DEFA14A

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): July 22, 2008

Philadelphia Consolidated Holding Corp.

(Exact Name of Registrant as Specified in Charter)

Pennsylvania (State or Other Jurisdiction of Incorporation)	0-22280 (Commission File Number)	23-2202671 (IRS Employer Identification No.)
One Bala Plaza, Suite 100, Bala Cynwyd, Pennsylvania (Address of Principal Executive Offices)		19004 (Zip Code)

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

Not Applicable
(Former Name or Former Address, if Changed Since Last Report)

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 (see General Instruction A.2. below):

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

þ 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 1.01 Entry into a Material Definitive Agreement.

Agreement and Plan of Merger

On July 22, 2008, Philadelphia Consolidated Holding Corp. (the “Philadelphia Consolidated”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Tokio Marine Holdings, Inc., a Japanese corporation (“Tokio Marine”). The Merger Agreement provides that, as promptly as reasonably practicable after signing the Merger Agreement, Tokio Marine will cause a corporation to be formed in Pennsylvania as an indirect wholly-owned subsidiary of Tokio Marine (“Subsidiary”), and Tokio Marine will cause Subsidiary to become a party to the Merger Agreement. The Merger Agreement provides that at the Effective Time (as defined in the Merger Agreement), Subsidiary will be merged with and into Philadelphia Consolidated (the “Merger”), with Philadelphia Consolidated continuing as the surviving corporation and becoming an indirect wholly-owned subsidiary of Tokio Marine.

Pursuant to the Merger Agreement, at the Effective Time and as a result of the Merger, each then issued and outstanding share of Philadelphia Consolidated common stock (each a “Share”), other than Shares owned by Tokio Marine, Subsidiary or any other direct or indirect wholly owned subsidiary of Tokio Marine (which will be cancelled without payment of any consideration), will be converted into the right to receive $61.50 in cash per Share and will be cancelled. All stock options, stock appreciation rights, performance awards, restricted shares, and stock purchase plan awards outstanding immediately prior to the Effective Time of the Merger (collectively, the “Stock Awards”) will vest, and the holders will be paid $61.50 for each share represented by their rights and awards, less any amounts owed by the holder to Philadelphia Consolidated (the exercise price or reference price, as applicable), and any applicable withholding taxes.

Some employees, including Philadelphia Consolidated’s named executive officers, James J. Maguire, Chairman of the Board, James J. Maguire, Jr., President and Chief Executive Officer (Principal Executive Officer), Craig P. Keller, Executive Vice President and Chief Financial Officer (Principal Financial Officer), Sean S. Sweeney, Executive Vice President, and Christopher J. Maguire, Executive Vice President and Chief Operating Officer (collectively, the “NEOs”), may also receive a gross-up payment for excise taxes due as a result of “excess parachute payments” (as that term is used for purposes of Section 280G of the Internal Revenue Code) arising from the accelerated vesting of their Stock Awards, as provided for in their current employment agreements or as modified by an addendum to their current employment agreements entered into in connection with the Merger. See Item 5.02 of this report for a description of these addenda. The Chairman of the Board will be entitled to a gross-up payment for any excise tax liability imposed on him by reason of the Merger under his existing employment agreement.

Completion of the Merger is subject to various customary closing conditions, including, but not limited to, (1) the requisite approval of the Merger Agreement by Philadelphia Consolidated’s shareholders at a special meeting of the shareholders to be called for that purpose, (2) requisite approval of the Japan Financial Services Agency of an approval application and notification filing by Tokio Marine and its affiliates, (3) the receipt of all required insurance regulatory approvals and (4) the expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

The Merger Agreement provides certain termination rights for both Philadelphia Consolidated and Tokio Marine, and further provides that upon termination of the Merger Agreement under certain circumstances, Philadelphia Consolidated will be obligated to pay Tokio Marine a termination fee of $141 million and reimburse Tokio Marine for up to $15 million of its reasonable and documented out of pocket expenses.

The Merger Agreement contains a “no shop” provision that, in general, restricts Philadelphia Consolidated’s ability to solicit third party acquisition proposals or provide information to or engage in discussions or negotiations with third parties that have made or are reasonably likely to make an acquisition proposal. The no shop provision is subject to a “fiduciary out” provision that allows Philadelphia Consolidated, under certain circumstances and in compliance with certain obligations, to provide information and participate in discussions and negotiations with respect to unsolicited written third party acquisition proposals that would reasonably be expected to result in a Superior Proposal (as defined in the Merger Agreement) and to terminate the Merger Agreement and accept a Superior Proposal upon payment to Tokio Marine of the termination fee and reimbursement of expenses discussed above.

The Merger Agreement contains customary representations, warranties and covenants. The assertions embodied in those representations and warranties were made solely for purposes of the Merger Agreement. No person should rely on the representations and warranties in the Merger Agreement as characterizations of the actual state of facts or the condition of Philadelphia Consolidated or Tokio Marine or any of their respective affiliates, because, among other reasons, they may be modified by information provided in the Disclosure Letter referenced in the Merger Agreement, they may be subject to a contractual standard of materiality different from that generally applicable to Philadelphia Consolidated’s filings with the U.S. Securities and Exchange Commission (the “SEC”), or they may have been used for the purpose of allocating risk among the parties to the Merger Agreement rather than establishing matters as facts.

The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, which is filed as Exhibit 2.1 hereto and is incorporated herein by reference.

Employment Agreement Addenda

On July 22, 2008, in connection with the execution of the Merger Agreement, each of the NEOs entered into an addendum to his employment agreement providing for, among other things, his continued employment after the Effective Time and a retention payment (other than the addendum with respect to the Chairman of the Board, which does not provide for such retention payments) under certain circumstances at various times after the Effective Time. See Item 5.02 of this report for a description of these addenda.

Voting and Support Agreements

The Board of Directors of Philadelphia Consolidated has been advised that, on July 22, 2008, in connection with the execution of the Merger Agreement and after the approval of the Merger Agreement by the Board of Directors, certain shareholders of Philadelphia Consolidated, consisting of each of the NEOs, Maguire family members Frances M. Maguire and Timothy J. Maguire, The Maguire Foundation, and several trusts for the benefit of Maguire family members,

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each entered into and delivered to Tokio Marine a Voting and Support Agreement with Tokio Marine (each, a “Voting Agreement”) substantially in the form filed herewith as Exhibit 99.1. Pursuant to the Voting Agreements, each such shareholder has agreed, among other things, to vote (or cause to be voted) such shareholder’s Shares in favor of the approval of the Merger Agreement and has agreed not to dispose of such Shares while the Merger Agreement is in effect, other than as contemplated by the Merger Agreement.

The foregoing description of the Voting Agreements does not purport to be complete and is qualified in its entirety by reference to the full text of the form of Voting Agreement, which is filed as Exhibit 99.1 hereto and is incorporated herein by reference.

Share Purchase Agreements

The Board of Directors of Philadelphia Consolidated has been further advised that each of the NEOs has entered into an agreement with Tokio Marine to make certain open market purchases of Tokio Marine’s common stock (or shares of common stock represented by American Depository Shares) after the Effective Time.

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officer.

On July 22, 2008, in connection with the execution of the Merger Agreement, as described Item 1.01 of this Report, each of Philadelphia Consolidated’s NEOs entered into an Addendum to Employment Agreement (each, an “Addendum” and collectively, the “Addenda”), by and among Philadelphia Consolidated, Tokio Marine, Maguire Insurance Agency, Inc. (a wholly-owned subsidiary of Philadelphia Consolidated and the employer entity) (“the employer” or “MIA”) and such NEO.

Except as otherwise stated below, each NEO’s Addendum provides that:

• It will be effective immediately as of the Effective Time (as defined in the Merger Agreement), except for certain covenants that are effective immediately upon signing the Addendum. The covenants that are effective immediately include, in general, requirements that the NEO not terminate his employment, including for “Good Reason” as defined in his employment agreement as in effect immediately prior to entering into the Addendum (“Unamended Employment Agreement”) on or prior to the Effective Time and that Philadelphia Consolidated not take any action that would constitute “Good Reason” for the NEO to terminate his employment, and not otherwise terminate the NEO’s employment for any reason, on or prior to the Effective Time, other than for unlawful activity related to employment, demonstrable fraud or material malfeasance against Philadelphia Consolidated.

• After the Merger, each NEO will continue his employment under the terms of his employment agreement as amended by his Addendum. James J. Maguire will continue his employment as Chairman of the Board of Philadelphia Consolidated and will also serve as a Senior International Advisor to Philadelphia Consolidated, MIA and Tokio Marine.

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• The term of James J. Maguire’s employment agreement will be extended under his Addendum to the second anniversary of the Effective Time, and the employer may, at its option, elect to extend the term for an additional year thereafter. The terms of the other NEOs’ employment agreements will be extended under their Addenda and will expire on the fifth anniversary of the Effective Time.

• The NEOs could be entitled to a gross-up payment for excise taxes imposed on them as a result of “excess parachute payments” under Section 280G of the Internal Revenue Code, unless the liability for the excise tax can be eliminated by a reduction in the payments to the NEOs generally in an amount not in excess of 10% of the amount of the parachute payments that would be made to the NEOs (except for the Chairman of the Board, whose payment is not subject to such potential 10% cut-back under the terms of his gross-up agreement in his Unamended Employment Agreement, as described under Item 1.01 of this report). Of the NEOs other than the Chairman of the Board, only Christopher J. Maguire is expected to receive a gross-up payment. None of the NEOs is expected to be subject to a reduction in payments to avoid excise taxes on excess parachute payments.

• For each NEO other than the Chairman of the Board (who will not receive a retention bonus), if the NEO remains employed through the first three anniversaries of the Effective Time, the employer will pay to him a retention bonus, in the aggregate amount of $1,800,000 in the case of James J. Maguire, Jr., and $1,500,000 in the case of each of Messrs. Keller, Sweeney and Christopher J. Maguire. The retention bonus will be paid in equal installments of one-third of such aggregate retention bonus, on each of such anniversaries. If, during the three-year period, the NEO’s employment is terminated by Philadelphia Consolidated or MIA for Cause (as defined in the Unamended Employment Agreement) or by the NEO, or as a result of the NEO’s death or disability, any unearned installments of the retention bonus will not be paid. If, during such period, MIA or Philadelphia Consolidated terminates the NEO without Cause, or in the event of any reduction in or failure to timely pay the NEO’s base salary, the assignment to the NEO of duties that are not of a senior executive level or not consistent with his experience and training, or failure to pay any installment of the retention bonus when due, then any unpaid amount of the full retention bonus will be immediately due and payable in a lump sum.

• As of the Effective Time, the employer will provide each NEO, other than the Chairman of the Board, with compensation opportunities comparable in the aggregate to those provided to the NEO immediately prior to the Merger.

• As of the Effective Time, the base salary of the Chairman of the Board will increase from $1,000,000 per year to $2,000,000 per year, and the employer will provide him with compensation opportunities comparable in the aggregate to those provided to him immediately prior to the Merger, taking into account the increase in base salary described above, on a risk-adjusted basis.

• Each NEO’s Addendum also amends and broadens the scope of the restrictive covenants and confidentiality provisions of his Unamended Employment Agreement.

• James J. Maguire’s Addendum provides that he will be subject to the terms of a non-competition provision during his employment and for two years thereafter.

The foregoing description of the Addenda does not purport to be complete and is qualified in its entirety by reference to the full text of each of the Addenda, which are filed as Exhibits 10.1, 10.2, 10.3, 10.4 and 10.5 hereto and are incorporated herein by reference.

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Item 8.01 Other Events.

On July 23, 2008, Philadelphia Consolidated and Tokio Marine issued a joint press release announcing the execution of the Merger Agreement and related agreements. A copy of that press release is furnished as Exhibit 99.2.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

     The following exhibits are filed with this Current Report on Form 8-K:

Exhibit No.		Description
	2.1	Agreement and Plan of Merger among Philadelphia Consolidated Holding Corp. and Tokio Marine Holdings, Inc., dated as of July 22, 2008 (exhibits and schedules omitted pursuant to Regulation S-K Item 601(b)(2)).
	10.1*	Addendum to Employment Agreement, dated as of July 23, 2008, by and among Philadelphia Consolidated Holding Corp., Maguire Insurance Agency, Inc., Tokio Marine Holdings, Inc., and James J. Maguire.
	10.2*	Addendum to Employment Agreement, dated as of July 23, 2008, by and among Philadelphia Consolidated Holding Corp., Maguire Insurance Agency, Inc., Tokio Marine Holdings, Inc., and James J. Maguire, Jr.
	10.3*	Addendum to Employment Agreement, dated as of July 23, 2008, by and among Philadelphia Consolidated Holding Corp., Maguire Insurance Agency, Inc., Tokio Marine Holdings, Inc., and Craig P. Keller.
	10.4*	Addendum to Employment Agreement, dated as of July 23, 2008, by and among Philadelphia Consolidated Holding Corp., Maguire Insurance Agency, Inc., Tokio Marine Holdings, Inc., and Sean S. Sweeney.
	10.5*	Addendum to Employment Agreement, dated as of July 23, 2008, by and among Philadelphia Consolidated Holding Corp., Maguire Insurance Agency, Inc., Tokio Marine Holdings, Inc., and Christopher J. Maguire.
	99.1	Form of Voting and Support Agreement.
	99.2	Joint Press Release of Tokio Marine Holdings, Inc. and Philadelphia Consolidated Holding Corp., dated July 23, 2008.

* Management contract or compensatory plan or arrangement.

Forward-Looking Statements

Statements included in this report that are not historical facts are forward-looking statements within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding

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expectations as to the completion of the Merger and the other transactions contemplated by the Merger Agreement. Forward-looking statements are based on our current expectations and beliefs concerning future events and involve risks, uncertainties and assumptions. The factors that could cause actual results to differ materially include, in addition to Risk Factors referred to in filings made with the Securities and Exchange Commission (“SEC”), the following: operating costs, customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees, customers or suppliers) may be greater than expected following the announcement of the transaction; the retention of certain key employees at Philadelphia Consolidated; the conditions to the completion of the transaction may not be satisfied, or the regulatory approvals required for the transaction may not be obtained on the terms expected or on the anticipated schedule; the parties may not be able to meet expectations regarding the timing, completion and accounting and tax treatments of the merger. Philadelphia Consolidated assumes no obligation to, and expressly disclaims any obligation, to update the information in this report, except as otherwise required by law. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof.

Additional Information and Where to Find It

This communication may be deemed solicitation material in respect of the proposed acquisition of Philadelphia Consolidated by Tokio Marine. In connection with the proposed acquisition, Philadelphia Consolidated intends to file relevant materials with the SEC, including Philadelphia Consolidated’s proxy statement on Schedule 14A. WE URGE SHAREHOLDERS OF PHILADELPHIA CONSOLIDATED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE, INCLUDING PHILADELPHIA CONSOLIDATED’S PROXY STATEMENT, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and security holders will be able to obtain copies of the proxy statement (when available) as well as other filed documents containing information about Philadelphia Consolidated free of charge at the SEC’s web site, http://www.sec.gov, and shareholders of Philadelphia Consolidated will receive information at an appropriate time on how to obtain transaction-related documents for free from Philadelphia Consolidated. Such documents are not currently available. Free copies of Philadelphia Consolidated’s SEC filings are also available from Philadelphia Consolidated Holding Corp., One Bala Plaza, Suite 100, Bala Cynwyd, PA 19004, Attention: Joseph Barnholt, Assistant Vice President, Finance and Tax Reporting, Investor Relations.

Participants in the Solicitation

Philadelphia Consolidated, and its directors and executive officers, and Tokio Marine, and its directors and executive officers, may be deemed to be participants in the solicitation of proxies from the holders of Philadelphia Consolidated’s common stock in respect of the proposed transaction. Information about Philadelphia Consolidated’s directors and executive officers is set forth in the proxy statement for Philadelphia Consolidated’s 2008 Annual Meeting of Shareholders, which was filed with the SEC on April 15, 2008. Certain information about the directors and executive officers of Tokio Marine will be set forth in its Schedule 13D to be filed with the SEC with respect to Philadelphia Consolidated’s shares pursuant to the Exchange Act. Shareholders and investors may obtain additional information regarding the interest of such participants by reading the proxy statement regarding the acquisition when it becomes available.

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SIGNATURE

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.

Dated: July 23, 2008
	Philadelphia Consolidated Holding Corp.
	By:	/s/ Craig P. Keller
		Name:	Craig P. Keller
		Title:	Executive Vice President, Secretary, Treasurer and Chief Financial Officer

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EXHIBIT INDEX

     Each of the following exhibits is being filed electronically with this Current Report on Form 8-K:

Exhibit No.		Description
	2.1	Agreement and Plan of Merger among Philadelphia Consolidated Holding Corp. and Tokio Marine Holdings, Inc., dated as of July 22, 2008 (exhibits and schedules omitted pursuant to Regulation S-K Item 601(b)(2)).
	10.1*	Addendum to Employment Agreement, dated as of July 23, 2008, by and among Philadelphia Consolidated Holding Corp., Maguire Insurance Agency, Inc., Tokio Marine Holdings, Inc., and James J. Maguire.
	10.2*	Addendum to Employment Agreement, dated as of July 23, 2008, by and among Philadelphia Consolidated Holding Corp., Maguire Insurance Agency, Inc., Tokio Marine Holdings, Inc., and James J. Maguire, Jr.
	10.3*	Addendum to Employment Agreement, dated as of July 23, 2008, by and among Philadelphia Consolidated Holding Corp., Maguire Insurance Agency, Inc., Tokio Marine Holdings, Inc., and Craig P. Keller.
	10.4*	Addendum to Employment Agreement, dated as of July 23, 2008, by and among Philadelphia Consolidated Holding Corp., Maguire Insurance Agency, Inc., Tokio Marine Holdings, Inc., and Sean S. Sweeney.
	10.5*	Addendum to Employment Agreement, dated as of July 23, 2008, by and among Philadelphia Consolidated Holding Corp., Maguire Insurance Agency, Inc., Tokio Marine Holdings, Inc., and Christopher J. Maguire.
	99.1	Form of Voting and Support Agreement.
	99.2	Joint Press Release of Tokio Marine Holdings, Inc. and Philadelphia Consolidated Holding Corp., dated July 23, 2008.

* Management contract or compensatory plan or arrangement.

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EX-2.1

Exhibit 2.1

EXECUTION COPY

AGREEMENT AND PLAN OF MERGER

Among

PHILADELPHIA CONSOLIDATED HOLDING CORP.,

TOKIO MARINE HOLDINGS, INC.

and

MERGER SUB
(as herein defined)

Dated as of July 22, 2008

TABLE OF CONTENTS

	Page
AGREEMENT AND PLAN OF MERGER
ARTICLE I
The Merger; Closing; Effective Time
1.1. The Merger		1
1.2. Closing		1
1.3. Effective Time		2
ARTICLE II
Articles of Incorporation and By-Laws of the Surviving Corporation
2.1. The Articles of Incorporation		2
2.2. The By-Laws		2
ARTICLE III
Directors of the Surviving Corporation
3.1. Directors		2
ARTICLE IV
Effect of the Merger on Capital Stock; Exchange of Certificates
4.1. Effect on Capital Stock		3
4.2. Exchange of Certificates		3
4.3. Treatment of Stock Plans		6
4.4. Adjustments to Prevent Dilution		7
ARTICLE V
Representations and Warranties
5.1. Representations and Warranties of the Company		8
5.2. Representations and Warranties of Parent and Merger Sub		28
ARTICLE VI
Covenants
6.1. Interim Operations		31
6.2. Acquisition Proposals		35
6.3. Proxy Filing; Information Supplied		38
6.4. Shareholders Meeting		39
6.5. Filings; Other Actions; Notification		39
6.6. Access and Reports		41

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Table of Contents
(continued)

	Page
6.7. Stock Exchange Delisting		41
6.8. Publicity		42
6.9. Employee Benefits		42
6.10. Expenses		43
6.11. Director and Officer Indemnification and Liability Insurance		43
6.12. Other Actions by the Company		45
6.13. Parent Vote		45
6.14. Formation of Merger Sub; Accession		45
6.15. Ownership of Director’s Qualifying Shares		46
6.16. Pre-Closing Restructuring		46
ARTICLE VII
Conditions
7.1. Conditions to Each Party’s Obligation to Effect the Merger		46
7.2. Conditions to Obligations of Parent and Merger Sub		47
7.3. Conditions to Obligation of the Company		48
ARTICLE VIII
Termination
8.1. Termination by Mutual Consent		48
8.2. Termination by Either Parent or the Company		48
8.3. Termination by the Company		49
8.4. Termination by Parent		50
8.5. Effect of Termination and Abandonment		50
ARTICLE IX
Miscellaneous and General
9.1. Survival		53
9.2. Modification or Amendment		53
9.3. Waiver of Conditions		53
9.4. Counterparts		53
9.5. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL; SPECIFIC PERFORMANCE		53
9.6. Notices		55
9.7. Entire Agreement		56
9.8. No Third Party Beneficiaries		56
9.9. Obligations of Parent and of the Company		57
9.10. Transfer Taxes		57
9.11. Definitions		57
9.12. Severability		57

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Table of Contents
(continued)

	Page
9.13. Interpretation; Construction		58
9.14. Assignment		58
9.15. Dates and Dollar Amounts		58

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AGREEMENT AND PLAN OF MERGER

          AGREEMENT AND PLAN OF MERGER (hereinafter called this “Agreement”), dated as of July 22, 2008, among Philadelphia Consolidated Holding Corp., a Pennsylvania corporation (the “Company”), Tokio Marine Holdings, Inc., a Japanese corporation (“Parent”) and, from and after its accession to this Agreement in accordance with Section 6.14, Merger Sub (as that term is defined in Section 6.14 of this Agreement), a Pennsylvania corporation; the Company and Merger Sub sometimes being hereinafter collectively referred to as the “Constituent Corporations”).

RECITALS

          WHEREAS, the Boards of Directors of each of the parties hereto has determined that it is in the best interests of such party and its shareholders and other constituencies to enter into this Agreement, and has approved the execution, delivery and performance of this Agreement and the Voting Agreements.

          WHEREAS, the Company, Parent and Merger Sub desire to make certain representations, warranties, covenants and agreements in connection with this Agreement.

          WHEREAS, this Agreement is intended to constitute the plan of merger required by Section 1924 of the Pennsylvania Business Corporation Law of 1988, as amended (the “PBCL”) for the Merger.

          NOW, THEREFORE, in consideration of the premises, and of the representations, warranties, covenants and agreements contained herein, the parties hereto agree as follows:

ARTICLE I

The Merger; Closing; Effective Time

          1.1. The Merger. Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time, Merger Sub shall be merged with and into the Company, and the separate corporate existence of Merger Sub shall thereupon cease (the “Merger”). The Company shall be the surviving corporation in the Merger (sometimes hereinafter referred to as the “Surviving Corporation”), and the separate corporate existence of the Company, with all its rights, privileges, immunities, powers and franchises, shall continue unaffected by the Merger, except as set forth in Article II. The Merger shall have the effects specified in the PBCL.

          1.2. Closing. Unless otherwise mutually agreed in writing between the Company and Parent, the closing for the Merger (the “Closing”) shall take place at the offices of Sullivan & Cromwell LLP, 125 Broad Street, New York, New York, at 9:00 A.M. on the second Business Day (the “Closing Date”) following the day on which

the last to be satisfied or waived of the conditions set forth in Article VII (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the fulfillment or waiver of those conditions) shall be satisfied or waived in accordance with this Agreement. For purposes of this Agreement, the term “Business Day” shall mean any day ending at 11:59 p.m. (Eastern U.S. Time) other than a Saturday or Sunday or a day on which banks are required or authorized to close in the City of New York or Tokyo.

          1.3. Effective Time. Immediately after the Closing, the Company, Merger Sub and Parent will cause the Articles of Merger (the “Pennsylvania Articles of Merger”) to be executed, acknowledged and filed in the Department of State of the Commonwealth of Pennsylvania as provided in Section 1927 of the PBCL. The Merger shall become effective at the time when the Pennsylvania Articles of Merger have been duly filed in the Department of State of the Commonwealth of Pennsylvania or at such other later date and time as is agreed between the parties and specified in the Articles of Merger in accordance with the relevant provisions of the PBCL (the “Effective Time”).

ARTICLE II

Articles of Incorporation and By-Laws
of the Surviving Corporation

          2.1. The Articles of Incorporation. The articles of incorporation of the Company as in effect immediately prior to the Effective Time shall be the articles of incorporation of the Surviving Corporation (the “Charter”), except that the articles of incorporation of the Company shall be amended as follows: The sentence “The aggregate number of shares which the corporation shall have authority to issue is 125,000,000 shares of Common Stock no par value, and 10,000,000 shares of Preferred Stock with a par value of $.01 per share.” shall be deleted in its entirety and replaced with “The aggregate number of shares, classes of shares and par value of shares which the corporation shall have authority to issue is 1000 shares of Common Stock with a par value of $1.00 per share.”

          2.2. The By-Laws. The by-laws of Merger Sub as in effect immediately prior to the Effective Time shall be the by-laws of the Surviving Corporation (the “By-Laws”), until thereafter amended as provided therein or by applicable law.

ARTICLE III

Directors of the Surviving Corporation

          3.1. Directors. The Board of Directors of Merger Sub at the Effective Time shall, from and after the Effective Time, be the directors of the Surviving Corporation until their successors have been duly elected or appointed and qualified or

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until their earlier death, resignation or removal in accordance with the Charter and the By-Laws.

ARTICLE IV

Effect of the Merger on Capital Stock;
Exchange of Certificates

          4.1. Effect on Capital Stock. At the Effective Time, as a result of the Merger and without any action on the part of the holder of any capital stock of the Company:

          (a) Merger Consideration. Each share of the Common Stock, no par value per share, of the Company (a “Share” or, collectively, the “Shares”) issued and outstanding immediately prior to the Effective Time, other than Shares owned by Parent, Merger Sub or any other direct or indirect wholly owned Subsidiary of Parent and Shares owned by the Company or any direct or indirect wholly owned Subsidiary of the Company, and in each case not held on behalf of third parties (each, an “Excluded Share,” and collectively, “Excluded Shares”) shall be converted into the right to receive $61.50 per Share (the “Per Share Merger Consideration,” together with the amounts payable under this Agreement pursuant to the provisions of Section 4.3 to the holders of the Stock Awards, the “Merger Consideration”). At the Effective Time, all of the Shares shall cease to be outstanding, shall be cancelled and shall cease to exist, and each certificate (a “Certificate”) formerly representing any of the Shares (other than Excluded Shares) shall thereafter represent only the right to receive the Per Share Merger Consideration, without interest.

          (b) Cancellation of Excluded Shares. Each Excluded Share shall, by virtue of the Merger and without any action on the part of the holder of the Excluded Share, cease to be outstanding, be cancelled without payment of any consideration therefor and shall cease to exist.

          (c) Merger Sub. At the Effective Time, each share of Common Stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into one share of common stock, $1.00 par value per share, of the Surviving Corporation.

          4.2. Exchange of Certificates.

          (a) Paying Agent. Immediately prior to the Effective Time, Parent shall make available or cause to be made available to a paying agent which is a U.S. based commercial bank or trust company selected by Parent at least five (5) Business Days prior to the Effective Time with the Company’s prior approval (such approval not to be unreasonably withheld or delayed) (the “Paying Agent”) in an account for the benefit of the holders of the Shares (other than the Excluded Shares) and the Options, SARs, Performance Awards, Restricted Shares, Stock Purchase Plan Awards or Other

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Company Awards (collectively, the “Stock Awards”), amounts sufficient in the aggregate to provide all funds necessary for the Paying Agent to make payments of the Merger Consideration (such cash being hereinafter referred to as the “Exchange Fund”). The Paying Agent shall invest the Exchange Fund as directed by Parent; provided that any and all such investments shall be in obligations of or guaranteed by the United States of America or in commercial paper obligations rated A-1 or P-1 or better by Standard & Poor’s or Moody’s Investors Service, respectively or a combination of the foregoing or in certificates of deposit, bank repurchase agreements or banker’s acceptances of commercial banks with capital exceeding $1,000,000,000 and, in any such case, no such instrument shall have a maturity exceeding three months. To the extent that there are losses with respect to such investments, or the Exchange Fund diminishes for other reasons below the level required to make prompt cash payment of the aggregate Merger Consideration as contemplated hereby, Parent shall promptly replace or restore the cash in the Exchange Fund lost through such investments or other events so as to ensure that the Exchange Fund is at all times maintained at a level sufficient to make such cash payments. Any interest and other income resulting from such investment shall become a part of the Exchange Fund, and any amounts in excess of the amounts payable under Section 4.1(a) shall be promptly returned to Parent.

          (b) Exchange Procedures. Promptly after the Effective Time (and in any event within three Business Days), the Surviving Corporation shall cause the Paying Agent (x) to mail to each holder of record of Shares (other than holders of Excluded Shares) (i) a letter of transmittal in customary form specifying that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates (or affidavits of loss in lieu of the Certificates as provided in Section 4.2(e)) to the Paying Agent, such letter of transmittal to be in such form and have such other provisions as Parent and the Company may reasonably agree, and (ii) instructions for use in effecting the surrender of the Certificates (or affidavits of loss in lieu of the Certificates as provided in Section 4.2(e)) in exchange for the Per Share Merger Consideration, and (y) to mail to each holder of a Stock Award, a check in an amount due and payable to such holder pursuant to the provisions of Section 4.3. Upon surrender of a Certificate (or affidavit of loss in lieu of the Certificate as provided in Section 4.2(e)) to the Paying Agent in accordance with the terms of such letter of transmittal, duly executed, the holder of such Certificate shall be entitled to receive in exchange therefor a cash amount in immediately available funds (after giving effect to any required tax withholdings as provided in Section 4.2(g)) equal to (x) the number of Shares represented by such Certificate (or affidavit of loss in lieu of the Certificate as provided in Section 4.2(e)) multiplied by (y) the Per Share Merger Consideration, and the Certificate so surrendered shall forthwith be cancelled. No interest will be paid or accrued on any amount payable upon due surrender of the Certificates. In the event of a transfer of ownership of Shares that is not registered in the transfer records of the Company, a check for any cash to be exchanged upon due surrender of the Certificate may be issued to such transferee if the Certificate formerly representing such Shares is presented to the Paying Agent, accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid or are not applicable.

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          (c) Transfers. From and after the Effective Time, there shall be no transfers on the stock transfer books of the Company of the Shares that were outstanding immediately prior to the Effective Time. If, after the Effective Time, any Certificate is presented to the Surviving Corporation, Parent or the Paying Agent for transfer, it shall be cancelled and exchanged for the cash amount in immediately available funds to which the holder of the Certificate is entitled pursuant to this Article IV.

          (d) Termination of Exchange Fund. Any portion of the Exchange Fund (including the proceeds of any investments of the Exchange Fund) that remains unclaimed by the shareholders of the Company for 365 calendar days after the Effective Time shall be delivered to the Surviving Corporation. Any holder of Shares (other than Excluded Shares) who has not theretofore complied with this Article IV shall thereafter look only to the Surviving Corporation for payment of the Per Share Merger Consideration (after giving effect to any required tax withholdings as provided in Section 4.2(g)) upon due surrender of its Certificates (or affidavits of loss in lieu of the Certificates), without any interest thereon. Notwithstanding the foregoing, none of the Surviving Corporation, Parent, the Paying Agent or any other Person shall be liable to any former holder of Shares for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar Laws. For the purposes of this Agreement, the term “Person” shall mean any individual, corporation (including not-for-profit), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, Governmental Entity or other entity of any kind or nature.

          (e) Lost, Stolen or Destroyed Certificates. In the event any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent, the posting by such Person of a bond in a reasonable amount the Paying Agent will issue a check in the amount (after giving effect to any required tax withholdings) equal to the number of Shares represented by such lost, stolen or destroyed Certificate multiplied by the Per Share Merger Consideration.

          (f) No Dissenters’ Rights. Pursuant to Section 1571 of the PBCL, no dissenters’ rights or rights of appraisal will apply in connection with the Merger.

          (g) Withholding Rights. Each of Parent and the Surviving Corporation shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Shares such amounts as it is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the “Code”), or any other applicable state, local or foreign Tax Law. To the extent that amounts are so withheld by the Surviving Corporation or Parent, as the case may be, such withheld amounts (i) shall be remitted by Parent or the Surviving Corporation, as applicable, to the applicable Governmental Entity, and (ii) shall be treated for all purposes of this Agreement as having been paid to the holder of Shares in respect of which such deduction and withholding was made by the Surviving Corporation or Parent, as the case may be.

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          4.3. Treatment of Stock Plans.

          (a) Treatment of Options. At the Effective Time, each outstanding option to purchase Shares (an “Option”), under the Company Amended and Restated Employees’ Stock Incentive and Performance Based Compensation Plan (the “Amended and Restated Plan”), as well as the Company’s prior Stock Option Plan which was amended and restated by the Amended and Restated Plan, vested or unvested, shall be cancelled and shall only entitle the holder of such Option to receive an amount in cash equal to the product of (x) the total number of Shares subject to the Option times (y) the excess, if any, of the Per Share Merger Consideration over the exercise price per Share under such Option.

