8-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): April 27, 2007

Philadelphia Consolidated Holding Corp.

(Exact Name of Registrant as Specified in Charter)

Pennsylvania	0-22280	23-2202671
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer’ Identification No.)

One Bala Plaza, Suite 100, Bala Cynwyd, PA	19004
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (610) 617-7900

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 5.02	Departure of Directors of Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
	At the Company’s annual meeting of shareholders held on April 27, 2007, the shareholders approved the Company’s 2007 Cash Bonus Plan (the “Cash Bonus Plan”) and the Company’s Amended and Restated Non-Qualified Employee Stock Purchase Plan (the “Non-Qualified Stock Purchase Plan”; and, collectively with the Cash Bonus Plan, the “Plans”). The Company’s executive officers may participate in the Plans, which were previously approved by the Company’s Board of Directors.
	The Plans are summarized below. Reference is made to the copies of the Plans attached as Exhibits to this Form 8-K for a complete description of the Plans.
	(a) Nonqualified Stock Purchase Plan.
	Effective upon approval by the Company’s shareholders on April 27, 2007, the Nonqualified Stock Purchase Plan was amended and restated, effective as of January 1, 2007 to incorporate certain performance-based compensation provisions that will make purchases by certain key employees under this Plan subject to the attainment of certain performance-goals, and to increase the number of shares available for purchase under this Plan from 3,000,000 to 6,000,000.
	Administration of the Nonqualified Stock Purchase Plan. The design and administration of the Nonqualified Stock Purchase Plan are intended to cause taxable compensation attributable to purchases made under the special performance-based compensation provisions of that Plan to be treated as “performance-based compensation”, as that term is used for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). As a consequence, the provisions of the Code which would otherwise limit the deductibility by the Company of certain executive compensation in excess of $1,000,000 should not be applicable to any compensation expense attributable to the Plan. The Nonqualified Stock Purchase Plan is administered by the Compensation Committee of the Company’s Board of Directors or by such other committee or committees that may be designated by the Board to administer this Plan from time to time. The Compensation Committee or any other administrative committee for the Nonqualified Stock Purchase Plan is referred to in this section (a).
	Eligibility. All employees of the Company and of the Company’s subsidiaries which are designated, at the discretion of the Committee, as participating in the Nonqualified Stock Purchase Plan are eligible to participate in the Nonqualified Stock Purchase Plan except employees who are customarily employed for 20 hours per week or less, or who are customarily employed five months per calendar year or less.
	Participation, Payroll Deductions and Purchases. Employees who are eligible to participate in the Nonqualified Stock Purchase Plan may elect to purchase shares during one-month “offering periods” established from time to time by the Committee. Purchases will generally occur on the last day of the offering period, and the price for the shares purchased is the lesser of 85% of the fair market value of the shares on the first business day of the offering period or the date the shares are purchased.
	Each employee purchasing shares under the Nonqualified Stock Purchase Plan will be required to execute a promissory note evidencing an unconditional obligation to pay the purchase price to the Company or to any subsequent holder of the note. Under the terms of the note, the purchase price for the shares will be paid, without interest, by means of equal, regular payroll deductions over a period of 108 months. If an employee ceases to be employed by the Company or any subsidiary, the outstanding principal balance payable under his or her note, if any, is payable in full within 30 days of terminating employment. An employee may pay the outstanding balance due with respect to his or her shares at any time.

Limits on Purchase of Shares. In addition to the aggregate limitation on the number of shares available for purchase under the Nonqualified Stock Purchase Plan, no employee shall be permitted to purchase shares in excess of the limitation or limitations as may be imposed by the Committee from time to time. These limitations may be established on an offering period basis, or on such other basis as the Committee determines to be appropriate. Executives who are designated to participate in the Nonqualified Stock Purchase Plan pursuant to its performance-based compensation provisions, are, in addition to any other limitations generally applicable under this Plan, not permitted to purchase more than one million (1,000,000) shares during any one taxable year of the Company.

Resale Restrictions. Any shares purchased under the Nonqualified Stock Purchase Plan are restricted, and may not be sold, transferred, made subject to any lien or otherwise disposed of for a period of five years (measured from the first day of the applicable offering period). An attempt to sell, transfer, make subject to any lien or otherwise dispose of shares during the restricted period results in forfeiture to the Company on payment by the Company of the lesser of the fair market value of the shares or the purchase price paid for the shares.

Termination of Employment. If an employee ceases to be employed by the Company or any of its subsidiaries on account of the employee’s retirement, death or disability, the employee (or the employee’s beneficiary if one has been designated or the employee’s estate otherwise) will be entitled to the shares held in the employee’s investment account maintained under the Nonqualified Stock Purchase Plan for these purposes, provided the participant’s payment obligation with respect to such shares is satisfied, and the Company’s right to repurchase during the five-year “restricted period” for the lesser of the purchase price or current fair market value will lapse with respect to such an employee’s shares. If an employee ceases to be employed by the Company or any of its subsidiaries for any reason other than retirement, disability or death, any shares purchased under the Nonqualified Stock Purchase Plan which have not been held beyond the five-year “restricted period” may be repurchased by the Company for the lesser of the fair market value of the shares or the purchase price paid for the shares.

Amendment and Termination of the Nonqualified Stock Purchase Plan. The Board may amend the Nonqualified Stock Purchase Plan at its discretion, except that an amendment which increases the maximum number of shares available for purchase under the Nonqualified Stock Purchase Plan, which materially increases the benefits accruing to employees under the Nonqualified Stock Purchase Plan, or which expands the classes of individuals who are eligible to participate in the Nonqualified Stock Purchase Plan, can only be made with shareholder approval. The Board has the right to terminate the Nonqualified Stock Purchase Plan at any time. On termination of the Nonqualified Stock Purchase Plan, shares held for employees will be transferred to a successor stock purchase plan, if there is one, or will be issued to the employees on satisfaction of all payment obligations for the shares. In addition, no amendment to the performance-based provisions of the Nonqualified Stock Purchase Plan will be effective unless approved by the Company’s shareholders except to the extent that the amendment would not (absent shareholder approval) cause these provisions to fail to qualify as creating compensation expense that is fully deductible as performance-based compensation for purposes of Code Section 162(m).

