Award shall contain
such additional terms and conditions as the Board deems appropriate.

15. Adjustments upon Changes in Capitalization or Merger.

     (a) Changes in Capitalization. Subject to any action by the Company required by
applicable law or regulations or the requirements of the NASDAQ Stock Market or an established
stock exchange on which the Company’s securities are traded, and subject to Section 15(d), the
number and kind of shares of Common Stock (or other securities or property) covered by each
outstanding Award, and the number and kind of shares of Common Stock (or other securities or
property) which have been authorized for issuance under the Plan but as to which no Awards have yet
been granted or which have been returned to the Plan upon cancellation or expiration of an Award,
as well as the price per share of Common Stock (or other securities or property) covered by each
such outstanding Award, shall be adjusted proportionately to the extent the Board determines that
any increase, decrease or adjustment in the number or kind of issued shares of Common Stock (or
other securities or property), dividend, distribution, stock split, reverse stock split, stock

-12-

 

dividend, combination or reclassification of the Common Stock, reorganization, merger,
consolidation, split-up, repurchase, liquidation, dissolution, or sale, transfer, exchange or other
disposition of all or substantially all of the assets of the Company, exchange of Common Stock or
other securities of the Company, or other similar corporate transaction or event, in the Board’s
sole discretion, affects the Common Stock such that an adjustment is determined by the Board to be
appropriate in order to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan or with respect to an Award. Such adjustment shall be
made by
the Board, whose determination in that respect shall be final, binding and conclusive. Except
as expressly provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of shares of Common Stock subject to an
Award.

     (b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Board shall notify the Holder at least fifteen (15) days prior to
such proposed action. To the extent it has not been previously exercised, the Award shall
terminate immediately prior to the consummation of such proposed action.

     (c) Merger or Asset Sale. In the event of a merger, sale of all or substantially all
of the assets of the Company, tender offer or other transaction or series of related transactions
resulting in a change of ownership of more than fifty percent (50%) of the voting securities of the
Company (“Change in Control”) approved by the majority of the members of the Board on the
Board prior to the commencement of such Change in Control, each outstanding Option shall be assumed
or an equivalent option or right substituted by the successor corporation or a Parent or Subsidiary
of the successor corporation; provided, however, in the event that within one year of the date of
the completion of the Change in Control, the successor corporation or a Parent or Subsidiary of the
successor corporation terminates the employment of an Optionee without Cause (as defined below),
such Optionee shall fully vest in and have the right to exercise the options assumed or substituted
for the Option as to all of the Optioned Stock, including Shares as to which it would not otherwise
be exercisable. In the event that the successor corporation refuses to assume or substitute for
the Option, the Optionee shall fully vest in and have the right to exercise the Option as to all of
the Optioned Stock, including Shares as to which it would not otherwise be exercisable. If an
Option becomes fully vested and exercisable in lieu of assumption or substitution in the event of a
Change in Control, the Board shall notify the Optionee in writing or electronically that the Option
shall be fully vested and exercisable for a period of fifteen (15) days from the date of such
notice, and the Option shall terminate upon the expiration of such period. For the purposes of
this paragraph, the Option shall be considered assumed if, following the Change in Control, the
option confers the right to purchase, for each Share of Optioned Stock subject to the Option
immediately prior to the Change in Control, the consideration (whether stock, cash, or other
securities or property) received in the Change in Control by holders of Common Stock for each Share
held on the effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of the outstanding
Shares); provided, however, that if such consideration received in the Change in Control is not
solely common stock of the successor corporation or its Parent, the Board may, with the consent of
the successor corporation, provide for the consideration to be received upon the exercise of the
Option, for each Share of Optioned Stock subject to the Option, to be solely common stock of the
successor corporation or its Parent equal in fair market

-13-

 

value to the per share consideration
received by holders of Common Stock in the Change in Control. For purposes of this paragraph,
termination shall be for “Cause” in the event of the occurrence of any of the following:
(a) any intentional action or intentional failure to act by employee which was performed in bad
faith and to the material detriment of the successor corporation or its Parent or Subsidiary; (b)
employee willfully and habitually neglects the duties of employment; or (c) employee is convicted
of a felony crime involving moral turpitude; provided, that in the event that any of the foregoing
events is capable of being cured, the successor corporation or its Parent or
Subsidiary shall provide written notice to the employee describing the nature of such event
and the employee shall thereafter have five (5) business days to cure such event.

     In the event of a Change in Control which is not approved by the majority of the members of
the Board on the Board prior to the commencement of a Change in Control, each Optionee shall fully
vest in and have the right to exercise all outstanding Options as to all of the Optioned Stock,
including Shares as to which it would not otherwise be exercisable.

     (d) With respect to Awards which are granted to Section 162(m) Participants and are intended
to qualify as performance-based compensation under Section 162(m)(4)(C), no adjustment or action
described in this Section 15 or in any other provision of the Plan shall be authorized to the
extent that such adjustment or action would cause such Award to fail to so qualify under Section
162(m)(4)(C), or any successor provisions thereto.

16. Date of Granting Awards. The date of grant of an Award shall, for all purposes, be the
date on which the Board makes the determination granting such Award. Notice of the determination
shall be given to each Employee or Consultant to whom an Award is so granted within a reasonable
time after the date of such grant.

17. Amendment and Termination of the Plan.

     (a) Amendment and Termination. The Board may at any time amend, alter, suspend or
discontinue the Plan, but no amendment, alteration, suspension or discontinuation shall be made
which would impair the rights of any Holder under any grant theretofore made, without his or her
consent. In addition, to the extent necessary and desirable to comply with Section 422 of the Code
(or any other applicable laws or regulation, the requirements of the NASDAQ Stock Market or an
established stock exchange), the Company shall obtain stockholder approval of any Plan amendment in
such a manner and to such a degree as required.

     (b) Effect of Amendment or Termination. Any such amendment or termination of the Plan
shall not affect Awards already granted, and such Awards shall remain in full force and effect as
if this Plan had not been amended or terminated, unless mutually agreed otherwise between the
Holder, as applicable, and the Board, which agreement must be in writing and signed by the Holder,
as applicable, and the Company.

18. Conditions upon Issuance of Shares. Shares shall not be issued pursuant to the
exercise of an Award unless the exercise of such Award and the issuance and delivery of such Shares
pursuant thereto shall comply with all relevant provisions of law, including, without limitation,
the Securities

-14-

 

Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the rules
and regulations promulgated thereunder, and the requirements of the NASDAQ Stock Market or any
stock exchange upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.

As a condition to the exercise of an Award, the Company may require the person exercising such
Award to represent and warrant at the time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of the aforementioned
relevant provisions of law.

19. Reservation of Shares. The Company, during the term of this Plan, will at all times
reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements
of the Plan. The inability of the Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of
the failure to issue or sell such Shares as to which such requisite authority shall not have been
obtained.

20. Award Agreements. Options shall be evidenced by written Option Agreements in such form
as the Board shall approve. Restricted Stock awards, Restricted Stock Unit awards, or Stock Bonus
awards shall be evidenced by written restricted stock award agreements, a restricted stock unit
award agreements, or stock bonus agreements, respectively, in such form as the Board shall approve.

21. Stockholder Approval. Continuance of the Plan shall be subject to approval by the
stockholders of the Company within twelve (12) months before or after the date the Plan is adopted.
Such stockholder approval shall be obtained in the degree and manner required under applicable
laws and the rules of the NASDAQ Stock Market or any stock exchange upon which the Common Stock is
listed.

22. Section 409A of the Code. In the event any provision of the Plan, or the application
thereof, is or becomes inconsistent with Section 409A of the Code and any regulations promulgated
thereunder, such provision shall be void or unenforceable or in the sole discretion of the Board
shall be deemed amended to comply with Section 409A and any regulations promulgated thereunder.
The other provisions of the Plan shall remain in full force and effect.

-15-<PAGE>
EXHIBIT 10_38

                                                      CARVILL
--------------------------------------------------------------------------------
                                                      CARVILL AMERICA, INC.
                                                      The Pinnacle, Suite 375
                                                      3455 Peachtree Road, NE
                                                      Atlanta, Georgia  30326
                                                      Telephone:  404-475-0314
                                                      Toll Free:  877-309-8990
                                                      Facsimile:  404-475-0439

TITLE                   EXCESS CESSION REINSURANCE CONTRACT

BETWEEN                 DARWIN NATIONAL ASSURANCE COMPANY, DARWIN SELECT
                        INSURANCE COMPANY AND/OR ANY OTHER ASSOCIATED,
                        AFFILIATED OR SUBSIDIARY COMPANIES OF DARWIN
                        PROFESSIONAL UNDERWRITERS, INC., INCLUDING BUSINESS
                        ASSUMED BY THE REASSURED FROM CAPITOL INDEMNITY
                        CORPORATION, CAPITOL SPECIALTY INSURANCE CORPORATION,
                        PLATTE RIVER INSURANCE COMPANY AND/OR ANY OTHER
                        ASSOCIATED, AFFILIATED OR SUBSIDIARY COMPANIES OF
                        ALLEGHANY INSURANCE HOLDING LLC, BUT ONLY IN RESPECT
                        OF BUSINESS UNDERWRITTEN BY DARWIN PROFESSIONAL
                        UNDERWRITERS, INC.