          (b) Stock Appreciation Rights. At the Effective Time, each outstanding Stock Appreciation Right to receive a payment based on the increase in the value of a Share (a “SAR”) granted pursuant to the Stock Plans, vested or unvested, shall be cancelled and shall only entitle the holder of such SAR to receive an amount in cash equal to the product of (x) the total number of Shares subject to the SAR times (y) the excess, if any, of the Per Share Merger Consideration over the reference price per Share under such SAR.

          (c) Performance Awards. At the Effective Time, each outstanding performance share (a “Performance Award”) under the Stock Plans, vested or unvested, shall be cancelled and shall only entitle the holder of such Performance Award to receive an amount in cash equal to the product of (x) the number of Performance Awards outstanding immediately prior to the Effective Time, times (y) the Per Share Merger Consideration.

          (d) Restricted Shares. Immediately prior to the Effective Time, the Company shall waive any vesting or holding conditions or restrictions applicable to any Shares of restricted stock (“Restricted Shares”) granted pursuant to the Stock Plans, and such Restricted Shares shall be treated the same as all other Shares in accordance with Section 4.1 of this Agreement.

          (e) Shares Issued Under Stock Plans. Immediately prior to the Effective Time, the Company shall waive any vesting or holding conditions or restrictions applicable to any Shares that have been issued to any Person by reason of such Person’s participation in the Company Employee Stock Purchase Plan, the Company Directors Stock Purchase Plan, the Company Nonqualified Employee Stock Purchase Plan and the Company Stock Purchase Plan for Preferred Agents (such Plans, together with the Amended and Restated Plan, are referred to herein collectively as the “Stock Plans”, and the Shares which have been so issued are referred to herein collectively as the “Stock Purchase Plan Awards”), and such Shares shall be treated the same as all other Shares in accordance with Section 4.1 of this Agreement provided, however, that all loans that are outstanding and payable by any Person on account of or in respect of such Shares shall be immediately due and payable by such Person to the

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Company and may be paid from the consideration received by such Person under Section 4.1 of this Agreement.

          (f) Other Company Awards. At the Effective Time, each right of any kind, contingent or accrued, to acquire or receive Shares or benefits measured by the value of Shares, and each award of any kind consisting of Shares that may be held, awarded, outstanding, payable or reserved for issuance under the Stock Plans and any other Benefit Plans, other than Options, SARs, Performance Awards, Stock Purchase Plan Awards and Restricted Shares, if any (the “Other Company Awards”), shall be converted and shall only entitle the holder of such Other Company Award (if any) to receive an amount in cash equal to (x) the number of Shares subject to such Other Company Award immediately prior to the Effective Time times (y) the Per Share Merger Consideration (or, if the Other Company Award provides for payments to the extent the value of the Shares exceed a specified reference price, the amount, if any, by which the Per Share Merger Consideration exceeds such reference price), less applicable Taxes required to be withheld with respect to such payment. The time and form of payment in respect of such Other Company Awards, if any, will be in accordance with the applicable Stock Plan or Benefit Plan.

          (g) Corporate Actions. At or prior to the Effective Time, the Company, the Board of Directors of the Company and the compensation committee of the Board of Directors of the Company, as applicable, shall adopt any resolutions and take any actions which are necessary to effectuate the provisions of Sections 4.3(a) through 4.3(g). The Company shall take all actions necessary to ensure that (i) from and after the Effective Time, neither Parent nor the Surviving Corporation will be required to deliver Shares, other capital stock of the Company, or other compensation of any kind (other than amounts required to be paid pursuant to Sections 4.3(a) through 4.3(g)) to any Person pursuant to or in settlement of the Stock Awards and the Stock Plans will thereupon terminate, and (ii) neither the Merger nor any other transaction contemplated by this Agreement shall be deemed to result in a “Hostile Change of Control” or similar event under any employment agreement with any employee of the Company. It is acknowledged, however, that the Merger will be deemed to be a “Change of Control” for the purposes of the Stock Awards.

          4.4. Adjustments to Prevent Dilution. In the event that the Company changes the number of Shares or securities convertible or exchangeable into or exercisable for Shares issued and outstanding prior to the Effective Time as a result of a reclassification, stock split (including a reverse stock split), stock dividend or distribution, recapitalization, merger, issuer tender or exchange offer, or other similar transaction, the Per Share Merger Consideration shall be equitably adjusted.

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ARTICLE V

Representations and Warranties

          5.1. Representations and Warranties of the Company. Except as set forth in the Company SEC Documents filed on or after January 1, 2007 and prior to the date of this Agreement (excluding any disclosure set forth in the sections titled “risk factors” and “forward-looking statements” or in any other section to the extent the disclosure is a forward-looking statement or cautionary, predictive or forward-looking in nature) or otherwise disclosed to Parent in the corresponding sections or subsections of the letter (the “Company Disclosure Letter”) delivered to it by the Company prior to the execution of this Agreement (it being agreed that disclosure of any item in any section or subsection of the Company Disclosure Letter (i) shall be deemed disclosure with respect to any other section or subsection to which the relevance of such disclosure to the applicable representation and warranty is reasonably apparent and (ii) with respect to any disclosure of an item relating to a representation or warranty in which the phrase “Material Adverse Effect” appears shall not be deemed to be an admission that such item constitutes or may reasonably be expected to result in, a Material Adverse Effect), the Company hereby represents and warrants to Parent and Merger Sub that:

          (a) Organization, Good Standing and Qualification. Each of the Company and its Subsidiaries is a legal entity duly organized, validly existing and in good standing (or, with respect to any such entity which is a Pennsylvania corporation, is subsisting) under the Laws of its respective jurisdiction of organization and has all requisite corporate or similar power and authority to own, lease and operate its properties and assets and to carry on its business as presently conducted and is qualified to do business and is in good standing as a foreign corporation or other legal entity in each jurisdiction where the ownership, leasing or operation of its assets or properties or conduct of its business requires such qualification, except where the failure to be so organized, qualified or in good standing, or to have such power or authority, would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect or to prevent, materially delay or materially impair the consummation of the transactions contemplated by this Agreement. The Company has made available to Parent complete and correct copies of the Company’s and its Subsidiaries’ articles of incorporation and by-laws or comparable governing documents, each as amended to the date of this Agreement, and each as so delivered is in full force and effect. Section 5.1(a)(i) of the Company Disclosure Letter contains a correct and complete list of each jurisdiction where the Company and its Subsidiaries are organized.

          As of the date hereof, the Company conducts its insurance operations solely through the Subsidiaries set forth in Section 5.1(a)(ii) of the Company Disclosure Letter (collectively, the “Company Insurance Subsidiaries”). Each of the Company Insurance Subsidiaries is (i) duly licensed or authorized as an insurance company in its jurisdiction of incorporation, (ii) duly licensed or authorized as an insurance company in each other jurisdiction where it is required to be so licensed or authorized, and (iii) duly

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authorized in its jurisdiction of incorporation and each other applicable jurisdiction to write each line of business reported as being written in the Company SAP Statements, and the Company has made all required filings under applicable insurance holding company statutes, except where the failure to be so licensed or authorized, or to make any such filings, would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect or to prevent, materially delay or materially impair the consummation of the transactions contemplated by this Agreement. No insurance regulator in any state has notified the Company or any Company Insurance Subsidiary, orally or in writing, that any Company Insurance Subsidiary is commercially domiciled in any jurisdiction and, to the knowledge of the Company, there are no facts that would result in any Company Insurance Subsidiary being commercially domiciled in any state. For the purposes of this Agreement, the term “knowledge of the Company” means the actual knowledge of the individuals serving as of January 1, 2008 as the Company’s Chairman, Chief Executive Officer or Chief Financial Officer or as any Executive Vice President of the Company.

          As used in this Agreement, the term (i) “Subsidiary” or “Company Subsidiary” means, with respect to any Person, any other Person of which at least a majority of the securities or ownership interests having by their terms ordinary voting power to elect a majority of the Board of Directors or other persons performing similar functions is directly or indirectly owned or controlled by such Person and/or by one or more of its Subsidiaries, (ii) “Significant Subsidiary” is as defined in Rule 1.02(w) of Regulation S-X promulgated pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and (iii) “Material Adverse Effect” with respect to the Company means a material adverse effect on the financial condition, properties, assets, liabilities, business or results of operations of the Company and its Subsidiaries taken as a whole, provided, that none of the following shall constitute a Material Adverse Effect;

          (A) changes in the economy or financial markets generally in the United States;

          (B) changes that are the result of factors generally affecting the property-casualty insurance industry in the geographic areas in which the Company and the Company Subsidiaries operate;

          (C) any loss of, or adverse change in, the relationship of the Company or any of the Company Subsidiaries with its customers, employees, agents or suppliers caused by the pendency or the announcement of the transactions contemplated by this Agreement, in each case to the extent that the Company reasonably demonstrates that a causal relationship exists between such pendency or announcement, on the one hand, and such change, on the other hand;

          (D) changes in generally accepted accounting principles (“GAAP”) in the United States or Japan, SAP, the rules or policies of the Public Company Accounting Oversight Board, or any statute, rule or regulation unrelated

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to the Merger and of general applicability, or interpretation of any of the foregoing, after the date of this Agreement;

          (E) any failure by the Company to meet any estimates of revenues or earnings for any period ending on or after the date of this Agreement and prior to the Closing, provided that the exception in this clause shall not preclude a determination that any change, effect, circumstance or development underlying such failure has resulted in, or contributed to, a Material Adverse Effect on the Company;

          (F) the suspension of trading in securities on the New York Stock Exchange or Nasdaq or a decline in the price of the Company Common Stock on Nasdaq, provided that the exception in this clause shall not preclude a determination that any change, effect, circumstance or development underlying such decline has resulted in, or contributed to a Material Adverse Effect on the Company;

          (G) any change or announcement of a potential change in the credit rating or A.M. Best rating of the Company or any of the Company Subsidiaries or any of their securities; provided that the exception in this clause shall not preclude a determination that any change, effect, circumstance or development underlying such failure has resulted in, or contributed to a Material Adverse Effect on the Company;

          (H) the entry into or announcement of the execution of this Agreement or compliance by the Company with the terms of this Agreement; and

          (I) the disposition of any interim motion relating to the action described in Schedule 5.1(g) of the Company Disclosure Letter;

provided that, with respect to clauses (A) and (B), such change, event, circumstance or development does not (i) primarily relate to (or have the effect of primarily relating to) the Company and the Company Subsidiaries or (ii) disproportionately adversely affect the Company and the Company Subsidiaries compared to other companies of similar size operating in the property and casualty insurance industry in similar geographic areas in which the Company and the Company Subsidiaries operate.

          Liberty American Premium Finance Company is duly licensed by the State of Florida to conduct a premium finance business, is in compliance with all Laws relating to premium finance (except to the extent any such non-compliance, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect) and has never been and is not engaged in nor has it ever participated in, shared profits or revenue from, promoted or solicited any life settlement or viatical settlement transaction.

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          (b) Capital Structure.

     (i) The authorized capital stock of the Company consists of 125,000,000 Shares, of which 71,503,346 Shares were outstanding as of the close of business on June 30, 2008, and 10,000,000 shares of Preferred Stock, par value $.01 per share, none of which are outstanding. All of the outstanding Shares have been duly authorized and are validly issued, fully paid (it being acknowledged that part of the consideration for certain Shares issued under the Stock Plans consisted of promissory notes from the individuals to whom such shares were issued which are not fully paid) and nonassessable. Other than 6,098,688 Shares reserved for issuance as of July 18, 2008 under the Stock Awards, the Company has no Shares reserved for issuance. Section 5.1(b)(i) of the Company Disclosure Letter contains a correct and complete list as of June 30, 2008 of Options, Restricted Shares, Performance Awards, SARs and Other Company Awards, including the holder, date of grant, number of Shares and, where applicable, exercise or reference price and vesting schedule. All vesting thereunder will be accelerated by the consummation of the Merger. Each of the outstanding shares of capital stock or other securities of each of the Company’s Subsidiaries is duly authorized, validly issued, fully paid and nonassessable, and owned by the Company, or by a direct or indirect wholly owned Subsidiary of the Company, free and clear of any lien, charge, pledge, security interest, claim or other encumbrance, other than a lien, charge, pledge, security interest, claim or other encumbrance for Taxes not yet due (each, a “Lien”); it being understood that, and the Company represents and warrants that, certain shares of the Company Subsidiaries originally issued as directors’ qualifying shares are beneficially owned by the Company or a Company Subsidiary and no other Person has any rights as a result of such directors’ qualifying shares. Except as set forth above and except for securities issued pursuant to the Stock Plans since June 30, 2008, as of the date hereof, there are no preemptive or other outstanding rights, options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements, calls, commitments or rights of any kind that obligate the Company or any of its Subsidiaries to issue or sell any shares of capital stock or other securities of the Company or any of its Subsidiaries or any securities or obligations convertible or exchangeable into or exercisable for, or giving any Person a right to subscribe for or acquire, any securities of the Company or any of its Subsidiaries, and no securities or obligations evidencing such rights are authorized, issued or outstanding. Upon any issuance of any Shares in accordance with the terms of the Stock Plans, such Shares will be duly authorized, validly issued, fully paid (it being acknowledged that part of the consideration for certain Shares issued under the Stock Plans consisted of promissory notes from the individuals to whom such shares were issued which are not fully paid) and nonassessable, and free and clear of any Liens. The Company does not have outstanding any bonds, debentures, notes or other obligations the holders of which have the right to vote (or convertible into or

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exercisable for securities having the right to vote) with the shareholders of the Company on any matter.

     (ii) Section 5.1(b)(ii) of the Company Disclosure Letter sets forth (x) each of the Company’s Subsidiaries and the ownership interest of the Company in each such Subsidiary, as well as the ownership interest of any other Person or Persons in each such Subsidiary and (y) the Company’s or its Subsidiaries’ capital stock, equity interest or other direct or indirect ownership interest in any other Person, other than securities in a Person held for investment by the Company or any of its Subsidiaries, with a fair market value, market price and acquisition price of less than $63,100,000 as of June 30, 2008 and consisting of less than 5% of the outstanding equity interests (or securities convertible into or exercisable for equity interests) of such Person.

     (c) Corporate Authority; Approval and Fairness.

     (i) The Company has all requisite corporate power and authority and has taken all corporate action necessary in order to execute, deliver and perform its obligations under this Agreement and to consummate the Merger, subject only to adoption of this Agreement by the affirmative vote of a majority of the votes cast by all shareholders entitled to vote on such matter at a shareholders’ meeting duly called and held for such purpose (the “Requisite Company Vote”). This Agreement has been duly executed and delivered by the Company and constitutes a valid and binding agreement of the Company enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar Laws of general applicability relating to or affecting creditors’ rights and to general equitable principles, regardless of whether such enforceability is considered in a proceeding in equity or at law (the “Bankruptcy and Equity Exception”).

     (ii) The Board of Directors of the Company has (A) unanimously determined that the Merger is in the best interests of the Company and its shareholders, approved and declared advisable this Agreement, the Merger and the other transactions contemplated hereby and thereby and resolved to recommend adoption of this Agreement to the holders of Shares (the “Company Recommendation”), (B) directed that this Agreement be submitted to the holders of Shares for their adoption and (C) received the opinion of its financial advisor, Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”), to the effect that, as of the date of such opinion, the Per Share Merger Consideration is fair from a financial point of view to such holders of Shares. It is agreed and understood that such opinion is for the benefit of the Company’s Board of Directors and may not be relied upon by Parent or Merger Sub.

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     (d) Governmental Filings; No Violations; Certain Contracts.

     (i) Other than (A) the filings and/or notices pursuant to Section 1.3 and under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) (the “Company Approvals”), and (B) the filings required to be made by the Company with the Securities and Exchange Commission under the Exchange Act, no notices, reports or other filings are required to be made by the Company with, nor are any consents, registrations, approvals, permits or authorizations required to be obtained by the Company from, any federal, state, local or foreign governmental or regulatory authority, agency, commission, department, body, court or other legislative, executive or judicial governmental entity (each a “Governmental Entity”), in connection with the execution, delivery and performance of this Agreement by the Company and the consummation of the Merger and the other transactions contemplated hereby, except those that the failure to make or obtain would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect or to prevent, materially delay or materially impair the consummation of the transactions contemplated by this Agreement, and except for any such notices, reports or filings which may have to be made by the Company with any Japanese Governmental Entity, as to which the Company is not making any representation or warranty.

     (ii) The execution, delivery and performance of this Agreement by the Company do not, and the consummation of the Merger and the other transactions contemplated hereby will not, constitute or result in (A) a breach or violation of, or a default under, the articles of incorporation or by-laws of the Company or the comparable governing documents of any of its Subsidiaries, (B) with or without notice, lapse of time or both, a breach or violation of, a termination (or right of termination) or default under, the creation or acceleration of any obligations under or the creation of a Lien on any of the assets of the Company or any of its Subsidiaries pursuant to any agreement, lease, license, contract, note, mortgage, indenture, arrangement or other obligation (each, a “Contract”) binding upon the Company or any of its Subsidiaries or, assuming (solely with respect to performance of this Agreement and consummation of the Merger and the other transactions contemplated hereby), compliance with the matters referred to in Section 5.1(d)(i) under any Law to which the Company or any of its Subsidiaries is subject, or (C) any change in the rights or obligations of any party under any Contract binding upon the Company or any of its Subsidiaries, except, in the case of clause (B) or (C) above, for any such breach, violation, termination, default, creation, acceleration or change that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect or to prevent, materially delay or materially impair the consummation of the transactions contemplated by this Agreement.

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     (iii) The Company and its Subsidiaries are not creditors or claimants with respect to any debtors or debtor-in-possession subject to proceedings under chapter 11 of title 11 of the United States Code with respect to claims that, in the aggregate, constitute more than 25% of the gross assets of the Company and its Subsidiaries (excluding cash and cash equivalents).

     (e) Company Reports; Financial Statements.

     (i) The Company has filed all forms, statements, certifications, reports and documents required to be filed by it with the SEC pursuant to the Exchange Act or the Securities Act since December 31, 2005 (the “Applicable Date”) (the forms, statements, reports and documents filed since the Applicable Date and those filed subsequent to the date of this Agreement, including any amendments thereto, the “Company Reports”). As of their respective filing dates (or, if amended prior to the date of this Agreement, as of the date of such amendment), the Company Reports did not, and any Company Reports filed with or furnished to the SEC subsequent to the date of this Agreement will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading.

     (ii) The Company maintains disclosure controls and procedures required by Rule 13a-15(e) or 15d-15(e) under the Exchange Act. Such disclosure controls and procedures are effective to ensure that material information required to be disclosed by the Company in the reports that it files under the Exchange Act is recorded and reported on a timely basis to the individuals responsible for the preparation of the Company’s filings with the SEC and other public disclosure documents. The Company maintains internal control over financial reporting (as defined in Rule 13a-15 or 15d-15, as applicable, under the Exchange Act). Such disclosure controls and procedures are sufficient to ensure that material information required to be disclosed by the Company in the reports that it files or furnishes under the Exchange Act is recorded and reported on a timely basis to the Company’s management to allow the principal executive officer and the principal financial officer of the Company, or persons performing similar functions, to make decisions regarding required disclosure. The Company has disclosed, based on the most recent evaluation of its chief executive officer and its chief financial officer prior to the date of this Agreement, to the Company’s auditors and the audit committee of the Company’s Board of Directors (A) any significant deficiencies in the design or operation of its internal controls over financial reporting that are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information and has identified for the Company’s auditors and audit committee of the Company’s Board of Directors any material weaknesses in internal control over financial reporting and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s

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internal control over financial reporting and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting. The Company has made available to Parent any such disclosure made by management to the Company’s independent auditors and the Audit Committee of the Company’s Board of Directors.

     (iii) Each of the consolidated balance sheets included in or incorporated by reference into the Company Reports (including the related notes and schedules) fairly presents in all material respects, or, in the case of Company Reports filed after the date of this Agreement, will fairly present in all material respects, the consolidated financial position of the Company and its consolidated Subsidiaries as of its date and each of the consolidated statements of operations and comprehensive income, consolidated statements of the changes in shareholders’ equity and consolidated statements of cash flows included in or incorporated by reference into the Company Reports (including any related notes and schedules) fairly presents in all material respects, or, in the case of Company Reports filed after the date of this Agreement, will fairly present in all material respects, the results of operations, retained earnings (loss) and changes in financial position, as the case may be, of such companies for the periods set forth therein (subject, in the case of unaudited statements, to notes and normal year-end adjustments that will not be material in amount or effect), in each case in accordance with GAAP consistently applied during the periods involved, except as may be noted therein.

     (iv) The Company has previously furnished or made available to Parent true and complete copies of the annual statutory statements for each of the years ended December 31, 2005, December 31, 2006 and December 31, 2007, and quarterly statutory statements for the quarter ended March 31, 2008 together with all exhibits and schedules thereto (collectively, the “Company SAP Statements”), with respect to each of the Company Insurance Subsidiaries, in each case as filed with the Governmental Entity charged with supervision of insurance companies of such Company Insurance Subsidiary’s jurisdiction of domicile. The Company SAP Statements were prepared in all material respects in conformity with applicable statutory accounting practices prescribed or permitted by such Governmental Entity (“SAP”) applied on a consistent basis, except as may have been noted therein and present fairly, in all material respects, to the extent required by and in conformity with SAP, the statutory financial condition of such Company Insurance Subsidiary at the respective dates and the results of operations, changes in capital and surplus and cash flow of such Company Insurance Subsidiary for each of the periods then ended. The Company SAP Statements were filed with the applicable Governmental Entity in a timely fashion on forms prescribed or permitted by such Governmental Entity. No deficiencies or violations material to the financial condition of any of the Company Insurance Subsidiaries, individually, whether or not material in the aggregate, have been asserted in writing by any Governmental Entity which have not been cured or otherwise resolved to the satisfaction of such Governmental Entity (unless not currently pending). The quarterly and annual statements of each Company

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Insurance Subsidiary filed on or after the date hereof and prior to the Closing (“Interim SAP Statements”), when filed with the applicable Governmental Entities, including insurance regulatory authorities, of the applicable jurisdictions, will present fairly in all material respects, to the extent required by and in conformity with SAP, except as may be noted therein, the statutory financial condition of such Company Insurance Subsidiary at the respective dates indicated and the results of operations, changes in capital and surplus and cash flow of such Company Insurance Subsidiary for each of the periods therein specified (subject to normal year-end adjustments) and will be filed in a timely fashion on forms prescribed or permitted by the relevant Governmental Entity. The Company will deliver to Parent true, correct and complete copies of the Interim SAP Statements promptly after they are filed with the applicable Governmental Entity in the domiciliary states. Since the year ended December 31, 2006, the annual balance sheets and statements of operations included in the Company SAP Statements have been audited by PricewaterhouseCoopers LLP. True, correct, and complete copies of the audit opinions relating to such balance sheets and statements of operations have been furnished to Parent prior to the date of this Agreement.

     (v) There are no off-balance sheet transactions, arrangements, obligations or relationships to which the Company or any Subsidiary of the Company is a party.

     (vi) The aggregate reserves for claims, losses (including, without limitation, incurred but not reported losses), loss adjustment expenses (whether allocated or unallocated), as reflected in each of the Company Reports and Company SAP Statements, (A) were determined in all material respects in accordance with generally accepted actuarial standards consistently applied (except as otherwise noted in the financial statements and notes thereto included in such financial statements); and (B)  were computed on the basis of methodologies consistent in all material respects with those used in computing the corresponding reserves in the prior fiscal years (except as otherwise noted in the financial statements and notes thereto included in such financial statements).

          (f) Absence of Certain Changes. Since December 31, 2007, (i) except as required pursuant to this Agreement, the business of the Company and the Company Subsidiaries has been conducted in the ordinary course of business consistent with past practice, and (ii) there has not been any event, occurrence, development or circumstance that has had or is reasonably likely to have, individually or in the aggregate, a Material Adverse Effect with respect to the Company.

          (g) Litigation and Liabilities. There are no (i) civil, criminal or administrative actions, suits, claims, hearings, arbitrations, investigations or other proceedings pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries or (ii) except as reflected or reserved against in the Company’s consolidated balance sheets (and the notes thereto) included in the Company

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Reports filed prior to the date of this Agreement, obligations or liabilities of the Company or any of its Subsidiaries, whether or not accrued, contingent or otherwise, and whether or not required to be disclosed, or any other facts or circumstances to the knowledge of the Company that could reasonably be expected to result in any claims against, or obligations or liabilities of, the Company or any of its Subsidiaries, including those relating to matters involving any Environmental Law, except for those that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect or to prevent, materially delay or materially impair the consummation of the transactions contemplated by this Agreement. Neither the Company nor any of its Subsidiaries is a party to or subject to the provisions of any judgment, order, writ, injunction, decree or award of any Governmental Entity which would, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect or to prevent, materially delay or materially impair the consummation of the transactions contemplated by this Agreement.

          (h) Employee Benefits.

     (i) All benefit and compensation plans, contracts, policies, arrangements or understandings covering current or former officers, employees, agents or consultants and independent contractors of the Company and its Subsidiaries (the “Employees”) and current or former directors of the Company, including, but not limited to, “employee benefit plans” within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and deferred compensation, severance, stock option, stock purchase, stock appreciation rights, stock based, incentive and bonus, phantom stock, vacation, disability, death benefit, hospitalization, medical insurance, life insurance, welfare, or other employee benefit plan, agreement, policy, arrangement or understanding, and any employment, consulting, change in control, termination retention or similar or other agreements, arrangements or understandings (the “Benefit Plans” are listed on Section 5.1(h)(i) of the Company Disclosure Letter. True and complete copies of all Benefit Plans listed on Section 5.1(h)(i) of the Company Disclosure Letter, including, but not limited to, any trust instruments, insurance contracts and, with respect to any employee stock ownership plan, loan agreements forming a part of any Benefit Plans, and all amendments thereto have been provided or made available to Parent (provided, however, that (i) with respect to such insurance contracts and loan agreements and subscription agreements relating to the Stock Purchase Plan, there has been provided a representative insurance contract, form of loan agreement and subscription agreement; the other insurance contracts, loan agreements and subscription agreements are substantially similar thereto, and (ii) with respect to the 2008 bonus plans for employees, there has been provided a summary of the bonuses which may be payable pursuant thereto), along with, to the extent applicable: (A) any related funding instrument; (B) the most recent determination letter or applicable opinion letter; (C) the most recent summary plan description; and (iv) the two most recent (A) Form 5500 and attached schedules, (B) audited

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financial statements, and (C) actuarial valuation reports. Each Benefit Plan which has received or submitted an application for a favorable opinion letter from the Internal Revenue Service National Office, including any master or prototype plan, has been separately identified. None of the Benefit Plans is a “multiemployer plan” within the meaning of Section 3(37) of ERISA (a “Multiemployer Plan”).

     (ii) All Benefit Plans are in substantial compliance with, and have been maintained, operated and administered in accordance and substantial compliance with, their terms and with applicable Law, including but not limited to ERISA and the Code. Each Benefit Plan which is subject to ERISA (an “ERISA Plan”) that is an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA (a “Pension Plan”), and which is intended to be qualified under Section 401(a) of the Code, is so qualified and has received a favorable determination letter from the Internal Revenue Service (the “IRS”) covering all Tax Law changes prior to the Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGTRRA”) and, if the applicable remedial amendment period under Revenue Procedure 2007-44 for such Benefit Plan has ended prior to the date of this Agreement, has applied to the IRS for such letter covering all Tax Law and other changes through EGTRRA or is operated using a volume submitter or prototype plan document that is the subject of an IRS opinion letter regarding the form of such plan document, and the Company is not aware of any circumstances that could result in the loss of the qualification of such Plan under Section 401(a) of the Code. Any voluntary employees’ beneficiary association within the meaning of Section 501(c)(9) of the Code which provides benefits under a U.S. Benefit Plan has (i) received an opinion letter from the IRS recognizing its exempt status under Section 501(c)(9) of the Code and (ii) filed a timely notice with the IRS pursuant to Section 505(c) of the Code, and the Company is not aware of circumstances likely to result in the loss of such exempt status under Section 501(c)(9) of the Code. Neither the Company nor any of its Subsidiaries has engaged in a transaction with respect to any ERISA Plan that could subject the Company or any Subsidiary to a Tax or penalty imposed by either Section 4975 of the Code or Section 502(i) of ERISA. Neither the Company nor any of its Subsidiaries has incurred or reasonably expects to incur a Tax or penalty imposed by Section 4980F of the Code or Section 502 of ERISA.

     (iii) Neither the Company, any or its Subsidiaries nor any entity which is considered one employer with the Company under Section 4001 of ERISA or Section 414 of the Code (an “ERISA Affiliate”) (x) maintains or contributes to or has within the past six years maintained or contributed to a Pension Plan that is subject to Subtitles C or D of Title IV of ERISA or (y) maintains or has an obligation to contribute to or has within the past six years maintained or had an obligation to contribute to a Multiemployer Plan or a “multiple employer” plan, within the meaning of Sections 210(a), 4063 or 4064 of ERISA. All contributions required to be made under each Benefit Plan, as of the date hereof, have been

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timely made and all obligations in respect of each Benefit Plan have been properly accrued and reflected in the Company Reports.

     (iv) As of the date of this Agreement, there is no pending or, to the knowledge of the Company threatened, litigation or other action or claim relating to any of the Benefit Plans, other than routine claims for routine benefits in the ordinary course of business. No Benefit Plan is under, and neither the Company nor any of its Subsidiaries has received a notice of, any audit or investigation by any Governmental Entity with respect to a Benefit Plan. Neither the Company nor any of its Subsidiaries has any obligations for retiree health and life benefits, except as required to avoid an excise tax under Section 4980B of the Code. The Company or its Subsidiaries may amend or terminate any Benefit Plan at any time without incurring any liability thereunder other than in respect of claims incurred prior to such amendment or termination.

     (v) There has been no amendment to, announcement by the Company or any of its Subsidiaries relating to, or change in participation or coverage under, any Benefit Plan which would increase the expense of maintaining such plan above the level of the expense incurred therefor for the most recent fiscal year. Except as listed on Section 5.1(h)(v) of the Company Disclosure Letter or as expressly provided in this Agreement, neither the execution of this Agreement, shareholder or other approval of this Agreement nor the consummation of the transactions contemplated hereby will (w) entitle any Person to severance or other pay or any increase in such pay upon any termination of employment or services after the date of this Agreement, (x) accelerate the time of payment or vesting or result in any payment or funding (through a grantor trust or otherwise) of compensation or benefits under, increase the amount payable or result in any other material obligation pursuant to, any of the Benefit Plans, (y) limit or restrict the right of the Company or, after the consummation of the transactions contemplated hereby, Parent or any Affiliate to merge, amend or terminate any of the Benefit Plans or (z) result in payments under any of the Benefit Plans, or payments to any Employees or other Person, which would not be deductible under Section 162(m) or Section 280G of the Code.

     (vi) None of the Benefit Plans are maintained outside of the United States, or are otherwise primarily for the benefit of Employees or other Persons working outside of the United States.

          (i) Compliance with Laws; Licenses. The businesses of each of the Company and its Subsidiaries (including the appointment of Agents) have not been, and are not being, conducted in violation of any federal, state, local or foreign law, statute or ordinance, common law, or any rule, regulation, judgment, order, writ, injunction, decree, arbitration award, agency requirement or published interpretation of any Governmental Entity (collectively, “Laws”), except for violations that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. Without

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limiting the generality of the foregoing (i) each Company Insurance Subsidiary and, to the knowledge of the Company, its Agents, have marketed, sold and issued insurance products in compliance with insurance Laws applicable to the business of such Company Insurance Subsidiary and in the respective jurisdictions in which such products have been sold, except for such non-compliance that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. To the knowledge of the Company, the Company has not received since December 31, 2004 any written notice or communication of any material noncompliance with any such Laws (which non-compliance would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect) that has not been cured as of the date of this Agreement. Each of the Company and its Subsidiaries has obtained and is in compliance with all permits, certifications, approvals, registrations, consents, authorizations, franchises, variances, exemptions and orders issued or granted by a Governmental Entity (“Licenses”) necessary to conduct its business as presently conducted, except those the absence of which would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. The Company has made available to Parent a true, correct and complete list of all pending market conduct examinations as of the date hereof by any Governmental Entity relating to any Company Insurance Subsidiary.

          (j) Material Contracts.