Adjustment in Case of Changes Affecting Shares. If there is a subdivision or split of outstanding shares, payment of a stock dividend, or similar change affecting the shares, the share limits applicable under the Nonqualified Stock Purchase Plan, including the limitation on the aggregate number of shares available for purchases, will be adjusted appropriately, as may be deemed equitable by the Committee.

Special Provisions Relating to Performance-Based Compensation and Participation of Certain Executives. Various provisions apply to certain of the Company’s executive officers if their compensation is determined by the Committee to be potentially subject to certain limits on deductibility under Section 162(m) of the Code and permits the Committee to make their participation in the Nonqualified Stock Purchase Plan, subject to certain limitations.

(b) Cash Bonus Plan.

Administration of the Cash Bonus Plan. The design and administration of the Cash Bonus Plan are intended to cause all taxable compensation attributable to the Cash Bonus Plan to be treated as “performance-based compensation”, as that term is used for purposes of Section 162(m) of the Code. As a consequence, the provisions of the Code which would otherwise limit the deductibility by the Company of certain executive compensation in excess of $1,000,000 should not be applicable to any compensation expense attributable to the Cash Bonus Plan. The Cash Bonus Plan is administered by either the Compensation Committee or by another committee, which must consist exclusively of two or more “outside directors” (as that term is defined under Section 162(m) of the Code), which may be designated by the Board to administer the Cash Bonus Plan. This administrative committee for the Cash Bonus Plan is referred to in this section (b) as the “Committee.” The resolution of any questions arising with respect to the Cash Bonus Plan will be determined by the Committee, and all such determinations are final and conclusive.

Eligibility. Participants in the Cash Bonus Plan are those key executives who are designated by the Committee to participate in the Cash Bonus Plan from time to time.

The Cash Bonus Plan became effective as of January 1, 2007, upon approval by the Company’s shareholders on April 27, 2007, and will continue until it is terminated by the Company’s Board of Directors.

Benefits under the Cash Bonus Plan. In general, the benefits under the Cash Bonus Plan consist of a cash bonus payable to participants provided the performance goals established by the Committee are met (and if met, the extent to which they are met). The maximum amount that can be paid to any one participant as a bonus under the Cash Bonus Plan with respect to any one year is two times his or her base compensation in effect for the relevant year, and in no event may any such bonus exceed $2,000,000.

Performance Goals. Bonuses payable under the Cash Bonus Plan are intended to be provided only on the attainment of the performance goals established by the Committee for the year for which the bonus is paid.

The bases for such performance goals may include any of the following criteria:

stock price, market share, gross sales, gross revenue, net revenues, pretax income, operating income, cash flow, earnings per share, return on equity, return on invested capital or assets, cost reductions and savings, return on revenues or productivity, or any variation or combination of the preceding business criteria. In addition, the Committee may utilize as an additional performance measure (to the extent consistent with the tax rules relating to “performance-based” compensation) the attainment by a participant of one or more personal objectives and/or goals that the Committee deems appropriate, including, but not limited to, implementation of Company policies, negotiation of significant corporate transactions, development of long-term business goals or strategic plans for the Company, or the exercise of specific areas of managerial responsibility. In all such cases, however, the measurement of the Company’s or a participant’s achievement of any of these goals must be objectively determinable and is to be determined, to the extent applicable, according to generally accepted accounting principles as in existence on the date on which performance goal or goals for the year in question were established. The performance goals for a year must be established no later than 90 days after the beginning of the year. The achievement of performance goals established under the Cash Bonus Plan must be certified by the Committee before any bonus may be paid.

Amendment and termination of the Cash Bonus Plan. The Board may terminate or revoke the Cash Bonus Plan at any time and may amend the Cash Bonus Plan from time to time. Termination, revocation or amendment of the Cash Bonus Plan, however, may not reduce the amount of a bonus payment that has been determined by the Committee to be due and payable, but has not yet been paid unless the participant consents to that change in writing. Any amendment or modification of the Cash Bonus by the Board that would increase the amount of any bonus beyond the amount determined pursuant to applicable provisions of the Cash Bonus Plan will not be effective unless that

	change is approved by the Committee and disclosed to and approved by the Company’s shareholders in a separate vote that takes place prior to the payment of any bonuses under such modified Cash Bonus Plan provisions. The Cash Bonus Plan may also be modified or amended by the Committee, as it deems appropriate, in order to comply with the tax rules related to deductibility of “performance-based” compensation.
ITEM 9.01	FINANCIAL STATEMENTS AND EXHIBITS.
(a)	Financial Statements of Business Acquired.
	Not applicable.
(b)	Pro Forma Financial Information.
	Not applicable.
(c)	Exhibits.
	Exhibit 10.1 The Philadelphia Insurance Companies 2007 Cash Bonus Plan effective as of January 1, 2007
	Exhibit 10.2 Philadelphia Insurance Companies Nonqualified Employee Stock Purchase Plan (amended and restated, effective as of January 1, 2007, with Performance-Based Compensation Provisions)

Signatures

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Philadelphia Consolidated Holding Corp. (Registrant)
Dated: May 3, 2007	By:	Craig P. Keller
		Craig P. Keller
		Executive Vice President, Secretary, Treasurer and Chief Financial Officer

EXHIBIT INDEX

Exhibit	Description	Method of Filing
10.1	The Philadelphia Insurance Companies 2007 Cash Bonus Plan effective as of January 1, 2007	Furnished electronically herewith.
10.2	Philadelphia Insurance Companies Nonqualified Employee Stock Purchase Plan (amended and restated, effective as of January 1, 2007, with Performance-Based Compensation Provisions)	Furnished electronically herewith.

EX-10.1

THE PHILADELPHIA INSURANCE COMPANIES
2007 CASH BONUS PLAN
Effective as of January 1, 2007

1. PURPOSE

The purpose of the Plan, as adopted by the Board, subject to shareholder approval, is to provide performance-based cash bonus compensation for key executives based on the attainment of one or more performance goals or targets that are related to the financial success of the Company, and that are established from time to time by the Committee, as part of an integrated compensation program which is intended to assist the Company in motivating and retaining employees of superior ability, industry and loyalty.

2. DEFINITIONS

The following words and phrases as used herein shall have the following meanings, unless a different meaning is plainly required by the context:

(a) “Board” or “Board of Directors” shall mean the board of directors of the Company.

(b) “Bonus Base” shall mean a percentage of a Participant’s base salary in effect for the Plan Year that may be any percentage between zero percent (0%) and one hundred percent (100%). For these purposes, the Participant’s base salary for the Plan Year shall be the Participant’s actual annual base salary, unless otherwise specified by the Committee when establishing the Maximum Percentage Schedule for the Plan Year.