                        AND

                        THE REINSURERS SIGNATORY HERETO

COMMENCING              APRIL 1, 2006

U.S. CLASSIFICATION     U.S. REINSURANCE

                                  Page 1 of 28
<PAGE>
CONTENTS

PREAMBLE          IDENTITY OF PARTIES
ARTICLE 1         BUSINESS REINSURED
ARTICLE 2         EXCLUSIONS
ARTICLE 3         COVER, LIMIT AND RETENTION
ARTICLE 4         EXPRESS WARRANTY
ARTICLE 5         TERRITORIAL SCOPE
ARTICLE 6         PERIOD
ARTICLE 7         SPECIAL TERMINATION
ARTICLE 8         FOLLOW THE FORTUNES
ARTICLE 9         LOSS CAP
ARTICLE 10        EXCESS OF ORIGINAL POLICY LIMITS
ARTICLE I1        EXTRA-CONTRACTUAL OBLIGATIONS
ARTICLE 12        PREMIUM
ARTICLE 13        CEDING COMMISSION
ARTICLE 14        ACCOUNTS AND REPORTS\
ARTICLE 15        NOTICE OF LOSS AND LOSS SETTLEMENTS
ARTICLE 16        INTEREST PENALTY
ARTICLE 17        LOSS AND UNEARNED PREMIUM RESERVES
ARTICLE 18        CURRENCY
ARTICLE 19        TAX PROVISIONS
ARTICLE 20        INSOLVENCY OF THE REASSURED
ARTICLE 21        OFFSET
ARTICLE 22        DELAYS, ERRORS AND OMISSIONS
ARTICLE 23        AMENDMENTS AND ALTERATIONS
ARTICLE 24        ACCESS TO RECORDS AND CLAIMS REVIEW
ARTICLE 25        ARBITRATION
ARTICLE 26        SERVICE OF SUIT
ARTICLE 27        CONFIDENTIALITY
ARTICLE 28        REGULATORY COMPLIANCE
ARTICLE 29        INTERMEDIARY
ARTICLE 30        GOVERNING LAW
ARTICLE 31        PARTICIPATION
ARTICLE 32        SEVERAL LIABILITY NOTICE

ATTACHMENTS:
1.    NUCLEAR INCIDENT EXCLUSION CLAUSES -- LIABILITYREINSURANCE -
      U.S.A/CANADA

2.    NUCLEAR ENERGY RISKS EXCLUSION CLAUSE --- REINSURANCE - 1994 -
      (WORLDWIDE excluding U.S.A and CANADA)

                                  Page 2 of 28
<PAGE>
                       EXCESS CESSION REINSURANCE CONTRACT

PREAMBLE

This Contract is made and entered into between Darwin National Assurance
Company, Darwin Select Insurance Company and/or any other any other associated,
affiliated or subsidiary companies of Darwin Professional Underwriters, Inc.,
including business assumed by the Reassured from Capitol Indemnity Corporation,
Capitol Specialty Insurance Corporation, Platte River Insurance Company and/or
any other associated, affiliated or subsidiary companies of Alleghany Insurance
Holding LLC, but only in respect of business underwritten by Darwin Professional
Underwriters Inc. of 9 Farm Springs Road, Farmington, Connecticut 06032 (NAIC
Group Code 10472) (hereinafter referred to as "the Reassured") and the
Reinsurers signatory hereto (hereinafter referred to as the "Reinsurers"), on
the following terms and conditions:

ARTICLE 1

BUSINESS REINSURED

This Contract applies to policies of insurance classified by the Reassured as
Directors' & Officers' Liability, Fiduciary Liability, Employment Practices
Liability, Managed Care Organizations Errors and Omissions Liability, Insurance
Agents Errors and Omissions Liability, Lawyers Professional Liability (subject
to Exclusion 8 herein), Insurance Company Errors and Omissions Liability
(subject to Exclusion 10 herein), Miscellaneous Professional Liability and
Technology Errors and Omissions Liability.

For the purposes of this Contract, the terms "policy", "policies" or "original
policies" as used herein shall be understood to mean all binders, policies,
contracts, endorsements or other evidence of insurance issued in the name of the
Reassured.

ARTICLE 2

EXCLUSIONS

This Contract does not apply to and absolutely excludes the following:

1.    Nuclear Incidents, in accordance with the attached Nuclear Incident
      Exclusion Clauses - Liability - Reinsurance - U.S.A./Canada.

2.    Nuclear Energy Risks, in accordance with the attached Nuclear Energy Risks
      Exclusion Clause (Reinsurance) (1994) (Worldwide excluding U.S.A. and
      Canada).

3.    Insolvency Funds, in accordance with the Insolvency Funds Exclusion
      Clause.

4.    Liability assumed by the Reassured as a Member or Reinsurer of any Pool,
      Association or Syndicate.

5.    Financial Guarantee and Insolvency Insurance when written as such.

                                  Page 3 of 28
<PAGE>
6.    Surety Business when written as such.

7.    Reinsurance Assumed Business, other than policies "fronted" by another
      carrier and underwritten by Darwin Professional Underwriters, Inc. and
      Inter-Company Pooling Arrangements.

8.    Business classified by the Reassured as Accountants Errors & Omissions,
      Actuarial Errors & Omissions, Architects and Engineers Errors & Omissions,
      Engineering/Construction Risk Errors & Omissions, Lawyers Professional
      Liability but only in respect of law firms with 100 or more attorneys at
      the inception of the original policy/program attaching hereto, For Profit
      Outside Directors Liability when written as such under a Lawyers
      Professional Liability policy subject to this Contract, Media Professional
      Liability (except when classified by the Reassured as Technology Errors
      and Omissions Liability), Medical Malpractice, Hospital Professional
      Liability and Nursing Home Errors & Omissions.

9.    Insurance Agents Errors & Omissions for the following: Marsh, Aon, Willis,
      Arthur J. Gallagher, Jardine Lloyd Thompson, Heath Lambert, Benfeld and
      Brown & Brown

10.   Business classified by the Reassured as Errors & Omissions Liability for
      Financial Institutions, which is understood to mean business classified by
      the Reassured as Commercial Money Center Banks, Investment Banks, Mutual
      Funds, Hedge Funds, Security Dealers/Brokers, Investment Advisors and
      Insurance Companies with more than USD250,000,000 of premium income at the
      inception of the original policy/program attaching hereto.

11.   Business classified by the Reassured as Directors' & Officers' Liability
      for Financial Institutions, for risks with market capitalizations of
      USD5,000,000,000 or greater at the time the risk is quoted. Such exclusion
      shall not apply to business classified by the Reassured as Side "A" or
      Side "A" DIC Directors' & Officers' Liability.

12.   Business classified by the Reassured as Directors' & Officers Liability
      for Hedge Funds.

13.   Business classified by the Reinsured as Representation and Warranties, Tax
      Opinion and Loss Mitigation Units Insurance.

14.   Business classified by the Reassured as "Jumbo" Technology Errors and
      Omissions Liability, unless specifically accepted by Reinsurers hereon.
      For the purposes of this exclusion "Jumbo" is understood to mean any
      company, determined by the Reinsured only, as having more than
      USD1,000,000,000 annual revenues and 1,000 or more employees related to
      technology activities subject to the Reinsured "Technology Errors and
      Omissions Liability policy form at the inception of the original
      policy/program attaching hereto.

Notwithstanding the above, it is agreed that Exclusions 8, 10 and 11 shall not
apply when they are incidental to the main operations subject to the Reassured's
original policy form, provided such main operations are covered by the Reassured
and are not themselves excluded from the scope of this Contract. For the
purposes of this article "incidental" shall be understood to mean any operation
that contributes less than 5% to the total revenues covered by the Reassured's
original policy form as determined by the Reassured.

Notwithstanding anything in this Article to the contrary, should the Reassured
submit a risk to Reinsurers hereon for their special acceptance, to the extent
that Reinsurers agree to accept such a risk by way of special acceptance, the
above exclusions shall not apply only as provided in the special acceptance.
Additionally it is agreed that, where a risk previously accepted by way of
special acceptance is renewed,

                                  Page 4 of 28
<PAGE>
no further special acceptance by Reinsurers shall be required, and all such
prior special acceptances on predecessor Contracts shall also be covered
hereunder. Notwithstanding the above, as a condition precedent to prior special
acceptances on predecessor contracts being automatically covered, all such prior
special acceptances will be identified to the Reinsurer by the Reassured in the
information provided for the purposes of renewal of this Contract.

For all accounts submitted for special acceptance, the Reassured will provide
the Reinsurers the following information:

      -     A copy of the underwriting work-up on the account

      -     Terms, conditions and pricing that the Reassured propose to offer
            within this Contract.

      -     An account loss history

Upon receipt of the above information provided in an electronic format, the
Reinsurers will provide their underwriting decision on any account submitted for
special acceptance within three (3) working days it being understood that if not
received within the allotted timeframe, the account will be automatically
approved and accepted under this Contract.

ARTICLE 3

COVER, LIMIT AND RETENTION

Section A:

In respect of all original policies except Directors' and Officers' Liability
coming within the scope of this Contract which are issued by the Reassured for
limits in excess of USD5,000,000 each and every loss, each Insured, each
policy/program, the Reassured shall cede and the Reinsurers shall accept by the
way of reinsurance under this Contract, all liability in excess of underlying
limits of USD5,000,000 each and every loss, each Insured, each policy/program,
subject to a limit of liability to the Reinsurers of up to USD5,000,000 each and
every loss, each insured, each policy/program.