     (i) All of the material contracts of the Company and each Company Subsidiary that are filed as exhibits to the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 or described in the Company SAP Statements for the year ended December 31, 2007 (the “Material Contracts”) are in full force and effect, except for those for which the failure to be in full force and effect would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. True and complete copies of all Material Contracts have been made available by the Company to Parent. Neither the Company nor any Company Subsidiary nor, to the knowledge of the Company, any other party to the Material Contracts is in breach of or in default under any Material Contracts, and, to the knowledge of the Company, no event has occurred which, with the passage of time and/or the giving of notice, would constitute a default thereunder by the Company or the Company Subsidiary party thereto or by any other party thereto, except for such breaches and defaults (i) as are not, individually or in the aggregate, reasonably likely to be materially adverse to the business, assets (including intangible assets), liabilities, financial condition or results of operations of the Company and the Company Subsidiaries taken as a whole or (ii) that result from the consummation of the transactions contemplated by this Agreement. Neither the Company nor any Company Subsidiary is party to any contract, agreement or arrangement, whether written or oral, containing any provision or covenant limiting in any material respect the ability of the Company or any Company Subsidiary or any Affiliate of the Company (including, after the Effective Time, Parent and its Affiliates) (A) to (i) sell any products or services of or to any other Person or (ii) write, bind, renew or otherwise solicit insurance

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business, (B) to (i) engage in any line of business, (ii) do any business in any geographic location or (iii) compete with or to obtain products or services from any Person or limiting the ability of any Person to provide products or services to the Company or any Company Subsidiary or (C) acquiring assets or securities of any other Person, other than the option of the Company to reacquire             shares of the Company’s common stock issued under the Stock Plans, under the circumstance set forth in such Plans and the Subscription Agreements therefor (any such contract, together with any contract between the Company or any of its Subsidiaries, on the one hand, and any director or officer of the Company or any of its Subsidiaries, on the other hand, a “Restricted Contract”).

     (ii) Each Material Contract is (assuming due power and authority of, and due execution and delivery by, the other party or parties thereto) valid and binding upon the Company or the Company Subsidiary party thereto and, to the knowledge of the Company, each other party thereto (except as may be limited by the Bankruptcy and Equity Exception).

          (k) Real Property.

     (i) Neither the Company nor any of its Subsidiaries owns any real property.

     (ii) With respect to the real property leased or subleased to the Company or its Subsidiaries for which the annual base rent is over $200,000 (the “Leased Real Property”), the lease or sublease for such property is valid, legally binding, enforceable and in full force and effect, and none of the Company or any of its Subsidiaries is in breach of or default under such lease or sublease, and no event has occurred which, with notice, lapse of time or both, would constitute a breach or default by any of the Company or its Subsidiaries or permit termination, modification or acceleration by any third party thereunder, or prevent, materially delay or materially impair the consummation of the transactions contemplated by this Agreement except in each case, for such invalidity, failure to be binding, unenforceability, ineffectiveness, breaches, defaults, terminations, modifications, accelerations or repudiations that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

          (l) Takeover Statutes. No “fair price,” “moratorium,” or other similar Pennsylvania anti-takeover statute or regulation (each, a “Takeover Statute”) or any anti-takeover provision in the Company’s articles of incorporation or by-laws is applicable to the Company, the Shares, the Merger or the other transactions contemplated by this Agreement or the Voting Agreements dated as of the date hereof, between Parent, on the one hand, and certain shareholders of the Company, on the other hand (the “Voting Agreements”), except for Subchapter F of Chapter 25 of the PBCL.

          (m) Environmental Matters. Except for such matters that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse

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Effect: (i) the Company and its Subsidiaries have complied at all times with all applicable Environmental Laws; (ii) to the knowledge of the Company, no property currently owned or operated by the Company or any of its Subsidiaries (including soils, groundwater, surface water, buildings or other structures) is contaminated with any Hazardous Substance; (iii) to the knowledge of the Company, no property formerly owned or operated by the Company or any of its Subsidiaries was contaminated with any Hazardous Substance during or prior to such period of ownership or operation; (iv) neither the Company nor any of its Subsidiaries is subject to liability for any Hazardous Substance disposal or contamination on any third party property; (v) neither the Company nor any of its Subsidiaries has been associated with any release or threat of release of any Hazardous Substance; (vi) neither the Company nor any of its Subsidiaries has received since January 1, 2005, any written notice, demand, letter, claim or request for information alleging that the Company or any of its Subsidiaries may be in violation of or subject to liability under any Environmental Law; (vii) neither the Company nor any of its Subsidiaries is subject to any order, decree, injunction or other arrangement with any Governmental Entity or any indemnity or other agreement with any third party relating to liability under any Environmental Law or relating to Hazardous Substances; (viii) there are no other circumstances or conditions involving the Company or any of its Subsidiaries that could reasonably be expected to result in any claim, liability, investigation, cost or restriction on the ownership, use, or transfer of any property pursuant to any Environmental Law; and (ix) the Company has delivered to Parent copies of all environmental reports, studies, assessments, sampling data and other environmental information in its possession relating to Company or its Subsidiaries or their respective current and former properties or operations.

          As used herein, the term “Environmental Law” means any federal, state, local or foreign statute, law, regulation, order, decree, permit, authorization, opinion, common law or agency requirement relating to: (A) the protection, investigation or restoration of the environment, health, safety, or natural resources, (B) the handling, use, presence, disposal, release or threatened release of any Hazardous Substance or (C) noise, odor, indoor air, employee exposure, wetlands, pollution, contamination or any injury or threat of injury to persons or property relating to any Hazardous Substance.

          As used herein, the term “Hazardous Substance” means any substance that is: (A) listed, classified or regulated pursuant to any Environmental Law; (B) any petroleum product or by product, asbestos-containing material, lead-containing paint or plumbing, polychlorinated biphenyls, radioactive material or radon; or (C) any other substance which may be the subject of regulatory action by any Government Entity in connection with any Environmental Law.

          (n) Taxes. The Company and each of its Subsidiaries (i) have been prepared in good faith and duly and timely filed (taking into account any extension of time within which to file) all material Tax Returns required to be filed by any of them and all such filed Tax Returns are complete and accurate in all material respects; (ii) have paid or withheld all Taxes that are shown as due on such filed Tax Returns or that the

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Company or any of its Subsidiaries are obligated to pay or withhold from amounts owing to any employee, creditor or third party, except with respect to matters contested in good faith; and (iii) have not waived any statute of limitations with respect to Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency. As of the date of this Agreement, there are not pending or, to the knowledge of the Company, threatened in writing, any audits, examinations, investigations or other proceedings in respect of Taxes or Tax matters. The Company has made available to Purchaser true and correct copies of the United States federal income Tax Returns filed by the Company and its Subsidiaries for each of the fiscal years ended December 31, 2006, 2005 and 2004. The Company and each of its Subsidiaries has complied with all applicable information and other reporting, withholding and disclosure requirements under the Code or any other applicable foreign, state and local Law, except to the extent that any such failure to comply would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect .

          As used in this Agreement, (i) the term “Tax” (including, with correlative meaning, the term “Taxes”) includes all federal, state, local and foreign income, profits, franchise, gross receipts, environmental, customs duty, capital stock, severances, stamp, payroll, sales, employment, unemployment, disability, use, property, withholding, excise, production, value added, occupancy and other taxes, duties or assessments of any nature whatsoever, together with all interest, penalties and additions imposed with respect to such amounts and any interest in respect of such penalties and additions, and (ii) the term “Tax Return” includes all returns and reports (including elections, declarations, disclosures, schedules, estimates and information returns) required to be supplied to a Tax authority relating to Taxes.

          With respect to any reinsurance contracts to which the Company or any of its Subsidiaries is a party, to the knowledge of the Company or any of its Subsidiaries no facts, circumstances or basis exists under which the IRS could make any reallocation, recharacterization or other adjustment under Section 845(a) of the Code, or make any adjustment arising from a determination that any reinsurance contract had or has a significant tax avoidance effect under Section 845(b) of the Code. Neither the Company nor any of its Subsidiaries has issued, assumed, modified, exchanged, marketed, sold or administered any life insurance contract or annuity contract.

          (o) Labor Matters. Neither the Company nor any of its Subsidiaries is a party to or otherwise bound by any collective bargaining agreement or other Contract with a labor union or labor organization, nor is the Company or any of its Subsidiaries the subject of any material proceeding that asserts that the Company or any of its Subsidiaries has committed an unfair labor practice or that seeks to compel it to bargain with any labor union or labor organization nor is there pending or, to the knowledge of the Company, threatened, nor has there been for the past five years, any labor strike, dispute, walk-out, work stoppage, slow-down or lockout involving the Company or any of its Subsidiaries. To the knowledge of the Company, there are no organizational efforts with respect to the formation of a collective bargaining unit presently being made

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involving employees of the Company or any of its Subsidiaries. The Company has previously made available to Parent correct and complete copies of all labor and collective bargaining agreements, Contracts or other agreements or understandings with a labor union or labor organization to which the Company or any of its Subsidiaries is party or by which any of them are otherwise bound (collectively, the “Company Labor Agreements”). The consummation of the Merger and the other transactions contemplated by this Agreement will not entitle any third party (including any labor union or labor organization) to any payments under any of the Company Labor Agreements. The Company and its Subsidiaries have complied in all material respects with the reporting requirements of the Labor Management Reporting and Disclosure Act.

          (p) Intellectual Property.

     (i) Section 5.1(p)(i) of the Company Disclosure Letter contains a true and complete list of (a) all Intellectual Property owned or held exclusively by the Company or its Subsidiaries (“Owned Intellectual Property”) that is registered or subject to an application for registration, indicating for each item the registration or application number and the applicable filing jurisdiction, and (b) all material unregistered Trademarks and Copyrights. The Company exclusively owns (beneficially, and of record where applicable) all Owned Intellectual Property, free and clear of all encumbrances, exclusive licenses and non-exclusive licenses not granted in the ordinary course of business, except where the failure to so own such Property in such manner would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

     (ii) Except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect on the Company: (A) the Company and/or each Company Subsidiary owns, or is licensed or otherwise possesses sufficient rights to use all Intellectual Property used in the business of the Company and the Company Subsidiaries as currently conducted, all of which rights shall survive unchanged the consummation of the transactions contemplated by this Agreement, and (B) to the knowledge of the Company, all Intellectual Property owned by the Company and/or the Company Subsidiaries is valid and subsisting, (C) there are no written claims, nor any litigation, opposition, cancellation, proceeding or objection, with respect to the Intellectual Property owned by the Company or any Company Subsidiary (the “Company Intellectual Property Rights”) currently pending or, to the knowledge of the Company, threatened in writing by any Person, and (D) to the knowledge of the Company, the registered Company Intellectual Property Rights do not infringe or misappropriate the Intellectual Property of any Person. To the knowledge of the Company, no Person is infringing or misappropriating any material Owned Intellectual Property right.

     (iii) The Company and its Subsidiaries have taken all reasonable measures to protect the material Intellectual Property they own and to protect the

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confidentiality and value of all material Trade Secrets that are owned, used or held by the Company and its Subsidiaries, it being acknowledged, however, that not all of the Company’s trademarks and service marks are registered with the U.S. Patent and Trademark Office.

     (iv) For purposes of this Agreement, the following terms have the following meanings:

          “Intellectual Property” means all (i) trademarks, service marks, brand names, certification marks, collective marks, d/b/a’s, Internet domain names, logos, symbols, trade dress, trade names, and other indicia of origin, all applications and registrations for the foregoing, and all goodwill associated therewith and symbolized thereby, including all renewals of same (collectively, “Trademarks”); (ii) inventions and discoveries, whether patentable or not, and all patents, registrations, invention disclosures and applications therefor, including divisions, revisions, supplementary protection certificates, continuations, continuations-in-part and renewal applications, and including renewals, extensions, re-examinations and reissues; (iii) confidential information, trade secrets and know-how, including processes, schematics, business methods, formulae, drawings, prototypes, models, designs, customer lists and supplier lists (collectively, “Trade Secrets”); (iv) published and unpublished works of authorship, whether copyrightable or not (including, without limitation, databases and other compilations of information, mask works and software, both source code and object code), copyrights therein and thereto, and registrations and applications therefor, and all renewals, extensions, restorations and reversions thereof (collectively, “Copyrights”); and (v) all other intellectual property or proprietary rights, and the rights to sue for and remedies against past, present and future infringements of, any or all of the foregoing, and rights of priority and protection of interests therein under the laws of any jurisdiction worldwide.

          (q) Insurance Policies. All material fire and casualty, general liability, business interruption, product liability, and sprinkler and water damage insurance policies maintained by the Company or any of its Subsidiaries (“Insurance Policies”) are with reputable insurance carriers, provide adequate coverage for all normal risks incident to the business of the Company and its Subsidiaries and their respective properties and assets which are typically insured against by Persons engaged in similar business, and are in character and amount at least equivalent to that carried by Persons engaged in similar businesses and subject to the same or similar perils or hazards, except for any such failures to maintain insurance policies that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. Each Insurance Policy is in full force and effect and all premiums due with respect to all Insurance Policies have been paid, with such exceptions that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

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          (r) Insurance Matters.

     (i) To the knowledge of the Company, since January 1, 2007 at the time each agent, representative, distributor, broker, employee or other Person authorized to sell or administer products on behalf of any Company Insurance Subsidiary (“Agent”) wrote, sold or procured business for a Company Insurance Subsidiary, such Agent was at the time the Agent wrote or sold business, duly licensed for the type of activity and business written, sold or produced. Each of the Contracts between the Company and any Agent who has sold, underwritten, or issued business for or on behalf of the Company since January 1, 2006, is valid, binding and in full force and effect in accordance with its terms, except such as would not, individually or in the aggregate, reasonably be expected to result in Material Adverse Effect. As of the date of this Agreement, except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, no Agent individually accounting for 1% or more of the total gross premiums of all Company Insurance Subsidiaries for the year ended December 31, 2007 has indicated to the Company or any Company Insurance Subsidiary that such Agent will be unable or unwilling to continue its relationship as an Agent with the Company or any Company Insurance Subsidiary within twelve months after the date hereof. To the knowledge of the Company, as of the date of this Agreement, no Agent has been since January 1, 2006, or is currently, in violation (or with or without notice or lapse of time or both, would be in violation) of any term or provision of any Law applicable to the writing, sale or production of insurance or other business for the Company or any Company Insurance Subsidiary, except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

     (ii) Prior to the date hereof, the Company has delivered or made available to Parent a true and complete copy of any material actuarial reports prepared by actuaries, independent or otherwise, with respect to any Company Insurance Subsidiary since January 1, 2007, and all attachments, addenda, supplements and modifications thereto (the “Company Actuarial Analyses”). To the knowledge of the Company, each Company Actuarial Analysis was based, in all material respects, upon an accurate inventory of policies in force for the Company Insurance Subsidiaries at the relevant time of preparation.

     (iii) The Company and the Company Insurance Subsidiaries have filed all reports, statements, documents, registrations, filings or submissions (including without limitation any sales material) required to be filed with any Governmental Entity which regulates insurance matters since January 1, 2007 in the manner prescribed by applicable Laws and Licenses, and all such reports, registrations, filings and submissions were in compliance in all material respects with applicable Law and Licenses when filed or as amended or supplemented, and no deficiencies have been asserted in writing by any such Governmental Entity with respect to such reports, registrations, filings or submissions that have not been

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remedied, except where such failure to file or non-compliance would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

     (iv) Neither the Company nor any Subsidiary of the Company is a party to any written agreement, consent decree or memorandum of understanding with, or a party to any commitment letter or similar undertaking to, or is subject to any cease-and-desist or other order or directive by, or has adopted any policies, procedures or board resolutions at the request of, any Governmental Entity which restricts materially the conduct of the business of the Company or any of its Subsidiaries, or to the knowledge of the Company relates to any Company Insurance Subsidiary’s capital adequacy or risk management policies, nor has the Company or any Subsidiary of the Company been advised in writing by any Governmental Entity since January 1, 2005 that it is contemplating any such undertakings.

          (s) Reinsurance and Coinsurance. To the knowledge of the Company, all reinsurance or coinsurance treaties or agreements, including retrocessional agreements, with respect to insurance policies written by the Company, to which any Company Insurance Subsidiary is a party or under which any Company Insurance Subsidiary has any existing rights, obligations or liabilities (“Reinsurance Agreements”) are, as of the date of this Agreement, in full force and effect. Copies of all Reinsurance Agreements renewed since January 1, 2008 have been made available to Parent. Neither the Company Insurance Subsidiaries nor, to the knowledge of the Company, any other party to a reinsurance or coinsurance treaty or agreement with the Company or any of its Subsidiaries is in default in any material respect as to any provision thereof, and no such agreement contains any provision providing that the other party thereto may terminate such agreement by reason of the transactions contemplated by this Agreement. In those instances in which a Company Insurance Subsidiary is a cedent, the Company has not received any written notice that the financial condition of any other party to any Reinsurance Agreement is impaired with the result that a material default thereunder may be reasonably anticipated, except in those instances in which such default would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

          (t) Certain Reinsurance Agreement Issues. With respect to any such Reinsurance Agreement for which the Company or any Company Insurance Subsidiary is taking credit on its most recent Company SAP Statements or has taken credit on any Company SAP Statements from and after January 1, 2007, (i) there has been no separate written or oral agreements between any of the Company or any Company Insurance Subsidiary and the assuming reinsurer that would under any circumstances reduce, limit, mitigate or otherwise affect any actual or potential loss to the parties under any such reinsurance agreement, other than inuring to reinsurance contracts that are specifically defined in any such Reinsurance Agreement, (ii) for each such reinsurance agreement entered into, renewed, or amended on or after January 1, 2007, for which risk transfer is

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not reasonably considered to be self-evident, documentation concerning the economic intent of the transaction and the risk transfer analysis evidencing the proper accounting treatment, as required by SSAP No. 62, is available for review by the domiciliary state insurance departments for each of the Company and the Company Insurance Subsidiaries, (iii) the Company and each Company Insurance Subsidiary complies and has complied from and after January 1, 2007 in all material respects with all of the requirements set forth in SSAP No. 62 and (iv) the Company and each Company Insurance Subsidiary has and has had from January 1, 2007 appropriate controls in place to monitor the use of reinsurance and comply with the provisions of SSAP No. 62.

          (u) Investment Advisor. Neither the Company nor any of its Subsidiaries conducts activities of or is otherwise deemed under applicable Law to be an “investment advisor” as such term is defined in Section 2(a)(20) of the Investment Company Act of 1940. Neither the Company nor any of its Subsidiaries is an “investment company” as defined under the Investment Company Act of 1940.

          (v) Brokers and Finders. Neither the Company nor any of its officers, directors or employees has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders fees in connection with the Merger or the other transactions contemplated in this Agreement except that the Company has employed Merrill Lynch as its financial advisor, and in that connection has agreed to pay Merrill Lynch a fee upon closing of the Merger pursuant to an engagement letter (a true and complete copy of which has been provided to Parent prior to the date hereof). The Company has made available to Parent a complete and accurate copy of all agreements pursuant to which Merrill Lynch is entitled to any fees and expenses in connection with any of the transactions contemplated by this Agreement.

          5.2. Representations and Warranties of Parent and Merger Sub. Parent and Merger Sub (subject to Section 6.14) hereby jointly and severally represent and warrant to the Company that:

          (a) Organization, Good Standing and Qualification. Each of Parent and Merger Sub is a legal entity duly organized, validly existing and in good standing under the Laws of its respective jurisdiction of organization and has all requisite corporate or similar power and authority to own, lease and operate its properties and assets and to carry on its business as presently conducted and is qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the ownership, leasing or operation of its assets or properties or conduct of its business requires such qualification, except where the failure to be so organized, qualified or in such good standing, or to have such power or authority, would not, individually or in the aggregate, reasonably be expected to prevent, materially delay or impair the ability of Parent and Merger Sub to consummate the Merger and the other transactions contemplated by this Agreement. Parent has made available to the Company a complete and correct copy of the articles of incorporation and by-laws of Parent and Merger Sub, each as in effect on the date of this Agreement.

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          (b) Corporate Authority. No vote of holders of capital stock of Parent is necessary to approve this Agreement and the Merger and the other transactions contemplated hereby. Each of Parent and Merger Sub has all requisite corporate power and authority and has taken, and has caused its Subsidiaries to take, all corporate action necessary in order to execute, deliver and perform its obligations under this Agreement, subject only to the adoption of this Agreement by Parent’s wholly owned Subsidiary that will be the direct shareholder of Merger Sub as the sole shareholder of Merger Sub (the “Requisite Parent Vote”), and to consummate the Merger. This Agreement has been duly executed and delivered by each of Parent and Merger Sub and is a valid and binding agreement of, Parent and Merger Sub, enforceable against each of Parent and Merger Sub in accordance with its terms, subject to the Bankruptcy and Equity Exception.

          (c) Governmental Filings; No Violations; Etc.

     (i) Other than (A) the filings and/or notices pursuant to Section 1.3, (B)  a filing under the HSR Act and expiration of the related waiting period, (C) an application to the Commonwealth of Pennsylvania Insurance Department and approval of the Pennsylvania insurance commissioner, (D) an application to the Florida Office of Insurance Regulation and approval of such Office and (E) an approval application to and a notification filing with the Japan Financial Services Agency (the “JFSA”) by Parent and its Affiliates and of JFSA approval (collectively, the “Parent Approvals”), no notices, reports or other filings are required to be made by Parent (or its wholly owned Subsidiary that will be the direct shareholder of Merger Sub) or Merger Sub with, nor are any consents, registrations, approvals, permits or authorizations required to be obtained by Parent (or its wholly owned Subsidiary that will be the direct shareholder of Merger Sub) or Merger Sub from, any Governmental Entity in connection with the execution, delivery and performance of this Agreement by Parent and Merger Sub and the consummation by Parent and Merger Sub of the Merger and the other transactions contemplated hereby, except those that the failure to make or obtain would not, individually or in the aggregate, reasonably be expected to prevent or materially delay the ability of Parent or Merger Sub to consummate the Merger and the other transactions contemplated by this Agreement. As of the date hereof, Parent has a reasonable basis to believe that the Parent Approvals will be obtained prior to the Termination Date.

     (ii) The execution, delivery and performance of this Agreement by Parent and Merger Sub do not, and the consummation by Parent and Merger Sub of the Merger and the other transactions contemplated hereby will not, constitute or result in (A) a breach or violation of, or a default under, the articles of incorporation or by-laws or comparable governing instruments of Parent or Merger Sub or the comparable governing instruments of any of its Subsidiaries, (B) with or without notice, lapse of time or both, a breach or violation of, a termination (or right of termination) or a default under, the creation or acceleration of any obligations under or the creation of a Lien on any of the assets

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of Parent or any of its Subsidiaries pursuant to, any Contracts binding upon Parent or any of its Subsidiaries or any Laws or governmental or non-governmental permit or license to which Parent or any of its Subsidiaries is subject; or (C) any change in the rights or obligations of any party under any of such Contracts, except, in the case of clause (B) or (C) above, for any breach, violation, termination, default, creation, acceleration or change that would not, individually or in the aggregate, reasonably be expected to prevent or materially delay the ability of Parent or Merger Sub to consummate the Merger and the other transactions contemplated by this Agreement.

          (d) Litigation. As of the date of this Agreement, there are no civil, criminal or administrative actions, suits, claims, hearings, investigations or proceedings pending or, to the knowledge of the officers of Parent, threatened against Parent or Merger Sub that seek to enjoin, or would reasonably be expected to have the effect of preventing, making illegal, or otherwise interfering with, any of the transactions contemplated by this Agreement, except as would not, individually or in the aggregate, reasonably be expected to prevent or materially delay the ability of Parent and Merger Sub to consummate the Merger and the other transactions contemplated by this Agreement. As of the date of this Agreement, no Order of any Governmental Entity that would reasonably be expected to prevent, materially delay or materially impair the consummation of the transactions contemplated by this Agreement is outstanding against Parent or Merger Sub.

          (e) Available Funds. Parent has available to it, or as of the Closing will have available to it, all funds necessary for the payment to the Paying Agent of the Merger Consideration and to satisfy all of the obligations of Parent and Merger Sub under this Agreement.

          (f) Capitalization of Merger Sub. All of the issued and outstanding capital stock of Merger Sub is, and at the Effective Time will be, owned by Parent or a direct or indirect wholly owned Subsidiary of Parent. Merger Sub has not conducted any business prior to the date of this Agreement and has no, and prior to the Effective Time will have no, assets, liabilities or obligations of any nature other than those incident to its formation and pursuant to this Agreement and the Merger and the other transactions contemplated by this Agreement.

          (g) Proxy Statement. None of the information supplied or to be supplied by Parent or Merger Sub in writing for inclusion or incorporation by reference in the Proxy Statement will, at the date the Proxy Statement is mailed to shareholders of the Company and at the time of the Company Shareholder Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading.

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          (h) Finders’ Fees. Except for Fox-Pitt Kelton Cochran Caronia Waller, there is no investment banker, broker, finder or other intermediary that has been retained by or is authorized to act on behalf of Parent or any of its Subsidiaries who might be entitled to any fee or commission from Parent or any of its Affiliates in connection with the transactions contemplated by this Agreement.

          (i) Interested Shareholder. At the time immediately preceding the date of this Agreement and the Voting Agreements, neither Parent nor any of its Affiliates was, with respect to the Company, an “interested shareholder,” as such term is defined in Section 2553 of the PBCL.

ARTICLE VI

Covenants

     6.1. Interim Operations.

     (a) The Company covenants and agrees as to itself and its Subsidiaries that, after the date of this Agreement and prior to the Effective Time (unless Parent shall otherwise approve in writing, and except as otherwise expressly contemplated by this Agreement) and except as required by applicable Laws, the business of it and its Subsidiaries shall be conducted in the ordinary and usual course and, to the extent consistent therewith, it and its Subsidiaries shall use their respective commercially reasonable efforts to preserve their business organizations intact and maintain existing relations and goodwill with Governmental Entities, customers, suppliers, third-party payors, agents, distributors, creditors, lessors, employees, reinsurers, Agents, rating agencies and business associates and use commercially reasonable efforts to keep available the services of its and its Subsidiaries’ present employees, reinsurers, Agents, rating agencies and agents. Without limiting the generality of, and in furtherance of, the foregoing, from the date of this Agreement until the Effective Time, except (A) as required by applicable Law or a Governmental Entity as otherwise expressly required by this Agreement, (B) as Parent may approve in writing (such approval not to be unreasonably withheld, delayed or conditioned) or (C) as set forth in Section 6.1 of the Company Disclosure Letter, the Company will not and will not permit its Subsidiaries to:

     (i) adopt or propose any change in its articles of incorporation or by-laws or other applicable governing instruments;

     (ii) merge or consolidate the Company or any of its Subsidiaries with any other Person, except for any such transactions among wholly owned Subsidiaries of the Company, or restructure, reorganize or completely or partially liquidate or otherwise enter into any agreements or arrangements imposing material changes or restrictions on its assets, operations or businesses;

     (iii) acquire assets outside of the ordinary course of business from any other Person with a value or purchase price in the aggregate in excess of

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$5,000,000 in any transaction or series of related transactions, other than acquisitions pursuant to Contracts in effect as of the date of this Agreement;

     (iv) issue, sell, pledge, dispose of, grant, transfer, encumber, or authorize the issuance, sale, pledge, disposition, grant, transfer, lease, license, guarantee or encumbrance of, any shares of capital stock of the Company or any of its Subsidiaries (other than the issuance of shares by a wholly owned Subsidiary of the Company to the Company or another wholly owned Subsidiary), or securities convertible or exchangeable into or exercisable for any shares of such capital stock, or any options, warrants or other rights of any kind to acquire any shares of such capital stock or such convertible or exchangeable securities, other than (A) issuances to the Company’s directors required under the Directors Stock Purchase Plan in connection with such directors’ service as directors, and (B) issuances in connection with the exercise of Stock Awards outstanding as of the date of this Agreement;

     (v) create or incur any Lien material to the Company or any of its Subsidiaries on any assets of the Company or any of its Subsidiaries having a value in excess of $1,000,000, other than Liens granted to the Federal Home Loan Board of Pittsburgh to secure borrowings by Philadelphia Indemnity Insurance Company and used by it for arbitrage investment purposes (the “Specified Borrowings”).

     (vi) make any loans, advances, guarantees or capital contributions to or investments in any Person (other than the Company or any direct or indirect wholly owned Subsidiary of the Company) in excess of $5,000,000 in the aggregate;

     (vii) declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock (except for dividends paid by any direct or indirect wholly owned Subsidiary to the Company or to any other direct or indirect wholly owned Subsidiary) or enter into any agreement with respect to the voting of its capital stock;

     (viii) reclassify, split, combine, subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock or securities convertible or exchangeable into or exercisable for any shares of its capital stock;

     (ix) incur any indebtedness for borrowed money or guarantee such indebtedness of another Person, or issue or sell any debt securities or warrants or other rights to acquire any debt security of the Company or any of its Subsidiaries, except for (x) indebtedness for borrowed money incurred in the ordinary course of business (A) not to exceed $5,000,000 in the aggregate, (B) in replacement of existing indebtedness for borrowed money on terms substantially consistent with or more beneficial than the indebtedness being replaced, or

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(C) guarantees incurred by the Company of indebtedness of wholly owned Subsidiaries of the Company and (y) the Specified Borrowings (for the purposes of this Agreement, Philadelphia Insurance Company and Philadelphia Indemnity Insurance Company shall be deemed to be wholly owned Subsidiaries of the Company);

     (x) except as set forth in the capital budgets set forth in Section 6.1(i)(x) of the Company Disclosure Letter and consistent therewith, make or authorize any capital expenditures in excess of $5,000,000 in the aggregate;

     (xi) (A) enter into any Contract that would have been a Restricted Contract had it been entered into prior to this Agreement, or (B) other than in the ordinary course of business, enter into any Contract that would have been a Material Contract had it been entered into prior to this Agreement;

     (xii) make any changes with respect to accounting policies or procedures, except as required by changes in GAAP or SAP;

     (xiii) settle any litigation or other proceedings before a Governmental Entity for an amount in excess of $2,500,000 individually or $5,000,000 in the aggregate or any obligation or liability of the Company in excess of such amount, other than (A) ordinary course policy claim matters for amounts that are within policy limits, (B) the payment, discharge or satisfaction of obligations or liabilities in accordance with the terms of Contracts in effect as of the date hereof or (C) settlement of any liability for which reserves have been made on the Company’s financial statements included in the Company Reports;

     (xiv) (A) amend, modify or terminate any Restricted Contract, (B) except in the ordinary course of business, amend, modify or terminate any Material Contract, or (C) cancel, modify or waive any debts or claims held by it or waive any rights having in each case a value in excess of $1,000,000;

     (xv) make any material Tax election;

     (xvi) transfer, sell, lease, license, mortgage, pledge, surrender, encumber, divest, cancel, abandon or allow to lapse or expire or otherwise dispose of (A) except in the ordinary course of business, any material assets, licenses, operations, rights, product lines, businesses or interests therein of the Company or its Subsidiaries, other than pursuant to Contracts in effect prior to the date of this Agreement or (B) any capital stock of any of its Subsidiaries;

     (xvii) Except as required pursuant to existing written, binding agreements in effect prior to the date of this Agreement or set forth in Section 5.1(h)(i) of the Company Disclosure Letter, or as otherwise required by applicable Law (A) grant, provide or promise to grant or provide any severance, retention,

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termination or similar payments or benefits to any director or Employee (except in the ordinary course of business to employees who are not a party to employment agreements with the Company, in amounts not to exceed $50,000 in the aggregate for all such employees), (B)  increase or promise to increase the compensation (except for routine base salary increases for Employees who are no more senior than Assistant Vice Presidents in the ordinary course of business consistent with past practice), bonus or pension, welfare, severance or other benefits of, pay any bonus to, or make any new equity awards to any director or Employee, other than (x) issuances to the Company’s directors required under the Directors Stock Purchase Plan in connection with such directors’ service as directors, and (y) issuances in connection with the exercise of Stock Awards outstanding as of the date of this Agreement (C) establish, adopt, amend or terminate any Benefit Plan, amend the terms of any outstanding Options, SARs, Performance Awards, Restricted Shares, or Other Company Awards, or other awards or grant any new awards of compensation or benefits, (D) except as set forth in Section 4.3 hereof, take any action to accelerate the vesting or payment, or fund or in any way secure the payment, of compensation or benefits under any Benefit Plan, (E) change any actuarial or other assumptions used to calculate funding obligations with respect to any Benefit Plan, or change the manner in which contributions to such plans are made or the basis on which such contributions are determined; or (F) forgive or promise to forgive any loans to directors or Employees;

     (xviii) grant, extend, amend (except as required in the diligent prosecution of the Owned Intellectual Property) waive or modify any material rights in or to, nor sell, assign, lease, transfer, license, let lapse, abandon, cancel, or otherwise dispose of, or extend or exercise any option to sell, assign, lease, transfer, license, or otherwise dispose of, any material Owned Intellectual Property, other than in the ordinary course of business (ii) fail to diligently prosecute the Company’s and its Subsidiaries’ material patent applications, if any, or (iii) fail to exercise a right of renewal or extension under any material Intellectual Property Contract;

     (xix) except in the ordinary course of business, enter into any new quota share or other reinsurance transaction; it being understood that nothing in this subsection (xix) shall restrict or prohibit the Company or any of its Subsidiaries from modifying, terminating or extending, in the ordinary course of business, any quota share or other reinsurance agreement that is in effect as of the date of this Agreement;

     (xx) enter into or engage in (through acquisition, product extension or otherwise) the business of selling any products or services other than property and casualty insurance materially different from existing products or services of the Company and its Subsidiaries or enter into or engage in new lines of business (as such term is defined in the National Association of Insurance Commissioners instructions for the preparation of the annual statement form) without Parent’s prior written approval);

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          (xxi) adopt a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization of a Company Insurance Subsidiary;

          (xxii) except in the ordinary course of business, alter or amend in any material respect any existing underwriting, claim handling, loss control, investment, actuarial practice guideline or policy or any material assumption underlying an actuarial practice or policy, except as may be required by (or, in the reasonable good faith judgment of the Company, advisable under) GAAP, applicable SAP, any Governmental Entity or applicable Law; or

          (xxiii) agree, authorize or commit to do any of the foregoing.