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

(d) “Committee” shall mean the Compensation Committee of the Board of Directors, or such other committee established by the Board, in any case consisting exclusively of two or more Outside Directors, to act as the Committee with respect to the Plan, or such other committee as may be appointed by the Board of Directors to act as the Committee with respect to the Plan.

(e) “Company” shall mean Philadelphia Consolidated Holding Corp., a Pennsylvania corporation, and any successor thereto, and shall also, except as otherwise required by the context, include any other affiliated employer whose employees are designated by the Committee as a Participant in the Plan.

(f) “Covered Employee” means an employee who is a “covered employee” as that term is defined in Code Section 162(m) and regulations promulgated thereunder.

(g) “Designated Beneficiary” shall mean the person, if any, specified in writing by the Participant to receive any payments due to the Participant in the event of the Participant’s death. In the event no person is specified by the Participant, the Participant’s estate shall be deemed to be the Designated Beneficiary.

(h) “Effective Date” shall mean January 1, 2007.

(i) “Outside Director” shall mean a member of the Board of Directors who is treated as an “outside director” for purposes of Code Section 162(m).

(j) “Maximum Percentage” shall mean the percentage determined by reference to the Maximum Percentage Schedule established for each Plan Year by the Committee, which percentage may not exceed two hundred percent (200%).

(k) “Maximum Percentage Schedule” shall mean the schedule pursuant to which a determination of the Participant’s Maximum Percentage is determined, based on the extent to which the performance goal or goals set forth therein have been achieved during the Plan Year, which schedule can be varied on a Participant by Participant basis, all as established at the discretion of the Committee.

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(l) “Participant” shall mean those executives the Committee determines are or are reasonably likely to be Covered Employees and who are designated by the Committee to participate in the Plan from time to time.

(m) “Performance-Based Bonus” shall mean the cash bonus payable to a Participant under Section 6(a).

(n) “Performance Based Compensation Rules” shall mean those provisions of Code Section 162(m) and regulations promulgated thereunder that provide the rules pursuant to which compensation that is paid to executives on the basis of performance is exempt from the limitations on deductibility applicable to certain compensation paid to executives in excess of $1,000,000.

(o) “Plan” shall mean The Philadelphia Insurance Companies 2007 Cash Bonus Plan.

(p) “Plan Year” shall mean the taxable year of the Company.

3. PARTICIPATION

Those key executives as may be designated by the Committee to participate in the Plan from time to time are the participants in the Plan. Participants under the Plan for each Plan Year shall be specified no later than the time the Maximum Percentage Schedule (as described in Section 6(a) below) is established by the Committee, and may be set forth as part of that Schedule.

4. TERM OF PLAN

Subject to approval of the Plan by the shareholders of the Company, the Plan shall be in effect as of the Effective Date, and shall continue until terminated by the Board of Directors.

Notwithstanding the foregoing, the Plan shall only continue in effect to the extent bonus payments may be characterized as “performance-based compensation” under the Performance Based Compensation Rules. Such Rules require, among other things, that material features of the Plan be periodically disclosed to the Company’s shareholders, and that the continuation of the Plan be subject to the approval of the Company’s shareholders.

5. BONUS ENTITLEMENT

A Participant shall be entitled to receive a bonus with respect to a Plan Year in accordance with the provisions of Section 6 of the Plan only after certification in writing by the Committee that the performance goals, consistent with the provisions of Section 6, and as set forth in the Maximum Percentage Schedule applicable for such Plan Year, have been satisfied. The bonus payment with respect to a Plan Year shall be payable to the Participant in the next Plan Year on or before March 15th of such next Plan Year; provided, however, that no bonus payment shall be made to any Participant who is not employed by the Company as of the date of such payment. Notwithstanding anything to the contrary contained herein, no bonus shall be payable under the Plan without the prior disclosure of the terms of the Plan to the shareholders of the Company and the approval of the Plan by such shareholders.

6. DETERMINATION OF PERFORMANCE-BASED COMPENSATION BONUS

(a) Performance-Based Bonus.  Each Participant, or the Designated Beneficiary of a deceased Participant, may be entitled to a bonus with respect to such Plan Years as are determined by the Committee that is equal to the “Maximum Percentage” of the Bonus Base, determined by reference to the Maximum Percentage Schedule in effect for the Plan Year; provided, however, that any bonus payment may be reduced or eliminated at the discretion of the Committee, as provided in Section 6(d) below.

(b) Performance Goals.  The Maximum Percentage is the percentage derived from the Maximum Percentage Schedule established for each Plan Year by the Committee and set forth on that Plan Year’s Maximum Percentage Schedule, which shall be based on one or more of the following business criteria (which may be determined for these purposes either by reference to the Company as a whole or by reference to any one or more of its subsidiaries, operating divisions or other operating units): stock price, market share, gross sales, gross revenue, net revenues, pretax income, operating income, cash flow,

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earnings per share, return on equity, return on invested capital or assets, cost reductions and savings, return on revenues or productivity, or any variation or combination of the preceding business criteria. In addition, the Committee may utilize as an additional performance measure (to the extent consistent with the Performance Based Compensation Rules) the attainment by a Participant of one or more personal objectives and/or goals that the Committee deems appropriate, including, but not limited to, implementation of Company policies, negotiation of significant corporate transactions, development of long-term business goals or strategic plans for the Company, or the exercise of specific areas of managerial responsibility; provided, however, that the measurement of the Company’s or a participant’s achievement of any of such goals must be objectively determinable and shall be determined, to the extent applicable, according to generally accepted accounting principles as in existence on the date on which the Maximum Percentage Schedule for the Plan Year is established. In all cases, the Committee shall establish the Maximum Percentage Schedule for each Plan Year no later than 90 days after the beginning of the Plan Year and shall endeavor to establish such Maximum Percentage Schedule in a manner that is consistent with the Performance Based Compensation Rules. In the event an Maximum Percentage Schedule is not established with respect to one or more Participants for a Plan Year, the Maximum Percentage Schedule for the prior Plan Year shall be treated as the Maximum Percentage Schedule for such Participant(s) for the current Plan Year.