Section B:

In respect of all original policies classified by the Reassured as Directors'
and Officers' Liability coming within the scope of this Contract which are
issued by the Reassured for limits in excess of USD5,000,000 each and every
loss, each Insured, each policy/program, the Reassured shall cede and the
Reinsurers shall accept by the way of reinsurance under this Contract, all
liability in excess of underlying limits of USD5,000,000 each and every loss,
each Insured, each policy/program, subject to a litmit of liability to the
Reinsurers of up to USD10,000,000 each and every loss, each insured, each
policy/program.

However, it is understood and agreed that, for Public D&O risks, full entity
(A/B/C) coverage will comprise a maximum of USD5,000,000 of the limit hereon or
so deemed.

Section A and B:

The Reassured shall retain the said underlying limits for their own account but
without prejudice to the above shall be at liberty to protect that retention by
way of excess of loss reinsurance for their own account and benefit.

                                  Page 5 of 28
<PAGE>
Reinsurers hereon agree to bear their proportional share of all loss adjustment
and defense cost expenses, as per the original policy. Original policies may
provide for costs inclusive or costs in addition to the coverage limit. Where
coverage is issued on a cost inclusive basis, costs shall be included within the
limit hereon. Where coverage is issued on a cost in addition basis, pro rata
costs shall be payable in addition to the limit hereon.

The Reassured shall be at liberty to effect specific facultative reinsurance, or
to omit cessions hereunder, when they consider it in the best interest of the
Reinsurers to do so. It is further understood and agreed that the amount of the
Reinsurers' liability hereunder shall not be increased by reason of the
inability of the Reassured to collect from any such specific facultative
reinsurance.

It is understood and agreed that the limits and retentions hereon apply
separately to each original coverage and/or section thereof as applicable,
issued by the Reassured, unless written on a combined, shared limit basis, as
per original policies.

The meaning of "each and every loss", "claim", "claim made" and "losses
discovered" shall follow the definitions in the policies covered hereunder, as
finally determined by the Reassured. The Reassured shall also be the determinant
of what constitutes "each Insured", "each coverage", "each section" and "each
policy".

Where the Reassured issues more than one policy to the same original insured
covering the same class of business, (such as on a layered basis), then the
combination of such policies shall be considered a program for the purposes
hereof, as reasonably determined by the Reassured.

                                    ARTICLE 4

EXPRESS WARRANTY

Patent Infringement coverage applicable to business classified by the Reassured
as Technology Errors and Omissions Liability will be sub-limited to USD1,000,000
or so deemed.

The Reassured shall retain not less than 15.00% of the liability and premium in
respect of each cession hereunder, net and unreinsured, except for internal
reinsurance and/or Catastrophe Excess of Loss Reinsurance.

                                    ARTICLE 5

TERRITORIAL SCOPE

This Contract shall cover wherever the original policies cover.

                                    ARTICLE 6

PERIOD

'This Contract covers all claims made or losses discovered, as original, on
original policies issued or renewed during the period April 1, 2006 12:01 a.m.
Standard Time to April 1st, 2007 12:01 a.m. Standard Time at the place and
location of risks.

                                  Page 6 of 28
<PAGE>
The maximum original policy period shall be 12 months plus odd time not to
exceed 18 months in all, plus extended reporting period coverage or
endorsements, as original. Such extended reporting period coverage or
endorsements shall be limited to 36 months or so deemed, or such longer period
as required by State Regulations. Notwithstanding the foregoing, policies
classified by the Reassured as "Run-Off" may be issued for periods up to 72
months.

For the purposes of this Contract, any extension, discovery period or extended
reporting endorsement attaching to a policy covered hereunder shall be
considered as part of the period of the said policy, subject to the provision
that a separate limit of liability may apply in respect thereof.

Upon expiry of this Contract, policies in force at the effective time and date
of expiration hereof shall continue to be covered hereunder until their
individual natural expiration or termination dates, whichever sooner, including
extensions, discovery periods or other similar extended reporting endorsements
attaching to such policies. The Reassured may however, subject to agreement by
Reinsurers hereon, terminate the liability of the Reinsurers for claims made or
losses discovered, as applicable on or after the effective time and date of
expiration hereof and, in such event, the unearned premium on all ceded policies
attaching hereunder shall be returned to the Reassured by the Reinsurer less any
ceding commission previously allowed on unearned premium.

Notwithstanding the above, should the Reassured elect to terminate Reinsurers'
liability, premium applicable to run off policies, discovery periods or other
similar extended reporting endorsements in force at the effective time and date
of termination shall be deemed to be fully earned. Any claims applicable to such
run off policies, discovery periods or similar extended reporting endorsements
shall be deemed to have been made on the date the original policy expired or was
cancelled

                                    ARTICLE 7

SPECIAL TERMINATION CLAUSE

A.    Either party may terminate this Contract upon 30 days notice in the event
      that the other party's surplus has been reduced by 30% or more of the
      amount of surplus at March 31st, 2006.

B.    The Reinsured may terminate the Reinsurer's participation hereon at any
      time by giving 30 days' prior written notice to the Reinsurer in the event
      that:

      (1)   A State Insurance Department or other legal authority has ordered
            the subscribing Reinsurer to cease writing business; or

      (2)   The subscribing Reinsurer has become insolvent or has been placed
            into liquidation or receivership or proceedings have been instituted
            against the subscribing Reinsurer for the appointment of a receiver,
            liquidator, rehabilitator, conservator or trustee in bankruptcy, or
            other agents known by whatever name, to take possession of its
            assets or control of its operation; or

      (3)   The subscribing Reinsurer has reinsured its entire liability under
            this Contract without the Reinsured's prior written consent.
            However, the Reinsurer shall be at liberty to effect catastrophe
            excess and/or aggregate stop loss excess reinsurance; or

      (4)   The subscribing Reinsurer has ceased assuming new and renewal treaty
            reinsurance business; or

                                  Page 7 of 28
<PAGE>
      (5)   The subscribing Reinsurer experiences a downgrading in their
            financial strength rating from Standard and Poor's Group below BBB
            or a downgrading in rating from A.M. Best Company below A-.

In the event of such termination, the liability of the Reinsurer shall be
terminated as follows:

Policies in force at the effective time and date of termination of this Contract
shall continue to be covered hereunder until their individual expiration dates,
including extensions, discovery periods or other such similar reporting
endorsements or provisions attached thereto. For rating purposes, the applicable
Original Gross Net Written Premium Income shall be calculated on policies issued
or renewed from the inception date of this Contract to the effective time and
date of termination of this Contract.

The Reassured may however terminate the liability of the Reinsurers for claims
made or losses discovered, as original, after the effective time and date of
termination of this Contract and, in such event, the unearned premium at the
termination date applicable to in force policies, including extensions,
discovery periods or other similar extended reporting endorsements or provisions
attached thereto, shall be returned to the Reassured by the Reinsurers less any
ceding commission previously allowed on

                                    ARTICLE 8

FOLLOW THE FORTUNES

This Contract shall he construed as an honorable undertaking between the
Reassured and the Reinsurers and shall not be defeated by technical legal
restrictions, it being the intention of this Contract that the fortunes of the
Reinsurers shall follow in all respects the fortunes of the Reassured on all
original policies and contracts of insurance ceded to this Contract.

It is understood however, that this Contract is a contract of reinsurance
separate and distinct from the original policies issued by the Reassured. Except
as provided for in INSOLVENCY OF 'THE REASSURED the Reinsurers will not, under
any circumstances whatsoever, he directly liable to the original insureds.

                                    ARTICLE 9

LOSS CAP

Notwithstanding any other provision of this Contract the maximum recoverable
hereon shall not exceed the greater of USD40,000,000 or 250% of the final
reinsurance premium.

                                   ARTICLE 10

EXCESS OF ORIGINAL POLICY LIMITS

In addition to the coverage afforded under COVER, LIMIT AND RETENTION, should
the Reassured incur additional liability as the result of an award in excess of
their original policy limit as defined below, the Reinsurers shall accept the
additional liability incurred solely on cessions made hereunder,

                                  Page 8 of 28
<PAGE>
up to an additional Cession limit in addition to any contractual loss hereunder
(subject to the Reassured's 15.00% co-participation hereon), it being understood
the maximum additional recoverable in respect of specific excess of original
policy limits and extra contractual obligations coverage shall be USD10,000,000
any one claim. However, specific Excess of Original Policy Limits coverage
afforded under the Reassured's underlying "i-bind" Quota Share and Excess of
Loss Reinsurance Contracts shall inure to the benefit of Reinsurers hereon. No
separate underlying retention of USD5,000,000 shall apply to such additional
Excess of Original Policy Limits coverage hereunder.

Awards in excess of the original policy limit are defined as contractual losses
which the Reassured may be legally liable to pay, but in excess of the original
policy limit, such losses in excess of the original policy limit having been
incurred because of, but not limited to, the following: failure by the Reassured
to settle within the original policy limit or by reason of alleged or actual
negligence, fraud or bad faith in rejecting an offer of settlement or in the
preparation of the defense or in the trial of any action against an insured or
in the preparation or prosecution of an appeal consequent upon such action.