               (b) Parent shall not knowingly take or permit any of its Subsidiaries to take any action that is reasonably likely to prevent the consummation of the Merger.

               6.2. Acquisition Proposals.

               (a) No Solicitation or Negotiation. The Company agrees that, except as expressly permitted by this Section 6.2, neither it nor any of its Subsidiaries shall, and the Company shall use its commercially reasonable efforts to instruct and cause its and its Subsidiaries’ employees, investment bankers, attorneys, accountants and other advisors or representatives (such directors, officers, employees, investment bankers, attorneys, accountants and other advisors or representatives, collectively, “Representatives”) not to, directly or indirectly, nor shall it authorize any of the officers and directors of it or its Subsidiaries, to:

          (i) initiate, solicit or knowingly encourage any inquiries or the making of any proposal or offer that constitutes, or could reasonably be expected to lead to, any Acquisition Proposal; or

          (ii) engage in or otherwise participate in any discussions or negotiations regarding an Acquisition Proposal, or provide any non-public information or data to any Person that has made, or to the knowledge of the Company is reasonably likely to make or is considering (in each case whether alone or as part of a group), an Acquisition Proposal, except to notify such Person of the existence of the provisions of this Section 6.2;

               Notwithstanding anything in this Agreement to the contrary, prior to the time, but not after, the Requisite Company Vote is obtained, the Company may (A) provide information in response to a request therefor by a Person who has made an unsolicited written Acquisition Proposal that the Board of Directors of the Company reasonably believes to be credible providing for the acquisition of more than 50% of the assets (on a consolidated basis) or total voting power of the equity securities of the Company if the Company receives from the Person so requesting such information an executed confidentiality agreement on terms relating to confidentiality not significantly

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less restrictive to the other party than those contained in the Confidentiality Agreement (provided that such executed confidentiality agreement need not prohibit the making, or amendment, of any Acquisition Proposal to the Company); and promptly discloses (and, if applicable, provides copies of) any such information to Parent to the extent not previously provided to Parent; (B) engage or participate in any discussions or negotiations with any Person who has made such an unsolicited written Acquisition Proposal; or (C) after having complied with Section 6.2(c), approve, recommend, or otherwise declare advisable or propose to approve, recommend or declare advisable (publicly or otherwise) such an Acquisition Proposal, if and only to the extent that, (x) prior to taking any action described in clause (A), (B) or (C) above, the Board of Directors of the Company determines in good faith after consultation with outside legal counsel that such action is necessary in order for such directors to comply with the directors’ fiduciary duties under applicable Law, (y) in each such case referred to in clause (A) or (B) above, the Board of Directors of the Company has determined in good faith based on the information then available and after consultation with its financial advisor that such Acquisition Proposal either constitutes a Superior Proposal or would reasonably be expected to result in a Superior Proposal, and (z) in the case referred to in clause (C) above, the Board of Directors of the Company determines in good faith (after consultation with its financial advisor and outside legal counsel) that such Acquisition Proposal is a Superior Proposal.

               (b) Definitions. For purposes of this Agreement:

               “Acquisition Proposal” means (i) any proposal or offer with respect to a merger, joint venture, partnership, consolidation, dissolution, liquidation, tender offer, recapitalization, reorganization, share exchange, business combination or similar transaction involving the Company or any of its Significant Subsidiaries with any Person other than the Company or any of its Subsidiaries, Parent, Merger Sub or any controlled Affiliate thereof (a “Third Party”), or (ii) any acquisition by any Third Party or proposal or offer by any Third Party, which if consummated would result in any Person becoming the beneficial owner of, directly or indirectly, in one or a series of related transactions, 20% or more of the total voting power or of any class of equity securities of the Company or those of any of its Subsidiaries, or 20% or more of the consolidated total assets of the Company and the Company Subsidiaries, in each case other than the transactions contemplated by this Agreement.

               “Superior Proposal” means an unsolicited Acquisition Proposal that would result in any person becoming the beneficial owner, directly or indirectly, of more than 50% of the assets (on a consolidated basis) or more than 50% of the total voting power of the equity securities of the Company that the Board of Directors of the Company has determined in its good faith judgment (x) would result in a transaction that if consummated, would be more favorable to the shareholders of the Company than the Merger, taking into account all of the terms and conditions of such proposal and of this Agreement (including any proposal by Parent to amend the terms of this Agreement) and the time likely to be required to consummate such Acquisition Proposal, and (y) is

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reasonably capable of being consummated on the terms so proposed, taking into account all financial, regulatory, legal and other aspects of such Proposal, including the likelihood of termination and the existence of a financing contingency.

               (c) No Change in Recommendation or Alternative Acquisition Agreement.

          (i) The Board of Directors of the Company and each committee of the Board of Directors shall not withhold, withdraw, qualify or modify (or publicly propose or resolve to withhold, withdraw, qualify or modify), in a manner adverse to Parent, the Company Recommendation with respect to the Merger, or fail to reaffirm its approval or recommendation of this Agreement and the Merger within three Business Days after receiving a written request to do so from Parent, or approve, recommend or otherwise declare advisable (or publicly propose to approve or recommend) any Acquisition Proposal (any of the foregoing a “Change in Company Recommendation”).

          (ii) The Company shall not, and the Board of Directors shall not cause or permit the Company to, and the Company shall not cause or permit any Company Subsidiary to, enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement or other agreement (except for confidentiality agreements permitted under Section 6.2(a)) relating to any Acquisition Proposal (an “Alternative Acquisition Agreement”).

               (d) Change in Company Recommendation. Notwithstanding anything to the contrary set forth in this Agreement, the Board of Directors of the Company may, prior to but not after the time the Company Shareholder Approval is obtained, make a Change in Company Recommendation in connection with an Acquisition Proposal if the Board of Directors of the Company has determined in good faith, after consulting with its outside legal counsel, that the failure to take such action would be inconsistent with the directors’ fiduciary duties under applicable Law; provided that the Board of Directors may not take any such action in connection with an Acquisition Proposal unless (1) such Acquisition Proposal constitutes a Superior Proposal, (2) prior to making such Change in Recommendation, the Company provides prior written notice to Parent at least five (5) Business Days in advance (the “Change in Recommendation Notice Period”) of its intention to take such action, which notice shall specify all material terms and conditions of such Superior Proposal (including the identity of the party making such Superior Proposal and copies of any documents evidencing such Superior Proposal), and any material modifications to any of the foregoing, (3) during the Change in Recommendation Notice Period the Company shall, and shall cause its financial advisors and outside counsel to, negotiate with Parent in good faith should Parent propose to make such adjustments in the terms and conditions of this Agreement so that such Acquisition Proposal ceases to constitute (in the good faith judgment of the Board of Directors) a Superior Proposal and (4) such Acquisition Proposal continues to constitute (in the good

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faith judgment of the Board of Directors) a Superior Proposal after taking into account any such amendments that Parent shall have agreed to make prior to the end of the Change in Recommendation Notice Period; it being understood that any material amendment to any Acquisition Proposal will be deemed to be a new Acquisition Proposal for purposes of the Change in Recommendation Notice Period.

               (e) Certain Permitted Disclosure. Nothing contained in this Section 6.2 shall be deemed to prohibit the Company from (i) complying with its disclosure obligations under U.S. federal or state law with regard to an Acquisition Proposal, (ii) making any disclosure to the Company’s shareholders if, after consultation with its outside legal counsel, the Company determines that such disclosure would be required under applicable Law or (iii) informing any Person of the existence of the provisions contained in this Section 6.2.

               (f) Existing Discussions. The Company agrees that it will immediately cease and cause to be terminated any existing activities, solicitations, discussions or negotiations with any parties conducted heretofore by the Company, its Subsidiaries or any representatives of the Company or its Subsidiaries with respect to any Acquisition Proposal. The Company also agrees that it will promptly request each Person that has heretofore executed a confidentiality agreement in connection with its consideration of acquiring it or any of its Subsidiaries to return or destroy all confidential information heretofore furnished to such Person by or on behalf of it or any of its Subsidiaries.

               (g) Notice. The Company agrees that it will promptly (and, in any event, within two Business Days) notify Parent if any inquiries, proposals or offers with respect to an Acquisition Proposal are received by, any such information is requested from, or any such discussions or negotiation are sought to be initiated or continued with, it or any of its Representatives indicating, in connection with such notice, the name of such Person and the material terms and conditions of any proposals or offers (including, if applicable, copies of any written requests, proposals or offers, including proposed agreements) and thereafter shall keep Parent informed, on a current basis, of the status and terms of any such proposals or offers (including any amendments thereto) and the status of any such discussions or negotiations, including any change in the Company’s intentions as previously notified.

               6.3. Proxy Filing; Information Supplied. The Company shall prepare and file with the SEC, as promptly as practicable after the date of this Agreement, a proxy statement in preliminary form relating to the Shareholders Meeting (such proxy statement, including any amendment or supplement thereto, the “Proxy Statement”). The Company agrees, as to it and its Subsidiaries, that (i) the form of the Proxy Statement will comply in all material respects with the applicable provisions of the Exchange Act and the rules and regulations thereunder and (ii) none of the information supplied by it or any of its Subsidiaries for inclusion or incorporation by reference in the Proxy Statement (which, for this purpose, excludes any information supplied by or on behalf of Parent or

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Merger Sub) will, at the date of mailing to shareholders of the Company or at the time of the Shareholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

               6.4. Shareholders Meeting. The Company will take, in accordance with applicable Law and its articles of incorporation and by-laws, all action necessary to convene a meeting of holders of Shares (the “Shareholders Meeting”) as promptly as practicable after the execution of this Agreement, to consider and vote upon the adoption of this Agreement, and shall not postpone or adjourn such meeting except to the extent required by law or as approved in writing by Parent. Subject to Section 6.2 hereof, the Board of Directors of the Company shall recommend such adoption and shall take all commercially reasonable lawful action to solicit such adoption of this Agreement.

               6.5. Filings; Other Actions; Notification.

               (a) Proxy Statement. The Company shall promptly notify Parent of the receipt of all comments of the SEC with respect to the Proxy Statement and of any request by the SEC for any amendment or supplement thereto or for additional information and shall promptly provide to Parent copies of all correspondence between the Company and/or any of its Representatives and the SEC with respect to the Proxy Statement. The Company and Parent shall each use its reasonable best efforts to promptly provide responses to the SEC with respect to all comments received on the Proxy Statement by the SEC and the Company shall cause the definitive Proxy Statement to be mailed as promptly as practicable after the date the SEC staff advises that it has no further comments thereon or that the Company may commence mailing the Proxy Statement.

               (b) Cooperation. Subject to the terms and conditions set forth in this Agreement, the Company and Parent shall cooperate with each other and use (and shall cause their respective Subsidiaries to use) their respective reasonable best efforts to take or cause to be taken all actions, and do or cause to be done all things, reasonably necessary, proper or advisable on its part under this Agreement and applicable Laws to consummate and make effective the Merger and the other transactions contemplated by this Agreement as soon as reasonably practicable, including preparing and filing as promptly as reasonably practicable all documentation to effect all necessary notices, reports and other filings (and in any event no later than the time required by applicable Law) and to obtain as promptly as practicable all consents, registrations, approvals, permits and authorizations necessary or advisable to be obtained from any third party and/or any Governmental Entity in order to consummate the Merger or any of the other transactions contemplated by this Agreement. Subject to applicable Laws relating to the exchange of information, Parent shall have the right to direct all matters with any Governmental Entity relating to the Parent Approvals consistent with its obligations hereunder; provided that Parent and the Company shall have the right to review in

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advance and, to the extent practicable, each will consult with the other on and consider in good faith the views of the other in connection with, all of the material information relating to Parent or the Company, as the case may be, and any of their respective Subsidiaries, that appears in any filing made with, or written materials submitted to, any Third Party and/or any Governmental Entity in connection with the Merger and the other transactions contemplated by this Agreement (including the Proxy Statement). In exercising the foregoing rights, each of the Company and Parent shall act reasonably and as promptly as reasonably practicable.

               (c) Information. The Company and Parent each shall, upon request by the other, furnish the other with all information concerning itself, its Subsidiaries, directors, officers and shareholders and such other matters as may be reasonably necessary or advisable in connection with the Proxy Statement or any other statement, filing, notice or application made by or on behalf of Parent, the Company or any of their respective Subsidiaries to any third party and/or any Governmental Entity in connection with the Merger and the transactions contemplated by this Agreement.

               (d) Status. Subject to applicable Laws and as required by any Governmental Entity, the Company and Parent each shall keep the other apprised of the status of matters relating to completion of the transactions contemplated hereby, including promptly furnishing the other with copies of notices or other communications received by Parent or the Company, as the case may be, or any of its Subsidiaries, from any third party and/or any Governmental Entity with respect to the Merger and the other transactions contemplated by this Agreement. The Company and Parent shall give prompt notice to the other party of any change, fact or condition that would, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect or of any failure of any condition to the other party’s obligations to effect the Merger. Neither the Company nor Parent shall permit any of its officers or any other representatives or agents to participate in any live or telephonic meeting with any U.S. Governmental Entity in respect of any filings, investigation or other inquiry (other than for routine or ministerial matters) relating to the transactions contemplated hereby unless it consults with the other party in advance and, to the extent permitted by Law or by such Governmental Entity, gives the other party the opportunity to attend and participate thereat.

               (e) Resolution of Objections. If any objections are asserted with respect to the transactions contemplated hereby under any applicable Law or if any suit is instituted by any Governmental Entity or any private party challenging any of the transactions contemplated hereby as violative of any applicable Law, each of the Company, Merger Sub and Parent shall use its reasonable best efforts to resolve any such objections or challenge as such Governmental Entity or private party may have to such transactions under such applicable Law so as to permit consummation of the transactions contemplated by this Agreement on the terms and conditions set forth in this Agreement; provided, however, that, notwithstanding the foregoing or anything else to the contrary in this Agreement, nothing in this Agreement shall require, or be construed to require Parent

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or the Company or any of their respective Affiliates, in order to obtain any Company Approval or Parent Approval (other than any approval from the JFSA) or otherwise, to (i)(A) sell, lease, license, transfer, dispose of, divest or otherwise encumber, or hold separate pending any such action, or (B) propose, negotiate or offer to effect, or consent or commit to, any such sale, leasing, licensing, transfer, disposal, divestiture or other encumbrance, or holding separate, before or after the Effective Time, of any assets, licenses, operations, rights, product lines, businesses or interest therein of Parent, the Company or the Surviving Corporation (or any of their respective Affiliates), or (ii) take or agree to take any other action or agree or consent to any limitations or restrictions on freedom of actions with respect to, or its ability to retain, or make changes in, any such assets, licenses, operations, rights, product lines, businesses or interest therein of Parent, the Company or the Surviving Corporation (or any of their respective Affiliates) if the actions of the type described in clauses (i) and (ii), individually or in the aggregate, would have a Material Adverse Effect (a “Negative Regulatory Action”); provided that any actions of the type described in clauses (i) and (ii) above imposed on Parent or its Affiliates shall constitute a Negative Regulatory Action if such action would or would reasonably be expected to, individually or when taken together with any other actions of the type described in clauses (i) and (ii) above imposed on the Company, Parent or any of their respective Affiliates, have constituted a Material Adverse Effect by reference to the business, financial condition or results of operations of the Company and its Subsidiaries, taken as a whole.

               6.6. Access and Reports. Subject to applicable Law, upon reasonable notice, the Company shall (and shall cause its Subsidiaries to) afford Parent’s and/or its Subsidiaries’ officers and other authorized Representatives reasonable access, during normal business hours throughout the period prior to the Effective Time, to its employees, properties, books, contracts and records and, during such period, the Company shall (and shall cause its Subsidiaries to) furnish promptly to Parent all information concerning its business, properties and personnel as may reasonably be requested, provided that no investigation pursuant to this Section 6.6 shall affect or be deemed to modify any representation or warranty made by the Company herein, and provided, further, that the foregoing shall not require the Company (i) to permit any inspection, or to disclose any information, that in the reasonable judgment of the Company would result in the disclosure of any trade secrets of third parties or violate any of its obligations with respect to confidentiality if the Company shall have used reasonable best efforts to obtain the consent of such third party to such inspection or disclosure or (ii) to disclose any privileged information of the Company or any of its Subsidiaries. All requests for information made pursuant to this Section 6.6 shall be directed to the executive officer or other Person designated by the Company. All such information shall be governed by the terms of the Confidentiality Agreement.

               6.7. Stock Exchange Delisting. The Surviving Corporation shall use its reasonable best efforts to cause the Shares to no longer be listed on the NASDAQ and deregistered under the Exchange Act as soon as practicable following the Effective Time.

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               6.8. Publicity. The initial press release regarding the Merger shall be a joint press release and thereafter the Company and Parent each shall consult with each other prior to issuing any press releases or otherwise making public announcements with respect to the Merger and the other transactions contemplated by this Agreement and prior to making any filings with any third party and/or any Governmental Entity (including any national securities exchange or interdealer quotation service) with respect thereto, except as may be required by Law or by obligations pursuant to any listing agreement with or rules of any national securities exchange or interdealer quotation service or by the request of any Government Entity.

               6.9. Employee Benefits.

               (a) Parent agrees that, during the period commencing at the Effective Time and ending on the eighteen (18) month anniversary of the Effective Time, the employees of the Company and its Subsidiaries will continue to be provided with pension and welfare benefits under employee benefit plans that are no less favorable in the aggregate than those currently provided by the Company and its Subsidiaries to such employees. To the extent applicable, Parent will cause any employee benefit plans which the employees of the Surviving Corporation and its Subsidiaries are entitled to participate in after the Effective Time to take into account for purposes of eligibility, vesting, and level of benefits only for purposes of vacation, paid time off and severance plans, thereunder, except for purposes of qualifying for subsidized early retirement benefits or to the extent it would result in a duplication of benefits, service with the Company and its Subsidiaries as if such service were with the Surviving Corporation, to the same extent such service was credited under a comparable plan of the Company. With respect to any plan that is a “welfare benefit plan” (as defined in Section 3(1) of ERISA) adopted by the Surviving Corporation after the Effective Time, Parent shall cause there to be waived any restrictions with respect to any pre-existing condition, actively at work requirements and waiting periods (except to the extent such restrictions were applicable as of the Effective Time under the Company’s or any of its Subsidiaries’ then current welfare benefit plan), and any eligible expenses incurred by any employees of the Company and their Subsidiaries and their respective covered dependents during the portion of the plan year prior to adoption of such plan shall be taken into account for purposes of satisfying all deductible, coinsurance and maximum out-of-pocket requirements applicable to such Person for the applicable plan year as if such amounts had been paid in accordance with such plan.

               (b) Prior to the Effective Time, if requested by Parent in writing, to the extent permitted by applicable Law and the terms of the applicable plan or arrangement, the Company shall cause to be amended the Benefit Plans to the extent necessary to provide that no employees of Parent, the Surviving Corporation and their Subsidiaries shall commence participation therein following the Effective Time, unless the Parent explicitly authorizes such participation. In addition, prior to the Effective Time, the Company shall cause to be amended the Benefit Plans providing for deferred compensation if and to the extent necessary to fully comply with the applicable

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requirements of Section 409A of the Code and the applicable final regulations issued thereunder.

               (c) The Company agrees to cause each of its officers and directors to repay any outstanding promissory notes to the Company or its Subsidiaries prior to the Effective Time, and, with respect to the promissory notes in connection with the Stock Purchase Plan Awards referenced in Section 4.3(e), such notes shall be repaid to the Company pursuant to the provisions of Section 4.3(e).

               (d) Prior to making any written or oral communications to the directors, officers or employees of the Company or any of its Subsidiaries pertaining to compensation or benefit matters that are affected by the transactions contemplated by this Agreement, the Company shall provide Parent with a copy of the intended communication, Parent shall have a reasonable period of time to review and comment on the communication, and Parent and the Company shall cooperate in providing any such mutually agreeable communication.

               (e) Parent, the Company and its Affiliates agree that the Persons listed in Schedule 6.9(e) of the Company Disclosure Letter shall be offered retention bonus agreements by the Company between the date of this Agreement and Closing Date, on the terms and conditions set forth in Section 6.9(e) of the Company Disclosure Letter.

               (f) Notwithstanding the foregoing, nothing contained herein shall (i) be treated as an amendment of any particular Benefit Plan, (ii) give any third party any right to enforce the provisions of this Section 6.9 or (iii) obligate Parent, the Surviving Corporation or any of their Affiliates to (x) maintain any Benefit Plan or any other particular compensation or benefit plan, program, arrangement, policy or understanding, or (y) retain the employment of any particular Employee.

               6.10. Expenses. Except as otherwise provided in Section 8.5, whether or not the Merger is consummated, all costs and expenses incurred in connection with this Agreement and the Merger and the other transactions contemplated by this Agreement shall be paid by the party incurring such expense.

               6.11. Director and Officer Indemnification and Liability Insurance.

               (a) From and after the Effective Time, each of Parent and the Surviving Corporation shall jointly and severally, and Parent shall cause the Surviving Corporation to, indemnify and hold harmless, to the fullest extent permitted under applicable Law (and Parent and the Surviving Corporation shall also advance expenses as incurred to the fullest extent permitted under applicable law; provided the Person to whom expenses are advanced provides an undertaking to repay such advances if it is ultimately determined that such Person is not entitled to indemnification), each then present and former director and officer of the Company and/or any of the Company Subsidiaries (collectively, the “Indemnified Parties”) against any costs or expenses (including attorneys’ fees), judgments, fines, losses, claims, damages or liabilities

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(collectively, “Costs”) incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to matters existing or occurring at or prior to the Effective Time, including the transactions contemplated by this Agreement, and pertaining to the fact that the Indemnified Party is or was a director or officer of the Company or its Subsidiaries, whether asserted or claimed prior to, at or after the Effective Time.

               (b) As of the Effective Time, the Company shall have purchased (provided that the Company shall not be required to pay any amounts in respect of such coverage prior to the Closing, other than any such amounts advanced by Parent to the Company prior to the due date for the payment of such amounts), and, following the Effective Time, the Surviving Corporation shall maintain, a tail policy to the current policy of directors’ and officers’ liability insurance maintained on the date hereof by the Company (the “Current Policy”) from an insurance carrier rated at least “A+” by A.M. Best with respect to directors’ and officers’ liability insurance and fiduciary liability insurance (collectively, “D&O Insurance”) with terms, conditions, retentions and limits of liability that are at least as favorable as the Company’s existing policies with respect to any matter claimed against a director or officer of the Company or any of the Company Subsidiaries by reason of him or her serving in such capacity that existed or occurred at or prior to the Effective Time (including in connection with this Agreement or the transactions or actions contemplated hereby) which tail policy shall be effective for a period from the Effective Time through and including the date six years after the Closing Date with respect to claims arising from facts or events that existed or occurred prior to or at the Effective Time, and which tail policy shall contain substantially the same coverage and amount as, and contain terms and conditions no less advantageous to the covered persons, in the aggregate, than the coverage currently provided by the Current Policy; provided, however, that in no event shall the Company expend an aggregate amount to purchase such tail policy that would be in excess of an amount equal to 300% of the annual premium currently paid by the Company under the Current Policy (the “Insurance Amount”); provided, however, that if the cost of such tail policy would exceed the Insurance Amount, the Company shall be obligated to purchase, and the Surviving Corporation shall be obligated to maintain, a tail policy with the greatest coverage available for a cost not exceeding the Insurance Amount.

               (c) In the event that the Surviving Corporation or any of its successors or assigns (i) consolidates with or merges into any other Person and is not the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of its properties and assets to any person (including by dissolution), then, and in each such case, Parent shall cause proper provision to be made so that the successors and assigns of the Surviving Corporation assume and honor the obligations set forth in this Section 6.11. The agreements and covenants contained herein shall not be deemed to be exclusive of any other rights to which any such present or former director or officer is entitled, whether pursuant to Pennsylvania law, contract or otherwise. Nothing in this Agreement is intended to, shall be construed to or shall release, waive or impair any rights to directors’ and officers’ insurance claims under any

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policy that is or has been in existence with respect to the Company or any of its Subsidiaries or their respective officers, directors and employees, it being understood and agreed that the indemnification provided for in this Section 6.11 is not prior to or in substitution for any such claims under any such policies.

          6.12. Other Actions by the Company.

          (a) Takeover Statutes. If any Takeover Statute (including, without limitation, Subchapter F of Chapter 25 of the PBCL) is or may become applicable to the Merger or the other transactions contemplated by this Agreement or the Voting Agreements, the Company and its Board of Directors shall grant such approvals and use commercially reasonable efforts to take such actions as are necessary so that such transactions may be consummated as promptly as practicable on the terms contemplated by this Agreement (as long as prior to the Effective Time neither Parent, Merger Sub nor any Affiliate thereof becomes, without the Company’s consent, an “interested shareholder” under Section 2553 of the PBCL except as a result of the execution of the Voting Agreements), and otherwise use commercially reasonable efforts to attempt to eliminate or minimize the effects of such Takeover Statute on such transactions.

          (b) Section 16 Matters. Prior to the Effective Time, the Company will take all such steps as may be required to cause to be exempt under Rule 16b-3 promulgated under the Exchange Act any dispositions of Shares (including derivative securities with respect to Shares) that are treated as dispositions under such rule and result from the transactions contemplated by this Agreement by each director or officer of the Company who is subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to the Company.

          6.13. Parent Vote. Parent shall vote (or consent with respect to) or cause to be voted (or a consent to be given with respect to) any Shares and any shares of common stock of Merger Sub beneficially owned by it or any of its Subsidiaries or with respect to which it or any of its Subsidiaries has the power (by agreement, proxy or otherwise) to cause to be voted (or to provide a consent), in favor of the adoption and approval of this Agreement at any meeting of shareholders of the Company or Merger Sub, respectively, at which this Agreement shall be submitted for adoption and approval and at all adjournments or postponements thereof (or, if applicable, by any action of shareholders of either the Company or Merger Sub by consent in lieu of a meeting).

          6.14. Formation of Merger Sub; Accession. As promptly as reasonably practicable after the date hereof, and in any event within twenty (20) calendar days after the date hereof, Parent shall form a Pennsylvania corporation as an indirect wholly owned Subsidiary of Parent (“Merger Sub”). Promptly after incorporating Merger Sub, and in any event within twenty five (25) calendar days after the date hereof, (x) Parent shall cause the sole shareholder of Merger Sub, in its capacity as such, to approve and adopt this Agreement and (y) Parent shall cause Merger Sub to accede to this Agreement by executing a signature page to this Agreement, after which time Merger Sub shall be a

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party hereto for all purposes set forth herein. Notwithstanding any provision herein to the contrary, (i) the obligations of Merger Sub to perform its covenants hereunder shall commence only at the time of its incorporation and (ii) the representations and warranties of Merger Sub set forth in Section 5.2 shall be deemed to have been made as though Merger Sub had been a party to this Agreement as of the date hereof. Prior to the Effective Time, Parent shall take such actions as are reasonably necessary to cause the Board of Directors of Merger Sub to unanimously approve this Agreement and declare it advisable for Merger Sub to enter into this Agreement. Notwithstanding anything to the contrary in this Agreement, Parent and its Affiliates may amend, or cause to be amended, the by-laws of Merger Sub at any time prior to the Effective Time so long as such amendment would not impair, delay or prevent the Closing.

          6.15. Ownership of Director’s Qualifying Shares. Prior to the Effective Time, the Company will take all such steps as may be reasonably necessary to cause (i) the 10 shares of common stock of Philadelphia Insurance Company (“PIC”) owned of record by natural persons who were directors of PIC at or after the time of its formation and are currently officers or directors of the Company or a Company Subsidiary and (ii) the 12 shares of common stock of Philadelphia Indemnity Insurance Company (“PIIC”) owned of record by natural persons who were directors of PIIC at or after the time of its formation and are currently officers or directors of the Company or a Company Subsidiary to be owned beneficially and of record by the Company.

          6.16. Pre-Closing Restructuring. Section 6.16 of the Company Disclosure Letter lists Company Subsidiaries that are no longer doing business (each, a “Dormant Subsidiary”). Prior to the Effective Time, if Parent provides a written request, the Company will cause each of the Dormant Subsidiaries identified in Parent’s request to be merged with and into a Company Subsidiary other than a Company Insurance Subsidiary, or liquidated or dissolved (as specified in Parent’s request), provided that in no event shall the Company be required to effect any such merger, liquidation or dissolution if (a) such action would reasonably be expected to prevent or materially impair or delay the Merger or (b) Parent fails to deliver its written request therefor sufficiently in advance of the Effective Time such that it is reasonably practicable for such merger, liquidation or dissolution to be effective prior to the Effective Time, taking into account any filing and/or approval requirements under applicable Law, reasonable preparation and documentation time and such other factors as the Company reasonably determines are relevant.

ARTICLE VII

Conditions

          7.1. Conditions to Each Party’s Obligation to Effect the Merger. The respective obligation of each party to effect the Merger is subject to the satisfaction or waiver at or prior to the Effective Time of each of the following conditions:

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          (a) Shareholder Approval. This Agreement shall have been duly adopted by holders of Shares constituting the Requisite Company Vote in accordance with applicable Law and the articles of incorporation and by-laws of the Company.

          (b) Regulatory Consents. The waiting period applicable to the consummation of the Merger under the HSR Act shall have expired or been earlier terminated.

          (c) Litigation. No court or other Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any Law (whether temporary, preliminary or permanent) that is in effect and restrains, enjoins or otherwise prohibits consummation of the Merger (collectively, an “Order”).

          (d) Approvals. The Parent Approvals referred to in clauses (C), (D) and (E) of Section 5.2(c)(i) shall have been obtained without the imposition of any conditions that, individually or in the aggregate, would be reasonably likely to constitute a Negative Regulatory Action.

          7.2. Conditions to Obligations of Parent and Merger Sub. The obligations of Parent and Merger Sub to effect the Merger are also subject to the satisfaction or waiver by Parent at or prior to the Effective Time of the following conditions:

          (a) Representations and Warranties. (i) The representations and warranties of the Company set forth in this Agreement that are qualified by reference to Material Adverse Effect shall be true and correct as of the date of this Agreement and as of the Closing Date as though made on and as of such date and time (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date); (ii) the representations and warranties of the Company set forth in this Agreement that are not qualified by reference to Material Adverse Effect shall be true and correct as of the date of this Agreement and as of the Closing Date as though made on and as of such date and time (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date); provided, however, that, notwithstanding anything herein to the contrary, the condition set forth in this Section 7.2(a)(ii) shall be deemed to have been satisfied even if any representations and warranties of the Company (other than Sections 5.1(b), 5.1(c) and 5.1(j), which must be true and correct in all material respects and other than Section 5.1(f)(ii) hereof, which must be true and correct in all respects) are not so true and correct except to the extent that the failure of such representations and warranties of the Company to be so true and correct, individually or in the aggregate, has resulted in or would reasonably be expected to result in a Material Adverse Effect; and (iii) Parent shall have received at the Closing a certificate signed on behalf of the Company by an executive officer of the Company to such effect.

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          (b) Performance of Obligations of the Company. The Company shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and Parent shall have received a certificate signed on behalf of the Company by an executive officer of the Company to such effect.

          7.3. Conditions to Obligation of the Company. The obligation of the Company to effect the Merger is also subject to the satisfaction or waiver by the Company at or prior to the Effective Time of the following conditions:

          (a) Representations and Warranties. (i) The representations and warranties of Parent and Merger Sub set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date as though made on and as of such date and time (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date), and (ii) the Company shall have received at the Closing a certificate signed on behalf of Parent by an executive officer of Parent to such effect.

          (b) Performance of Obligations of Parent and Merger Sub. Each of Parent and Merger Sub shall have performed in all material respects (other than with respect to its obligations to make available or cause to be made available the Exchange Fund to the Paying Agent pursuant to the first sentence of Section 4.2(a), which shall be required to be performed in all respects), all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and the Company shall have received a certificate signed on behalf of each of Parent and Merger Sub by an executive officer of Parent and Merger Sub to such effect.

