Exhibit 10.23

THIS RETENTION AND SEVERANCE COMPENSATION AGREEMENT (the “Agreement”) is made and entered into between and among ProAssurance Group Services Corporation, an Alabama corporation, and ProAssurance Corporation, a Delaware corporation (“PROASSURANCE”), and Michael L. Boguski, an individual (the “Executive”). PROASSURANCE and its direct and indirect subsidiaries, including Eastern Insurance Holdings, Inc. and its subsidiaries (“EASTERN”), are hereinafter collectively referred to as the “Companies.”

Executive currently provides services to EASTERN and its subsidiaries as an employee of EASTERN’S subsidiary, Eastern Services Corporation (“ESC”), under the terms and conditions of the Employment Agreement by and among Executive and ESC, dated March 17, 2005 and effective September 21, 2004, as amended December 17, 2008 and further amended August 23, 2010 (the “Executive Agreement”). PROASSURANCE has agreed to acquire all of the outstanding common stock of EASTERN on the Effective Date (herein defined) pursuant to the Agreement and Plan of Merger, dated September 23, 2013 (the “Merger Agreement”), executed by PROASSURANCE, PA Merger Company, and EASTERN, in connection with the cash merger of EASTERN and PROASSURANCE’S subsidiary (the “Merger”).

PROASSURANCE has offered to employ Executive as an at will employee of the Companies at Executive’s primary location of employment in Lancaster, Pennsylvania, subject to the benefits and protections afforded to the Executive under this Agreement on the condition that the Executive will agree to terminate the Executive Agreement as of the Effective Date and to release the Companies from any obligation to pay any change of control or severance benefits thereunder. The Companies and Executive have entered into this Agreement to evidence the termination of the Executive Agreement; the terms and conditions upon which the Companies will pay retention payments as an incentive for the Executive to continue in the employ of the Companies after the Effective Date; the terms and conditions upon which the Companies will pay Executive for an extension of his covenant not to compete; and the terms and conditions upon which the Companies will provide severance benefits to the Executive upon the termination of employment with the Companies under certain circumstances.

NOW, THEREFORE, These Premises Considered, and in consideration of the mutual covenants and promises in this Agreement, the sufficiency of which is hereby acknowledged and intending to be legally bound, the parties agree as follows:

1. Definitions. For purposes of this Agreement, the following terms shall have the meanings set forth below:

(a) “Annual Base Salary” of the Executive shall be defined as the Executive’s annual base rate of compensation in effect as of the Date of Termination (herein defined), but in no event less than the greater of: (A) the Executive’s annual base rate of $454,904 which is the base salary to be paid to Executive by the Companies on the Effective Date; or (B) the Executive’s annual base rate of compensation in effect as of the end of the last calendar quarter preceding the Date of Termination.

(b) “Average Annual Incentive Awards and Bonus(es)” shall mean the amount equal to the average of the annual incentive award(s) and bonus(es) paid to Executive in each of the three complete calendar years prior to the Date of Termination (including amounts paid by EASTERN if the Date of Termination occurs less than three years after the Effective Date). The “Average Annual Incentive Award(s) and Bonus(es)” shall mean the dollar value of the cash or other consideration paid to the Executive as annual performance based compensation (whether or not deferred) in each calendar year during said period; the performance based compensation shall be deemed to be paid to Executive in the calendar year that the Executive is notified of the award of performance based compensation and has the right to accept payment of the award. Executive’s annual incentive awards and bonuses do not include long-term incentive compensation or any Retention Payments (herein defined) or the Non-compete Payment (herein defined); therefore, annual incentive awards and bonuses shall be calculated excluding the value of options to purchase stock, performance shares, restricted stock, restricted stock units, or other long-term incentives.

(c) “Board” means the Board of Directors of PROASSURANCE either acting as a full Board or through its Compensation Committee.

(d) “Cash Severance Benefits” means (A) in the case of Severance Benefits payable under Section 5(a) hereof, the cash payments to be made to Executive pursuant to subparagraphs (i), (ii), (iii) and (iv) thereunder, (B) in the case of Severance Benefits payable under Section 5(b) hereof, the cash payments to be made to Executive pursuant to subparagraph (i) and (ii) thereunder, and (C) in the case of Severance Benefit payable under Section 5(c) hereof, the cash payments to be made to Executive pursuant to subparagraphs (i) and (ii) thereunder.