The date on which any liability in excess of original policy limits is incurred
by the Reassured shall be deemed, in all circumstances, to be the date the
original claim was made or occurred.

However, this Article shall not apply where such awards in excess of original
policy limit have been incurred due to the fraud of a member of the Board of
Directors or a corporate officer of the Reassured acting individually or
collectively or in collusion with any individual or corporation or any other
organization or party involved in the presentation, defense or settlement of any
claim.

                                   ARTICLE 11

EXTRA-CONTRACTUAL OBLIGATIONS

In addition to the coverage afforded under COVER, LIMIT AND RETENTION, should
the Reassured incur additional liability as the result of an award in respect of
any extra-contractual obligations, as defined below, the Reinsurers shall accept
the additional liability incurred solely on cessions made hereunder, up to an
additional Cession limit in addition to any contractual loss hereunder (subject
to the Reassured's 15.00% co-participation hereon), it being understood the
maximum additional recoverable in respect of specific excess of original policy
limits and extra contractual obligations coverage shall be USD10,000,000 any one
claim. However, specific Extra Contractual Obligations coverage afforded under
the Reassured's "i-bind" Quota Share and Excess of Loss Reinsurance Contracts
shall inure to the benefit of Reinsurers hereon. No separate underlying
retention of USD 5,000,000 shall apply to such additional Extra Contractual
Obligations coverage hereunder.

"Extra-contractual obligations" are defined as those liabilities not covered
under any other provision of this Contract and which arise from the handling of
any claim on business covered hereunder, such liabilities arising because of,
but not limited to, the following: failure by the Reassured to settle within the
policy limit, or by reason of alleged or actual negligence, fraud or bad faith
in rejecting an offer of settlement or in the preparation of the defense or in
the trial of any action against an insured or in the preparation or prosecution
of an appeal consequent upon such action.

The date on which any extra-contractual obligation is incurred by the Reassured
shall be deemed, in all circumstances, to be the date the original claim was
made or discovered.

                                  Page 9 of 28
<PAGE>
Recoveries, collectibles or retentions from any other form of insurance or
reinsurance including deductibles or self insured retentions that protect the
Company against Extra Contractual Obligations shall inure to the benefit of the
Reinsurers and shall be deducted from the total amount of Extra Contractual
Obligations for purposes of determining the loss hereunder.

However, this Article shall not apply where such extra-contractual obligations
have been incurred due to the fraud of a member of the Board of Directors or a
corporate officer of the Reassured acting individually or collectively or in
collusion with any individual or corporation or any other organization or party
involved in the presentation, defense or settlement of any claim.

                                   ARTICLE 12

PREMIUM

In consideration of the liabilities undertaken by the Reinsurers in accordance
with the terms of this Contract, the Reassured shall pay to the Reinsurers their
proportion of the Reassured's Original Gross Net Written Premium for limits
attaching hereon, generated in accordance with the Increased Limit Factors
(ILF's) established by the Reassured for each class of business covered
hereunder,

The term "Original Gross Net Written Premium" shall for the purpose of this
Contract be understood to mean the full gross amount of the premiums charged by
the Reassured to its original insureds, less cancellations and return premiums,
if applicable.

                                   ARTICLE 13

CEDING COMMISSION

The Reinsurers agree to allow the Reassured to deduct and retain for its own
benefit as Ceding Commission 25% of the Original Gross Net Written Premium
payable to the Reinsurers in accordance with the terms of the PREMIUM Article.

                                   ARTICLE 14

ACCOUNTS AND REPORTS

Accounts shall be rendered by the Reassured quarterly in arrears. Payment of the
premium due the Reinsurers and the a Bordereau of cessions hereon shall be
rendered by the Reassured within 45 days of the close of each calendar quarter
being within 45 days of June 30th, 2006 and quarterly thereafter.

Quarterly premium accounts payable within 45 days of.

June 30th, 2006 (or the next business day thereafter) September 30th, 2006 (or
the next business day thereafter) January 1st, 2007 (or the next business day
thereafter) March 31st, 2007 (or the next business day thereafter)

and each successive quarter thereafter.

                                 Page 10 of 28
<PAGE>
The bordereaux of cessions, as prepared by the Reassured, shall contain the
following information: policy number, insured name, premium, policy limit,
policy term, SIR/attachment point, class of business, and market capitalization
for publicly traded D&O accounts only at the time the risk is written as
determined by the Reassured.

                                   ARTICLE 15

NOTICE OF LOSS AND LOSS SETTLEMENTS

Reinsurers agree to abide by all loss settlements of the Reassured which at its
sole discretion shall adjust, settle or compromise all losses and all such
adjustments, settlements or compromises shall be binding upon Reinsurers subject
to the terms, conditions and limitations of the original policies and this
Contract.

The Reassured shall provide individual loss reports to the Reinsurers of all
claims reserved at or above USD 2,500,000, and in the event of loss settlements
by the Reassured, the Reinsurers agree to settle to the Reassured their
proportion of such loss settlements immediately upon receipt of satisfactory
proof of loss.

Where the Reassured's original policies and/or specific coverage parts of their
original policies provide for loss adjustment expenses in addition to limit, all
loss adjustment expenses paid by the Reassured shall be apportioned in
proportion to the respective interests in the loss of the parties hereto as such
interests finally appear and shall be in addition to their share of the loss
recoverable hereunder. In the event a verdict or judgment is reduced by an
appeal or a settlement, subsequent to the entry of the judgment, resulting in an
ultimate saving on such verdict or judgment, or a judgment is reversed outright,
the expense incurred in securing such final reduction or reversal shall be
pro-rated between the Reinsurers and the Reassured in the proportion that each
benefits from such reduction or reversal; and the expenses incurred up to the
time and date of the original verdict or judgment shall be pro-rated in
proportion to each party's interest in such verdict or judgment.

Notwithstanding the foregoing, in the event that the Reassured's original
policies and/or specific coverage parts of their original policies are issued
with loss adjustment expenses included within the original policy limit, such
loss adjustment expenses shall be included as Loss for the purposes of recovery
hereunder.

In the event of external legal or external adjustment expenses, including
outside monitoring counsel expenses, which are incurred by the Reassured in
connection with a claim or potential claim hereunder and which are not the
subject of the Reassured's original policy, then Reinsurers shall also be liable
for their proportion of such expenses in addition to their share of the loss
recoverable hereunder.

The Reinsurers shall also accept additional liability, solely on cessions made
hereunder, for legal expenses incurred in respect of coverage questions and
legal actions in connection with a claim or potential claim hereunder
(hereinafter referred to as "declaratory judgment and/or rescission expenses").
It being understood and agreed that:

1.    When there is no contractual loss, other than declaratory judgment and/or
      rescission expenses, the declaratory judgment and/or rescission expenses
      shall he considered a Loss for the purposes of recovery hereunder.

2.    When a contractual loss, exclusive of declaratory judgment and/or
      rescission expenses, is incurred hereunder, the Reinsurers shall be liable
      for their proportionate share of such declaratory judgment and/or
      rescission expenses, as the respective interests in the loss of the
      parties hereto finally appear,

                                 Page 11 of 28
<PAGE>
      up to an additional limit of this Contract (subject to the Reassured's
      15.00% co-participation hereon) in addition to any Loss recoverable
      hereunder.

For the purposes of this Contract loss adjustment expenses shall include all
expenses of litigation, including post judgment interest, but shall exclude the
salaries of regular employees and all office expenses of the Reassured.

All salvages, recoveries or payments recovered or received subsequent to a loss
settlement under this Contract shall be applied as if recovered or received
prior to the aforesaid settlement and all necessary adjustments shall be made by
the parties hereto.

                                   ARTICLE 16

INTEREST PENALTY

The provisions of this Article shall not be implemented unless specifically
invoked, in writing, by the Reassured or Reinsurer. The interest amounts
provided for in this Article will apply to the Reinsurer or to the Reassured in
the following circumstances:

1.    Loss payment owed by the Reinsurer to the Reassured shall have a due date
      to the Reassured of 30 calendar days following the date of the Reinsurer's
      receipt of the billing, but no later than 60 calendar days from the
      Reassured's date of the billing.

2.    Payment of any premium installments shall be due to the Reinsurer within
      30 calendar days of the date specified in this Contract. Any premium
      adjustments will be due by the debtor party within 60 calendar days of the
      date specified in this Contract.

3.    Payment of return premiums, commissions, profit sharing, or any other
      amounts not provided in paragraphs 1 or 2 above, shall be due by the
      debtor party within 60 calendar days of the due date specified in this
      Contract. If no due date is specified, the due date shall be 60 days
      following the date of the debtor party's receipt of the billing, but no
      later than 90 days from the creditor party's date of the billing.

4.    Failure by the Reinsurer or Reassured to comply with their respective
      payment obligations within the time periods as herein provided will result
      in a compound interest penalty payable at a rate equal to the 90 day
      Treasury Bill rate as published in the Money Rate Section or any successor
      section of the Wall Street Journal on the first business day following the
      date a remittance becomes due, plus 2% per annum, to be compounded and
      adjusted quarterly. Any interest which occurs pursuant to this Article
      shall be calculated by the party to which it is owed. The accumulation of
      the number of days that any payment is past clue will stop on the date the
      Intermediary, where applicable, receives payment.