(c) Maximum Permissible Performance-Based Bonus.  Notwithstanding anything contained in the Plan to the contrary, no Participant shall be entitled to a Performance-Based Bonus with respect to any Plan Year in excess of $2,000,000 or two times the Participant’s base compensation, whichever is less.

(d) Committee Discretion.  Notwithstanding the determination of a Participant’s bonus or bonuses under the provisions of this Section 6 (without regard to this Section 6(d)), the Committee may, at its sole discretion and at any time prior to the time a particular bonus is paid, reduce the amount of or totally eliminate any such bonus or bonuses to the extent the Committee determines that such reduction or elimination is appropriate under such facts and circumstances as the Committee deems relevant. In no event shall the Committee have the authority to increase the amount of any Participant’s bonus or bonuses as determined under the provisions of the Plan and taking into account the Maximum Percentage Schedule as initially established for a Plan Year and the terms and conditions initially established with respect to a Transaction Bonus.

7. COMMITTEE

(a) Powers.  The Committee shall have the power and duty to do all things necessary or convenient to effect the intent and purposes of the Plan and not inconsistent with any of the provisions hereof, whether or not such powers and duties are specifically set forth herein, and, by way of amplification and not limitation of the foregoing, the Committee shall have the power to:

(i) provide rules and regulations for the management, operation and administration of the Plan, and, from time to time, to amend or supplement such rules and regulations;

(ii) construe the Plan, which construction, as long as made in good faith, shall be final and conclusive upon all parties hereto; and

(iii) correct any defect, supply any omission, or reconcile any inconsistency in the Plan in such manner and to such extent as it shall deem expedient to carry the same into effect, and it shall be the sole and final judge of when such action shall be appropriate.

The resolution of any questions with respect to payments and entitlements pursuant to the provisions of the Plan shall be determined by the Committee, and all such determinations shall be final and conclusive.

(b) Indemnity.  No member of the Committee shall be directly or indirectly responsible or under any liability by reason of any action or default by him as a member of the Committee, or the exercise of or failure to exercise any power or discretion as such member. No member of the Committee shall be liable in any way for the acts or defaults of any other member of the Committee, or any of its advisors, agents or representatives. The Company shall indemnify and save harmless each member of the

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Committee against any and all expenses and liabilities arising out of his own membership on the Committee.

(c) Compensation and Expenses.  Members of the Committee shall receive no separate compensation for services other than compensation for their services as members of the Board of Directors, which compensation can include compensation for services at any committee meeting attended in their capacity as members of the Board of Directors. Members of the Committee shall be entitled to receive their reasonable expenses incurred in administering the Plan. Any such expenses, as well as extraordinary expenses authorized by the Company, shall be paid by the Company.

(d) Participant Information.  The Company shall furnish to the Committee in writing all information the Company deems appropriate for the Committee to exercise its powers and duties in administration of the Plan. Such information shall be conclusive for all purposes of the Plan and the Committee shall be entitled to rely thereon without any investigation thereof; provided, however, that the Committee may correct any errors discovered in any such information.

(e) Inspection of Documents.  The Committee shall make available to each Participant and his Designated Beneficiary, for examination at the principal office of the Company (or at such other location as may be determined by the Committee), a copy of the Plan and such of its records, or copies thereof, as may pertain to any benefits of such Participant and beneficiary under the Plan.

8. EFFECTIVE DATE, TERMINATION AND AMENDMENT

(a) Effective Date of Participation in Plan.  Subject to shareholder and Committee approval of the Plan, the Plan shall be effective as of the Effective Date, and Participants who have been designated by the Committee as eligible for bonuses with respect to the Plan Year that commenced as of the Effective Date shall participate in the Plan pursuant to the terms of the Maximum Percentage Schedule as applicable to each such Participant.

(b) Amendment and Termination of the Plan.  The Plan may be terminated or revoked by the Board at any time and amended by the Board from time to time, provided that neither the termination, revocation or amendment of the Plan may, without the written approval of the Participant, reduce the amount of a bonus payment that has been determined by the Committee to be due and payable, but has not yet been paid; and provided further that no modification to the Plan that would increase the amount of any bonus payable hereunder beyond the amount determined pursuant to Section 6 of the Plan shall be effective without (i) approval by the Committee, (ii) disclosure to the shareholders of the Company of such modification, and (iii) approval of such modification by the shareholders of the Company in a separate vote that takes place prior to the payment of any bonuses under such modified Plan provisions. The Plan may also be modified or amended by the Committee, as it deems appropriate, in order to comply with the Performance Based Compensation Rules.

9. MISCELLANEOUS PROVISIONS

(a) Unsecured Creditor Status.  A Participant entitled to a bonus payment hereunder shall rely solely upon the unsecured promise of the Company, as set forth herein, for the payment thereof, and nothing herein contained shall be construed to give to or vest in a Participant or any other person now or at any time in the future, any right, title, interest, or claim in or to any specific asset, fund, reserve, account, insurance or annuity policy or contract, or other property of any kind whatever owned by the Company, or in which the Company may have any right, title, or interest, now or at any time in the future.

(b) Other Company Plans.  It is agreed and understood that any benefits under this Plan are in addition to any and all benefits to which a Participant may otherwise be entitled under any other contract, arrangement, or voluntary pension, profit sharing or other compensation plan of the Company, whether funded or unfunded, and that this Plan shall not affect or impair the rights or obligations of the Company or a Participant under any other such contract, arrangement, or voluntary pension, profit sharing or other compensation plan.

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(c) Separability.  If any term or condition of the Plan shall be invalid or unenforceable to any extent or in any application, then the remainder of the Plan, with the exception of such invalid or unenforceable provision, shall not be affected thereby, and shall continue in effect and application to its fullest extent.

(d) Continued Employment.  Neither the establishment of the Plan, any provisions of the Plan, nor any action of the Committee shall be held or construed to confer upon any Participant the right to a continuation of employment by the Company. The Company reserves the right to dismiss any employee (including a Participant), or otherwise deal with any employee (including a Participant) to the same extent as though the Plan had not been adopted.

(e) Incapacity.  If the Committee determines that a Participant or Beneficiary is unable to care for his affairs because of illness or accident, or is a minor, any benefit due such Participant or Beneficiary under the Plan may be paid to his spouse, child, parent, or any other person deemed by the Committee to have incurred expense for such Participant or Beneficiary (including a duly appointed guardian, committee, or other legal representative), and any such payment shall be a complete discharge of the Company’s obligation hereunder.