(e) “Cause” means: (i) the Executive has been convicted in a federal or state court of a crime classified as a felony; (ii) action or inaction by the Executive (A) that constitutes embezzlement, theft, misappropriation or conversion of assets of the Companies which alone or together with related actions or inactions involve assets of more than a de minimus amount or that constitutes intentional fraud, gross malfeasance of duty, or conduct grossly inappropriate to Executive’s office, and (B) such action or inaction has adversely affected or is likely to adversely affect the business of the Companies, taken as a whole, or has resulted or is intended to result in a direct or indirect gain or personal enrichment of Executive to the detriment of the Companies; (iii) Executive has been grossly inattentive to, or in a grossly negligent manner failed to competently perform, Executive’s job duties and the failure was not cured within 45 days after written notice from PROASSURANCE; or (iv) Executive has failed to timely execute the certification required to be executed by executives of PROASSURANCE at a comparable level in support of the certifications required to be included in the annual and quarterly reports of PROASSURANCE pursuant to SEC Rule 13a-14(a) and SEC Rule 13a-14(b), and such failure continues for a period of three (3) business days after written notice from PROASSURANCE.

(f) “Change of Control” shall mean the occurrence of any one of the following events during the term of this Agreement:

(i) any one Person or more than one Person acting as a group (as defined in Section 409A of the Code) acquires ownership of the stock of PROASSURANCE that together with the stock held by such Person or group constitutes more than 50.1% of the outstanding voting securities of PROASSURANCE;

(ii) a merger, consolidation or reorganization involving PROASSURANCE in which any one Person or more than one Person acting as a group (as defined in Section 409A of the Code) acquires ownership of the stock of the surviving entity that together with the stock held by such Person or group constitutes more than 50.1% of the outstanding voting securities of the surviving entity; or

(iii) the sale or other disposition of substantially all of the assets of PROASSURANCE (as defined in the regulations under Section 409A of the Code).

In no event shall a Change of Control be deemed to have occurred, with respect to Executive, if the Executive is part of a purchasing group which consummates a Change of Control Transaction. The Executive shall be deemed “part of a purchasing group” for purposes of the preceding sentence if the Executive is an equity participant or has agreed to become an equity participant in the purchasing company or group (except for ownership of less than 5% of the stock of the purchasing company).

(g) “Change of Control Transaction” means any of the transactions as described in subparagraphs (i), (ii) and (iii) of Section 1(f) hereof.

(h) “Code” means the Internal Revenue Code of 1986, as amended.

(i) “Common Stock” means shares of PROASSURANCE common stock, par value $0.01 per share, which are reserved for issuance under the Plan.

(j) “Date of Termination” means Executive’s “separation from service” (as defined in Section 1.409A-3(a)(1) of the Treasury Regulations).

(k) “Disability” means that Executive is (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under the disability insurance, if any, covering employees of the Companies, or (iii) determined to be totally disabled by the Social Security Administration.

 

(l) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(m) “Good Reason” shall constitute any of the following circumstances if they occur without the Executive’s express written consent during the term of this Agreement: (i) a material diminution in the Executive’s authority, duties or responsibilities such that Executive no longer is the President of EASTERN or its successor or holds a position with executive level responsibilities equal to or greater than his position as President of EASTERN; (ii) the Companies require a material change in the Executive’s primary location of employment of more than one hundred (100) miles from the location of the Executive’s primary location of employment on date of this Agreement; (iii) the Companies materially reduce the Executive’s incentive compensation opportunities and employee benefits to a level that is less than the incentive compensation program as described on the term sheet attached hereto as Exhibit B; (iv) a material breach by the Companies of any provision of this Agreement; (v) a reduction by the Companies of Executive’s Annual Base Salary (herein defined); or (vi) the termination or non-renewal of this Agreement by the Companies at any time prior to December 31 in the year that Executive reaches 65 years of age.

(n) “Non-Compete Payment” means the payment to be made to Executive pursuant to Section 8 hereof.

(o) “Plan” means the PROASSURANCE Corporation 2014 Equity Incentive Plan and any successor plan adopted by the Board of Directors of PROASSURANCE and approved by the stockholders.