5.    The validity of any claim or payment may be contested under the provisions
      of this Contract. If the debtor party prevails in such action, there shall
      be no interest penalty due. Otherwise, any interest will be calculated and
      due as outlined above.

6.    If a Reinsurer advances payment of any claim it is contesting, and
      prevails such action, the Reassured shall return such payment plus pay
      interest on same, calculated as per the provisions of this Article.

7.    Any interest which occurs pursuant to this Article may be waived by the
      party to which it is owed. Further, any interest which is calculated
      pursuant to this Article that is USD100 or less shall be

                                 Page 12 of 28
<PAGE>
      waived. Waiver of such interest, however, shall not affect the waiving
      party's right to similar interest for any other failure by the other party
      to make payment when due under this Article.

8.    Nothing in this Article shall diminish any legal remedies which either
      party may have against the other.

                                   ARTICLE 17

UNEARNED PREMIUM AND LOSS RESERVES

This Article applies only to those Reinsurers signatory hereto who do not
qualify for credit under the regulations of the State insurance authorities or
departments which have jurisdiction over the Reassured's reserves.

The Reassured agrees that when, for its Annual Convention Statement purposes, it
files with the authorities or departments mentioned above or sets up in its
books statutory reserves for known outstanding losses and allocated loss
expenses reinsured by this Contract, for unearned premium in respect of business
coming within the scope of this Contract, or for incurred but not reported
losses (IBNR), hereinafter "The Stated Reserves", it shall forward to the
Reinsurers a clear statement of the Reinsurers' proportion of The Stated
Reserves detailing separately the amounts involved for known outstanding losses
and allocated loss expenses and for unearned premium and IBNR, and also how
those amounts are calculated. Reserves for IBNR shall be equal to the actual
amount of IBNR carried on the books of the Reassured for statutory reporting
purposes.

The Reinsurers, promptly upon receipt of the Reassured's statement, shall apply
for, and secure delivery to the Reassured of, clean irrevocable and
unconditional Letters of Credit or such equivalent funding acceptable to the
Reassured, for the benefit of the Reassured in amounts equal to their proportion
of The Stated Reserves.

All Letters of Credit procured pursuant to this Contract shall be issued by a
Bank which is a Member of the Federal Reserve and acceptable to the authorities
or departments mentioned in the first paragraph of this Article current at the
(late of the Reassured's statement. Such Letter of Credit shall be in full
conformity with the requirements of such authorities or departments.

Further, all such Letters of Credit shall be "Evergreen" in that they shall be
issued for an initial period of not less than one year and shall be
automatically extended for one year from their original expiration dates and
subsequently from their extended expiration dates unless and until, at least
thirty days before any expiration date, the issuing bank gives notice to the
Reassured by registered mail that the issuing bank elects not to extend the life
of the Letter of Credit in question beyond its forthcoming expiration date.

In consideration of the contract of the Reinsurers to furnish such Letters of
Credit to the Reassured to enable it to obtain credit for the reinsurance
provided under this Contract, the Reassured hereby undertakes to hold such
Letters of Credit and the proceeds of any drawings made upon them in trust for
the Reinsurers and to use and apply the proceeds of any such drawings for the
following purposes only:

a.    To pay the Reinsurers' share or to reimburse the Reassured for that share
      of any liability for loss or allocated loss expense reinsured by this
      Contract or for unearned premium in respect of business corning within the
      scope of this Contract;

b.    To refund to the Reinsurers any balance by which the amount of the Letter
      of Credit exceeds the Reinsurers' proportion of any liability for loss or
      allocated loss expense reinsured by this Contract,

                                 Page 13 of 28
<PAGE>
      incurred but not reported losses (IBNR) or for unearned premium in respect
      of business coming within the scope of this Contract.

c.    In the event that one or more of the Reinsurers participating in the
      Letter of Credit gives timely notice of cancellation or non-renewal of
      their participation in the Letter of Credit and provided that the
      obligations secured by the Letter of Credit remain unliquidated and
      undischarged at the time of receipt by the Reassured of such notice, the
      Reassured shall create a cash deposit account, separate from its own
      assets, in an amount equal to the participation of the canceling or
      non-renewing Reinsurer(s) in the Letter of Credit. That cash deposit
      account may then be used as in subparagraphs a. and b. above. It is
      understood and agreed that this procedure may only be implemented before
      the expiry of the notice period in respect of cancellation or non-renewal
      and that if it is implemented, the Reassured will ensure that a rate of
      interest is obtained for the Reinsurers on such a deposit account that is
      at least equal to the rate which would be paid by Citibank N.A. in New
      York, and further that the Reassured will account to the Reinsurers on an
      annual basis for all interest accruing on the cash deposit account for the
      benefit of the Reinsurers.

The issuing bank shall have no responsibility whatsoever in connection with the
propriety of drawings made by the Reassured on the Letters of Credit issued
under this Contract or in connection with the disposition of any funds so
withdrawn, except to ensure that drawings are made only upon the order of
properly authorized representatives of the Reassured.

All Letters of Credit procured for the Reassured under this Contract shall be
adjusted at annual intervals, or more frequently as agreed (but never more
frequently than quarterly), to reflect the current balance of the Reinsurers'
proportion of the Reassured's known outstanding loss and allocated loss expense
reserves and unearned premium reserves, and the Reassured shall produce a
statement for this purpose detailed in the same way as the original statement on
the basis of which such Letters of Credit were first issued. If the statement
shows that the Reinsurers' proportion of such losses and allocated expenses,
IBNR or unearned premium reserves exceeds the current amount of the Letters of
Credit, the Reinsurers shall, within thirty clays after receipt of the
statement, secure the amendment of the Letters of Credit increasing their amount
to the amount of the current balance of these items. If, however, the statement
shows that the Reinsurers' proportion of the current balance of those items is
less than the amount of the Letters of Credit the Reassured shall, within thirty
days of receipt of a written request from the Reinsurers to do so, facilitate
the release of the excessive security by authorizing the amendment of the
Letters of Credit so as to reduce their amount to the current balance required.

All expenses incurred in the establishment or maintenance of such Letters of
Credit shall be paid by the Reinsurers.

                                   ARTICLE 18

CURRENCY

The currency to be used for all purposes of this Contract shall be United States
Dollars ("USD"). All amounts paid or received by the Reassured in any other
currency shall be converted into United States Dollars at the rates of exchange
at which such transactions are converted in the books of the Reassured.

                                 Page 14 of 28
<PAGE>
                                   ARTICLE 19

TAX PROVISIONS

The Reassured shall be liable for all taxes (except Federal Excise Tax) levied
on it with respect to premiums payable to the Reinsurers hereunder. Federal
Excise Tax applies only to those Reinsurers, excepting Underwriters at Lloyd's,
London and other Reinsurers exempt from the Federal Excise Tax, who are
domiciled outside the United States of America.

To the extent that such premium is subject to Federal Excise Tax, the Reinsurers
hereby agree to allow as a deduction from the premium, for the purpose of paying
Federal Excise Tax, all applicable percentages of the premium payable hereon.

In the event of any return premium becoming due hereunder the Reinsurers will
deduct all applicable percentages from the amount of the return, and the
Reassured or its agents shall take steps to recover the tax from the Government
of the United States of America.

In consideration of the terms under which this Contract is issued, the Reassured
undertakes not to claim any deduction in respect of premium payable hereon when
making tax returns, other than Income or Profits tax returns, to any fiscal
authority of the United States of America or any State or Territory thereof.

                                   ARTICLE 20

INSOLVENCY OF THE REASSURED

Amounts due to the Reassured under this Contract shall be payable by the
Reinsurers on the basis of the liability of the Reassured under the original
policies reinsured hereunder without diminution because of the insolvency of any
one or all of the Reassured Companies.

In the event of the insolvency of the Reassured, the Liquidator or Receiver or
Statutory Successor of the Reassured shall give written notice to the Reinsurers
of the pendency of any claim against the insolvent Reassured on the original
policies reinsured hereunder within a reasonable tinge after such claim is filed
in the insolvency proceedings. During the pendency of such claim the Reinsurers
may investigate such claim and intervene, at their own expense, in the
proceedings where such claim is to be adjudicated and interpose any defense or
defenses which they may deem available to the Reassured or its Liquidator or
Receiver or Statutory Successor. The expense thus incurred by the Reinsurers
shall be chargeable, subject to court approval, against the insolvent Reassured
as part of the expense of liquidation to the extent of a proportionate share of
the benefit which may accrue to the Reassured solely as a result of the defense
so undertaken by the Reinsurers.

When two or more Reinsurers are involved in the same claim and a majority in
interest elect to investigate the claim and/or to interpose defense to such
claim, the expense shall be apportioned in accordance with the terms of the
above paragraph as though such expense had been incurred by the Reassured.

Should the Reassured go into liquidation or should a receiver be appointed, the
Reinsurers shall be entitled to deduct from any sums which may be or may become
due to the Reassured under this Contract any sums which are due to the
Reinsurers from the Reassured under this Contract and which are payable

                                 Page 15 of 28
<PAGE>
at a fixed or stated date, as well as any other sums due to the Reinsurers which
are permitted to be offset under applicable law.

In the event of the insolvency of the Reassured, the amounts due to the
Reassured under this Contract shall be payable by the Reinsurers directly to the
Reassured or to its Liquidator, Receiver or Statutory Successor.