ARTICLE VIII

Termination

          8.1. Termination by Mutual Consent. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, whether before or after the adoption of this Agreement by the shareholders of the Company referred to in Section 7.1(a), by mutual written consent of the Company and Parent by action of their respective boards of directors.

          8.2. Termination by Either Parent or the Company. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time by action of the Board of Directors of either Parent or the Company if:

          (a) the Merger shall not have been consummated on or before January 23, 2009 (the “Termination Date”); provided, however, that if on such date the condition to Closing set forth in Section 7.1(b) or Section 7.1(d) shall not have been satisfied but all other conditions to Closing shall have been satisfied (or in the case of

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conditions that by their terms are to be satisfied at the Closing, shall be capable of being satisfied on such date), then the Termination Date shall automatically be extended to April 23, 2009;

          (b) the approval of this Agreement by the shareholders of the Company referred to in Section 7.1(a) shall not have been obtained at the Shareholders Meeting scheduled for the consideration of this Agreement or at any subsequent Shareholders Meeting held following the adjournment or postponement of such scheduled meeting; or

          (c) any Order permanently restraining, enjoining or otherwise prohibiting consummation of the Merger shall become final and non-appealable (whether before or after the adoption of this Agreement by the shareholders of the Company referred to in Section 7.1(a));

provided that the right to terminate this Agreement pursuant to this Section 8.2 shall not be available to any party that has willfully or intentionally breached in any material respect its obligations under this Agreement in any manner that has proximately contributed to the occurrence of the failure of a condition to the consummation of the Merger.

          8.3. Termination by the Company. This Agreement may be terminated by the Company and the Merger may be abandoned if:

          (a) there has been a breach of any representation, warranty, covenant or agreement made by Parent or Merger Sub in this Agreement, or any such representation and warranty shall have become untrue after the date of this Agreement, such that Section 7.3(a) or 7.3(b) would not be satisfied and such breach or condition is not curable or, if curable, is not cured within the earlier of (x) thirty (30) days after written notice thereof is given by the Company to Parent and (y) the Termination Date;

          (b) at any time prior to the time the Requisite Company Vote is obtained, if (i) the Board of Directors of the Company authorizes the Company to enter into an Alternative Acquisition Agreement with respect to a Superior Proposal, (ii) the Company notifies Parent in writing that it intends to enter into such Alternative Acquisition Agreement, attaching the most current version of such Alternative Acquisition Agreement to such notice, (iii) Parent does not make, within five Business Days of receipt of such written notification (the “Termination Notice Period”) an offer that the Board of Directors of the Company determines, in good faith after consultation with its financial advisors, is at least as favorable to the shareholders of the Company as the Superior Proposal, and (iv) the Company, prior to such termination, pays to Parent the Termination Fee and the Parent Expenses in immediately available funds; it being understood that the Company agrees (x) that it will not enter into the Alternative Acquisition Agreement referred to in clause (i) above until at least the sixth Business Day after it has provided the notice to Parent required thereby, (y) to notify Parent promptly if its intention to enter into the Alternative Acquisition Agreement changes and (z) during

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the Termination Notice Period, to, and to cause its financial advisors and outside counsel to, negotiate with Parent in good faith should Parent propose to make such adjustments in the terms and conditions of this Agreement so that such Alternative Acquisition Agreement ceases to constitute (in the good faith judgment of the Board of Directors) a Superior Proposal; it being further understood that any material amendment to any Acquisition Proposal will be deemed to be a new Acquisition Proposal for purposes of the Termination Notice Period; or

          (c) if the Board of Directors of the Company shall have made a Change in the Company Recommendation pursuant to Section 6.2(d) in connection with an Acquisition Proposal and the Company, prior to such termination, pays to Parent the Termination Fee in immediately available funds.

          8.4. Termination by Parent. This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time by action of the Board of Directors of Parent if:

          (a) the Board of Directors of the Company shall have made a Change of Recommendation;

          (b) the Company shall have failed to hold a Shareholders Meeting for the purpose of voting on the Merger at which a quorum is present and a vote is taken prior to the Termination Date;

          (c) the Board of Directors of the Company shall have, if a tender offer or exchange offer for outstanding shares of Company Common Stock shall have been publicly disclosed by a Third Party, failed to recommend unequivocally that the Company’s shareholders reject such tender offer or exchange offer prior to the earlier of (i) the date of the Shareholders Meeting (if it is reasonably practicable to make such recommendation prior to the Shareholders Meeting, taking into account the amount of time between the disclosure of such offer and the Shareholders Meeting and the Company’s ability to adjourn the Shareholders Meeting to facilitate such recommendation) and (ii) eleven Business Days after the commencement of such tender offer or exchange offer pursuant to Rule 14d-2 under the Exchange Act; or

          (d) there has been a breach of any representation, warranty, covenant or agreement made by the Company in this Agreement, or any such representation and warranty shall have become untrue after the date of this Agreement, such that Section 7.2(a) or 7.2(b) would not be satisfied and such breach or condition is not curable or, if curable, is not cured within the earlier of (x) thirty (30) days after written notice thereof is given by Parent to the Company and (y) the Termination Date.

          8.5. Effect of Termination and Abandonment.

          (a) Except as provided in paragraph (b) below, in the event of termination of this Agreement and the abandonment of the Merger pursuant to this

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Article VIII, this Agreement shall become void and of no effect with no liability to any Person on the part of any party hereto (or of any of its Representatives or Affiliates); provided, however, and notwithstanding anything in the foregoing to the contrary, that (i) no such termination shall relieve any party hereto of any liability or damages to the other party hereto resulting from any willful or intentional material breach of this Agreement and (ii) the provisions set forth in this Section 8.5 and the second sentence of Section 9.1 shall survive the termination of this Agreement.

          (b) If this Agreement is terminated pursuant to any of the following provisions, the Company shall pay to Parent a fee equal to $141,000,000 (the “Termination Fee”):

          (i) Section 8.3(b); or

          (ii) Section 8.3(c); or

          (iii) Section 8.4(a); or

          (iv) (Subject to the provisions of the second sentence of Section 8.5(c)), Section 8.4(b); or

          (v) Section 8.4(c); or

          (vi) (Subject to the provisions of the second sentence of Section 8.5(c)), Section 8.2(a) if (A) after the date of this Agreement, any Person or “group” (within the meaning of Section 13(d)(3) of the Exchange Act) publicly makes or publicly announces an intention to make (whether or not conditional) an Acquisition Proposal and such Acquisition Proposal or publicly announced intention shall not have been publicly withdrawn without qualification at least ten (10) days prior to the Outside Date, (B) this Agreement is terminated thereafter by either Parent or the Company pursuant to Section 8.2(a) and (C) neither Parent nor Merger Sub has willfully or intentionally breached in any material respect its obligations under this Agreement in any manner that has proximately contributed to the occurrence of the failure of a condition to the consummation of the Merger; or

          (vii) (Subject to the provisions of the second sentence of Section 8.5(c)), Section 8.2(b) if (A) after the date of this Agreement, any Person or “group” (within the meaning of Section 13(d)(3) of the Exchange Act) publicly makes or publicly announces an intention to make (whether or not conditional) an Acquisition Proposal prior to the Company obtaining the Company Shareholder Approval and such Acquisition Proposal or publicly announced intention shall not have been publicly withdrawn without qualification at least five (5) Business Days prior to the vote of the Company’s shareholders with respect to the Merger, and (B) this Agreement is terminated thereafter by either Parent or the Company pursuant to Section 8.2(b); or

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          (viii) (Subject to the provisions of the second sentence of Section 8.5(c)), Section 8.4(d) if (A) after the date of this Agreement, any Person or “group” (within the meaning of Section 13(d)(3) of the Exchange Act) publicly makes or publicly announces an intention to make (whether or not conditional) an Acquisition Proposal and such Acquisition Proposal or publicly announced intention shall not have been publicly withdrawn without qualification at least ten (10) days prior to the date when the relevant breach commenced or the relevant representation and warranty shall have become untrue, and (B) this Agreement is terminated thereafter by Parent pursuant to Section 8.4(d).

          (c) If the Company is required to pay Parent a Termination Fee, such Termination Fee shall be payable not later than two Business Days after termination of this Agreement (except with respect to Section 8.3(b) or 8.3(c), which shall be paid as set forth in Section 8.3(b) or 8.3(c)), in each case by wire transfer of immediately available funds to an account designated by Parent. Notwithstanding the foregoing, the Termination Fee shall not be payable to Parent pursuant to Sections 8.5(b)(iv), 8.5(b)(vi), 8.5(b)(vii) or 8.5(b)(viii) unless and until within 12 months of such termination the Company or any of its Subsidiaries shall have entered into a binding Alternative Acquisition Agreement pursuant to which the Company or any of its Subsidiaries has agreed to undertake, solicit shareholder approval for or engage in, or shall have consummated, or shall have approved or recommended to the Company’s shareholders or otherwise not opposed, a transaction of the type referred to in the definition of “Acquisition Proposal” (substituting “50%” for “20%” in the definition of “Acquisition Proposal”); provided that for purposes of this Section 8.5, an Acquisition Proposal shall not be deemed to have been “publicly withdrawn” by any Person if, within 12 months of such termination, the Company or any of its Subsidiaries shall have entered into an Alternative Acquisition Agreement with respect to, or shall have consummated, or shall have approved or recommended to the Company’s shareholders or otherwise not opposed, an Acquisition Proposal made by or on behalf of such Person or any of its Affiliates. If this Agreement is terminated under any circumstances in connection with which the Company is required to pay a Termination Fee the Company shall reimburse Parent and Merger Sub for all of their reasonable and documented out-of-pocket Expenses relating to the proposed Merger, up to a maximum amount of $15,000,000 (the “Parent Expenses”), contemporaneously with the payment of the Termination Fee if Parent has theretofore provided written notice requesting payment and, in the event Parent has not theretofore provided such written notice, within three Business Days of receipt of written notice from Parent requesting payment thereof.

          (d) The parties each agree that the agreements contained in this Section 8.5 are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, the parties hereto would not have entered into this Agreement. Accordingly, if the Company fails promptly to pay any amounts due under this Section 8.5 and, in order to obtain such payment, Parent commences a suit that results in a judgment against the Company for such amounts, the Company shall pay interest on such amounts from the date payment of such amounts were due to the date of

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actual payment at the rate of interest published from time to time in The Wall Street Journal, Eastern Edition (or any successor publication thereto), designated therein as the prime rate on the date such payment was due, together with the costs and expenses of Parent (including reasonable legal fees and expenses) in connection with such suit. Notwithstanding anything to the contrary in this Agreement, the parties hereby acknowledge that in the event that the Termination Fee becomes payable and is paid by the Company pursuant to this Section 8.5, the Termination Fee shall be Parent’s and Merger Sub’s sole and exclusive remedy for monetary damages under this Agreement.

ARTICLE IX

Miscellaneous and General

          9.1. Survival. This Article IX and the agreements of the Company, Parent and Merger Sub contained in Article IV, and Sections 6.10 (Expenses), 6.11 (Director and Officer Liability), together with all other agreements contained in this Agreement or in any document delivered pursuant to this Agreement which by their terms apply or are to be performed in whole or in part after the Effective Time, shall survive the consummation of the Merger. This Article IX and the agreements of the Company, Parent and Merger Sub contained in Section 6.10 (Expenses) and Section 8.5 (Effect of Termination and Abandonment) and the Confidentiality Agreement shall survive the termination of this Agreement. Neither any other covenants and agreements in this Agreement, nor any representation or warranty contained in this Agreement shall survive the Effective Time or the termination of this Agreement.

          9.2. Modification or Amendment. Subject to the provisions of the applicable Laws, at any time prior to the Effective Time, the parties hereto may modify or amend this Agreement, by written agreement executed and delivered by duly authorized officers of the respective parties.

          9.3. Waiver of Conditions. The conditions to each of the parties’ obligations to consummate the Merger are for the sole benefit of such party and may be waived by such party in whole or in part to the extent permitted by applicable Laws.

          9.4. Counterparts. This Agreement may be executed in any number of counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts shall together constitute the same agreement.

          9.5. GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL; SPECIFIC PERFORMANCE.

          (a) THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE COMMONWEALTH OF PENNSYLVANIA APPLICABLE TO AGREEMENTS MADE AND WHOLLY TO BE PERFORMED IN THE COMMONWEALTH OF

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PENNSYLVANIA. EXCEPT AS SET OUT BELOW IN THIS PARAGRAPH, EACH OF THE COMPANY, PARENT AND MERGER SUB HEREBY IRREVOCABLY AND UNCONDITIONALLY CONSENTS TO SUBMIT TO THE SOLE AND EXCLUSIVE JURISDICTION OF THE COMMERCE PROGRAM OF THE COURT OF COMMON PLEAS OF PHILADELPHIA COUNTY, PENNSYLVANIA (OR, IF SUCH COURT DOES NOT HAVE SUBJECT MATTER JURISDICTION OVER SUCH MATTER, IN THE U.S. DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA) (THE “PENNSYLVANIA COURTS”) FOR ANY LITIGATION ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE NEGOTIATION, VALIDITY OR PERFORMANCE OF THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY (AND AGREES NOT TO COMMENCE ANY LITIGATION RELATING THERETO EXCEPT IN SUCH COURTS), WAIVES ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUCH LITIGATION IN THE PENNSYLVANIA COURTS AND AGREES NOT TO PLEAD OR CLAIM IN ANY PENNSYLVANIA COURT THAT SUCH LITIGATION BROUGHT THEREIN HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE PARTIES HERETO AGREES THAT SERVICE OF PROCESS MAY BE MADE ON THE COMPANY BY U.S. REGISTERED MAIL TO THE COMPANY’S ADDRESS SET FORTH IN SECTION 9.6 OR OTHER MEANS PERMITTED BY LAW. EACH OF THE PARTIES HERETO AGREES THAT SERVICE OF PROCESS MAY BE MADE ON PARENT OR MERGER SUB BY U.S. REGISTERED MAIL TO THE FOLLOWING ADDRESS:

Tokio Marine Americas Corporation
230 Park Avenue
New York, New York 10160
U.S.A.

OR OTHER MEANS PERMITTED BY LAW. SERVICE MADE PURSUANT TO THE IMMEDIATELY PRECEDING SENTENCES SHALL HAVE THE SAME LEGAL FORCE AND EFFECT AS IF SERVED UPON SUCH PARTY PERSONALLY WITHIN THE COMMONWEALTH OF PENNSYLVANIA. IN THE EVENT ANY PARTY HERETO FAILS TO NOTIFY ANY OTHER PARTY HERETO OF ITS AGENT FOR SERVICE OF PROCESS IN THE COMMONWEALTH OF PENNSYLVANIA, NOTHING HEREIN CONTAINED SHALL BE DEEMED TO AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY OTHER PARTY HERETO IN ANY OTHER JURISDICTION TO ENFORCE JUDGMENTS OBTAINED IN ANY ACTION, SUIT OR PROCEEDING BROUGHT PURSUANT TO THIS SECTION 9.5.

          (b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND

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UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.5.

          (c) The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in the Commerce Program of the Court of Common Pleas of Philadelphia County, Pennsylvania (or, if such court does not have subject matter jurisdiction over such matter, in the U.S. District Court for the Eastern District of Pennsylvania), this being in addition to any other remedy to which such party is entitled at law or in equity; provided, however, that after any termination of this Agreement, the provisions of this Section 9.5(c) shall survive only with respect to those provisions of this Agreement which survive the termination of this Agreement pursuant to the provisions of the second sentence of Section 9.1.

          9.6. Notices. Any notice, request, instruction or other document to be given hereunder by any party to the others shall be in writing in the English language and delivered personally or sent by registered or certified mail, postage prepaid, by facsimile or overnight courier:

If to Parent or Merger Sub:

Tokio Marine Holdings, Inc.
Tokio Kaijo Nichido Building Shinkan
1-2-1 Marunouchi, Chiyoda-Ku
Tokyo 100-0005 Japan
Attention:  Kichiichiro Yamamoto
                     Group Leader, Strategic Planning Group
fax:  +81 3 3285 0270

with a copy to

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Sullivan & Cromwell LLP
125 Broad Street, New York, NY 10004
Attention: Robert G. DeLaMater
fax:  +1 (212) 558-3588

If to the Company:

Philadelphia Consolidated Holding Corp.
One Bala Plaza, Suite 100
Bala Cynwyd, PA 19004
Attention:  Chief Executive Officer
fax:  +1 (610) 617-7600

with a copy to

WolfBlock LLP
1650 Arch Street, 22nd Floor
Philadelphia, PA 19103-2097
Attention: Michael M. Sherman
fax: +1 (215) 405-3836

or to such other persons or addresses as may be designated in writing by the party to receive such notice as provided above. Any notice, request, instruction or other document given as provided above shall be deemed given to the receiving party upon actual receipt, if delivered personally; three (3) Business Days after deposit in the mail, if sent by registered or certified mail; upon confirmation of successful transmission if sent by facsimile or email (provided that if given by facsimile or email receipt of such notice, request, instruction or other document is confirmed by telephone); or on the next Business Day after deposit with an overnight courier, if sent by an overnight courier.

          9.7. Entire Agreement. This Agreement (including any exhibits hereto), the Company Disclosure Letter and the Confidentiality Agreement, dated April 7, 2008, between Parent and the Company (the “Confidentiality Agreement”) constitute the entire agreement, and supersede all other prior agreements, understandings, representations and warranties both written and oral, among the parties, with respect to the subject matter hereof.

          9.8. No Third Party Beneficiaries. Except for the directors and officers referred to in Section 6.11 with respect to the covenants in their favor referred to therein, the Parent and the Company hereby agree that their respective representations, warranties and covenants set forth herein are solely for the benefit of the other party hereto, in accordance with and subject to the terms of this Agreement, and this Agreement is not intended to, and does not, confer upon any Person other than the parties hereto any rights or remedies hereunder, including, without limitation, the right to rely upon the representations and warranties set forth herein. The parties hereto further agree that the rights of third party beneficiaries under Section 6.11 shall not arise unless and until the

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Effective Time occurs. Notwithstanding the foregoing, the Company shall have the right to recover, solely through an action brought by the Company, damages from Parent in the event of a willful or intentional breach of this Agreement by Parent, in which event the damages recoverable by the Company for itself and on behalf of the Company’s shareholders and the holders of the Stock Awards shall be determined by reference to the total amount that would have been recoverable by such shareholders and holders if all such shareholders and holders brought an action against Parent and were recognized as third party beneficiaries hereunder. The representations and warranties in this Agreement are the product of negotiations among the parties hereto and are for the sole benefit of the parties hereto. Any inaccuracies in such representations and warranties are subject to waiver by the parties hereto in accordance with Section 9.3 without notice or liability to any other Person. In some instances, the representations and warranties in this Agreement may represent an allocation among the parties hereto of risks associated with particular matters regardless of the knowledge of any of the parties hereto. Consequently, Persons other than the parties hereto may not rely upon the representations and warranties in this Agreement as characterizations of actual facts or circumstances as of the date of this Agreement or as of any other date.

          9.9. Obligations of Parent and of the Company. Whenever this Agreement requires the Merger Sub to take any action, such requirement shall be deemed to include an undertaking on the part of Parent to cause Merger Sub to take such action. Whenever this Agreement requires a Subsidiary of the Company to take any action, such requirement shall be deemed to include an undertaking on the part of the Company to cause such Subsidiary to take such action and, after the Effective Time, on the part of the Surviving Corporation to cause such Subsidiary to take such action.

          9.10. Transfer Taxes. All transfer, documentary, sales, use, stamp, registration and other such Taxes and fees (including penalties and interest) incurred in connection with the Merger shall be paid by the Person that has the primary legal liability for such Taxes.

          9.11. Definitions. Each of the terms set forth in Annex A is defined in the Section of this Agreement set forth opposite such term.

          9.12. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. If any provision of this Agreement, or the application of such provision to any Person or any circumstance, is invalid or unenforceable, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application of such provision, in any other jurisdiction.

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          9.13. Interpretation; Construction.

          (a) The table of contents and headings herein are for convenience of reference only, do not constitute part of this Agreement and shall not be deemed to limit or otherwise affect any of the provisions hereof. Where a reference in this Agreement is made to a Section or Exhibit, such reference shall be to a Section of or Exhibit to this Agreement unless otherwise indicated. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.”

          (b) The parties have participated jointly in negotiating and drafting this Agreement. In the event that an ambiguity or a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.

          (c) Each party to this Agreement has or may have set forth information in its respective Disclosure Letter in a section of such Disclosure Letter that corresponds to the section of this Agreement to which it relates. The fact that any item of information is disclosed in a Disclosure Letter to this Agreement shall not be construed to mean that such information is required to be disclosed by this Agreement.

          9.14. Assignment. This Agreement shall not be assignable by operation of law or otherwise; provided, however, that Parent may designate, by written notice to the Company, another wholly owned direct or indirect Subsidiary which is a Pennsylvania corporation to be a Constituent Corporation in lieu of Merger Sub, in which event all references herein to Merger Sub shall be deemed references to such other Subsidiary, except that all representations and warranties made herein with respect to Merger Sub as of the date of this Agreement shall be deemed representations and warranties made with respect to such other Subsidiary as of the date of such designation; provided that any such designation shall not impede or delay the consummation of the transactions contemplated by this Agreement or otherwise impede the rights of the shareholders of the Company under this Agreement. Any purported assignment in violation of this Agreement is void.

          9.15. Dates and Dollar Amounts. All references to dates in this Agreement shall be deemed to be references to dates in the United States, and all references to “$” or “dollars” shall be references to United States dollars.

[Signatures appear on following pages]

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          IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officers of the parties hereto as of the date first written above.

PHILADELPHIA CONSOLIDATED HOLDING CORP.
By:	/s/ James J. Maguire, Jr.
	Name:	James J. Maguire, Jr.
	Title:	President
TOKIO MARINE HOLDINGS, INC.
By:	/s/ Shuzo Sumi
	Name:	Shuzo Sumi
	Title:	President

Acceded to as of                     

     TOKIO MARINE INVESTMENT
      (PENNSYLVANIA) INC.

By:
	Name: Hayato Isogai
	Title:   President

[Signature Page to Merger Agreement]

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ANNEX A

DEFINED TERMS

Terms	Section
Acquisition Proposal	6.2(b)
Agent	5.1(r)(i)
Agreement	Preamble
Alternative Acquisition Agreement	6.2(c)(i)
Applicable Date	5.1(e)(i)
Bankruptcy and Equity Exception	5.1(c)(i)
Benefit Plans	5.1(h)(i)
business day	1.2
By-Laws	2.2
Certificate	4.1(a)
Change in Company Recommendation	6.2(c)(i)
Charter	2.1
Closing	1.2
Closing Date	1.2
Code	4.2(g)
Company	Preamble
Company Actuarial Analyses	5.1(r)(ii)
Company Approvals	5.1(d)(i)
Company Disclosure Letter	5.1
Company Insurance Subsidiaries	5.1(a)
Company Labor Agreements	5.1(o)
Company Recommendation	5.1(c)(ii)
Company Reports	5.1(e)(i)
Company SAP Statements	5.1(e)(iv)
Company Subsidiary	5.1(a)
Confidentiality Agreement	9.7
Constituent Corporations	Preamble
Contract	5.1(d)(ii)
Copyrights	5.1(p)(iv)
Costs	6.11(a)
Current Policy	6.11(b)
D&O Insurance	6.11(b)
Dormant Subsidiary	6.16
Effective Time	1.3
EGTRRA	5.1(h)(ii)
Employees	5.1(h)(i)
Environmental Law	5.1(m)
ERISA	5.1(h)(i)

A-1

Terms	Section
ERISA Affiliate	5.1(h)(iii)
ERISA Plan	5.1(h)(ii)
Exchange Act	5.1(a)
Exchange Fund	4.2(a)
Excluded Share	4.1(a)
Excluded Shares	4.1(a)
GAAP	5.1(a)(D)
Governmental Entity	5.1(d)(i)
Hazardous Substance	5.1(m)
HSR Act	5.1(d)(i)9.7
Indemnified Parties	6.11(a)
Insurance Amount	6.11(b)
Insurance Policies	5.1(q)
Intellectual Property	5.1(p)(iv)
Interim SAP Statements	5.1(e)(iv)
IRS	5.1(h)(ii)
JFSA	5.2(c)(i)
Laws	5.1(i)
Leased Real Property	5.1(k)(ii)
Licenses	5.1(i)
Lien	5.1(b)(i)
Material Adverse Effect	5.1(a)
Material Contracts	5.1(j)(i)
Merger	1.1
Merger Consideration	4.1(a)
Merger Sub	6.14
Merrill Lynch	5.1(c)(ii)
Multiemployer Plan	5.1(h)(i)
Negative Regulatory Action	6.5(e)
Notice Period	6.2(d)
Option	4.3(a)
Order	7.1(c)
Other Company Awards	4.3(f)
Owned Intellectual Property	5.1(p)(i)
Parent	Preamble
Parent Approvals	5.2(c)(i)
Parent Expenses	8.5(c)
Paying Agent	4.2(a)
PBCL	Preamble
Pennsylvania Articles of Merger	1.3
Pennsylvania Courts	9.5(a)
Pension Plan	5.1(h)(ii)
Per Share Merger Consideration	4.1(a)
Performance Award	4.3(c)
Person	4.2(d)

A-2

Terms	Section
PIC	6.15
PIIC	6.15
Proxy Statement	6.3
Reinsurance Agreements	5.1(s)
Representatives	6.2(a)
Requisite Company Vote	5.1(c)(i)
Requisite Parent Vote	5.2(b)
Restricted Contract	5.1(j)(i)
Restricted Shares	4.3(d)
SAP	5.1(e)(iv)
SAR	4.3(b)
Share	4.1(a)
Shareholders Meeting	6.4
Shares	4.2(a)4.1(a)
Significant Subsidiary	5.1(a)
Specified Borrowings	6.1(a)(v)
Stock Awards	4.1(a)4.2(a)
Stock Purchase Plan Awards	4.3(e)
Subsidiary	5.1(a)
Superior Proposal	6.1(b)
Surviving Corporation	1.1
Takeover Statute	5.1(l)
Tax	5.1(n)
Tax Return	5.1(n)
Taxes	5.1(m)
Termination Date	8.2(a)
Termination Fee	8.5(b)
Termination Notice Period	8.3(b)
Third Party	6.2(b)
Trade Secrets	5.1(p)(iv)
Trademarks	5.1(p)(iv)
Voting Agreements	5.1(l)

A-3

EX-10.1

Exhibit 10.1

EXECUTION COPY

ADDENDUM TO EMPLOYMENT AGREEMENT

     This ADDENDUM TO EMPLOYMENT AGREEMENT (this “Addendum”), dated as of July 23, 2008, is by and among Philadelphia Consolidated Holding Corp., a Pennsylvania corporation (the “Company”), Maguire Insurance Agency, Inc., a Pennsylvania Corporation (the “Employer”), Tokio Marine Holdings, Inc. a Japanese corporation (“Parent”), and James J. Maguire (Employee”).

     WHEREAS, Employee has served the Company and its subsidiaries pursuant to an Amended and Restated Employment Agreement dated as of January 1, 2004 (as it exists on the date of this Addendum, the “Unamended Employment Agreement”);

     WHEREAS, the Company has entered into an Agreement and Plan of Merger, dated as of the date of this Addendum (the “Merger Agreement”), with Parent and Merger Sub (as defined in the Merger Agreement) whereby, at the “Effective Time” (as defined in the Merger Agreement) (i) Merger Sub will be merged with and into the Company (the “Merger”), (ii) the separate corporate existence of Merger Sub will thereupon cease, and the Company will be the surviving corporation in the Merger, and (iii) the Company and the Employer will become direct or indirect wholly owned subsidiaries of Parent;

     WHEREAS, Employee is an integral part of the management of the Employer, and is a key participant in the decision-making process relative to short-term and long-term planning and policy of the Employer and the Company, and the parties hereto believe that it is critical to the continued success of the Company, and to the ultimate success of the Merger, that Employee continue to be employed by the Employer after the Merger; and

     WHEREAS, the parties agree that is in their best interests to enter into this Addendum, with effect as described in Section 1 of this Addendum, on the terms set forth in this Addendum.

     NOW, THEREFORE, in consideration of the promises and mutual covenants herein and for other good and valuable consideration, the parties hereby agree as follows:

          1. Effectiveness.

     (a) This Addendum shall be effective immediately as of the Effective Time (other than with respect to the covenants set forth in the immediately following sentence, which shall be effective immediately); in the event that the Merger does not occur for any reason or the Merger Agreement terminates prior to the occurrence of the Merger, this Addendum shall terminate, and shall be of no further force or effect. From and after the date of this Addendum and continuing until the Effective Time, the parties hereto acknowledge and agree that (i) Employee’s employment shall continue to be subject to the terms and conditions of the Unamended Employment Agreement, (ii) Employee agrees not to terminate his employment with the Company for any reason (including, without limitation, for “Good Reason” (as defined in the Unamended Employment Agreement)) on or prior to the Effective Time, and (iii) the Company agrees not

to take any actions that would constitute “Good Reason” for Employee to terminate his employment, and not to otherwise terminate the employment of Employee for any reason, on or prior to the Effective Time, other than for unlawful activity related to employment, demonstrable fraud or material malfeasance against the Company after a two thirds majority vote of the Board with prompt and reasonable prior written notice to Parent, and an opportunity for Parent to investigate and respond prior to the effectiveness of such termination.

     (b) As of the Effective Time, Employee shall continue Employee’s employment with the Company in an uninterrupted manner under the terms of the Unamended Employment Agreement as amended by this Addendum (the “Amended Employment Agreement”) for the Term set forth herein. Employee acknowledges and agrees that he shall not terminate his employment pursuant to either the Unamended Employment Agreement or the Amended Employment Agreement for “Good Reason” due to any consequences arising from (i) the occurrence of the Merger, (ii) the Company no longer being a publicly traded company (which may result in a change in Employee’s duties), (iii) the Company becoming a subsidiary of Parent (which may result in a change in Employee’s duties), and/or (iv) Employee no longer participating in equity compensation plans, except that, notwithstanding the foregoing, (x) any reduction in or failure to timely pay Employee’s base salary as set forth in Section 5 of this Addendum, or (y) any change in Employee’s duties set forth in Section 3 of this Addendum without the written consent of Employee, shall constitute Good Reason. The parties represent, acknowledge and agree that the Merger shall not constitute a Hostile Change in Control. For purposes of clarity, notwithstanding any of the foregoing, it shall not be a breach of the Unamended Employment Agreement or of the Amended Employment Agreement if the Employee resigns from his or her employment with or without Good Reason after the Effective Time (it being acknowledged that if Employee resigns without Good Reason, he shall not receive any severance compensation of any kind under the Unamended Employment Agreement or the Amended Employment Agreement).

          2. Term. Notwithstanding the first three sentences of Section 4 of the Unamended Employment Agreement (which the parties agree shall not be effective after the Effective Time), the Term under the Amended Employment Agreement will expire on the second anniversary of the Effective Time, unless the Parent requests in writing, exercisable by notice given to Employee at least 60 days prior to such expiration date, that the Term continue for an additional year, in which case the Amended Employment Agreement will expire on the third anniversary of the Effective Time.

          3. Position and Responsibilities. Section 3(a) of the Unamended Employment Agreement is amended to delete such provision in its entirety, and to insert the following in its place:

“Employee shall serve the Employer, the Company and Parent, as a Senior International Advisor and shall serve as the Chairman of the Company. Employee’s responsibilities will include advising the parties on creating shareholder value; advising the Company and Parent on

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integration and synergies with the Parent’s other business, and advising the Parent on its international business development. Employee shall also serve on the Parent’s International Strategic Committee.”

          4. Restrictive Covenants and Confidentiality. Section 7 of the Unamended Employment Agreement is amended to delete the provisions therein in their entirety, and to insert the following in its place:

     (a) Non-Compete. During Employee’s employment with the Employer, and for a two-year period after the date Employee’s employment is terminated for any reason (the “Restricted Period”), Employee shall not directly or indirectly:

     i. hold a 5% or greater equity (including stock options whether or not exercisable), voting or profit participation interest in a Competitive Enterprise, or

     ii. associate (including as a director, officer, employee, partner, consultant, agent or advisor) with a Competitive Enterprise, or

     iii. engage, or directly or indirectly manage or supervise personnel engaged, in any activity on behalf of any Competitive Enterprise:

(A) that is substantially related to any activity that Employee was engaged in with the Employer during the 12 months prior to Employee’s termination date;

(B) that is substantially related to any activity for which Employee had direct or indirect managerial or supervisory responsibility with the Employer during the 12 months prior to Employee’s termination date; or

(C) that calls for the application of specialized knowledge or skills substantially related to those used by Employee in his activities with the Employer during the 12 months prior to Employee’s termination date.