(f) Jurisdiction.  The Plan shall be construed, administered, and enforced according to the laws of the Commonwealth of Pennsylvania, except to the extent that such laws are preempted by the Federal laws of the United States of America.

(g) Withholding.  The Participant or the Designated Beneficiary shall make appropriate arrangements with the Company for satisfaction of any federal, state or local income tax withholding requirements and Social Security or other tax requirements applicable to the accrual or payment of benefits under the Plan. If no other arrangements are made, the Company may provide, at its discretion, for any withholding and tax payments as may be required.

(h) Interpretation.  The Plan is intended to pay compensation only on the attainment of the performance goals set forth above in a manner that will exempt such compensation from the limitations on the deduction of certain compensation payments under Code Section 162(m). To the extent that any provision of the Plan would cause a conflict with the conditions required for such an exemption or would cause the administration of the Plan to fail to satisfy the applicable requirements for the performance-based compensation exemption under Code Section 162(m), such provision shall be deemed null and void to the extent permitted by applicable law.

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EX-10.2

PHILADELPHIA INSURANCE COMPANIES

NONQUALIFIED EMPLOYEE STOCK PURCHASE PLAN

(AMENDED AND RESTATED, EFFECTIVE AS OF JANUARY 1, 2007, WITH
PERFORMANCE-BASED COMPENSATION PROVISIONS)

1. Purpose.

(a) The purpose of the Philadelphia Insurance Companies Nonqualified Employee Stock Purchase Plan, as herein restated (the “Plan”), is to assist Philadelphia Consolidated Holding Corp., a Pennsylvania corporation (the “Company”), and its Subsidiaries in recruiting and retaining the employment of employees by offering them a greater stake in the Company’s success and a closer identity with it, and to aid in obtaining the services of individuals whose employment would be helpful to the Company and would contribute to its success by providing employees a continuing opportunity to purchase Shares (as hereinafter defined) from the Company through periodic offerings. The Plan is also intended to provide that no Eligible Employees who are Covered Employees shall be entitled to make purchases hereunder unless and until certain performance-based compensation requirements have been satisfied, and shall then only be permitted to make purchases within the limits imposed on purchases by such Covered Employees, all as set forth in the Plan.

(b) The Plan is not intended to comply with the provisions of Section 423 of the Code (as hereinafter defined).

(c) No purchases shall be permitted under the Plan unless and until the Plan has been approved by the Company’s shareholders.

2. Definitions. For purposes of the Plan:

(a) “Agent” means the person or persons appointed by the Board in accordance with Section 3(d).

(b) “Board” means the Board of Directors of the Company.

(c) “Code” means the Internal Revenue Code of 1986, as amended, or any successor thereto, and regulations promulgated thereunder.

(d) “Committee” means the committee described in Section 3.

(e) “Covered Employee” means an Eligible Employee who is a “covered employee” as that term is defined in Code Section 162(m); provided, however, that for purposes of Section 23 of the Plan, the Committee shall identify those Eligible Employees who are to be treated as Covered Employees with respect to each performance period established pursuant to Section 23 on or before the date the performance target or targets for such performance period shall have been established. Any Eligible Employee who is a “covered employee” for purposes of Code Section 162(m), but who is not so designated as a Covered Employee for a particular performance period shall be entitled to participate in the Plan on the same terms as any other Eligible Employee.

(f) “Disability” means a condition such that an Eligible Employee retires from employment with the Company or its Subsidiaries and qualifies for disability benefits on account of “total disability” under the applicable provisions of the Company’s long term disability plan then in effect, or, if no such plan is then in effect, “Disability” means a condition such that an Eligible Employee is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.

(g) “Eligible Employee” means an employee of the Company or a Subsidiary who is described in Section 4.

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(h) “Employer” means the Company or a Subsidiary for whom an Eligible Employee is performing services at the time the Eligible Employee becomes a Participant.

(i) “Fair Market Value” on any date means the closing price for Shares as reported on the NASDAQ National Market, or as reported on such other stock exchange, wherever the Shares may be listed, on such date as reported in the Wall Street Journal, or if there is no closing price reported, then Fair Market Value of a Share shall mean the average between the closing bid and asked prices for Shares on such date as reported. If there are no sales reports or bid or asked quotations, as the case may be, for a given date, the closest preceding date on which there were sales reports or bid or asked quotations shall be used. If the Committee determines, in its discretion, that such valuation does not accurately reflect the value of the Shares, or if Shares are not publicly traded, the Fair Market Value of a Share shall be determined by the Committee.

(j) “Investment Account” means the account established for a Participant pursuant to Section 8(b) to hold Shares acquired for a Participant pursuant to the Plan.

(k) “NASDAQ” means the National Association of Security Dealers, Inc. Automated Quotations System.

(l) “Offering Period” means each one month period designated at the discretion of the Committee as an Offering Period.

(m) “Participant” means an Eligible Employee who makes an election to participate in the Plan in accordance with Section 5, as well as any former employee to the extent such former employee has any Shares held for his or her benefit in an Investment Account.

(n) “Plan Year” means the 12 month period commencing each September 1 and ending on the subsequent August 31.

(o) “Purchase Date” means the last business day of each Offering Period.

(p) “Purchase Price” means the lesser of 85% of the Fair Market Value of a Share on (i) the first business day of the Offering Period or (ii) the Purchase Date.

(q) “Restricted Period” means the five year period described in Section 6(e).

(r) “Share” or “Shares” means a share or shares of common stock, no par value, of the Company.

(s) “Subscription Agreement” means the agreement, in a form established by the Committee, between the Participant and the Employer pursuant to which the Participant agrees to purchase Shares pursuant to the Plan.

(t) “Subsidiary” means any corporation that, at the time in question, is a subsidiary corporation of the Company, within the meaning of Section 424(f) of the Code (any references in the Plan to statutory or regulatory Sections or Rules shall be deemed to include a reference to any successors to such Sections or Rules).