(p) “Retention Benefits” mean the payments to be made to the Executive during the Initial Term pursuant to Section 4 hereof.

(q) “Restricted Period” has the meaning set forth in Section 8.

(r) “Severance Benefits” means the payments and other benefits to be provided to the Executive under Section 5(a), 5(b) and 5(c) hereof.

2. Term of Agreement.

(a) This Agreement is subject to and conditioned upon the closing of the Merger and shall commence on and as of the effective time of the Merger (the “Effective Date”). The initial terms and conditions of employment of Executive with the Companies are set forth on Exhibit B hereto. Executive and PROASSURANCE agree that this Agreement shall not be revoked or rescinded by either party prior to the Effective Date, except that this Agreement shall be terminated automatically without any further action on the part of Executive or the Companies if the Merger Agreement is terminated prior to the Effective Date.

(b) This Agreement shall have an initial term commencing on the Effective Date and ending at the expiration of three years after the Effective Date (the “Initial Term”). Thereafter, this Agreement shall automatically be extended for successive terms of one year (each a “Renewal Term”), except that this Agreement shall not be renewed and, with the exception of Section 8 hereof, shall terminate automatically and without any action of the Companies or the Executive at the expiration of the term that includes the date when the Executive reaches 65 years of age. If not sooner terminated, any of the Companies may elect to terminate this Agreement at the expiration of the then current term by delivery of written notice of the termination of this Agreement at least six (6) months prior to the commencement of any Renewal Term.

3. Termination of Executive Agreement. The Executive Agreement is hereby terminated as of the Effective Date. The Executive shall be relieved of all duties and obligations to EASTERN and its subsidiaries arising under the Executive Agreement from and after the Effective Date, and EASTERN and its subsidiaries are relieved of all obligations and liabilities to Executive arising under the Executive Agreement from and after the Effective Date.

4. Retention Benefits. As an incentive to continue in the employ of the Companies after the Merger and to provide PROASSURANCE and EASTERN knowledge and experience in the business of worker’s compensation insurance and in consideration for the termination of the Executive Agreement, Executive shall be eligible for the following retention incentive payments (the “Retention Payments”).

(a) PROASSURANCE shall cause EASTERN to pay Executive the cash sum of $300,000 six months after the Effective Date.

(b) Subject to the vesting requirements set forth herein, PROASSURANCE shall cause EASTERN to pay the Executive the following cash payments as herein provided:

(i) $300,000 shall vest and become payable to Executive as herein provided on the first anniversary of the Effective Date (the “First Vesting Date”) if the Executive has been continuously employed with the Companies from the Effective Date through and including the First Vesting Date; and

(ii) $300,000 shall vest and become payable to Executive as herein provided on the second anniversary of the Effective Date (the “Second Vesting Date”) if the Executive has been continuously employed with the Companies from the Effective Date through and including the Second Vesting Date; and

(iii) $300,000 shall vest and become payable to Executive as herein provided on the third anniversary of the Effective Date (the “Third Vesting Date”) if the Executive has been continuously employed with the Companies from the Effective Date through and including the Third Vesting Date.

Payment of the amounts required under this Section 4(b) shall be made to Executive on the Companies second payroll date immediately following the date of vesting, but in no event later than seventy-five (75) days after the end of the year in which the vesting occurs. Each Retention Payment shall be made in cash and shares of Common Stock with the cash portion being approximately 50% of the amount of each Retention Payment. The value of the shares of the Common Stock shall be the Fair Market Value as defined under the Plan of the shares on the applicable vesting date.

(c) If Executive’s employment is terminated by the Companies without Cause or if Executive terminates employment with the Companies for Good Reason, the payments to be made under Section 4(b) that have not vested on or before the Date of Termination shall become 100% vested and shall be paid to Executive in cash in accordance with Section 5(a)(i) hereof. If Executive’s employment is terminated by reason of death or Disability, the payments to be made under Section 4(b) hereof that have not vested on or before the Date of Termination shall become 100% vested and shall be paid in a lump sum to Executive, or the Executive’s beneficiary, upon on the second payroll date immediately following the Executive’s Date of Termination due to death or Disability, but in no event later than seventy-five (75) days after the end of the year in which the Executive’s Date of Termination occurs. If Executive’s employment with the Companies is terminated for Cause or Executive terminates his employment with the Companies without Good Reason, the payments under Section 4(b) that have not vested on or before the Date of Termination shall be forfeited and the Company shall have no obligation to make any further payments to the Executive under Section 4(b).