It is the mutual intent of the parties that, in the event of the insolvency of
the Reassured, this Article shall be read to conform with the state or
regulatory requirements of the jurisdiction in which the liquidation or
receivership is conducted. In the event that any provision of this Article is in
conflict with such state or regulatory requirements, then such provision shall
be reformed to be in compliance with such state or regulatory requirements.

                                   ARTICLE 21

OFFSET

Each party hereto shall have, and may exercise in the event of insolvency of the
other or the non-payment by the other of obligations when due hereunder, the
right to offset any balance or balances whether on account of premiums,
commissions, claims or losses, adjustment expenses, salvage or any amount due
from that party to the other party hereto under this Contract only against any
balance or balances due or to become due to the offsetting party from the other
party under this Contract only. The terms of this Article shall apply separately
to this Contract and to each successive renewal of this Contract.

                                   ARTICLE 22

DELAYS, ERRORS AND OMISSIONS

No inadvertent delay, error or omission shall be held to relieve either party
hereto of any liability which would have attached to them under this Contract if
such delay, error or omission had not been made, provided that rectification is
made immediately upon discovery.

                                   ARTICLE 23

AMENDMENTS AND ALTERATIONS

The terms herein contained comprise the whole Contract between the Reassured and
the Reinsurers and may only be changed in writing, signed by or on behalf of
both parties.

                                   ARTICLE 24

ACCESS TO RECORDS AND CLAIMS REVIEW

All documents and records in the possession of the Reassured concerning this
Contract shall be made available upon reasonable notice at the request of the
Reinsurers for inspection at the Reassured's offices

                                 Page 16 of 28
<PAGE>
by the Reinsurers or their nominated representatives for the purposes of
obtaining information concerning this Contract or the subject matter hereof.

Specifically, the Reinsurers shall be entitled to nominate a representative to
assess the Reassured's claims and claims procedures.

For the avoidance of doubt, it is hereby expressly agreed that the rights given
to the Reinsurers by this Article shall continue in effect notwithstanding the
expiration of this Contract and shall be exercised at the Reinsurers' own
expense.

                                   ARTICLE 25

ARBITRATION

As a condition precedent to any right of action hereunder, all disputes or
differences arising out of or connected with this Contract (whether or not
arising before or after expiration) its interpretation or implementation, shall
be referred to arbitration in Farmington, Connecticut, U.S.A., the city in which
the Reassured's principal office is located.

Arbitration shall be initiated by the delivery of a written notice of demand for
arbitration by one party to the other within a reasonable time after the dispute
has arisen stating the nature of the dispute and the remedy sought. Those
Reinsurers involved in the dispute or other matter in controversy shall be
considered as one party for the purpose of allocating the cost of the
arbitration.

Each party shall appoint an individual as arbitrator and the two so appointed
shall then appoint a third arbitrator. If either party refuses or neglects to
appoint an arbitrator within sixty (60) days, the other party may appoint the
second arbitrator. If the two arbitrators do not agree on a third arbitrator
within sixty (60) (lays of their appointment, within ten (10) days thereafter
the two arbitrators will request the American Arbitration Association ("AAA") to
appoint a third arbitrator with the qualifications set forth below in this
Article without regard to the AAA's Commercial Arbitration Rules. If the AAA
fails to appoint a third arbitrator within thirty (30) days after its receipt of
the two arbitrators' request, either party may apply to a court of competent
jurisdiction to appoint a third arbitrator with the qualifications set forth
below in this Article. The third arbitrator will immediately notify each party
of his selection. In the event of the resignation or death of any member of the
arbitrator panel, a replacement will be appointed in the same manner as the
resigning or deceased member was appointed.

Each arbitrator shall be an active or retired officer of an insurance or
reinsurance company or Underwriter at Lloyd's London; no arbitrator shall have a
personal or financial interest in the result of the arbitration, and shall not
be a present or former officer, attorney, or consultant of the Reassured or the
Reinsurer or either's affiliates.

The arbitrators shall interpret this Contract as an honorable engagement and not
as merely a legal obligation; they are relieved of all judicial formalities and
may abstain from following the strict rules of law, and shall make any award
with a view to effecting the general purpose of this Contract in a reasonable
manner with due regard to the custom and usage of the insurance and reinsurance
business.

The arbitrators shall have full discretion to make such orders as they think fit
in connection with all procedural matters in the Arbitration, including but not
limited to the conduct of the reference by written or oral submissions, the
production of documents, the examination of witnesses, and the imposition of

                                 Page 17 of 28
<PAGE>
time limits for the taking of necessary procedural steps. The arbitrators shall
also have full discretion to make such orders as they think fit with regard to
the payment of the costs of the Arbitration including attorneys' costs and fees.
However, the arbitrators shall be precluded from awarding punitive damages
against either party.

If more than one Reinsurer is involved in the same dispute, all such Reinsurers
shall constitute and act as one party for purposes of this Article and
communications shall be made by the Reassured to each of the Reinsurers
constituting the one party, provided that nothing herein shall impair the rights
of such Reinsurers to assert several, rather than joint, defenses or claims, nor
be construed as changing the liability of the Reinsurers under the terms of this
Contract from several to joint.

Any Award or order of the arbitrators or a majority thereof shall be binding on
the parties and there shall be no right of appeal there from. For the purpose of
enforcement of any Award, an action may he brought in any Court of competent
jurisdiction.

Except as provided above, arbitration shall be based, insofar as applicable,
upon the procedures of the American Arbitration Association.

                                   ARTICLE 26

SERVICE OF SUIT

This Service of Suit Article will not be read to conflict with or override the
obligations of the parties to arbitrate their disputes as provided for in the
Arbitration Article. This Article is intended as an aid to compelling
arbitration or enforcing such arbitration or arbitral award, not as an
alternative to the Arbitration Article for resolving disputes arising out of
this Contract.

In the event of the failure of the Reinsurers to pay any amount claimed to be
due hereunder, the Reinsurers, at the request of the Company, will 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 the Reinsurers' 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. The
Reinsurers, once the appropriate Court is selected, whether such court is the
one originally chosen by the Company and accepted by Reinsurers or is determined
by removal, transfer, or otherwise, as provided for 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 of any Appellate Court in the event of an appeal.

Service of process in such suit may be made upon Mendes & Mount, 750 Seventh
Avenue, New York, New York 10019-6829. The above-named are authorized and
directed to accept service of process on behalf of Reinsurers in any such suit.

Further, pursuant to any statute of any state, territory or district of the
United States that makes provision therefor, the Reinsurers hereby designate 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 proceedings instituted by or on behalf of the
Company or any beneficiary hereunder arising out of this Contract, and

                                 Page 18 of 28
<PAGE>
hereby designate the above-named as the person to whom the said officer is
authorized to mail such process or a true copy thereof.

                                   ARTICLE 27

CONFIDENTIALITY

The confidential nature of this Contract is acknowledged by all parties.
Moreover, the Reinsurers will only disclose to third parties, such as
regulators, auditors, rating agencies, shareholders, counsel, reinsurers and the
like, such details of this Contract as are necessary to comply with their
obligations to such third parties as part of their normal business practice.

It is a condition binding on Reinsurers hereon that they may not disclose any
details of this Contract at any time to any other third party without the
agreement of the Reassured.

                                   ARTICLE 28

REGULATORY COMPLIANCE

If any provision of this Contract shall be rendered illegal or unenforceable by
the laws, regulations or public policy of any State in the United States, such
provision shall be considered void in such State, but this shall not affect the
validity or enforceability of any other provision of this Contract, or the
validity or enforceability of such provision in any other jurisdiction.

                                   ARTICLE 29

INTERMEDIARY

Carvill America Incorporated is hereby recognized as the Intermediary
negotiating this Contract for all business hereunder. All communications
including notices, premiums, return premiums, commissions, taxes, losses, loss
adjustment expenses, salvages and loss settlements relating thereto shall be
transmitted to the Reinsurer or the Reassured through Carvill America
Incorporated at The Pinnacle, 3455 Peachtree Road, N.E., Suite 375, Atlanta
Georgia 30326. Payments by the Reassured to the Intermediary will be deemed to
constitute payment to the Reinsurer. Payments by the Reinsurer to the
Intermediary will be deemed only to constitute payment to the Reassured to the
extent that such payments are actually received by the Reassured.

                                   ARTICLE 30

GOVERNING LAW

This Contract shall be governed by and construed in accordance with the laws of
the State of Connecticut.

                                 Page 19 of 28
<PAGE>
                                   ARTICLE 31

PARTICIPATION

This Contract obligates each of the Reinsurers for their proportion of the
interests and liabilities set forth under this Contract, such proportions being
shown in the attached Schedules.

                                   ARTICLE 32

SEVERAL LIABILITY NOTICE

The subscribing Reinsurers' obligations under contracts of reinsurance to which
they subscribe are several and not joint and are limited solely to the extent of
their individual subscriptions. The subscribing Reinsurers are not responsible
for the subscription of any co-subscribing Reinsurer who for any reason does not
satisfy all or part of its obligations.