3. Administration of the Plan. The Plan shall be administered by the Company’s compensation committee, or by such other committee or committees as may be designated by the Board, as determined from time to time at the discretion of the Board. The compensation committee of the Company or any other committee designated to administer the Plan by the Board are all referred to herein as the “Committee.” Subject to the express provisions of the Plan, the Committee shall have full discretionary authority to interpret the Plan, to issue rules for administering the Plan, to change, alter, amend or rescind such rules, and to make all other determinations necessary or appropriate for the administration of the Plan. All determinations, interpretations and constructions made by the Committee with respect to the Plan shall be final and conclusive. Notwithstanding anything to the contrary in this Section 3, the Committee shall always consist solely of two or more members of the Board who qualify as both (i) “outside directors”, as that term is defined in Code

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Section 162(m), and (ii) “non-employee directors,” as that term is used in Rule 16b-3 under the Securities Exchange Act of 1934, as amended.

(a) Meetings. The Committee shall hold meetings at such times and places as it may determine, shall keep minutes of its meetings, and shall adopt, amend and revoke such rules or procedures as it may deem proper; provided, however, that it may take action only upon the agreement of a majority of the whole Committee. Any action which the Committee shall take through a written instrument signed by all of its members shall be as effective as though it had been taken at a meeting duly called and held. The Committee shall report all actions taken by it to the Board of Directors.

(b) Exculpation. No member of the Committee shall be personally liable for monetary damages as such for any action taken or any failure to take any action in connection with the administration of the Plan unless (i) the member of the Committee has breached or failed to perform the duties of his office under Subchapter B of Chapter 17 of the Pennsylvania Business Corporation Law of 1988, as amended, and (ii) the breach or failure to perform constitutes self-dealing, willful misconduct or recklessness; provided, however, that the provisions of this Section 3(b) shall not apply to the responsibility or liability of a member of the Committee pursuant to any criminal statute or to the liability of a member of the Committee for the payment of taxes pursuant to local, state or federal law.

(c) Indemnification. Service on the Committee shall constitute, for purposes of rights to indemnification from the Company, service as a member of the Board of Directors of the Company. Each member of the Committee shall be entitled, without further act on his part, to indemnity from the Company and limitation of liability to the fullest extent provided by applicable law and by the Company’s Articles of Incorporation and/or bylaws in connection with or arising out of any action, suit or proceeding with respect to the administration of the Plan in which he or she may be involved by reason of his or her being or having been a member of the Committee, whether or not he or she continues to be such member of the Committee at the time of the action, suit or proceeding.

(d) Agent. The Committee may engage an agent (the “Agent”) to purchase Shares on each Purchase Date and to perform custodial and recordkeeping functions for the Plan, such as holding record title to the Participants’ Share certificates, maintaining an individual Investment Account for each such Participant and providing periodic status reports to such Participants.

(e) Delegation. The Committee shall have full discretionary authority to delegate ministerial functions to management of the Company.

4. Eligibility. All employees of the Company, and its Subsidiaries, shall be eligible to participate in the Plan as of the first day of an Offering Period, provided each of such employees:

(a) is customarily employed for more than 20 hours per week; and

(b) is customarily employed more than five months per calendar year.

5. Election to Participate.

(a) Initial Subscription Agreements. Each Eligible Employee may become a Participant by filing with the Committee a Subscription Agreement specifying the number of Shares to be purchased during an Offering Period.

(b) Subsequent Subscription Agreements. In order to participate in the Plan for any subsequent Offering Period, an Eligible Employee must file with the Committee a new Subscription Agreement specifying the number of Shares to be purchased during such Offering Period.

(c) The time and manner for filing any Subscription Agreement required under this Section 5 to participate in the Plan, and rules regarding when a Subscription Agreement, once filed, may be revoked, shall be established by the Committee.

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6. Conditions and Terms of Purchases of Shares.

(a) The number of Shares that are to be purchased under a Subscription Agreement shall not exceed the limitations established pursuant to Section 7.

(b) Except as otherwise provided in the Plan, any Eligible Employee purchasing Shares under the Plan shall, at the time of such purchase, sign a note to the order of the Company in such form as the Committee may approve, for the Purchase Price of such Shares. The terms of the note shall provide for payment of the Purchase Price by means of equal, regular payroll deductions over a period of 108 months (without interest, except as specified below), commencing as of the first day of the month following the end of the Offering Period; provided however that, in the event the Eligible Employee terminates his or her employment with the Company or a Subsidiary at any time prior to the payment in full of the Purchase Price, the entire remaining amount payable under such note shall become payable in full within 30 days of the date of such termination of employment. In the event such remaining amount is not paid in full within 30 days of such termination of employment, the remaining amount payable shall accrue interest at the lesser of three (3) percentage points over the prime rate as quoted in the Money Rates section of the Wall Street Journal or any successor thereto (of, if such Prime Rate is not so quoted, the prime rate shall be that of any such bank as shall be selected by the Committee), or the highest rate permitted by law. A Participant may pay the outstanding balance due under his or her note with respect to the Purchase Price of Shares under the Plan at any time. If, at any time, an Eligible Employee’s compensation drops below the amount required to make any payments required under the note, or under any subsequent extension of the note, through regular payroll deductions (as a result of a leave of absence or any other reason), such Eligible Employee shall continue to be personally obligated to make the monthly payments required under the note, with such payments to be made directly by the Eligible Employee to the Company. Notwithstanding the foregoing, if any applicable securities law or regulation prohibits the Company from loaning funds to any particular Eligible Employee, such Eligible Employee must pay the purchase price for the Shares issued to such Eligible Employee in full as of the time of the issuance of the Shares.

(c) Until such time as the Purchase Price is paid in full, the Shares purchased under the Plan may not be sold, transferred or otherwise disposed of, and shall be pledged by the Eligible Employee and held by the Company as collateral securing such payment obligation. In the event an Eligible Employee fails to comply with the terms for payment of the Purchase Price set forth above, the Company shall have the right to repurchase that number of Shares as is required to satisfy the outstanding balance due with respect to the Purchase Price (such number of Shares being determined by reference to the Fair Market Value as of the repurchase date, with the repurchase price paid by means of an offset against the Eligible Employee’s obligation to repay the balance due relating to such amounts which are owed under the Note), and the Eligible Employee shall have no further rights with respect to such Shares.