(d) The payments to be made to the Executive under this Section 4 shall be in addition to and not in limitation of the Executive’s Annual Base Salary and the annual performance based compensation and long term incentive compensation under the employee benefit plans of the Companies in which the Executive is eligible to participate.

5. Severance Benefits.

(a) If (A) during the Initial Term of this Agreement, (x) the Companies terminate the employment of Executive for any reason other than Cause, death or Disability, or (y) the Executive terminates employment with the Companies for Good Reason, and (B) the Executive executes the Release as required in Section 5(d) hereof, the Executive shall receive the following benefits:

(i) Cash in an amount equal to the vested Retention Benefits under Section 4(b) hereof that have not been paid to Executive on or before the Date of Termination;

(ii) Cash in an amount equal to the Non-Compete Payment;

(iii) Cash in an amount equal to the sum of (A) Executive’s current Annual Base Salary (but no less than the Annual Base Salary on the Effective Date) plus (B) Executive’s Average Annual Incentive Awards and Bonuses; and

(iv) Cash payments in lieu of benefits (e.g., group insurance) in an amount equal to 22.5% of Executive’s Annual Base Salary.

(b) Subject to the provisions of Section 5(c) hereof, if (A) during any Renewal Term of this Agreement, (x) the Companies terminate the employment of Executive for any reason other than Cause, death or Disability, or (y) the Executive terminates employment with the Companies for Good Reason, and (B) the Executive, executes the Release as required in Section 5(d) hereof, the Executive shall receive the following benefits:

(i) An amount equal to the Executive’s Annual Base Salary;

(ii) An amount equal to the Executive’s Average Annual Incentive Award(s) and Bonus(es);

(iii) Payment of the Executive’s monthly COBRA premiums for continued health and dental insurance coverage for the shorter of the following: (A) twelve (12) months from the Date of Termination; (B) until the Executive no longer has coverage under COBRA; or (C) until the Executive becomes eligible for substantially similar coverage under a subsequent employer’s group health plan;

(iv) Outplacement services that are customary to Executive’s position; and

(v) Payment of the Non-Compete Payment subject to and in accordance with the terms and provisions of Section 8(b) hereof.

(c) Notwithstanding the provisions of Section 5(b) hereof, the Executive shall receive the Severance Benefits described in this Section 5(c) in lieu of and not in addition to the Severance Benefits described in Section 5(b) hereof if all of the following conditions are satisfied: (A) a Change of Control Transaction is publicly announced during any Renewal Term of this Agreement; (B) during the period commencing on the public announcement of the Change of Control Transaction and ending two (2) years after the effective date of the Change of Control Transaction, (x) the Companies terminate the employment of Executive for any reason other than Cause, Disability or death, or (y) the Executive terminates employment with the Companies for Good Reason; and (C) the Executive executes the Release as required in Section 5(d) hereof. In such event, the Severance Benefits payable to the Executive pursuant to this Section 5(c) shall be as follows:

(i) An amount equal to two (2) times the Executive’s Annual Base Salary;

(ii) An amount equal to two (2) times the Executive’s Average Annual Incentive Award(s) or Bonus(es);

(iii) Payment of the Executive’s monthly COBRA premiums for continued health and dental insurance coverage for the shorter of the following: (A) the Restricted Period; (B) until the Executive no longer has coverage under COBRA; or (C) until the Executive becomes eligible for substantially similar coverage under a subsequent employer’s group health plan; and

(iv) Outplacement services that are customary to Executive’s position; and

(v) Payment of the Non-Compete Payment subject to and in accordance with the terms and provisions of Section 8(b) hereof.