For purposes of this Agreement, “Competitive Enterprise” means any business enterprise that either (i) engages in any activity in the insurance business or industry, or in insurance related services, such as the insurance agent and broker businesses, or (ii) holds a 5% or greater equity, voting or profit participation interest in any enterprise that engages in the insurance business or industry, or in insurance related services, such as the insurance agent and broker businesses.

     (b) Non-Solicit. During the Restricted Period, Employee shall not, in any manner, directly or indirectly (without the prior written consent of the Employer): (i) Solicit any Client to transact business with a Competitive Enterprise or to reduce or refrain from doing any business with the Employer,

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(ii) transact business with any Client that would cause Employee to be a Competitive Enterprise, (iii) interfere with or damage any relationship between the Employer and a Client or (iv) Solicit anyone who is then an employee or consultant of the Employer (or who was an employee of the Employer within the prior 12 months) to resign from the Employer or to apply for or accept employment or engagement with any other business or enterprise.

For purposes of this Agreement, a “Client” means any client or prospective client of the Employer to whom Employee provided services, or for whom Employee transacted business, or whose identity became known to Employee in connection with his relationship with or employment by the Employer, and “Solicit” means any direct or indirect communication of any kind, regardless of who initiates it, that in any way invites, advises, encourages or requests any person to take or refrain from taking any action.

     (c) Confidential Information. Employee hereby acknowledges that, as an employee of the Employer, he will be making use of, acquiring and adding to confidential information of a special and unique nature and value relating to the Employer and its strategic plan and financial operations. Employee further recognizes and acknowledges that all confidential information is the exclusive property of the Employer, is material and confidential, and is critical to the successful conduct of the business of the Employer. Accordingly, Employee hereby covenants and agrees that he will use confidential information for the benefit of the Employer only and shall not at any time, directly or indirectly, during the Term and thereafter divulge, reveal or communicate any confidential information to any person, firm, corporation or entity whatsoever, or use any confidential information for his own benefit or for the benefit of others. Notwithstanding the foregoing, Employee shall be authorized to disclose confidential information (i) as may be required by law or legal process after providing the Employer with prior written notice and an opportunity to respond to such disclosure (unless such notice is prohibited by law), (ii) in any criminal proceeding against him after providing the Employer with prior written notice and an opportunity to seek protection for such confidential information and (iii) with the prior written consent of the Employer.

     (d) Survival. Any termination of Employee’s employment shall have no effect on the continuing operation of this Section 7.

     (e) Validity. The terms and provisions of this Section 7 are intended to be separate and divisible provisions and if, for any reason, any one or more of them is held to be invalid or unenforceable, neither the validity nor the enforceability of any other provision of the Amended Employment Agreement shall thereby be affected. The parties hereto acknowledge that the potential restrictions on Employee’s future employment imposed by this Section 7 are reasonable in both duration and geographic scope and in all other respects. If for any reason any court of competent jurisdiction shall find any provisions of this Section 7 unreasonable in duration or geographic scope or otherwise, Employee and the Employer agree that the restrictions and prohibitions contained herein

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shall be effective to the fullest extent allowed under applicable law in such jurisdiction.

     (f) Adequate Consideration. The parties acknowledge that this Addendum would not have been entered into in the absence of Employee’s covenants under this Section 7. In addition, Employee agrees that the payments and benefits that he will receive in connection with the Merger constitute adequate consideration for the promises undertaken by him under this Addendum, including without limitation those specifically set forth in this Section 7.

     (g) Remedies. Employee agrees that if Employee breaches or threatens to breach any of the provisions of this Section 7 or Section 11 of the Amended Employment Agreement, the Employer will have available, in additional to any other right or remedy available, the right to obtain injunctive and equitable relief of any type from a court of competent jurisdiction, including but not limited to restraining such breach or threatened breach and to specific performance any such provision of the Amended Employment Agreement. Employee further agrees that no bond or other security shall be required in obtaining such equitable relief and Employee hereby consents to the issuance of such injunction and to the ordering of specific performance.

     (h) Definition of Employer. The term “Employer”, as used in this Section 7, and in Section 2(b), and Section 11, of the Amended Employment Agreement, shall include the Company, the Employer, Parent and all of their respective Affiliates.

          5. Compensation. As of the Effective Time, Employee’s base salary shall be increased to a rate of $2,000,000 per year. As of the Effective Time, Employer shall provide Employee with compensation opportunities comparable in the aggregate to those provided to Employee immediately prior to the Merger, taking into account the increase in base salary set forth in the first sentence of this paragraph, on a risk-adjusted basis.

          6. Gross up Under Section 280G. The parties confirm that Employee is (both prior to the Effective Time, and on and following the Effective Time) entitled to the full “golden parachute adjustment” as described and provided in Section 9 of the Unamended Employment Agreement. The manner of making the computation of the amount provided in Section 9 with respect to the acceleration provided in Sections 4.3(a), (b), (c), (d) and (e), respectively, of the Merger Agreement (the “Acceleration”) will be as mutually agreed between Parent and the Company between the date of this Addendum and the Effective Time, and such amount with respect to the Acceleration will be paid to Employee within ten (10) business days of the Effective Time.

          7. Release Requirement Clarification. The first paragraph of Section 6(a) of the Employment Agreement is amended to add, in the first sentence, after the word “Control)” and before the comma, the words “which shall be provided to Employee within ten (10) days of the cessation of Employee’s employment”.

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          8. General. Capitalized terms not otherwise defined in this Addendum have the meanings ascribed to such terms in the Unamended Employment Agreement. All terms of the Unamended Employment Agreement that have not been amended by this Addendum shall continue in full force and effect under the Amended Employment Agreement from and after the Effective Time. Parent shall be a party to the Amended Employment Agreement from and after the Effective Time, and shall be considered a party for all relevant purposes, including, for clarity, for provisions relating to Affiliates, amendments, notices to the parties, release of the Employer, Notice of Termination (at the address for Parent set forth in the Merger Agreement), restrictive covenants, and protection of Employer property and information, but, for clarity, not for purposes of employment, compensation, benefits, position, authority, title or duties.

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

PHILADELPHIA CONSOLIDATED HOLDING CORP.
By:	/s/ Craig P. Keller
	Name:	Craig P. Keller
	Title:	CFO
MAGUIRE INSURANCE AGENCY, INC.
By:	/s/ Craig P. Keller
	Name:	Craig P. Keller
	Title:	CFO
TOKIO MARINE HOLDINGS, INC.
By:	/s/ Shuzo Sumi
	Name:	Shuzo Sumi
	Title:	President
JAMES J. MAGUIRE
By:	/s/ James J. Maguire

EX-10.2

Exhibit 10.2

EXECUTION COPY

ADDENDUM TO EMPLOYMENT AGREEMENT

     This ADDENDUM TO EMPLOYMENT AGREEMENT (this “Addendum”), dated as of July 23, 2008, is by and among Philadelphia Consolidated Holding Corp., a Pennsylvania corporation (the “Company”), Maguire Insurance Agency, Inc., a Pennsylvania Corporation (the “Employer”), Tokio Marine Holdings, Inc. a Japanese corporation (“Parent”), and James J. Maguire, Jr. (“Employee”).

     WHEREAS, Employee has served the Company and its subsidiaries pursuant to an Employment Agreement dated as of January 1, 2007 (as it exists on the date of this Addendum, the “Unamended Employment Agreement”);

     WHEREAS, the Company has entered into an Agreement and Plan of Merger, dated as of the date of this Addendum (the “Merger Agreement”), with Parent and Merger Sub (as defined in the Merger Agreement) whereby, at the “Effective Time” (as defined in the Merger Agreement) (i) Merger Sub will be merged with and into the Company (the “Merger”), (ii) the separate corporate existence of Merger Sub will thereupon cease, and the Company will be the surviving corporation in the Merger, and (iii) the Company and the Employer will become direct or indirect wholly owned subsidiaries of Parent;

     WHEREAS, Employee is an integral part of the management of the Employer, and is a key participant in the decision-making process relative to short-term and long-term planning and policy of the Employer and the Company, and the parties hereto believe that it is critical to the continued success of the Company, and to the ultimate success of the Merger, that Employee continue to be employed by the Employer after the Merger; and

     WHEREAS, the parties agree that is in their best interests to enter into this Addendum, with effect as described in Section 1 of this Addendum, on the terms set forth in this Addendum.

     NOW, THEREFORE, in consideration of the promises and mutual covenants herein and for other good and valuable consideration, the parties hereby agree as follows:

          1. Effectiveness.

     (a) This Addendum shall be effective immediately as of the Effective Time (other than with respect to the covenants set forth in the immediately following sentence, which shall be effective immediately); in the event that the Merger does not occur for any reason or the Merger Agreement terminates prior to the occurrence of the Merger, this Addendum shall terminate, and shall be of no further force or effect. From and after the date of this Addendum and continuing until the Effective Time, the parties hereto acknowledge and agree that (i) Employee’s employment shall continue to be subject to the terms and conditions of the Unamended Employment Agreement, (ii) Employee agrees not to terminate his employment with the Company for any reason (including, without limitation, for “Good Reason” (as defined in the Unamended Employment

Agreement)) on or prior to the Effective Time, and (iii) the Company agrees not to take any actions that would constitute “Good Reason” for Employee to terminate his employment, and not to otherwise terminate the employment of Employee for any reason, on or prior to the Effective Time, other than for unlawful activity related to employment, demonstrable fraud or material malfeasance against the Company after a two thirds majority vote of the Board with prompt and reasonable prior written notice to Parent, and an opportunity for Parent to investigate and respond prior to the effectiveness of such termination.

     (b) As of the Effective Time, Employee shall continue Employee’s employment with the Company in an uninterrupted manner under the terms of the Unamended Employment Agreement as amended by this Addendum (the “Amended Employment Agreement”) for the Term of Employment set forth herein. Employee acknowledges and agrees that he shall not terminate his employment pursuant to either the Unamended Employment Agreement or the Amended Employment Agreement for “Good Reason” due to any consequences arising from (i) the occurrence of the Merger, (ii) the Company no longer being a publicly traded company (which may result in a change in Employee’s duties), (iii) the Company becoming a subsidiary of Parent (which may result in a change in Employee’s duties), and/or (iv) Employee no longer participating in equity compensation plans, except that, notwithstanding the foregoing, (x) any reduction in or failure to timely pay Employee’s base salary, or (y) the assignment to Employee of duties that are not of a senior executive level or are not consistent with Employee’s training or experience (other than incidental de minimis office tasks), or (z) any failure to pay the Retention Bonus or any installment thereof described below when due, shall constitute Good Reason. The parties represent, acknowledge and agree that the Merger shall not constitute a Hostile Change in Control. For purposes of clarity, notwithstanding any of the foregoing, it shall not be a breach of the Unamended Employment Agreement or of the Amended Employment Agreement if the Employee resigns from his or her employment with or without Good Reason after the Effective Time (it being acknowledged that if Employee resigns without Good Reason, he shall not receive any severance compensation of any kind under the Unamended Employment Agreement or the Amended Employment Agreement nor will he receive any unpaid Retention Bonus).

     (c) As of the Effective Time, under the Amended Employment Agreement, the following sentence shall be added to the end of Section 3(b): “Employee’s responsibilities under this Agreement will include, without limiting the breadth of the provisions contained in this Section 3, using Employee’s best efforts to maximize the shareholder value of the Employer and its Affiliates, and to increase the growth, financially and otherwise, of the Employer and its Affiliates.”

          2. Term of Employment. Notwithstanding the first sentence of Section 4 of the Unamended Employment Agreement, the Term of Employment shall be extended under the

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Amended Employment Agreement, and will expire on the fifth anniversary of the Effective Time.

          3. Retention Bonus. If Employee remains continuously employed by the Employer through the first, second, and third anniversaries, respectively, after the Effective Time, then the Employer shall pay to Employee an amount equal to an aggregate of $1,800,000 (the “Retention Bonus”), to be paid in equal installments as follows: one third (1/3) of the Retention Bonus on each of such first, second, and third anniversary dates after the Effective Time, in lump sums within five (5) business days after each such date, conditioned in each case on the continued employment of Employee on such anniversary dates. If, during the three-year period after the Effective Time, Employee’s employment is terminated by Employee (other than under the circumstances described in (x)-(z) below), by the Company or the Employer for Cause, or due to Employee’s death or disability (other than in the case of Employee’s death or disability after any such anniversary date but prior to the installment payment date with respect to such anniversary date, in which case such installment shall be paid to Employee or his estate, as the case may be), then any unpaid installments of the Retention Bonus will not be paid (and will not be payable) from and after the date of such termination of employment. If, during such period, the Employer or the Company terminates Employee without Cause, then the full amount of the unpaid portion of the Retention Bonus (if any) shall be immediately due and payable to Employee in one lump sum within five (5) business days after such termination of employment. In addition, during such period, in the event of (x) any reduction in or failure to timely pay Employee’s base salary, or (y) the assignment to Employee of duties that are not of a senior executive level or are not consistent with Employee’s training or experience (other than incidental de minimis office tasks), or (z) any failure to pay an installment of Retention Bonus described below when due, then the full amount of the unpaid portion of the Retention Bonus (if any) shall be immediately due and payable to Employee in one lump sum within five (5) business days after Employee’s subsequent resignation from employment. All Retention Bonus payments shall be paid by the Parent if the Employer and/or the Company fail to make payment when due. The parties hereto agree and acknowledge that the amount of the Retention Bonus shall not be taken into account for any purposes (other than for tax witholding purposes) under the Amended Employment Agreement or under any plan, program, agreement or arrangement, including without limitation for purposes of calculating Employee’s Base Compensation, Target Bonus, severance, or other compensation whatsoever (including under any qualified or non-qualified plans).

          4. Restrictive Covenants and Confidentiality. Section 7 of the Unamended Employment Agreement is amended to delete the provisions therein in their entirety, and to insert the following in its place:

     (a) Non-Compete. During Employee’s employment with the Employer, and for a two-year period after the date Employee’s employment is terminated for any reason (the “Restricted Period”), Employee shall not directly or indirectly:

     i. hold a 5% or greater equity (including stock options whether or not exercisable), voting or profit participation interest in a Competitive Enterprise, or

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     ii. associate (including as a director, officer, employee, partner, consultant, agent or advisor) with a Competitive Enterprise, or

     iii. engage, or directly or indirectly manage or supervise personnel engaged, in any activity on behalf of any Competitive Enterprise:

(A) that is substantially related to any activity that Employee was engaged in with the Employer during the 12 months prior to Employee’s termination date;

(B) that is substantially related to any activity for which Employee had direct or indirect managerial or supervisory responsibility with the Employer during the 12 months prior to Employee’s termination date; or

(C) that calls for the application of specialized knowledge or skills substantially related to those used by Employee in his activities with the Employer during the 12 months prior to Employee’s termination date.

For purposes of this Agreement, “Competitive Enterprise” means any business enterprise that either (i) engages in any activity in the insurance business or industry, or in insurance related services, such as the insurance agent and broker businesses, or (ii) holds a 5% or greater equity, voting or profit participation interest in any enterprise that engages in the insurance business or industry, or in insurance related services, such as the insurance agent and broker businesses.

     (b) Non-Solicit. During the Restricted Period, Employee shall not, in any manner, directly or indirectly (without the prior written consent of the Employer): (i) Solicit any Client to transact business with a Competitive Enterprise or to reduce or refrain from doing any business with the Employer, (ii) transact business with any Client that would cause Employee to be a Competitive Enterprise, (iii) interfere with or damage any relationship between the Employer and a Client or (iv) Solicit anyone who is then an employee or consultant of the Employer (or who was an employee of the Employer within the prior 12 months) to resign from the Employer or to apply for or accept employment or engagement with any other business or enterprise.

For purposes of this Agreement, a “Client” means any client or prospective client of the Employer to whom Employee provided services, or for whom Employee transacted business, or whose identity became known to Employee in connection with his relationship with or employment by the Employer, and “Solicit” means any direct or indirect communication of any kind, regardless of who initiates it, that in any way invites, advises, encourages or requests any person to take or refrain from taking any action.

     (c) Confidential Information. Employee hereby acknowledges that, as an employee of the Employer, he will be making use of, acquiring and adding to confidential information of a special and unique nature and value relating to the

4

Employer and its strategic plan and financial operations. Employee further recognizes and acknowledges that all confidential information is the exclusive property of the Employer, is material and confidential, and is critical to the successful conduct of the business of the Employer. Accordingly, Employee hereby covenants and agrees that he will use confidential information for the benefit of the Employer only and shall not at any time, directly or indirectly, during the Term of Employment and thereafter divulge, reveal or communicate any confidential information to any person, firm, corporation or entity whatsoever, or use any confidential information for his own benefit or for the benefit of others. Notwithstanding the foregoing, Employee shall be authorized to disclose confidential information (i) as may be required by law or legal process after providing the Employer with prior written notice and an opportunity to respond to such disclosure (unless such notice is prohibited by law), (ii) in any criminal proceeding against him after providing the Employer with prior written notice and an opportunity to seek protection for such confidential information and (iii) with the prior written consent of the Employer.

     (d) Survival. Any termination of Employee’s employment shall have no effect on the continuing operation of this Section 7.

     (e) Validity. The terms and provisions of this Section 7 are intended to be separate and divisible provisions and if, for any reason, any one or more of them is held to be invalid or unenforceable, neither the validity nor the enforceability of any other provision of the Amended Employment Agreement shall thereby be affected. The parties hereto acknowledge that the potential restrictions on Employee’s future employment imposed by this Section 7 are reasonable in both duration and geographic scope and in all other respects. If for any reason any court of competent jurisdiction shall find any provisions of this Section 7 unreasonable in duration or geographic scope or otherwise, Employee and the Employer agree that the restrictions and prohibitions contained herein shall be effective to the fullest extent allowed under applicable law in such jurisdiction.

     (f) Adequate Consideration. The parties acknowledge that this Addendum would not have been entered into, and the Retention Bonus would not have been promised, in the absence of Employee’s covenants under this Section 7.

     (g) Remedies. Employee agrees that if Employee breaches or threatens to breach any of the provisions of this Section 7 or Section 11 of the Amended Employment Agreement, the Employer will have available, in additional to any other right or remedy available, the right to obtain injunctive and equitable relief of any type from a court of competent jurisdiction, including but not limited to restraining such breach or threatened breach and to specific performance any such provision of the Amended Employment Agreement. Employee further agrees that no bond or other security shall be required in obtaining such equitable relief and Employee hereby consents to the issuance of such injunction and to the ordering of specific performance.

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     (h) Definition of Employer. The term “Employer”, as used in this Section 7, and in Sections 2(b), the last paragraph of 6(a), and Section 11 of the Amended Employment Agreement, shall include the Company, the Employer, Parent and all of their respective Affiliates.

          5. Compensation. As of the Effective Time, Employer shall provide Employee with compensation opportunities comparable in the aggregate to those provided to Employee immediately prior to the Merger, including an increase in base salary from his current level (as disclosed to Parent and its agents and representatives).

          6. Gross up Under Section 280G. Employee will be entitled to receive an amount in cash, within ten (10) business days of the Effective Time, equal to the Gross Up Payment (as defined below), if any. The term “Gross-Up Payment” will mean a payment to Employee that is sufficient to pay in full Employee’s excise tax under Section 4999 of the Code and any similar excise tax under applicable state and local tax Laws relating to “excess parachute payments” (including any excise tax or federal, state or local tax payable in respect of the Gross-Up Payment), if any, arising only from the acceleration of vesting of Employee’s Options, SARs, Performance Awards, Restricted Shares and Stock Purchase Plan Awards as defined and described in Sections 4.3(a), (b), (c), (d) and (e), respectively, of the Merger Agreement (the “Acceleration”). The manner of making the computation of the amount provided in this paragraph will be as mutually agreed between Parent and the Company between the date of this Addendum and the Effective Time. Notwithstanding anything in this Agreement to the contrary, if it is determined by Parent that Employee would otherwise be entitled to a Gross-Up Payment, but that the payments to Employee in respect of the Acceleration would not be subject to the Excise Tax if such payments in respect of the Acceleration were reduced by an amount that is equal to or less than 10% of 2.99 times Employee’s “base amount” (as defined under Section 280G of the Code), then Employee will not receive the Gross-Up Payment, and such payments in respect of the Acceleration will be reduced to the maximum amount that would not result in the imposition of the Excise Tax on Employee. The payments in respect of the Acceleration to be reduced, if any, will be reduced in the inverse order of when such payments would have otherwise been made to, or the benefits would have otherwise been received by, Employee, until the reduction specified this Section 7 is achieved. For the avoidance of doubt, the payments described in this paragraph are in lieu of, and no payments will be made to Employee under, Section 8(c) of the Unamended Employment Agreement and the Amended Employment Agreement, in connection with, or with respect to any transactions associated with, the Merger.

          7. Release Requirement Clarification. The first paragraph of Section 6(a) of the Employment Agreement is amended to delete the words “as described in Subsection 2(b) above” and to add at the end of that sentence (after the word “Control)” and before the colon) the words “which shall be provided to Employee within ten (10) days of the cessation of Employee’s employment”.

          8. General. Capitalized terms not otherwise defined in this Addendum have the meanings ascribed to such terms in the Unamended Employment Agreement. All terms of the Unamended Employment Agreement that have not been amended by this Addendum shall continue in full force and effect under the Amended Employment Agreement from and after the Effective Time. References to “Executive Committee” shall mean the Board of Directors of the

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Company after the Effective Time. Parent shall be a party to the Amended Employment Agreement from and after the Effective Time, and shall be considered a party for all relevant purposes, including, for clarity, for provisions relating to Affiliates, amendments, notices to the parties, release of the Employer, Notice of Termination (at the address for Parent set forth in the Merger Agreement), restrictive covenants, and protection of Employer property and information, but, for clarity, not for purposes of employment, compensation, benefits, position, authority, title or duties.

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

PHILADELPHIA CONSOLIDATED HOLDING CORP.
By:	/s/ Craig P. Keller
	Name:	Craig P. Keller
	Title:	CFO
MAGUIRE INSURANCE AGENCY, INC.
By:	/s/ Craig P. Keller
	Name:	Craig P. Keller
	Title:	CFO
TOKIO MARINE HOLDINGS, INC.
By:	/s/ Shuzo Sumi
	Name:	Shuzo Sumi
	Title:	President
JAMES J. MAGUIRE, JR.
By:	/s/ James J. Maguire, Jr.

EX-10.3

Exhibit 10.3

EXECUTION COPY

ADDENDUM TO EMPLOYMENT AGREEMENT

     This ADDENDUM TO EMPLOYMENT AGREEMENT (this “Addendum”), dated as of July 23, 2008, is by and among Philadelphia Consolidated Holding Corp., a Pennsylvania corporation (the “Company”), Maguire Insurance Agency, Inc., a Pennsylvania Corporation (the “Employer”), Tokio Marine Holdings, Inc. a Japanese corporation (“Parent”), and Craig P. Keller (“Employee”).

     WHEREAS, Employee has served the Company and its subsidiaries pursuant to an Employment Agreement dated as of January 1, 2007 (as it exists on the date of this Addendum, the “Unamended Employment Agreement”);

     WHEREAS, the Company has entered into an Agreement and Plan of Merger, dated as of the date of this Addendum (the “Merger Agreement”), with Parent and Merger Sub (as defined in the Merger Agreement) whereby, at the “Effective Time” (as defined in the Merger Agreement) (i) Merger Sub will be merged with and into the Company (the “Merger”), (ii) the separate corporate existence of Merger Sub will thereupon cease, and the Company will be the surviving corporation in the Merger, and (iii) the Company and the Employer will become direct or indirect wholly owned subsidiaries of Parent;

     WHEREAS, Employee is an integral part of the management of the Employer, and is a key participant in the decision-making process relative to short-term and long-term planning and policy of the Employer and the Company, and the parties hereto believe that it is critical to the continued success of the Company, and to the ultimate success of the Merger, that Employee continue to be employed by the Employer after the Merger; and

     WHEREAS, the parties agree that is in their best interests to enter into this Addendum, with effect as described in Section 1 of this Addendum, on the terms set forth in this Addendum.

     NOW, THEREFORE, in consideration of the promises and mutual covenants herein and for other good and valuable consideration, the parties hereby agree as follows:

          1. Effectiveness.

     (a) This Addendum shall be effective immediately as of the Effective Time (other than with respect to the covenants set forth in the immediately following sentence, which shall be effective immediately); in the event that the Merger does not occur for any reason or the Merger Agreement terminates prior to the occurrence of the Merger, this Addendum shall terminate, and shall be of no further force or effect. From and after the date of this Addendum and continuing until the Effective Time, the parties hereto acknowledge and agree that (i) Employee’s employment shall continue to be subject to the terms and conditions of the Unamended Employment Agreement, (ii) Employee agrees not to terminate his employment with the Company for any reason (including, without limitation, for “Good Reason” (as defined in the Unamended Employment

Agreement)) on or prior to the Effective Time, and (iii) the Company agrees not to take any actions that would constitute “Good Reason” for Employee to terminate his employment, and not to otherwise terminate the employment of Employee for any reason, on or prior to the Effective Time, other than for unlawful activity related to employment, demonstrable fraud or material malfeasance against the Company after a two thirds majority vote of the Board with prompt and reasonable prior written notice to Parent, and an opportunity for Parent to investigate and respond prior to the effectiveness of such termination.

     (b) As of the Effective Time, Employee shall continue Employee’s employment with the Company in an uninterrupted manner under the terms of the Unamended Employment Agreement as amended by this Addendum (the “Amended Employment Agreement”) for the Term of Employment set forth herein. Employee acknowledges and agrees that he shall not terminate his employment pursuant to either the Unamended Employment Agreement or the Amended Employment Agreement for “Good Reason” due to any consequences arising from (i) the occurrence of the Merger, (ii) the Company no longer being a publicly traded company (which may result in a change in Employee’s duties), (iii) the Company becoming a subsidiary of Parent (which may result in a change in Employee’s duties), and/or (iv) Employee no longer participating in equity compensation plans, except that, notwithstanding the foregoing, (x) any reduction in or failure to timely pay Employee’s base salary, or (y) the assignment to Employee of duties that are not of a senior executive level or are not consistent with Employee’s training or experience (other than incidental de minimis office tasks), or (z) any failure to pay the Retention Bonus or any installment thereof described below when due, shall constitute Good Reason. The parties represent, acknowledge and agree that the Merger shall not constitute a Hostile Change in Control. For purposes of clarity, notwithstanding any of the foregoing, it shall not be a breach of the Unamended Employment Agreement or of the Amended Employment Agreement if the Employee resigns from his or her employment with or without Good Reason after the Effective Time (it being acknowledged that if Employee resigns without Good Reason, he shall not receive any severance compensation of any kind under the Unamended Employment Agreement or the Amended Employment Agreement nor will he receive any unpaid Retention Bonus).

     (c) As of the Effective Time, under the Amended Employment Agreement, the following sentence shall be added to the end of Section 3(b): “Employee’s responsibilities under this Agreement will include, without limiting the breadth of the provisions contained in this Section 3, using Employee’s best efforts to maximize the shareholder value of the Employer and its Affiliates, and to increase the growth, financially and otherwise, of the Employer and its Affiliates.”

          2. Term of Employment. Notwithstanding the first sentence of Section 4 of the Unamended Employment Agreement, the Term of Employment shall be extended under the

2

Amended Employment Agreement, and will expire on the fifth anniversary of the Effective Time.

          3. Retention Bonus. If Employee remains continuously employed by the Employer through the first, second, and third anniversaries, respectively, after the Effective Time, then the Employer shall pay to Employee an amount equal to an aggregate of $1,500,000 (the “Retention Bonus”), to be paid in equal installments as follows: one third (1/3) of the Retention Bonus on each of such first, second, and third anniversary dates after the Effective Time, in lump sums within five (5) business days after each such date, conditioned in each case on the continued employment of Employee on such anniversary dates. If, during the three-year period after the Effective Time, Employee’s employment is terminated by Employee (other than under the circumstances described in (x)-(z) below), by the Company or the Employer for Cause, or due to Employee’s death or disability (other than in the case of Employee’s death or disability after any such anniversary date but prior to the installment payment date with respect to such anniversary date, in which case such installment shall be paid to Employee or his estate, as the case may be), then any unpaid installments of the Retention Bonus will not be paid (and will not be payable) from and after the date of such termination of employment. If, during such period, the Employer or the Company terminates Employee without Cause, then the full amount of the unpaid portion of the Retention Bonus (if any) shall be immediately due and payable to Employee in one lump sum within five (5) business days after such termination of employment. In addition, during such period, in the event of (x) any reduction in or failure to timely pay Employee’s base salary, or (y) the assignment to Employee of duties that are not of a senior executive level or are not consistent with Employee’s training or experience (other than incidental de minimis office tasks), or (z) any failure to pay an installment of Retention Bonus described below when due, then the full amount of the unpaid portion of the Retention Bonus (if any) shall be immediately due and payable to Employee in one lump sum within five (5) business days after Employee’s subsequent resignation from employment. All Retention Bonus payments shall be paid by the Parent if the Employer and/or the Company fail to make payment when due. The parties hereto agree and acknowledge that the amount of the Retention Bonus shall not be taken into account for any purposes (other than for tax witholding purposes) under the Amended Employment Agreement or under any plan, program, agreement or arrangement, including without limitation for purposes of calculating Employee’s Base Compensation, Target Bonus, severance, or other compensation whatsoever (including under any qualified or non-qualified plans).

          4. Restrictive Covenants and Confidentiality. Section 7 of the Unamended Employment Agreement is amended to delete the provisions therein in their entirety, and to insert the following in its place:

     (a) Non-Compete. During Employee’s employment with the Employer, and for a two-year period after the date Employee’s employment is terminated for any reason (the “Restricted Period”), Employee shall not directly or indirectly:

     i. hold a 5% or greater equity (including stock options whether or not exercisable), voting or profit participation interest in a Competitive Enterprise, or

3

ii. associate (including as a director, officer, employee, partner, consultant, agent or advisor) with a Competitive Enterprise, or

iii. engage, or directly or indirectly manage or supervise personnel engaged, in any activity on behalf of any Competitive Enterprise:

(A) that is substantially related to any activity that Employee was engaged in with the Employer during the 12 months prior to Employee’s termination date;

(B) that is substantially related to any activity for which Employee had direct or indirect managerial or supervisory responsibility with the Employer during the 12 months prior to Employee’s termination date; or

(C) that calls for the application of specialized knowledge or skills substantially related to those used by Employee in his activities with the Employer during the 12 months prior to Employee’s termination date.

For purposes of this Agreement, “Competitive Enterprise” means any business enterprise that either (i) engages in any activity in the insurance business or industry, or in insurance related services, such as the insurance agent and broker businesses, or (ii) holds a 5% or greater equity, voting or profit participation interest in any enterprise that engages in the insurance business or industry, or in insurance related services, such as the insurance agent and broker businesses.

     (b) Non-Solicit. During the Restricted Period, Employee shall not, in any manner, directly or indirectly (without the prior written consent of the Employer): (i) Solicit any Client to transact business with a Competitive Enterprise or to reduce or refrain from doing any business with the Employer, (ii) transact business with any Client that would cause Employee to be a Competitive Enterprise, (iii) interfere with or damage any relationship between the Employer and a Client or (iv) Solicit anyone who is then an employee or consultant of the Employer (or who was an employee of the Employer within the prior 12 months) to resign from the Employer or to apply for or accept employment or engagement with any other business or enterprise.

For purposes of this Agreement, a “Client” means any client or prospective client of the Employer to whom Employee provided services, or for whom Employee transacted business, or whose identity became known to Employee in connection with his relationship with or employment by the Employer, and “Solicit” means any direct or indirect communication of any kind, regardless of who initiates it, that in any way invites, advises, encourages or requests any person to take or refrain from taking any action.

     (c) Confidential Information. Employee hereby acknowledges that, as an employee of the Employer, he will be making use of, acquiring and adding to confidential information of a special and unique nature and value relating to the

4

Employer and its strategic plan and financial operations. Employee further recognizes and acknowledges that all confidential information is the exclusive property of the Employer, is material and confidential, and is critical to the successful conduct of the business of the Employer. Accordingly, Employee hereby covenants and agrees that he will use confidential information for the benefit of the Employer only and shall not at any time, directly or indirectly, during the Term of Employment and thereafter divulge, reveal or communicate any confidential information to any person, firm, corporation or entity whatsoever, or use any confidential information for his own benefit or for the benefit of others. Notwithstanding the foregoing, Employee shall be authorized to disclose confidential information (i) as may be required by law or legal process after providing the Employer with prior written notice and an opportunity to respond to such disclosure (unless such notice is prohibited by law), (ii) in any criminal proceeding against him after providing the Employer with prior written notice and an opportunity to seek protection for such confidential information and (iii) with the prior written consent of the Employer.

     (d) Survival. Any termination of Employee’s employment shall have no effect on the continuing operation of this Section 7.