(d) In the alternative, on a termination of employment by an Eligible Employee who has a remaining balance payable with respect to any note for Shares purchased under the Plan, the Company shall have the right to repurchase any Shares that are held in an Investment Account for such Eligible Employee as follows: The Company shall repurchase Shares which have not been held beyond the Restricted Period applicable to such Shares, paying (i) the lesser of the Fair Market Value (determined as of the repurchase date) or the Purchase Price of such Shares, minus (ii) any unpaid balance of the note from the Eligible Employee to the Company issued in connection with the purchase of such Shares. The amount payable by the Company pursuant such repurchase shall be retained as an offset against amounts owed to the Company under the terms of the Eligible Employee’s note. If, after the repurchase of such Shares, any amounts are still owed to the Company under the terms of such note, the Company shall have the further right to repurchase at Fair Market Value (determined as of such repurchase date) Shares which have been held beyond the Restricted Period applicable to such Shares. The amounts payable by the Company pursuant to such repurchase of additional Shares shall also be retained by the Company as an offset against the Eligible Employee’s obligations under the note. Once the Eligible Employee’s payment obligation under the note has been satisfied through such set-offs as described above, certificates for the

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Shares remaining in such Eligible Employee’s Investment Account, if any, shall be distributed to such Eligible Employee.

(e) Any Shares purchased pursuant to the Plan shall be restricted for a period of five years, measured from the first day of the relevant Offering Period (the “Restricted Period”). Any attempt to sell, transfer, make subject to any lien, or otherwise dispose of such Shares prior to the end of the Restricted Period (except a transfer on death pursuant to the provisions of Section 13(a)) shall be null and void, and the Company shall have the right to repurchase from such Eligible Employee such Shares by payment to the Eligible Employee of an amount equal to (i) the lesser of the Fair Market Value (determined as of the repurchase date) or the Purchase Price of such Shares minus (ii) any unpaid balance of the note from the Eligible Employee to the Company issued in connection with the purchase of such Shares. All certificates for Shares shall be legended so as to indicate the restrictions on sales of such Shares under the Plan.

(f) Notwithstanding anything to the contrary herein, as a condition to participate in the Plan, each Eligible Employee agrees not to, and shall be prohibited from, filing an election under Section 83(b) of the Code to include in gross income attributable to participation in the Plan. This Section 6(f) shall not be applicable to any Eligible Employee who is an “officer” as defined in Rule 16a-1(f) promulgated under the Securities Exchange Act of 1934, as amended.

7. Limit on Purchase of Shares. The Committee may set such limitations on the number of Shares available for purchase during any one Offering Period as it determines to be appropriate from time to time, at its sole discretion.

8. Method of Purchase and Investment Accounts.

(a) Exercise of Option for Shares. Except as otherwise provided in the Plan, each Participant having elected to participate in the Plan pursuant to a properly filed Subscription Agreement consistent with the provisions of Section 5 shall be deemed, without any further action, to have exercised on the Purchase Date applicable to such Subscription Agreement, the right to purchase the number of Shares specified in the Subscription Agreement consistent with the terms for such purchase set forth in the Plan.

(b) All Shares so purchased shall, until both the Restricted Period applicable to such Shares has passed and the Participant’s payment obligation for such Shares is satisfied, be held in a separate Investment Account established for each Participant. All Shares held in such Investment Accounts shall be security with respect to the Participant’s payment obligation for such Shares under the terms of such Participant’s Subscription Agreement until payment in full of such obligation.

(c) Dividends or Other Distributions on Shares Held in Investment Accounts. All cash dividends or other distributions paid with respect to Shares at any time the Participant has an unpaid payment obligation for such Shares shall be retained by the Company and treated as additional amounts paid with respect to such payment obligation. Cash dividends or other distributions paid with respect to Shares after the payment obligation for such Shares has been satisfied shall be paid to the Participant.

(d) Adjustment of Shares on Application of Share Limits. If the total number of Shares that would be purchased pursuant to properly filed Subscription Agreements for a particular Offering Period exceeds the number of Shares then available for purchase under the Plan, either as to that Offering Period, or by reason of the limitation on the aggregate number of Shares available under the Plan, then the number of available Shares shall be allocated among the Participants filing Subscription Agreements for such Offering Period pro-rata on the basis of the number of Shares set forth in each such Subscription Agreement. The payment obligation for each such Subscription Agreement shall be deemed modified to take into account the purchase of a number of Shares that is less than the number specified in the Subscription Agreement.

9. Shares Subject to Plan. The aggregate maximum number of Shares that may be issued pursuant to the Plan is six million (6,000,000), subject to adjustment as provided in Section 17 of the Plan. The Shares delivered pursuant to the Plan may, at the option of the Company, be Shares purchased specifically for

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purposes of the Plan, shares otherwise held in treasury or Shares originally issued by the Company for such purpose.

10. Distribution of Certificates. Each Participant shall receive a certificate or certificates for those Shares held in an Investment Account for the benefit of such Participant as soon as practicable following the end of the Restricted Period applicable to such Shares, provided the payment obligation with respect to such Shares has been fully satisfied.

11. Registration of Certificates. Each certificate withdrawn by a Participant may be registered only in the name of the Participant, or, if the Participant so indicated on the Participant’s Subscription Agreement, in the Participant’s name jointly with a member of the Participant’s family, with right of survivorship. A Participant who is a resident of a jurisdiction which does not recognize such a joint tenancy may have certificates registered in the Participant’s name as tenant in common or as community property with a member of the Participant’s family without right of survivorship.

12. Voting. All Shares held in an Investment Account shall be voted as directed by the record owner thereof.

13. Retirement, Death or Other Termination of Employment.

(a) In the event of a Participant’s termination on account of retirement at any time after reaching the age of 50, death or Disability, the Participant, or in the event of the Participant’s death, the Participant’s beneficiary, if one has been designated, or the Participant’s estate, as the case may be, shall be entitled to the Shares held in the Participant’s Investment Account provided the Participant’s payment obligation with respect to such Shares is satisfied. The Restricted Period shall cease to be applicable to the Shares of a Participant whose termination of employment is described in this Section 13(a). The Participant, or the Participant’s beneficiary or estate, as the case may be, shall be issued a certificate or certificates for such Shares as soon as practicable after the payment obligation is satisfied. Whether a Participant’s termination of employment is by reason of “retirement” shall be determined at the discretion of the Committee.

(b) In the event of a Participant’s termination of employment for any reason other than a termination of employment described in Section 13(a), the Participant shall be entitled to the Shares which have been held beyond the Restricted Period applicable to such Shares, provided the Participant’s payment obligation with respect to such Shares is satisfied. With respect to those Shares for which the Restricted Period has not passed, the Company shall have the right, but not the obligation, to repurchase any such Shares for (i) the lesser of Fair Market Value (determined as of the repurchase date) or the Purchase Price of such Shares minus (ii) any unpaid balance of the note from the Eligible Employee to the Company issued in connection with the purchase of such Shares. If the Company does not so elect to repurchase such Shares, the Participant shall be entitled to such Shares provided the Participant’s payment obligation with respect to such Shares is satisfied. The Participant shall be issued a certificate or certificates for any Shares to which the Participant is entitled as soon as practicable after the payment obligation is satisfied.