IN WITNESS WHEREOF the parties hereto have, by their duly authorized
representative, executed this Contract as follows:

Signed in Farmington, Connecticut, this   19th  day of   April  , 2006.
                                        --------       ---------

For and on behalf of the Reassured:

Signed by:       /S/ Stephen Sills
          -------------------------------

Officers Title:     President & CEO
               --------------------------

Print Name:       Stephen Sills
           ------------------------------

And for the Reinsurer(s) by means of and in accordance with the attached
Schedule(s), which shall be considered to form an integral part of this
Contract.

                                 Page 20 of 28
<PAGE>
NUCLEAR INCIDENT EXCLUSION CLAUSE-LIABILITY-REINSURANCE (U.S.A.)

(1)   This reinsurance does not cover any loss or liability accruing to the
      Reassured as a member of, or subscriber to, any association of insurers or
      reinsurers formed for the purpose of covering nuclear energy risks or as a
      direct or indirect reinsurer of any such member, subscriber or
      association.

(2)   Without in any way restricting the operation of paragraph (1) of this
      Clause it is understood and agreed that for all purposes of this
      reinsurance all the original policies of the Reassured (new, renewal and
      replacement) of the classes specified in Clause II of this paragraph (2)
      from the time specified in Clause III in this paragraph (2) shall he
      deemed to include the following provision (specified as the Limited
      Exclusion Provision).

      LIMITED EXCLUSION PROVISION:

      I.    It is agreed that the policy does not apply under any liability
            coverage, to:     injury, sickness, disease, death or destruction
                              bodily injury or property damage
            with respect to which an insured under the policy is also an insured
            under a nuclear energy liability policy issued by Nuclear Energy
            Liability Insurance Association, Mutual Atomic Energy Liability
            Underwriters or Nuclear Insurance Association of Canada, or would be
            an insured under any such policy but for its termination upon
            exhaustion of its limit of liability.

      II.   Family Automobile Policies (liability only), Special Automobile
            Policies (private passenger automobiles, liability only), Farmers
            Comprehensive Personal Liability Policies (liability only),
            Comprehensive Personal Liability Policies (liability only) or
            policies of a similar nature; and the liability portion of
            combination forms related to the four classes of policies stated
            above, such as the Comprehensive Dwelling Policy and the applicable
            types of Homeowners Policies.

      III.  The inception dates and thereafter of all original policies as
            described in II above, whether new, renewal or replacement, being
            policies which either

            (a)   become effective on or after 1st May, 1960, or

            (b)   become effective before that date and contain the Limited
                  Exclusion Provision set out above;

            provided this paragraph (2) shall not be applicable to Family
            Automobile Policies, Special Automobile Policies, or policies or
            combination policies of a similar nature, issued by the Reassured on
            New York risks, until 90 days following approval of the Limited
            Exclusion Provision by the Governmental Authority having
            jurisdiction thereof.

            (3) Except for those classes of policies specified in Clause II of
            paragraph (2) and without in any way restricting the operation of
            paragraph (1) of this Clause, it is understood and agreed that for
            all purposes of this reinsurance the original liability policies of
            the Reassured (new, renewal and replacement) affording the following
            coverages:

               Owners, Landlords and Tenants Liability, Contractual Liability,
               Elevator Liability, Owners or Contractors (including railroad)
               Protective Liability, Manufacturers and Contractors Liability,
               Product Liability, Professional and Malpractice Liability,
               Storekeepers Liability, Garage Liability, Automobile Liability
               (including Massachusetts Motor Vehicle or Garage Liability)

         shall be deemed to include, with respect to such coverages, from the
         time specified in Clause V of this paragraph (3), the following
         provision (specified as the Broad Exclusion Provision):

                                 Page 21 of 28
<PAGE>
      BROAD EXCLUSION PROVISION*

      It is agreed that the policy does not apply:

      I.    Under any Liability Coverage, to  injury, sickness, disease, death
                                              or destruction
                                              bodily injury or property damage

            (a)   with respect to which an insured under the policy is also an
                  insured under a nuclear energy liability policy issued by
                  Nuclear Energy Liability Insurance Association, Mutual Atomic
                  Energy Liability Underwriters or Nuclear Insurance Association
                  of Canada, or would be an insured under any such policy but
                  for its termination upon exhaustion of its limit of liability;

            or

            (b)   resulting from the hazardous properties of nuclear material
                  and with respect to which (1) any person or organization is
                  required to maintain financial protection pursuant to the
                  Atomic Energy Act of 1954, or any law amendatory thereof,
                  or (2) the insured is, or had this policy not been issued
                  would be, entitled to indemnity from the United States of
                  America, or any agency thereof, under any agreement entered
                  into by the United States of America, or any agency
                  thereof, with any person or organization.

      II.   Under any Medical Payments Coverage, or under any Supplementary
            Payments Provision relating to     immediate medical or surgical
                                               relief,
                                               first aid,

            to expenses incurred with respect to      bodily injury, sickness,
                                                      disease or death
                                                      bodily injury
            resulting from the hazardous properties of nuclear material and
            arising out of the operation of a nuclear facility by any person or
            organization.

      III.  Under any Liability Coverage, to    injury, sickness, disease, death
                                                or destruction
                                                bodily injury or property damage
                  resulting from the hazardous properties of nuclear
                  material, if

            (a)   the nuclear material (1) is at any nuclear facility owned by,
                  or operated by or on behalf of, an insured or (2) has been
                  discharged or dispersed therefrom;

            (b)   the nuclear material is contained in spent fuel or waste at
                  any time possessed, handled, used, processed, stored,
                  transported or disposed of by or on behalf of an insured; or

            (c)   the   injury, sickness, disease, death or destruction
                        bodily injury or property damage
                  arises out of the furnishing by an insured of services,
                  materials, parts or equipment in connection with the planning,
                  construction, maintenance, operation or use of any nuclear
                  facility, but if such facility is located within the United
                  States of America, its territories, or possessions or Canada,
                  this exclusion (c) applies only to injury to or destruction of
                  property at such nuclear facility, property damage to such
                  nuclear facility and any property thereat.

                                 Page 22 of 28
<PAGE>
      IV.   As used in this endorsement:

            "HAZARDOUS PROPERTIES" include, radioactive, toxic or explosive
            properties; "NUCLEAR MATERIAL" means source material, special
            nuclear material or byproduct material; "SOURCE MATERIAL", "SPECIAL
            NUCLEAR MATERIAL", and "BYPRODUCT MATERIAL" have the meanings given
            them in the Atomic Energy Act of 1954 or in any law amendatory
            thereof; "SPENT FUEL" means any fuel element or fuel component,
            solid or liquid, which has been used or exposed to radiation in a
            nuclear reactor; "WASTE" means any waste material (1) containing by
            product material and (2) resulting from the operation by any person
            or organization of any nuclear facility included within the
            definition of nuclear facility under paragraph (a) or (b) thereof;
            "NUCLEAR FACILITY" means

            (a)   any nuclear reactor,

            (b)   any equipment or device designed or used for (1) separating
                  the isotopes of uranium or plutonium, (2) processing or
                  utilizing spent fuel, or (3) handling, processing or packaging
                  waste,

            (c)   any equipment or device used for the processing, fabricating
                  or alloying of special nuclear material if at any time the
                  total amount of such material in the custody of the insured at
                  the premises where such equipment or device is located
                  consists of or contains more than 25 grams of plutonium or
                  uranium 233 or any combination thereof, or more than 250 grams
                  of uranium 235,

            (d)   any structure, basin, excavation, premises or place
                  prepared or used for the storage or disposal of waste,

            and includes the site on which any of the foregoing is located, all
            operations conducted on such site and all premises used for such
            operations; "NUCLEAR REACTOR" means any apparatus designed or used
            to sustain nuclear fission in a self-supporting chain reaction or to
            contain a critical mass of fissionable material;

               With respect to injury to or destruction of property, the word
               "injury" or "destruction",
               "property damage" includes all forms of radioactive contamination
               of property, includes all forms of radioactive contamination of
               property.

      V.    The inception dates and thereafter of all original policies
            affording coverages specified in this paragraph (3), whether new,
            renewal or replacement, being policies which become effective on or
            after 1st May, 1960, provided this paragraph (3) shall not be
            applicable to

            (i)   Garage and Automobile Policies issued by the Reassured on New
                  York risks

                        or

            (ii)  statutory liability insurance required under Chapter 90,
                  General Laws of Massachusetts,

            until 90 days following approval of the Broad Exclusion Provision by
            the Governmental Authority having jurisdiction thereof.

            (4) Without in any way restricting the operation of paragraph ( 1 )
            of this Clause, it is understood and agreed that paragraphs (2) and
            (3) above are not applicable to original

                                 Page 23 of 28
<PAGE>
            liability policies of the Reassured in Canada and that with respect
            to such policies this Clause shall be deemed to include the Nuclear
            Energy Liability Exclusion Provisions adopted by the Canadian
            Underwriters' Association or the Independent Insurance Conference of
            Canada.

      *NOTE. The words printed in italics in the Limited Exclusion Provision and
      in the Broad Exclusion Provision shall apply only in relation to original
      liability policies which include a Limited Exclusion Provision or a Broad
      Exclusion Provision containing those words.

      21/9/67
      N.M.A. 1590

    NUCLEAR INCIDENT EXCLUSION CLAUSE-LIABILITY-REINSURANCE-CANADA

1.    This Agreement does not cover any loss or liability accruing to the
      Reinsured as a member of, or subscriber to, any association of insurers or
      reinsurers formed for the purpose of covering nuclear energy risks or as a
      direct or indirect reinsurer of any such member, subscriber or
      association.