     (e) Validity. The terms and provisions of this Section 7 are intended to be separate and divisible provisions and if, for any reason, any one or more of them is held to be invalid or unenforceable, neither the validity nor the enforceability of any other provision of the Amended Employment Agreement shall thereby be affected. The parties hereto acknowledge that the potential restrictions on Employee’s future employment imposed by this Section 7 are reasonable in both duration and geographic scope and in all other respects. If for any reason any court of competent jurisdiction shall find any provisions of this Section 7 unreasonable in duration or geographic scope or otherwise, Employee and the Employer agree that the restrictions and prohibitions contained herein shall be effective to the fullest extent allowed under applicable law in such jurisdiction.

     (f) Adequate Consideration. The parties acknowledge that this Addendum would not have been entered into, and the Retention Bonus would not have been promised, in the absence of Employee’s covenants under this Section 7.

     (g) Remedies. Employee agrees that if Employee breaches or threatens to breach any of the provisions of this Section 7 or Section 11 of the Amended Employment Agreement, the Employer will have available, in additional to any other right or remedy available, the right to obtain injunctive and equitable relief of any type from a court of competent jurisdiction, including but not limited to restraining such breach or threatened breach and to specific performance any such provision of the Amended Employment Agreement. Employee further agrees that no bond or other security shall be required in obtaining such equitable relief and Employee hereby consents to the issuance of such injunction and to the ordering of specific performance.

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     (h) Definition of Employer. The term “Employer”, as used in this Section 7, and in Sections 2(b), the last paragraph of 6(a), and Section 11 of the Amended Employment Agreement, shall include the Company, the Employer, Parent and all of their respective Affiliates.

          5. Compensation. As of the Effective Time, Employer shall provide Employee with compensation opportunities comparable in the aggregate to those provided to Employee immediately prior to the Merger, including an increase in base salary from his current level (as disclosed to Parent and its agents and representatives).

          6. Gross up Under Section 280G. Employee will be entitled to receive an amount in cash, within ten (10) business days of the Effective Time, equal to the Gross Up Payment (as defined below), if any. The term “Gross-Up Payment” will mean a payment to Employee that is sufficient to pay in full Employee’s excise tax under Section 4999 of the Code and any similar excise tax under applicable state and local tax Laws relating to “excess parachute payments” (including any excise tax or federal, state or local tax payable in respect of the Gross-Up Payment), if any, arising only from the acceleration of vesting of Employee’s Options, SARs, Performance Awards, Restricted Shares and Stock Purchase Plan Awards as defined and described in Sections 4.3(a), (b), (c), (d) and (e), respectively, of the Merger Agreement (the “Acceleration”). The manner of making the computation of the amount provided in this paragraph will be as mutually agreed between Parent and the Company between the date of this Addendum and the Effective Time. Notwithstanding anything in this Agreement to the contrary, if it is determined by Parent that Employee would otherwise be entitled to a Gross-Up Payment, but that the payments to Employee in respect of the Acceleration would not be subject to the Excise Tax if such payments in respect of the Acceleration were reduced by an amount that is equal to or less than 10% of 2.99 times Employee’s “base amount” (as defined under Section 280G of the Code), then Employee will not receive the Gross-Up Payment, and such payments in respect of the Acceleration will be reduced to the maximum amount that would not result in the imposition of the Excise Tax on Employee. The payments in respect of the Acceleration to be reduced, if any, will be reduced in the inverse order of when such payments would have otherwise been made to, or the benefits would have otherwise been received by, Employee, until the reduction specified this Section 7 is achieved. For the avoidance of doubt, the payments described in this paragraph are in lieu of, and no payments will be made to Employee under, Section 8(c) of the Unamended Employment Agreement and the Amended Employment Agreement, in connection with, or with respect to any transactions associated with, the Merger.

          7. Release Requirement Clarification. The first paragraph of Section 6(a) of the Employment Agreement is amended to delete the words “as described in Subsection 2(b) above” and to add at the end of that sentence (after the word “Control)” and before the colon) the words “which shall be provided to Employee within ten (10) days of the cessation of Employee’s employment”.

          8. General. Capitalized terms not otherwise defined in this Addendum have the meanings ascribed to such terms in the Unamended Employment Agreement. All terms of the Unamended Employment Agreement that have not been amended by this Addendum shall continue in full force and effect under the Amended Employment Agreement from and after the Effective Time. References to “Executive Committee” shall mean the Board of Directors of the

6

Company after the Effective Time. Parent shall be a party to the Amended Employment Agreement from and after the Effective Time, and shall be considered a party for all relevant purposes, including, for clarity, for provisions relating to Affiliates, amendments, notices to the parties, release of the Employer, Notice of Termination (at the address for Parent set forth in the Merger Agreement), restrictive covenants, and protection of Employer property and information, but, for clarity, not for purposes of employment, compensation, benefits, position, authority, title or duties.

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

PHILADELPHIA CONSOLIDATED HOLDING CORP.
By:	/s/ James J. Maguire, Jr.
	Name:	James J. Maguire, Jr.
	Title:	CEO

MAGUIRE INSURANCE AGENCY, INC.
By:	/s/ James J. Maguire, Jr.
	Name:	James J. Maguire, Jr.
	Title:	CEO

TOKIO MARINE HOLDINGS, INC.
By:	/s/ Shuzo Sumi
	Name:	Shuzo Sumi
	Title:	President

CRAIG P. KELLER
By:	/s/ Craig P. Keller

EX-10.4

Exhibit 10.4

EXECUTION COPY

ADDENDUM TO EMPLOYMENT AGREEMENT

     This ADDENDUM TO EMPLOYMENT AGREEMENT (this “Addendum”), dated as of July 23, 2008, is by and among Philadelphia Consolidated Holding Corp., a Pennsylvania corporation (the “Company”), Maguire Insurance Agency, Inc., a Pennsylvania Corporation (the “Employer”), Tokio Marine Holdings, Inc. a Japanese corporation (“Parent”), and Sean S. Sweeny (“Employee”).

     WHEREAS, Employee has served the Company and its subsidiaries pursuant to an Employment Agreement dated as of January 1, 2007 (as it exists on the date of this Addendum, the “Unamended Employment Agreement”);

     WHEREAS, the Company has entered into an Agreement and Plan of Merger, dated as of the date of this Addendum (the “Merger Agreement”), with Parent and Merger Sub (as defined in the Merger Agreement) whereby, at the “Effective Time” (as defined in the Merger Agreement) (i) Merger Sub will be merged with and into the Company (the “Merger”), (ii) the separate corporate existence of Merger Sub will thereupon cease, and the Company will be the surviving corporation in the Merger, and (iii) the Company and the Employer will become direct or indirect wholly owned subsidiaries of Parent;

     WHEREAS, Employee is an integral part of the management of the Employer, and is a key participant in the decision-making process relative to short-term and long-term planning and policy of the Employer and the Company, and the parties hereto believe that it is critical to the continued success of the Company, and to the ultimate success of the Merger, that Employee continue to be employed by the Employer after the Merger; and

     WHEREAS, the parties agree that is in their best interests to enter into this Addendum, with effect as described in Section 1 of this Addendum, on the terms set forth in this Addendum.

     NOW, THEREFORE, in consideration of the promises and mutual covenants herein and for other good and valuable consideration, the parties hereby agree as follows:

          1. Effectiveness.

     (a) This Addendum shall be effective immediately as of the Effective Time (other than with respect to the covenants set forth in the immediately following sentence, which shall be effective immediately); in the event that the Merger does not occur for any reason or the Merger Agreement terminates prior to the occurrence of the Merger, this Addendum shall terminate, and shall be of no further force or effect. From and after the date of this Addendum and continuing until the Effective Time, the parties hereto acknowledge and agree that (i) Employee’s employment shall continue to be subject to the terms and conditions of the Unamended Employment Agreement, (ii) Employee agrees not to terminate his employment with the Company for any reason (including, without limitation, for “Good Reason” (as defined in the Unamended Employment

Agreement)) on or prior to the Effective Time, and (iii) the Company agrees not to take any actions that would constitute “Good Reason” for Employee to terminate his employment, and not to otherwise terminate the employment of Employee for any reason, on or prior to the Effective Time, other than for unlawful activity related to employment, demonstrable fraud or material malfeasance against the Company after a two thirds majority vote of the Board with prompt and reasonable prior written notice to Parent, and an opportunity for Parent to investigate and respond prior to the effectiveness of such termination.

     (b) As of the Effective Time, Employee shall continue Employee’s employment with the Company in an uninterrupted manner under the terms of the Unamended Employment Agreement as amended by this Addendum (the “Amended Employment Agreement”) for the Term of Employment set forth herein. Employee acknowledges and agrees that he shall not terminate his employment pursuant to either the Unamended Employment Agreement or the Amended Employment Agreement for “Good Reason” due to any consequences arising from (i) the occurrence of the Merger, (ii) the Company no longer being a publicly traded company (which may result in a change in Employee’s duties), (iii) the Company becoming a subsidiary of Parent (which may result in a change in Employee’s duties), and/or (iv) Employee no longer participating in equity compensation plans, except that, notwithstanding the foregoing, (x) any reduction in or failure to timely pay Employee’s base salary, or (y) the assignment to Employee of duties that are not of a senior executive level or are not consistent with Employee’s training or experience (other than incidental de minimis office tasks), or (z) any failure to pay the Retention Bonus or any installment thereof described below when due, shall constitute Good Reason. The parties represent, acknowledge and agree that the Merger shall not constitute a Hostile Change in Control. For purposes of clarity, notwithstanding any of the foregoing, it shall not be a breach of the Unamended Employment Agreement or of the Amended Employment Agreement if the Employee resigns from his or her employment with or without Good Reason after the Effective Time (it being acknowledged that if Employee resigns without Good Reason, he shall not receive any severance compensation of any kind under the Unamended Employment Agreement or the Amended Employment Agreement nor will he receive any unpaid Retention Bonus).

     (c) As of the Effective Time, under the Amended Employment Agreement, the following sentence shall be added to the end of Section 3(b): “Employee’s responsibilities under this Agreement will include, without limiting the breadth of the provisions contained in this Section 3, using Employee’s best efforts to maximize the shareholder value of the Employer and its Affiliates, and to increase the growth, financially and otherwise, of the Employer and its Affiliates.”

          2. Term of Employment. Notwithstanding the first sentence of Section 4 of the Unamended Employment Agreement, the Term of Employment shall be extended under the

2

Amended Employment Agreement, and will expire on the fifth anniversary of the Effective Time.

          3. Retention Bonus. If Employee remains continuously employed by the Employer through the first, second, and third anniversaries, respectively, after the Effective Time, then the Employer shall pay to Employee an amount equal to an aggregate of $1,500,000 (the “Retention Bonus”), to be paid in equal installments as follows: one third (1/3) of the Retention Bonus on each of such first, second, and third anniversary dates after the Effective Time, in lump sums within five (5) business days after each such date, conditioned in each case on the continued employment of Employee on such anniversary dates. If, during the three-year period after the Effective Time, Employee’s employment is terminated by Employee (other than under the circumstances described in (x)-(z) below), by the Company or the Employer for Cause, or due to Employee’s death or disability (other than in the case of Employee’s death or disability after any such anniversary date but prior to the installment payment date with respect to such anniversary date, in which case such installment shall be paid to Employee or his estate, as the case may be), then any unpaid installments of the Retention Bonus will not be paid (and will not be payable) from and after the date of such termination of employment. If, during such period, the Employer or the Company terminates Employee without Cause, then the full amount of the unpaid portion of the Retention Bonus (if any) shall be immediately due and payable to Employee in one lump sum within five (5) business days after such termination of employment. In addition, during such period, in the event of (x) any reduction in or failure to timely pay Employee’s base salary, or (y) the assignment to Employee of duties that are not of a senior executive level or are not consistent with Employee’s training or experience (other than incidental de minimis office tasks), or (z) any failure to pay an installment of Retention Bonus described below when due, then the full amount of the unpaid portion of the Retention Bonus (if any) shall be immediately due and payable to Employee in one lump sum within five (5) business days after Employee’s subsequent resignation from employment. All Retention Bonus payments shall be paid by the Parent if the Employer and/or the Company fail to make payment when due. The parties hereto agree and acknowledge that the amount of the Retention Bonus shall not be taken into account for any purposes (other than for tax witholding purposes) under the Amended Employment Agreement or under any plan, program, agreement or arrangement, including without limitation for purposes of calculating Employee’s Base Compensation, Target Bonus, severance, or other compensation whatsoever (including under any qualified or non-qualified plans).

          4. Restrictive Covenants and Confidentiality. Section 7 of the Unamended Employment Agreement is amended to delete the provisions therein in their entirety, and to insert the following in its place:

     (a) Non-Compete. During Employee’s employment with the Employer, and for a two-year period after the date Employee’s employment is terminated for any reason (the “Restricted Period”), Employee shall not directly or indirectly:

     i. hold a 5% or greater equity (including stock options whether or not exercisable), voting or profit participation interest in a Competitive Enterprise, or

3

     ii. associate (including as a director, officer, employee, partner, consultant, agent or advisor) with a Competitive Enterprise, or

     iii. engage, or directly or indirectly manage or supervise personnel engaged, in any activity on behalf of any Competitive Enterprise:

(A) that is substantially related to any activity that Employee was engaged in with the Employer during the 12 months prior to Employee’s termination date;

(B) that is substantially related to any activity for which Employee had direct or indirect managerial or supervisory responsibility with the Employer during the 12 months prior to Employee’s termination date; or

(C) that calls for the application of specialized knowledge or skills substantially related to those used by Employee in his activities with the Employer during the 12 months prior to Employee’s termination date.

For purposes of this Agreement, “Competitive Enterprise” means any business enterprise that either (i) engages in any activity in the insurance business or industry, or in insurance related services, such as the insurance agent and broker businesses, or (ii) holds a 5% or greater equity, voting or profit participation interest in any enterprise that engages in the insurance business or industry, or in insurance related services, such as the insurance agent and broker businesses.

     (b) Non-Solicit. During the Restricted Period, Employee shall not, in any manner, directly or indirectly (without the prior written consent of the Employer): (i) Solicit any Client to transact business with a Competitive Enterprise or to reduce or refrain from doing any business with the Employer, (ii) transact business with any Client that would cause Employee to be a Competitive Enterprise, (iii) interfere with or damage any relationship between the Employer and a Client or (iv) Solicit anyone who is then an employee or consultant of the Employer (or who was an employee of the Employer within the prior 12 months) to resign from the Employer or to apply for or accept employment or engagement with any other business or enterprise.

For purposes of this Agreement, a “Client” means any client or prospective client of the Employer to whom Employee provided services, or for whom Employee transacted business, or whose identity became known to Employee in connection with his relationship with or employment by the Employer, and “Solicit” means any direct or indirect communication of any kind, regardless of who initiates it, that in any way invites, advises, encourages or requests any person to take or refrain from taking any action.

     (c) Confidential Information. Employee hereby acknowledges that, as an employee of the Employer, he will be making use of, acquiring and adding to confidential information of a special and unique nature and value relating to the

4

Employer and its strategic plan and financial operations. Employee further recognizes and acknowledges that all confidential information is the exclusive property of the Employer, is material and confidential, and is critical to the successful conduct of the business of the Employer. Accordingly, Employee hereby covenants and agrees that he will use confidential information for the benefit of the Employer only and shall not at any time, directly or indirectly, during the Term of Employment and thereafter divulge, reveal or communicate any confidential information to any person, firm, corporation or entity whatsoever, or use any confidential information for his own benefit or for the benefit of others. Notwithstanding the foregoing, Employee shall be authorized to disclose confidential information (i) as may be required by law or legal process after providing the Employer with prior written notice and an opportunity to respond to such disclosure (unless such notice is prohibited by law), (ii) in any criminal proceeding against him after providing the Employer with prior written notice and an opportunity to seek protection for such confidential information and (iii) with the prior written consent of the Employer.

     (d) Survival. Any termination of Employee’s employment shall have no effect on the continuing operation of this Section 7.

     (e) Validity. The terms and provisions of this Section 7 are intended to be separate and divisible provisions and if, for any reason, any one or more of them is held to be invalid or unenforceable, neither the validity nor the enforceability of any other provision of the Amended Employment Agreement shall thereby be affected. The parties hereto acknowledge that the potential restrictions on Employee’s future employment imposed by this Section 7 are reasonable in both duration and geographic scope and in all other respects. If for any reason any court of competent jurisdiction shall find any provisions of this Section 7 unreasonable in duration or geographic scope or otherwise, Employee and the Employer agree that the restrictions and prohibitions contained herein shall be effective to the fullest extent allowed under applicable law in such jurisdiction.

     (f) Adequate Consideration. The parties acknowledge that this Addendum would not have been entered into, and the Retention Bonus would not have been promised, in the absence of Employee’s covenants under this Section 7.

     (g) Remedies. Employee agrees that if Employee breaches or threatens to breach any of the provisions of this Section 7 or Section 11 of the Amended Employment Agreement, the Employer will have available, in additional to any other right or remedy available, the right to obtain injunctive and equitable relief of any type from a court of competent jurisdiction, including but not limited to restraining such breach or threatened breach and to specific performance any such provision of the Amended Employment Agreement. Employee further agrees that no bond or other security shall be required in obtaining such equitable relief and Employee hereby consents to the issuance of such injunction and to the ordering of specific performance.

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     (h) Definition of Employer. The term “Employer”, as used in this Section 7, and in Sections 2(b), the last paragraph of 6(a), and Section 11 of the Amended Employment Agreement, shall include the Company, the Employer, Parent and all of their respective Affiliates.

          5. Compensation. As of the Effective Time, Employer shall provide Employee with compensation opportunities comparable in the aggregate to those provided to Employee immediately prior to the Merger, including an increase in base salary from his current level (as disclosed to Parent and its agents and representatives).

          6. Gross up Under Section 280G. Employee will be entitled to receive an amount in cash, within ten (10) business days of the Effective Time, equal to the Gross Up Payment (as defined below), if any. The term “Gross-Up Payment” will mean a payment to Employee that is sufficient to pay in full Employee’s excise tax under Section 4999 of the Code and any similar excise tax under applicable state and local tax Laws relating to “excess parachute payments” (including any excise tax or federal, state or local tax payable in respect of the Gross-Up Payment), if any, arising only from the acceleration of vesting of Employee’s Options, SARs, Performance Awards, Restricted Shares and Stock Purchase Plan Awards as defined and described in Sections 4.3(a), (b), (c), (d) and (e), respectively, of the Merger Agreement (the “Acceleration”). The manner of making the computation of the amount provided in this paragraph will be as mutually agreed between Parent and the Company between the date of this Addendum and the Effective Time. Notwithstanding anything in this Agreement to the contrary, if it is determined by Parent that Employee would otherwise be entitled to a Gross-Up Payment, but that the payments to Employee in respect of the Acceleration would not be subject to the Excise Tax if such payments in respect of the Acceleration were reduced by an amount that is equal to or less than 10% of 2.99 times Employee’s “base amount” (as defined under Section 280G of the Code), then Employee will not receive the Gross-Up Payment, and such payments in respect of the Acceleration will be reduced to the maximum amount that would not result in the imposition of the Excise Tax on Employee. The payments in respect of the Acceleration to be reduced, if any, will be reduced in the inverse order of when such payments would have otherwise been made to, or the benefits would have otherwise been received by, Employee, until the reduction specified this Section 7 is achieved. For the avoidance of doubt, the payments described in this paragraph are in lieu of, and no payments will be made to Employee under, Section 8(c) of the Unamended Employment Agreement and the Amended Employment Agreement, in connection with, or with respect to any transactions associated with, the Merger.

          7. Release Requirement Clarification. The first paragraph of Section 6(a) of the Employment Agreement is amended to delete the words “as described in Subsection 2(b) above” and to add at the end of that sentence (after the word “Control)” and before the colon) the words “which shall be provided to Employee within ten (10) days of the cessation of Employee’s employment”.

          8. General. Capitalized terms not otherwise defined in this Addendum have the meanings ascribed to such terms in the Unamended Employment Agreement. All terms of the Unamended Employment Agreement that have not been amended by this Addendum shall continue in full force and effect under the Amended Employment Agreement from and after the Effective Time. References to “Executive Committee” shall mean the Board of Directors of the

6

Company after the Effective Time. Parent shall be a party to the Amended Employment Agreement from and after the Effective Time, and shall be considered a party for all relevant purposes, including, for clarity, for provisions relating to Affiliates, amendments, notices to the parties, release of the Employer, Notice of Termination (at the address for Parent set forth in the Merger Agreement), restrictive covenants, and protection of Employer property and information, but, for clarity, not for purposes of employment, compensation, benefits, position, authority, title or duties.

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

PHILADELPHIA CONSOLIDATED HOLDING CORP.
By:	/s/ Craig P. Keller
	Name:	Craig P. Keller
	Title:	CFO

MAGUIRE INSURANCE AGENCY, INC.
By:	/s/ Craig P. Keller
	Name:	Craig P. Keller
	Title:	CFO

TOKIO MARINE HOLDINGS, INC.
By:	/s/ Shuzo Sumi
	Name:	Shuzo Sumi
	Title:	President
SEAN S. SWEENEY
By:	/s/ Sean S. Sweeney

EX-10.5

Exhibit 10.5

EXECUTION COPY

ADDENDUM TO EMPLOYMENT AGREEMENT

     This ADDENDUM TO EMPLOYMENT AGREEMENT (this “Addendum”), dated as of July 23, 2008, is by and among Philadelphia Consolidated Holding Corp., a Pennsylvania corporation (the “Company”), Maguire Insurance Agency, Inc., a Pennsylvania Corporation (the “Employer”), Tokio Marine Holdings, Inc. a Japanese corporation (“Parent”), and Christopher J. Maguire (“Employee”).

     WHEREAS, Employee has served the Company and its subsidiaries pursuant to an Employment Agreement dated as of January 1, 2007 (as it exists on the date of this Addendum, the “Unamended Employment Agreement”);

     WHEREAS, the Company has entered into an Agreement and Plan of Merger, dated as of the date of this Addendum (the “Merger Agreement”), with Parent and Merger Sub (as defined in the Merger Agreement) whereby, at the “Effective Time” (as defined in the Merger Agreement) (i) Merger Sub will be merged with and into the Company (the “Merger”), (ii) the separate corporate existence of Merger Sub will thereupon cease, and the Company will be the surviving corporation in the Merger, and (iii) the Company and the Employer will become direct or indirect wholly owned subsidiaries of Parent;

     WHEREAS, Employee is an integral part of the management of the Employer, and is a key participant in the decision-making process relative to short-term and long-term planning and policy of the Employer and the Company, and the parties hereto believe that it is critical to the continued success of the Company, and to the ultimate success of the Merger, that Employee continue to be employed by the Employer after the Merger; and

     WHEREAS, the parties agree that is in their best interests to enter into this Addendum, with effect as described in Section 1 of this Addendum, on the terms set forth in this Addendum.

     NOW, THEREFORE, in consideration of the promises and mutual covenants herein and for other good and valuable consideration, the parties hereby agree as follows:

          1. Effectiveness.

     (a) This Addendum shall be effective immediately as of the Effective Time (other than with respect to the covenants set forth in the immediately following sentence, which shall be effective immediately); in the event that the Merger does not occur for any reason or the Merger Agreement terminates prior to the occurrence of the Merger, this Addendum shall terminate, and shall be of no further force or effect. From and after the date of this Addendum and continuing until the Effective Time, the parties hereto acknowledge and agree that (i) Employee’s employment shall continue to be subject to the terms and conditions of the Unamended Employment

Agreement, (ii) Employee agrees not to terminate his employment with the Company for any reason (including, without limitation, for “Good Reason” (as defined in the Unamended Employment Agreement)) on or prior to the Effective Time, and (iii) the Company agrees not to take any actions that would constitute “Good Reason” for Employee to terminate his employment, and not to otherwise terminate the employment of Employee for any reason, on or prior to the Effective Time, other than for unlawful activity related to employment, demonstrable fraud or material malfeasance against the Company after a two thirds majority vote of the Board with prompt and reasonable prior written notice to Parent, and an opportunity for Parent to investigate and respond prior to the effectiveness of such termination.

     (b) As of the Effective Time, Employee shall continue Employee’s employment with the Company in an uninterrupted manner under the terms of the Unamended Employment Agreement as amended by this Addendum (the “Amended Employment Agreement”) for the Term of Employment set forth herein. Employee acknowledges and agrees that he shall not terminate his employment pursuant to either the Unamended Employment Agreement or the Amended Employment Agreement for “Good Reason” due to any consequences arising from (i) the occurrence of the Merger, (ii) the Company no longer being a publicly traded company (which may result in a change in Employee’s duties), (iii) the Company becoming a subsidiary of Parent (which may result in a change in Employee’s duties), and/or (iv) Employee no longer participating in equity compensation plans, except that, notwithstanding the foregoing, (x) any reduction in or failure to timely pay Employee’s base salary, or (y) the assignment to Employee of duties that are not of a senior executive level or are not consistent with Employee’s training or experience (other than incidental de minimis office tasks), or (z) any failure to pay the Retention Bonus or any installment thereof described below when due, shall constitute Good Reason. The parties represent, acknowledge and agree that the Merger shall not constitute a Hostile Change in Control. For purposes of clarity, notwithstanding any of the foregoing, it shall not be a breach of the Unamended Employment Agreement or of the Amended Employment Agreement if the Employee resigns from his or her employment with or without Good Reason after the Effective Time (it being acknowledged that if Employee resigns without Good Reason, he shall not receive any severance compensation of any kind under the Unamended Employment Agreement or the Amended Employment Agreement nor will he receive any unpaid Retention Bonus).

     (c) As of the Effective Time, under the Amended Employment Agreement, the following sentence shall be added to the end of Section 3(b): “Employee’s responsibilities under this Agreement will include, without limiting the breadth of the provisions contained in this Section 3, using Employee’s best efforts to maximize the shareholder value of the Employer and its Affiliates, and to increase the growth, financially and otherwise, of the Employer and its Affiliates.”

          2. Term of Employment. Notwithstanding the first sentence of Section 4 of the Unamended Employment Agreement, the Term of Employment shall be extended under the

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Amended Employment Agreement, and will expire on the fifth anniversary of the Effective Time.

          3. Retention Bonus. If Employee remains continuously employed by the Employer through the first, second, and third anniversaries, respectively, after the Effective Time, then the Employer shall pay to Employee an amount equal to an aggregate of $1,500,000 (the “Retention Bonus”), to be paid in equal installments as follows: one third (1/3) of the Retention Bonus on each of such first, second, and third anniversary dates after the Effective Time, in lump sums within five (5) business days after each such date, conditioned in each case on the continued employment of Employee on such anniversary dates. If, during the three-year period after the Effective Time, Employee’s employment is terminated by Employee (other than under the circumstances described in (x)-(z) below), by the Company or the Employer for Cause, or due to Employee’s death or disability (other than in the case of Employee’s death or disability after any such anniversary date but prior to the installment payment date with respect to such anniversary date, in which case such installment shall be paid to Employee or his estate, as the case may be), then any unpaid installments of the Retention Bonus will not be paid (and will not be payable) from and after the date of such termination of employment. If, during such period, the Employer or the Company terminates Employee without Cause, then the full amount of the unpaid portion of the Retention Bonus (if any) shall be immediately due and payable to Employee in one lump sum within five (5) business days after such termination of employment. In addition, during such period, in the event of (x) any reduction in or failure to timely pay Employee’s base salary, or (y) the assignment to Employee of duties that are not of a senior executive level or are not consistent with Employee’s training or experience (other than incidental de minimis office tasks), or (z) any failure to pay an installment of Retention Bonus described below when due, then the full amount of the unpaid portion of the Retention Bonus (if any) shall be immediately due and payable to Employee in one lump sum within five (5) business days after Employee’s subsequent resignation from employment. All Retention Bonus payments shall be paid by the Parent if the Employer and/or the Company fail to make payment when due. The parties hereto agree and acknowledge that the amount of the Retention Bonus shall not be taken into account for any purposes (other than for tax witholding purposes) under the Amended Employment Agreement or under any plan, program, agreement or arrangement, including without limitation for purposes of calculating Employee’s Base Compensation, Target Bonus, severance, or other compensation whatsoever (including under any qualified or non-qualified plans).

          4. Restrictive Covenants and Confidentiality. Section 7 of the Unamended Employment Agreement is amended to delete the provisions therein in their entirety, and to insert the following in its place:

     (a) Non-Compete. During Employee’s employment with the Employer, and for a two-year period after the date Employee’s employment is terminated for any reason (the “Restricted Period”), Employee shall not directly or indirectly:

     i. hold a 5% or greater equity (including stock options whether or not exercisable), voting or profit participation interest in a Competitive Enterprise, or

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     ii. associate (including as a director, officer, employee, partner, consultant, agent or advisor) with a Competitive Enterprise, or

     iii. engage, or directly or indirectly manage or supervise personnel engaged, in any activity on behalf of any Competitive Enterprise:

(A) that is substantially related to any activity that Employee was engaged in with the Employer during the 12 months prior to Employee’s termination date;

(B) that is substantially related to any activity for which Employee had direct or indirect managerial or supervisory responsibility with the Employer during the 12 months prior to Employee’s termination date; or

(C) that calls for the application of specialized knowledge or skills substantially related to those used by Employee in his activities with the Employer during the 12 months prior to Employee’s termination date.

For purposes of this Agreement, “Competitive Enterprise” means any business enterprise that either (i) engages in any activity in the insurance business or industry, or in insurance related services, such as the insurance agent and broker businesses, or (ii) holds a 5% or greater equity, voting or profit participation interest in any enterprise that engages in the insurance business or industry, or in insurance related services, such as the insurance agent and broker businesses.

     (b) Non-Solicit. During the Restricted Period, Employee shall not, in any manner, directly or indirectly (without the prior written consent of the Employer): (i) Solicit any Client to transact business with a Competitive Enterprise or to reduce or refrain from doing any business with the Employer, (ii) transact business with any Client that would cause Employee to be a Competitive Enterprise, (iii) interfere with or damage any relationship between the Employer and a Client or (iv) Solicit anyone who is then an employee or consultant of the Employer (or who was an employee of the Employer within the prior 12 months) to resign from the Employer or to apply for or accept employment or engagement with any other business or enterprise.

For purposes of this Agreement, a “Client” means any client or prospective client of the Employer to whom Employee provided services, or for whom Employee transacted business, or whose identity became known to Employee in connection with his relationship with or employment by the Employer, and “Solicit” means any direct or indirect communication of any kind, regardless of who initiates it, that in any way invites, advises, encourages or requests any person to take or refrain from taking any action.

     (c) Confidential Information. Employee hereby acknowledges that, as an employee of the Employer, he will be making use of, acquiring and adding to confidential information of a special and unique nature and value relating to the

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Employer and its strategic plan and financial operations. Employee further recognizes and acknowledges that all confidential information is the exclusive property of the Employer, is material and confidential, and is critical to the successful conduct of the business of the Employer. Accordingly, Employee hereby covenants and agrees that he will use confidential information for the benefit of the Employer only and shall not at any time, directly or indirectly, during the Term of Employment and thereafter divulge, reveal or communicate any confidential information to any person, firm, corporation or entity whatsoever, or use any confidential information for his own benefit or for the benefit of others. Notwithstanding the foregoing, Employee shall be authorized to disclose confidential information (i) as may be required by law or legal process after providing the Employer with prior written notice and an opportunity to respond to such disclosure (unless such notice is prohibited by law), (ii) in any criminal proceeding against him after providing the Employer with prior written notice and an opportunity to seek protection for such confidential information and (iii) with the prior written consent of the Employer.

     (d) Survival. Any termination of Employee’s employment shall have no effect on the continuing operation of this Section 7.

     (e) Validity. The terms and provisions of this Section 7 are intended to be separate and divisible provisions and if, for any reason, any one or more of them is held to be invalid or unenforceable, neither the validity nor the enforceability of any other provision of the Amended Employment Agreement shall thereby be affected. The parties hereto acknowledge that the potential restrictions on Employee’s future employment imposed by this Section 7 are reasonable in both duration and geographic scope and in all other respects. If for any reason any court of competent jurisdiction shall find any provisions of this Section 7 unreasonable in duration or geographic scope or otherwise, Employee and the Employer agree that the restrictions and prohibitions contained herein shall be effective to the fullest extent allowed under applicable law in such jurisdiction.

     (f) Adequate Consideration. The parties acknowledge that this Addendum would not have been entered into, and the Retention Bonus would not have been promised, in the absence of Employee’s covenants under this Section 7.

     (g) Remedies. Employee agrees that if Employee breaches or threatens to breach any of the provisions of this Section 7 or Section 11 of the Amended Employment Agreement, the Employer will have available, in additional to any other right or remedy available, the right to obtain injunctive and equitable relief of any type from a court of competent jurisdiction, including but not limited to restraining such breach or threatened breach and to specific performance any such provision of the Amended Employment Agreement. Employee further agrees that no bond or other security shall be required in obtaining such equitable relief and Employee hereby consents to the issuance of such injunction and to the ordering of specific performance.