(c) In the event the Participant, or the Participant’s beneficiary or estate, as the case may be, fails to satisfy the remaining payment obligation with respect to any Shares, such payment obligation shall be satisfied by the Company by means of the repurchase of Shares held in the Participant’s Investment Account consistent with the provisions for repurchase of Shares set forth in Section 6(d) above, provided, however, that in the case of a repurchase of Shares following the retirement, death or Disability of a Participant, all such repurchases shall be at Fair Market Value (determined as of the repurchase date).

14. Rights Not Transferable. Except as permitted under Section 13, rights under the Plan are not transferable by a Participant and are exercisable during the Participant’s lifetime only by the Participant.

15. No Right to Continued Employment. Neither the Plan nor any right granted under the Plan shall confer upon any Participant any right to continuance of employment with the Company or any Subsidiary, or interfere in any way with the right of the Company or any Subsidiary to terminate the employment of such Participant.

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16. Application of Funds. All funds received or held by the Company under this Plan may be used for any corporate purpose.

17. Adjustments in Case of Changes Affecting Shares. In the event of a subdivision or split of outstanding Shares, or the payment of a stock dividend, the Share limits set forth in Sections 9 and 23 shall be adjusted proportionately, and such other adjustments (including adjustments to the determination of the purchase price) shall be made as may be deemed equitable by the Committee.

18. Amendment of the Plan. The Board of Directors of the Company may at any time, or from time to time, amend the Plan in such manner as it may deem advisable; provided, however, that any amendment which (i) increases the maximum number of shares available for purchase under the Plan, which materially increases the benefits accruing to employees under the Plan, or which expands the classes of individuals who are eligible to participate in the Plan or require approval of the Company’s shareholders under the applicable rules of NASDAQ or such other stock exchange in which the Shares are listed, shall not be effective except on the approval of the Company’s shareholders. Notwithstanding anything to the contrary herein, any amendment to Section 23 shall be subject to approval of the Company’s shareholders except to the extent that such amendment is determined will, if made without shareholder approval, not cause income attributable to participation in the Plan pursuant to Section 23 to fail to qualify as performance-based compensation for purposes of Code Section 162(m).

19. Termination of the Plan. The Plan and all rights of Eligible Employees under any offering hereunder shall terminate at such time as the Board of Directors, at its discretion, determines to terminate the Plan. Upon termination of this Plan, any Shares held in Investment Accounts for Participants shall be carried forward into the Participant’s Investment Account under a successor plan, if any, or, if there is no successor plan, certificates for such Shares shall be forwarded to the Participant upon satisfaction of all payment obligations for such Shares and the expiration of the applicable Restricted Period relating to such Shares.

20. Governmental Regulations.

(a) Anything contained in this Plan to the contrary notwithstanding, the Company shall not be obligated to sell or deliver any Share certificates under this Plan unless and until the Company is satisfied that such sale or delivery complies with (i) all applicable requirements of the governing body of the principal market in which such Shares are traded, (ii) all applicable provisions of the Securities Act of 1933, as amended (the “Act”), and the rules and regulations thereunder and (iii) all other laws or regulations by which the Company is bound or to which the Company is subject.

(b) The Company (or a Subsidiary) may make such provisions as it may deem appropriate for the withholding of any taxes or payment of any taxes which it determines it may be required to withhold or pay in connection with any Shares. The obligation of the Company to deliver certificates under this Plan is conditioned upon the satisfaction of the provisions set forth in the preceding sentence.

21. Section 16 Restrictions for Officers and Directors. Notwithstanding any other provision of the Plan, each officer (for purposes of Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), and director of the Company shall be subject to such restrictions as are required so that transactions under the Plan by such officer or director shall be exempt from Section 16(b) of the Exchange Act.

22. Repurchase of Shares. The Company shall not be required to repurchase from any Participant any Shares which such Participant acquires under the Plan.

23. Special Performance-Based Compensation Provisions. Notwithstanding anything to the contrary set forth in the Plan, the provisions of this Section 23 shall be applicable to and shall limit the participation in the Plan by each Participant who is or who is determined by the Committee to be reasonably likely to be treated as a Covered Employee for the taxable year of the Company that includes any Purchase Date hereunder.

(a) No Covered Employee shall be eligible to purchase more than one million (1,000,000) Shares during any one taxable year of the Company, subject to adjustment as set forth in Section 17 of the Plan.

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(b) A Covered Employee shall only be eligible to purchase Shares on Purchase Dates occurring during the twelve month period following the end of a performance period and, then only if all of the following requirements are satisfied:

(i) The Committee shall establish a performance period, consisting of a period of not more than one year;

(ii) The Committee shall have established one or more performance targets applicable to such performance period, which performance targets shall be based on one or more of the following business criteria (which may be determined for these purposes either by reference to the Company as a whole or by reference to any one or more of its subsidiaries, operating divisions or other operating units and shall not necessarily require the Covered Employee to meet the specified performance targets himself or herself): stock price, market share, gross sales, gross revenue, net revenues, pretax income, operating income, cash flow, earnings per share, return on equity, return on invested capital or assets, cost reductions and savings, return on revenues or productivity, or any variation or combination of the preceding business criteria; and, provided further, that such performance target or targets shall have been established during the first 90 days from the beginning of such performance period, or during the first twenty-five percent (25%) of such performance period, whichever is the shorter period;

(iii) The Committee shall have certified in writing that the performance target or targets applicable to such performance period have been met (such written certification may be in any form which meets the requirements of Section 162(m) of the Code);

(iv) The Plan, as restated herein, shall have been appropriately disclosed to and approved by the Company’s shareholders in a manner consistent with the shareholder approval requirements applicable to the performance-based compensation exception to the Code Section 162(m) limitations on deductibility of certain compensation paid to Covered Employees; and

(v) Any other requirements for the treatment of income recognized by reason of a purchase of Shares on such Purchase Date as “performance-based compensation,” as that term is defined in Code Section 162(m), are determined by the Committee to have been satisfied.

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