2.    Without in any way restricting the operation of paragraph I of this clause
      it is agreed that for all purposes of this Agreement all the original
      liability contracts of the Reinsured, whether new, renewal or replacement,
      of the following classes, namely,

      Personal Liability.
      Farmers' Liability.
      Storekeepers' Liability.

      which become effective on or after 31st December 1992, shall be deemed to
      include, from their inception dates and thereafter, the following
      provision:-

      Limited Exclusion Provision.

      This Policy does not apply to bodily injury or property damage with
      respect to which the Insured is also insured under a contract of nuclear
      energy liability insurance (whether the Insured is unnamed in such
      contract and whether or not it is legally enforceable by the Insured)
      issued by the Nuclear Insurance Association of Canada or any other group
      or pool of insurers or would be an Insured under any such policy but for
      its termination upon exhaustion of its limits of liability.

      With respect to property, loss of such property shall be deemed to be
      property damage.

3.    Without in any way restricting the operation of paragraph I of this clause
      it is agreed that for all purposes of this Agreement all the original
      liability contracts of the Reinsured, whether new, renewal or replacement,
      of any class whatsoever (other than Personal Liability, Farmers'
      Liability, Storekeepers' Liability or Automobile Liability contracts),
      which become effective on or after 31st December 1992, shall be deemed to
      include from their inception dates and thereafter, the following
      provision: -

      Broad Exclusion Provision.

      It is agreed that this Policy does not apply:

      (a)   to liability imposed by or arising from any nuclear liability
            act, law or statute or any law amendatory thereof; nor

      (b)   to bodily injury or property damage with respect to which an
            Insured under this policy is also insured under a contract of
            nuclear energy liability insurance (whether the Insured is

                                 Page 24 of 28
<PAGE>
            unnamed in such contract and whether or not it is legally
            enforceable by the Insured) issued by the Nuclear Insurance
            Association of Canada or any other insurer or group or pool of
            insurers or would be an Insured under any such policy but for its
            termination upon exhaustion of its limit or liability; nor

      (c)   to bodily injury or property damage resulting directly or indirectly
            from the nuclear energy hazard arising from:

            (i)   the ownership, maintenance, operation or use of a nuclear
                  facility by or on behalf of an Insured;

            (ii)  the furnishing by an Insured of services, materials, parts or
                  equipment in connection with the planning, construction,
                  maintenance, operation or use of any nuclear facility; and

            (iii) the possession, consumption, use, handling, disposal or
                  transportation of fissionable substances, or of other
                  radioactive material (except radioactive isotopes, away from a
                  nuclear facility, which have reached the final stage of
                  fabrication so as to be usable for any scientific, medical,
                  agricultural, commercial or industrial purpose) used,
                  distributed, handled or sold by an Insured.

As used in this Policy:

1.    The term "nuclear energy hazard" means the radioactive, toxic, explosive,
      or other hazardous properties of radioactive material;

2.    The term "radioactive material" means uranium, thorium, plutonium,
      neptunium. their respective derivatives and compounds, radioactive
      isotopes of other elements and any other substances which may be
      designated by or pursuant to any law, act or statute, or law amendatory
      thereof as being prescribed substances capable of releasing atomic energy,
      or as being requisite for the production, use of application of atomic
      energy;

3.    The term "nuclear facility" means:

      (a)   any apparatus designed or used to sustain nuclear fission in
            self-supporting chain reaction or to contain a critical mass of
            plutonium, thorium or uranium or any one or more of them;

      (b)   any equipment or device designed or used for (i) separating the
            isotopes of plutonium, thorium and uranium or any one or more of
            them, (ii) processing or utilizing spent fuel, or (iii) handling,
            processing or packaging waste;

      (c)   any equipment or device used for the processing, fabricating or
            alloying of plutonium, thorium or uranium enriched in the isotope
            uranium 233 or in the isotope uranium 235, or any one or more of
            them if at any time the total amount of such material in the custody
            of the Insured at the premises where such equipment. or device is
            located consists of or contains more than 25 grams of plutonium or
            uranium 233 or any combination thereof, or more than 250 grams of
            uranium 235

      (d)   any structure, basin, excavation, premises or place prepared or used
            for the storage or disposal of waste radioactive material;

      and includes the site on which any of the foregoing is located, together
      with all operations conducted thereon and all premises used for such
      operations.

                                 Page 25 of 28
<PAGE>
4.    The term "fissionable substance" means any prescribed substance that is,
      or from which can be obtained, a substance capable of releasing atomic
      energy by nuclear fission.

5.    With respect to property, loss of use of such property shall be deemed to
      be property damage.

NMA 1979a (01/04/96) Form approved by Lloyd's Underwriters' Non-Marine
Association Limited

                                 Page 26 of 28
<PAGE>
           NUCLEAR ENERGY RISKS EXCLUSION CLAUSE (REINSURANCE) (1994)
                      (WORLDWIDE EXCLUDING U.S.A. & CANADA)

This agreement shall exclude Nuclear Energy Risks whether such risks are written
directly and/or by way of reinsurance and/or via Pools and/or Associations.

For all purposes of this agreement Nuclear Energy Risks shall mean all first
party and/or third party insurances or reinsurances (other than Workers'
Compensation and Employers' Liability) in respect of: -

(I)   All Property on the site of a nuclear power station.
      Nuclear Reactors, reactor buildings and plant and equipment therein on any
      site other than a nuclear power station.

(II)  All Property, on any site (including but not limited to the sites referred
      to in (I) above) used or having been used for: -

      a)    The generation of nuclear energy; or
      b)    The Production, Use or Storage of Nuclear Material.

(III) Any other Property eligible for insurance by the relevant local Nuclear
      Insurance Pool and/or Association but only to the extent of the
      requirements of that local Pool and/or Association.

(IV)  The supply of goods and services to any of the sites, described in (I) to
      (III) above, unless such insurances or reinsurances shall exclude the
      perils of irradiation and contamination by Nuclear Material.

Except as undernoted, Nuclear Energy Risks shall not include: -

(i)   Any insurance or reinsurance in respect of the construction or erection or
      installation or replacement or repair or maintenance or decommissioning of
      Property as described in (I) to (III) above (including contractors' plant
      and equipment);

(ii)  Any Machinery Breakdown or other Engineering insurance or reinsurance
      not corning within the scope of (I) above;

Provided always that such insurance or reinsurance shall exclude the perils of
irradiation and contamination by Nuclear Material.

However, the above exemption shall not extend to: -

(1)   The provision of any insurance or reinsurance whatsoever in respect of:

      (a)   Nuclear Material;

      (b)   Any Property in the High Radioactivity Zone or Area of any Nuclear
            Installation as from the introduction of Nuclear Material or - for
            reactor installations - as from fuel loading or first criticality
            where so agreed with the relevant local Nuclear Insurance Pool
            and/or Association.

(2)   The provision of any insurance or reinsurance for the undernoted perils: -

      - Fire, lightning, explosion;
      - Earthquake;
      - Aircraft and other aerial devices or articles dropped therefrom;
      - Irradiation and radioactive contamination;
      - Any other peril insured by the relevant local Nuclear Insurance Pool and
        /or Association;

                                 Page 27 of 28
<PAGE>
      in respect of any other Property not specified in (1) above which directly
      involves the Production, Use or Storage of Nuclear Material as from the
      introduction of Nuclear Material into such Property.

Definitions

"Nuclear Material" means: -

(i)   Nuclear fuel, other than natural uranium and depleted uranium, capable of
      producing energy by a self-sustaining chain process of nuclear fission
      outside a Nuclear Reactor, either alone or in combination with some other
      material; and

(ii)  Radioactive Products or Waste.

"Radioactive Products or Waste" means any radioactive material produced in, or
any Material made radioactive by exposure to the radiation incidental to the
production or utilization of nuclear fuel, but does not include radioisotopes
which have reached the final stage of fabrication so as to be usable for any
scientific, medical, agricultural, commercial or industrial purpose.

"Nuclear Installation" means: -

(i)   Any Nuclear Reactor;

(ii)  Any factory using nuclear fuel for the production of Nuclear Material, or
      any factory for the processing of Nuclear Material, including any factory
      for the reprocessing of irradiated nuclear fuel; and

(iii) Any facility where Nuclear Material is stored, other than storage
      incidental to the carriage of such material.

"Nuclear Reactor" means any structure containing nuclear fuel in such an
arrangement that a self-sustaining chain process of nuclear fission can occur
therein without an additional source of neutrons.

"Production, Use or Storage of Nuclear Material" means the production,
manufacture, enrichment, conditioning, processing, reprocessing, use, storage,
handling and disposal of Nuclear Material.

"Property" shall mean all land, buildings, structures, plant, equipment,
vehicles, contents (including but not limited to liquids and gases) and all
materials of whatever description whether fixed or not.

"High Radioactivity Zone or Area" means: -

(i)   For nuclear power stations and Nuclear Reactors, the vessel or structure
      which immediately contains the core (including its supports and shrouding)
      and all the contents thereof, the fuel elements, the control rods and the
      irradiated fuel store; and

(ii)  For non-reactor Nuclear Installations, any area where the level of
      radioactivity requires the provision of a biological shield.

                                 Page 28 of 28

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