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     (h) Definition of Employer. The term “Employer”, as used in this Section 7, and in Sections 2(b), the last paragraph of 6(a), and Section 11 of the Amended Employment Agreement, shall include the Company, the Employer, Parent and all of their respective Affiliates.

          5. Compensation. As of the Effective Time, Employer shall provide Employee with compensation opportunities comparable in the aggregate to those provided to Employee immediately prior to the Merger, including an increase in base salary from his current level (as disclosed to Parent and its agents and representatives).

          6. Gross up Under Section 280G. Employee will be entitled to receive an amount in cash, within ten (10) business days of the Effective Time, equal to the Gross Up Payment (as defined below), if any. The term “Gross-Up Payment” will mean a payment to Employee that is sufficient to pay in full Employee’s excise tax under Section 4999 of the Code and any similar excise tax under applicable state and local tax Laws relating to “excess parachute payments” (including any excise tax or federal, state or local tax payable in respect of the Gross-Up Payment), if any, arising only from the acceleration of vesting of Employee’s Options, SARs, Performance Awards, Restricted Shares and Stock Purchase Plan Awards as defined and described in Sections 4.3(a), (b), (c), (d) and (e), respectively, of the Merger Agreement (the “Acceleration”). The manner of making the computation of the amount provided in this paragraph will be as mutually agreed between Parent and the Company between the date of this Addendum and the Effective Time. Notwithstanding anything in this Agreement to the contrary, if it is determined by Parent that Employee would otherwise be entitled to a Gross-Up Payment, but that the payments to Employee in respect of the Acceleration would not be subject to the Excise Tax if such payments in respect of the Acceleration were reduced by an amount that is equal to or less than 10% of 2.99 times Employee’s “base amount” (as defined under Section 280G of the Code), then Employee will not receive the Gross-Up Payment, and such payments in respect of the Acceleration will be reduced to the maximum amount that would not result in the imposition of the Excise Tax on Employee. The payments in respect of the Acceleration to be reduced, if any, will be reduced in the inverse order of when such payments would have otherwise been made to, or the benefits would have otherwise been received by, Employee, until the reduction specified this Section 7 is achieved. For the avoidance of doubt, the payments described in this paragraph are in lieu of, and no payments will be made to Employee under, Section 8(c) of the Unamended Employment Agreement and the Amended Employment Agreement, in connection with, or with respect to any transactions associated with, the Merger.

          7. Release Requirement Clarification. The first paragraph of Section 6(a) of the Employment Agreement is amended to delete the words “as described in Subsection 2(b) above” and to add at the end of that sentence (after the word “Control)” and before the colon) the words “which shall be provided to Employee within ten (10) days of the cessation of Employee’s employment”.

          8. General. Capitalized terms not otherwise defined in this Addendum have the meanings ascribed to such terms in the Unamended Employment Agreement. All terms of the Unamended Employment Agreement that have not been amended by this Addendum shall continue in full force and effect under the Amended Employment Agreement from and after the Effective Time. References to “Executive Committee” shall mean the Board of Directors of the

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Company after the Effective Time. Parent shall be a party to the Amended Employment Agreement from and after the Effective Time, and shall be considered a party for all relevant purposes, including, for clarity, for provisions relating to Affiliates, amendments, notices to the parties, release of the Employer, Notice of Termination (at the address for Parent set forth in the Merger Agreement), restrictive covenants, and protection of Employer property and information, but, for clarity, not for purposes of employment, compensation, benefits, position, authority, title or duties.

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

PHILADELPHIA CONSOLIDATED HOLDING CORP.
By:	/s/ Craig P. Keller
	Name:	Craig P. Keller
	Title:	CFO

MAGUIRE INSURANCE AGENCY, INC.
By:	/s/ Craig P. Keller
	Name:	Craig P. Keller
	Title:	CFO

TOKIO MARINE HOLDINGS, INC.
By:	/s/ Shuzo Sumi
	Name:	Shuzo Sumi
	Title:	President
CHRISTOPHER J. MAGUIRE
By:	/s/ Christopher J. Maguire

EX-99.1

Exhibit 99.1

VOTING AND SUPPORT AGREEMENT

     VOTING AND SUPPORT AGREEMENT, dated as of July [___], 2008 (this “Agreement”), by and between Tokio Marine Holdings, Inc., a Japanese corporation (“Buyer”), and [ • ] (the “Shareholder”). Capitalized terms used but not defined herein shall have the meanings given to such terms in the Merger Agreement (as such term is defined below).

W I T N E S S E T H:

     WHEREAS, Philadelphia Consolidated Holding Corp. (the “Company”) and Buyer are, concurrently with the execution and delivery of this Agreement, entering into an Agreement and Plan of Merger, dated the date hereof (the “Merger Agreement”), pursuant to which at the Closing an indirect wholly owned subsidiary of Buyer will merge with and into the Company (the “Merger”);

     WHEREAS, as of the date hereof, the Shareholder [is an officer and a member of the Company’s board of directors and]¹ owns of record, or has the power to vote, the outstanding shares of Company Common Stock, no par value (the “Shares”) listed on the signature page hereto (the “Existing Shares”);

     WHEREAS, the Shareholder wishes to undertake certain obligations to Buyer with respect to the Existing Shares and any other Shares that the Shareholder may become the owner of record of, or with respect to which the Shareholder obtains the power to vote, after the date of this Agreement and which would have been Existing Shares if owned, or if the Shareholder had the power to vote such Shares, on the date of this Agreement (such Shares, together with the Existing Shares, the “Total Shares”);

     NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements contained herein, and intending to be legally bound hereby, the parties hereto hereby agree as follows:

ARTICLE I

VOTING

     1.1 Agreement to Vote. Except as otherwise provided in this Agreement, the Shareholder agrees that, from and after the date hereof and until the date on which this Agreement is terminated pursuant to Section 4.1, at the Shareholders Meeting or any other meeting of the shareholders of the Company at which any of the matters described below in Section 1.1(b) are to be voted upon, however called, or in

¹ Insert for individuals if appropriate.

connection with any written consent of the shareholders of the Company with respect to any of the matters described in Section 1.1(b), the Shareholder shall:

     (a) appear at each such meeting (in person or by proxy) or otherwise cause all Total Shares owned of record by the Shareholder, or with respect to which the Shareholder has the power to vote, in each case as of the record date used for determining the holders of Shares entitled to vote at such meeting or to deliver such consent (the “Record Date”) to be counted as present thereat for purposes of calculating a quorum; and

     (b) vote (or cause to be voted), in person or by proxy, or deliver a written consent (or cause a consent to be delivered) covering, all Total Shares owned of record by the Shareholder or as to which the Shareholder has the power to vote, in each case as of the Record Date, (i) in favor of adoption of the Merger Agreement and any other action of the Company’s shareholders requested by the Company in furtherance thereof, (ii) against any action, agreement or transaction submitted for approval of the shareholders of the Company that would reasonably be expected to result in a breach of any covenant, representation or warranty or any other obligation or agreement of the Shareholder contained in this Agreement; and (iii) against any Acquisition Proposal or any other action, agreement or transaction submitted for approval to the shareholders of the Company that could reasonably be expected to materially impede or interfere with, delay, postpone or materially and adversely affect the Merger, the Merger Agreement or this Agreement.

     1.2 No Inconsistent Agreements. The Shareholder hereby covenants and agrees that, except as set forth on the signature page hereof and except for actions taken in furtherance of this Agreement, the Shareholder (a) has not entered, and shall not enter at any time while this Agreement remains in effect, into any voting agreement or voting trust with respect to the Total Shares owned of record by the Shareholder or with respect to which the Shareholder has the power to vote and (b) has not granted, and shall not grant at any time while this Agreement remains in effect, a proxy, a consent or power of attorney with respect to the Total Shares, other than to vote in accordance with the provisions of Section 1.1.

     1.3 Proxy. The Shareholder agrees, if requested, to grant to Buyer a proxy, in such form as is reasonably acceptable to Shareholder and Buyer, to vote the Total Shares owned of record by the Shareholder or with respect to which the Shareholder has the power to vote as indicated in Section 1.1 above if the Shareholder fails for any reason to vote such Shares in accordance with Section 1.1 (which proxy shall be limited to the matters set forth in Section 1.1). The Shareholder agrees that such a proxy would be coupled with an interest and irrevocable for so long as this Agreement is in effect, and the Shareholder will take such further action or execute such other instruments as may be reasonably necessary to effectuate the intent of such proxy. Any such proxy shall automatically terminate at the time of termination of this Agreement.

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ARTICLE II

REPRESENTATIONS AND WARRANTIES

     2.1 Representations and Warranties of the Shareholder. Except as set forth on the signature page hereof, the Shareholder hereby represents and warrants to Buyer as follows as of the date hereof:

     (a) Authorization; Validity of Agreement; Necessary Action. This Agreement has been duly executed and delivered by the Shareholder and, assuming this Agreement constitutes a valid and binding obligation of Buyer, constitutes a valid and binding obligation of the Shareholder, enforceable in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and general equitable principles).

     (b) Ownership. The Existing Shares are owned of record by the Shareholder or the Shareholder has the sole power to vote such Shares. The Existing Shares constitute all Shares held of record by Shareholder or for which voting power is held by the Shareholder. The Shareholder has sole power to issue instructions with respect to the matters set forth in Article I or Section 3.1 hereof, and sole power to agree to all of the matters set forth in this Agreement, in each case with respect to all of the Existing Shares, with no limitations, qualifications or restrictions on such rights, subject to applicable federal and state securities laws and the terms of this Agreement. The Shareholder has good title to the Existing Shares, free and clear of any Liens.

     (c) No Violation. The execution and delivery of this Agreement by the Shareholder does not, and the performance by the Shareholder of its obligations under this Agreement will not, (i) to its knowledge, cause a violation by Shareholder of any law, ordinance or regulation of any Governmental or Regulatory Authority applicable to the Shareholder or by which any of the Existing Shares is bound or (ii) conflict with, result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or require payment under, or result in the creation of any Lien on the properties or assets of the Shareholder pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Shareholder is a party or by which any of the Existing Shares is bound, except for any of the foregoing as could not reasonably be expected, either individually or in the aggregate, to materially impair the ability of the Shareholder to perform its obligations hereunder or to consummate the transactions contemplated hereby on a timely basis.

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ARTICLE III

OTHER COVENANTS

     3.1 Further Agreements of Shareholder.

     (a) Except as hereinafter provided in this Section 3.1(a), the Shareholder hereby agrees, while this Agreement is in effect, and except as expressly contemplated hereby or by the Merger Agreement, not to sell, transfer, pledge, encumber, assign, distribute, gift or otherwise dispose of any Total Shares owned of record by the Shareholder or any options, warrants or other rights to acquire additional Shares (collectively, “Options”) owned of record by the Shareholder (collectively, a “Transfer”), or enter into any contract, option or other arrangement or understanding with respect to any Transfer (whether by actual disposition or effective economic disposition due to hedging, cash settlement or otherwise) of any of the Total Shares or Options acquired of record by the Shareholder after the date hereof, or any interest therein. Notwithstanding anything in this Agreement to the contrary, nothing in this Section 3.1 shall prohibit (i) any Transfer (A) to any member of the Shareholder’s family or to a trust for the benefit of the Shareholder or any member of the Shareholder’s family or (B) upon the death of the Shareholder, (ii) any Transfer(s) to one or more charitable organizations described in Section 170(c) of the Internal Revenue Code of up to 15%, in the aggregate, of the amount of the Shareholder’s Existing Shares, or (iii) any Transfer pursuant to any pledge or similar agreement or Lien, provided, however, that a Transfer referred to in clause (i) shall be permitted only if (x) the Shareholder provides at least five calendar days’ notice to Buyer of the proposed Transfer, and (y) as a precondition to such Transfer, the transferee agrees in a writing reasonably satisfactory to Buyer to be bound by the terms of this Agreement or executes a Voting and Support Agreement substantially in the form of this Agreement with respect to such Transferred Shares or Options; and a Transfer referred to in clause (iii) shall be permitted only if as a precondition to such Transfer, the transferee agrees in writing to be bound by the terms of this Agreement. Nothing in this Section 3.1(a) shall preclude or limit the conversion or exercise of any Options.

     (b) In case of a stock dividend or distribution, or any change in the Shares by reason of any stock dividend or distribution, split-up, recapitalization, combination, exchange of shares or the like, the term “Shares” shall be deemed to refer to and include the Shares as well as all such stock dividends and distributions and any securities into which or for which any or all of the Shares may be changed or exchanged or which are received in such transaction.

     (c) The Shareholder agrees, while this Agreement is in effect, to notify Buyer promptly in writing of the number of any additional Shares acquired by the Shareholder, if any, after the date hereof.

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     (d) While this Agreement is in effect, the Shareholder agrees not to, nor to authorize any investment banker, financial adviser, attorney, accountant or other representative or agent of the Shareholder to, directly or indirectly, (i) initiate, solicit or encourage, any inquiries or the making of any proposal to acquire any Total Shares or Options, (ii) engage in any negotiations concerning, or provide any confidential information or data to, any person relating to any proposal to acquire any Total Shares or Options, or otherwise facilitate any efforts or attempt to make or implement any proposal to acquire any Total Shares. Nothing in this Section 3.1(d) shall preclude any Transfer of Shares or Options as permitted by Section 3.1(a) or any actions taken in furtherance of any such Transfer.

ARTICLE IV

MISCELLANEOUS

     4.1 Limitation on Liability. Notwithstanding anything in this Agreement to the contrary, no party to this Agreement shall have any liability for damages to any other party for any breach or violation of this Agreement unless such breach or violation was willful or intentional.

     4.2 Termination. This Agreement shall terminate upon the earlier to occur of (a) the date and time at which, in the Shareholders Meeting or any other meeting of the shareholders of the Company, a vote is taken regarding the adoption of the Merger Agreement and a quorum is present and (b) the date and time of termination of the Merger Agreement. Shareholder shall have the right to terminate this Agreement if the Merger Agreement is amended to decrease the Per Share Merger Consideration, provided, that the Shareholder sends notice to Buyer of the Shareholder’s election to terminate within seven days after public announcement of any such amendment, in which case this Agreement shall terminate on the date Buyer receives such notice. Upon such termination, no party shall have any further obligations or liabilities hereunder; provided, however, such termination shall not relieve any party from liability for any willful or intentional breach or violation of this Agreement prior to such termination.

     4.3 Further Assurances. From time to time, at the other party’s request and without further consideration, each party shall execute and deliver such additional documents and take all such further action as may be reasonably necessary or desirable to consummate the transactions contemplated by this Agreement.

     4.4 No Ownership Interest. Nothing contained in this Agreement shall be deemed to vest in Buyer any direct or indirect ownership or incident of ownership of or with respect to any Total Shares. All rights, ownership and economic benefits of and relating to the Total Shares shall remain vested in and belong to the Shareholder, and Buyer shall have no authority to manage, direct, superintend, restrict, regulate, govern or administer any of the policies or operations of the Company or exercise any power or

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authority to direct the Shareholder in the voting of any of such Shares, except as otherwise provided herein.

     4.5 Notices. Any notice, request, instruction or other document to be given hereunder by any party to the other shall be in writing and delivered personally or sent by registered or certified mail, postage prepaid, by facsimile, overnight courier or email:

(a) if to Buyer to:

Sullivan & Cromwell LLP
125 Broad Street
New York, New York 10004
Fax: (212) 558-3588
Email: delamaterr@sullcrom.com
Attention: Robert G. DeLaMater

(b) if to the Shareholder to the address listed next to his/her name on the signature page hereto, with a copy to:

WolfBlock LLP
1650 Arch Street, 22nd Floor
Philadelphia, PA 19103
Fax: (215) 405-3836
Email: msherman@wolfblock.com
Attention: Michael M. Sherman, Esquire

or to such other persons or addresses as may be designated in writing by the party to receive such notice as provided above. Any notice, request, instruction or other document given as provided above shall be deemed given to the receiving party upon actual receipt, if delivered personally; three (3) business days after deposit in the mail, if sent by registered or certified mail; upon confirmation of successful transmission if sent by facsimile or email (provided that if given by facsimile or email receipt of such notice, request, instruction or other document is confirmed by telephone); or on the next business day after deposit with an overnight courier, if sent by an overnight courier.

     4.6 Interpretation. The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and section references are to this Agreement unless otherwise specified. Whenever “knowledge” is used in this Agreement, it shall be deemed to mean the actual knowledge of the Shareholder. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

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     4.7 Counterparts. This Agreement may be executed in any number of counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts shall together constitute the same agreement.

     4.8 Entire Agreement. This Agreement (including any exhibits hereto) constitutes the entire agreement, and supersedes all other prior agreements, understandings, and representations and warranties, both written and oral, between the parties, with respect to the subject matter hereof.

     4.9 Governing Law and Jurisdiction. (a)  THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE COMMONWEALTH OF PENNSYLVANIA APPLICABLE TO AGREEMENTS MADE AND WHOLLY TO BE PERFORMED IN THE COMMONWEALTH OF PENNSYLVANIA.

     (b) EXCEPT AS SET OUT BELOW IN THIS PARAGRAPH, EACH OF THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY CONSENTS TO SUBMIT TO THE SOLE AND EXCLUSIVE JURISDICTION OF THE COMMERCE PROGRAM OF THE COURT OF COMMON PLEAS OF PHILADELPHIA COUNTY, PENNSYLVANIA (OR, IF SUCH COURT DOES NOT HAVE SUBJECT MATTER JURISDICTION OVER SUCH MATTER, IN THE U.S. DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA (THE “PENNSYLVANIA COURTS”) FOR ANY LITIGATION ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE NEGOTIATION, VALIDITY OR PERFORMANCE OF THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY (AND AGREES NOT TO COMMENCE ANY LITIGATION RELATING THERETO EXCEPT IN SUCH COURTS), WAIVES ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUCH LITIGATION IN THE PENNSYLVANIA COURTS AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH LITIGATION IN THE PENNSYLVANIA COURTS AND AGREES NOT TO PLEAD OR CLAIM IN ANY PENNSYLVANIA COURT THAT SUCH LITIGATION BROUGHT THEREIN HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE PARTIES HERETO AGREES THAT SERVICE OF PROCESS MAY BE MADE ON THE SHAREHOLDER BY U.S. REGISTERED MAIL TO THE SHAREHOLDER’S ADDRESS SET FORTH IN SECTION 4.5 OR OTHER MEANS PERMITTED BY LAW. EACH OF THE PARTIES HERETO AGREES THAT SERVICE OF PROCESS MAY BE MADE ON BUYER BY U.S. REGISTERED MAIL OR OTHER MEANS PERMITTED BY LAW TO THE FOLLOWING ADDRESS:

Tokio Marine Americas Corporation
230 Park Avenue
New York, New York 10160
U.S.A.

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SERVICE MADE PURSUANT TO THE IMMEDIATELY PRECEDING SENTENCES SHALL HAVE THE SAME LEGAL FORCE AND EFFECT AS IF SERVED UPON SUCH PARTY PERSONALLY WITHIN THE COMMONWEALTH OF PENNSYLVANIA. IN THE EVENT ANY PARTY HERETO FAILS TO NOTIFY ANY OTHER PARTY HERETO OF ITS AGENT FOR SERVICE OF PROCESS IN THE COMMONWEALTH OF PENNSYLVANIA, NOTHING HEREIN CONTAINED SHALL BE DEEMED TO AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY OTHER PARTY HERETO IN ANY OTHER JURISDICTION TO ENFORCE JUDGMENTS OBTAINED IN ANY ACTION, SUIT OR PROCEEDING BROUGHT PURSUANT TO THIS SECTION 4.9 .

     4.10 Amendment. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto.

     4.11 Enforcement. The parties agree that in the event that the Shareholder fails to perform any of its obligations under this Agreement in accordance with their specific terms, Buyer may not have an adequate remedy at law. It is accordingly agreed that the parties shall be entitled to specific performance of the terms hereof, this being in addition to any other remedy to which they are entitled at law or in equity. Each of the parties further agrees to waive any requirements for the securing or posting of any bond in connection with obtaining any such equitable relief.

     4.12 Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. If any provision of this Agreement, or the application of such provision to any Person or any circumstance, is invalid or unenforceable, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application of such provision, in any other jurisdiction.

     4.13 Assignment; Third Party Beneficiaries. Neither this Agreement nor any of the rights, interests or obligations of any party hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other party. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and permitted assigns. This Agreement is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder.

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     4.14 Shareholder Capacity. [By executing and delivering this Agreement, the Shareholder makes no agreement or understanding herein in his or her capacity or with respect to his or her actions as a director, officer or employee of the Company. The Shareholder is signing and entering into this Agreement solely in his or her capacity as the record owner of the Total Shares or in his or her capacity as the individual with voting power with respect to the Total Shares, and nothing herein shall limit or affect in any way any actions that may be hereafter taken by Shareholder in its capacity as an employee, officer or director of the Company or in any other capacity and no such actions shall be deemed to be a breach of this Agreement. Nothing contained in this Agreement will restrict, limit, prohibit or preclude the Shareholder from exercising or discharging his or her fiduciary duties as an officer or director of the Company under applicable law.]² Any trustee executing this Agreement is executing this Agreement solely in his or her fiduciary capacity and shall have no personal liability or obligation under this Agreement.

[Signatures appear on following pages.]

² Insert for individuals if appropriate.

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     IN WITNESS WHEREOF, the parties hereto have signed or have caused this Agreement to be signed by their respective officers or other authorized persons thereunto duly authorized as of the date first written above.

TOKIO MARINE HOLDINGS, INC.
By:
	Name:
	Title:

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VOTING AND SUPPORT AGREEMENT

Counterpart Signature Page

          IN WITNESS WHEREOF, the Shareholder has executed this Agreement as of the date first written above.

Number of Shares:
Address for notices:	[          ]
	[          ], [individually]

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EX-99.2

Exhibit 99.2

FOR IMMEDIATE RELEASE

TOKIO MARINE HOLDINGS TO ACQUIRE PHILADELPHIA
CONSOLIDATED IN $4.7 BILLION TRANSACTION

Marks Significant Expansion by Tokio Marine into the U.S. P&C Insurance Market
Continues Growth in Key International Markets
Enhances Well-balanced Global Portfolio

Tokyo, Japan and Bala Cynwyd, PA, July 23 – Tokio Marine Holdings, Inc. (TMHD) and Philadelphia Consolidated Holding Corp. (Philadelphia Consolidated) (NASDAQ: PHLY) today announced that they have entered into a definitive agreement under which TMHD will acquire all outstanding shares of Philadelphia Consolidated, a leading U.S. P&C insurance company offering specialty commercial property and casualty (P&C) products and services for targeted markets, for $61.50 per share in cash, through TMHD’s wholly owned subsidiary, Tokio Marine & Nichido Fire Insurance Co., Ltd. (TMNF). The total transaction value is approximately U.S. $4.7 billion. The transaction is expected to close in the fourth quarter of 2008.

The acquisition of Philadelphia Consolidated marks Tokio Marine’s significant expansion into the U.S. market and effectively complements Tokio Marine’s recent international growth initiatives. With 47 offices and approximately 1,400 employees across the U.S., Philadelphia Consolidated will provide Tokio Marine with a solid platform for their P&C business in the U.S. Philadelphia Consolidated has a consistent record of outperforming the U.S. P&C industry over many years, and continues to grow, even during periods when the P&C industry is not experiencing expansion. When combined with Tokio Marine’s financial strength and international market knowledge, Philadelphia Consolidated’s proven product development capabilities and multi-channel distribution expertise create a unique opportunity to expand the revenue and profits of Tokio Marine’s international business.

Shuzo Sumi, President of Tokio Marine, said, “Expansion of revenue and profits from international business is the driving force of Tokio Marine’s mid to long term growth strategy. The acquisition of Philadelphia Consolidated is consistent with our aspirations of expanding globally and realizing a well-balanced business portfolio. Combined with the recently completed acquisition of Kiln, we have established a strong presence in both key U.S. P&C and London insurance markets. With its disciplined, highly focused marketing and underwriting operations, Philadelphia Consolidated is an excellent strategic fit for us. When opportunities to acquire a premier organization arise, the best response is to act. ”

James J. Maguire, Chairman of Philadelphia Consolidated, said, “I founded this company in 1962. This is a great opportunity for us to take the company to the next level, and as a demonstration of our commitment, the executive management team and I will be making

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a substantial investment in TMHD’s stock promptly after closing of the transaction, and I will become a member of the International Strategic Committee of Tokio Marine.”

James J. Maguire, Jr., CEO of Philadelphia Consolidated, said, “Philadelphia Consolidated’s management team is fully committed to the successful growth of the business and delivering a performance which will continue our superior level of achievement. Joining the Tokio Marine Group with its international reach will fuel the next stage of our growth and will provide numerous benefits for our customers, brokers, agents and employees. Philadelphia Consolidated’s strong distribution relationships with brokers and agents and our local market knowledge acquired over almost 50 years will provide Tokio Marine with a substantial platform in its effort to realize superior growth and profitability in the U.S. and on an international scale. In addition, Tokio Marine’s credit quality and overall financial strength will open up additional avenues of expansion further enabling the combined company to generate enhanced returns.”

President Sumi concluded, “Tokio Marine has great respect for the superior growth and profitability that Philadelphia Consolidated has achieved under the leadership of its experienced and highly capable management team. We are pleased with the commitment of Philadelphia Consolidated’s management to this new partnership, which will be critical to the success of the combined business. Both Philadelphia Consolidated and Tokio Marine are top-tier insurers with a customer-driven approach, profitable underwriting, and a focus on long-term growth. We believe that we share common fundamental values and a business philosophy and we look forward to a long and successful partnership.”

As previously announced, Tokio Marine entered the Lloyd’s market with the acquisition of Kiln in March 2008. Philadelphia Consolidated’s ability to develop highly profitable, customized products, matched with Kiln’s significant global underwriting expertise and Tokio Marine’s financial resources, create an unsurpassed and highly complementary international platform.

The profits/losses of Philadelphia Consolidated will be consolidated into TMHD’s financial statements from fiscal year 2009 and will deliver greater earnings consistency throughout the insurance pricing cycle. If Philadelphia Consolidated were included in TMHD’s 2008 financial statements on a pro forma basis, the adjusted earnings of Tokio Marine’s international business would have increased by approximately 95 percent from JPY31.7 billion (approximately $300 million) to approximately JPY62 billion (approximately $580 million).

Certain Transaction Terms:

Under the terms of the agreement, Tokio Marine will acquire 100% of the shares of Philadelphia Consolidated in a cash merger transaction pursuant to which each share of Philadelphia Consolidated will be entitled to receive $61.50 per share. The acquisition

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will be financed through the utilization of Tokio Marine Group cash on hand, together with borrowings, including non-convertible bond issuance.

Approvals and Timing:

The Boards of Directors of both companies have unanimously approved the transaction and key family shareholders representing approximately 18% of Philadelphia Consolidated’s outstanding shares have agreed to vote in favor of the transaction. The acquisition is subject to the approval of Philadelphia Consolidated shareholders and the approval of various regulatory authorities in Japan and the U.S., as well as other customary closing conditions. The transaction is expected to close in the fourth quarter of 2008.

Fox-Pitt Kelton Cochran Caronia Waller acted as financial advisors to Tokio Marine in this transaction and Sullivan & Cromwell LLP provided external legal counsel. Merrill Lynch & Co. acted as financial advisors to Philadelphia Consolidated and WolfBlock LLP provided external legal counsel.

Enquiries:

Tokio Marine Holdings, Inc. Tokio Marine & Nichido Fire Insurance Co., Ltd. Shuji Asano, Group Leader, Corporate Communications Dept. Hayato Isogai, Chief Executive Officer (Tokio Marine Americas Corporation)	Tel: +81-(0)3-5223-3212 Tel: +1-212-297-6669
Fox-Pitt, Kelton Cochran Caronia Waller (Financial adviser to Tokio Marine) John Waller Ian Brimecome	Tel: +1-312-425-4077 Tel:+44-(0)20-7311-6005
Financial Dynamics (Financial PR adviser to Tokio Marine) David Roady	Tel: +1-212-850-5632
Philadelphia Consolidated Holding Corp. Joe Barnholt, Assistant Vice President, Investor Relations	Tel: +1-610-617-7626
Merrill Lynch & Co. (Financial Advisor to Philadelphia Consolidated) Daniel Luckshire	Tel: +1-212-449-4344

Press Conference:

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TMHD will host a press conference held at CLUB KANTO in the Tokyo Bankers Association Building (Tokyo Ginko Kyokai Building) to discuss the transaction on July 23 at 04:30 P.M. Japan time (03:30 A.M. EDT).

TMHD and Philadelphia Consolidated will host a teleconference for the international investment community today, July 23, 2008 at 10:00 P.M. Japan time (9:00 A.M. EDT) to discuss the announcement. The teleconference can be accessed by dialing 1-210-795-0517 (U.S. and Canada callers(*)) and entering the passcode (*) approximately ten minutes prior to the teleconference. An accompanying slide presentation will be available for download on http://www.tokiomarinehd.com/en/index.html approximately at 4:30 P.M. Japan time (3:30 A.M. EDT) prior to the start of the teleconference.

(*) For dial-in numbers of countries other than U.S. and Canada and the passcode, please contact Masamitsu Nomoto of TMHD by e-mail to masamitsu.nomoto@tokiom.com or by telephone at +81-(0)3-3285-1902.

About Tokio Marine Holdings, Inc.:

Tokio Marine Holdings, Inc., the ultimate holding company of the Tokio Marine Group, is incorporated in Japan and is listed on both the Tokyo and Osaka Stock Exchanges. The Tokio Marine Group operates in the property and casualty insurance, reinsurance and life insurance sector globally with a presence in approximately 40 countries/areas. Consolidated net premiums written of the Group for the fiscal year 2007 was approximately USD 21.2 billion. The Group’s main operating subsidiary, Tokio Marine & Nichido Fire (TMNF), was founded in 1879 and is the oldest and largest property and casualty insurer in Japan. TMNF conducts business in the United States mainly through its U.S. branch and enjoys an A.M. Best rating of A++, which ranks among the highest in the industry.

About Philadelphia Consolidated Holding Corp.:

In operation since 1962, Philadelphia Consolidated designs, markets, and underwrites commercial property/casualty and professional liability insurance products incorporating value added coverages and services for select industries. The Company, whose commercial lines insurance subsidiaries are rated A+ (Superior) by A.M. Best Company and A1 for insurance financial strength by Moody’s Investors Services, is nationally recognized as a member of Ward’s Top 50, Forbes’ Platinum 400 list of America’s Best Big Companies and Forbes’ 100 Best Mid-Cap Stocks in America. The organization has 47 offices strategically located across the United States to provide superior service.

Cautionary Statement Regarding Forward-Looking Statements

Certain statements in this release may constitute “forward-looking statements.” Actual results could differ materially from those projected or forecast in the forward-looking statements. The factors that could cause actual results to differ materially include, in

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addition to Risk Factors referred to in filings made with the Securities and Exchange Commission (“SEC”), the following: operating costs, customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees, customers or suppliers) may be greater than expected following the announcement of the transaction; the retention of certain key employees at Philadelphia Consolidated; the conditions to the completion of the transaction may not be satisfied, or the regulatory approvals required for the transaction may not be obtained on the terms expected or on the anticipated schedule; the parties may not be able to meet expectations regarding the timing, completion and accounting and tax treatments of the merger. Tokio Marine and Philadelphia Consolidated assume no obligation to, and expressly disclaim any obligation, to update the information in this release, except as otherwise required by law. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof.

Additional Information and Where to Find it

This communication may be deemed solicitation material in respect of the proposed acquisition of Philadelphia Consolidated by Tokio Marine. In connection with the proposed acquisition, Philadelphia Consolidated intends to file relevant materials with the SEC, including Philadelphia Consolidated’s proxy statement on Schedule 14A. STOCKHOLDERS OF PHILADELPHIA CONSOLIDATED ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, WHEN THEY BECOME AVAILABLE, INCLUDING PHILADELPHIA CONSOLIDATED’S PROXY STATEMENT, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and security holders will be able to obtain the documents free of charge at the SEC’s web site, http://www.sec.gov, and Philadelphia Consolidated stockholders will receive information at an appropriate time on how to obtain transaction-related documents for free from Philadelphia Consolidated. Such documents are not currently available.

Participants in the Solicitation

Tokio Marine and its directors and executive officers, and Philadelphia Consolidated and its directors and executive officers, may be deemed to be participants in the solicitation of proxies from the holders of Philadelphia Consolidated common stock in respect of the proposed transaction. Information about the directors and executive officers of Tokio Marine is set forth in its Schedule 13D filing with the SEC with respect to Philadelphia Consolidated’s shares. Information about the directors and executive officers of Philadelphia Consolidated is set forth in the proxy statement for Philadelphia Consolidated’s 2008 Annual Meeting of Stockholders, which was filed with the SEC on April 15, 2008. Investors may obtain additional information regarding the interest of such participants by reading the proxy statement regarding the acquisition when it becomes available.

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