(d) Executive understands and agrees that the payment of Cash Severance Benefits is subject to and conditioned upon the execution of the Release substantially in the form attached hereto as Exhibit “A” (the “Release”) within twenty-two days after the Date of Termination without subsequent revocation by Executive within seven (7) days after execution of the Release. Subject to the foregoing, payment of the Cash Severance Benefits shall be made to Executive in cash or good funds in equal monthly installments during the Restricted Period in accordance with the normal payroll practices of PROASSURANCE in effect on the Date of Termination. The payment of the Cash Severance Benefits shall commence on the first payroll payment date following the expiration of thirty (30) days after the Date of Termination; provided that the obligation of the Companies to pay such Cash Severance Benefits to the Executive shall be subject to termination as provided in Section 10 hereof in the event the Executive violates the covenants under either Section 8(a) or Section 9 hereof. The Companies shall withhold from any amounts payable under this Agreement all federal, state, city or other income and employment taxes that shall be required. Notwithstanding the foregoing, if the Executive is a “specified employee” within the meaning of Code Section 409A(a)(2)(B)(i), the payment schedule for Severance Benefits shall be modified or adjusted to provide that no payments shall be made until the expiration of six (6) months following the Date of Termination. In the event that payments are so delayed, a lump sum payment of the accumulated unpaid amounts attributable to the six (6) month period shall be made to Executive on the first day of the seventh month following the Date of Termination. This six month delay shall not apply to any Severance Benefits which are not subject to the requirements of Section 409A of the Code by reason of their being separation pay upon an involuntary separation from service and their meeting the requirements and limitations of the regulations under the above referenced Code section. In no event shall the aggregate amount of Severance Benefits be reduced as a result of such modification or adjustment. For purposes of Code Section 409A, the right to the series of installment payments is to be treated as the right to receive a series of separate payments.

(e) The outplacement services included in the Severance Benefits shall be provided to the Executive promptly after the execution of the Release but not later than the end of the calendar year following the year in which the Date of Termination occurred.

(f) The Executive shall be entitled to the following in addition to and not in limitation of the Severance Benefits: (i) accrued and unpaid base salary as of the Date of Termination; (ii) accrued vacation and sick leave, if any, on the Date of Termination in accordance with the then current policy or plan of the Companies with respect to terminated employees generally; and (iii) vested benefits under the Companies’ employee benefit plans in which the Executive was a participant on Date of Termination, which vested benefits shall be paid or provided for in accordance with the terms of said employee benefit plans.

(g) Executive shall not be entitled to receive Severance Benefits if employment with the Companies is terminated by reason of death or Disability of Executive (except that Executive shall be entitled to receive any unpaid Retention Payments as provided in Section 4(c) hereof); or by reason of termination of employment by the Executive without Good Reason; or by reason of termination of employment by the Companies with Cause.

(h) The Executive shall be under no duty or obligation to seek or accept other employment and shall not be required to mitigate the amount of the Severance Benefits provided under this Agreement by seeking employment or otherwise; provided, however, that the Executive shall be required to notify the Companies if the Executive becomes covered by a health or dental care program providing substantially similar coverage, at which time health or dental care continuation coverage provided under this Agreement shall cease.

6. Good Reason for Termination. In the event that Executive desires to terminate employment with the Companies for Good Reason, the Executive must provide the Companies with written notice no later than 45 calendar days after the Executive knows or should have known that Good Reason has occurred; provided that any such notice shall not be deemed to have been given unless and until a copy of the notice has been delivered to the Chief Executive Officer of PROASSURANCE in accordance with Section 13 hereof. Following the Executive’s notice, the Companies shall have thirty (30) calendar days to rectify the circumstances causing the Good Reason. If the Companies fail to rectify the event(s) causing the Good Reason within the thirty (30) day period after the Executive’s notice, or if the Chief Executive Officer of PROASSURANCE delivers to the Executive written notice stating that the circumstances cannot or shall not be rectified, the Executive shall be entitled to assert Good Reason and terminate employment on or before ninety (90) days after the delivery of the Executive’s notice. Should Executive fail to provide the required notice in a timely manner, Good Reason shall not be deemed to have occurred as a result of that event. The term of this Agreement shall not be deemed to have expired during the notice period, however, as long as the Executive has provided notice within the term.

7. Cause. If the Executive’s employment relationship with the Companies is terminated by the Companies for Cause, the Executive shall not be eligible for Severance Benefits and for the unvested Retention Benefits and the Non-Compete Payment and all rights of the Executive and obligations of the Companies under this Agreement shall expire. Any termination of the Executive’s employment by the Companies for Cause shall be communicated by a notice of termination to the Executive. The notice of termination shall be a written notice indicating the specific termination provision of this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under this provision. In the event the Executive disputes the basis for termination for Cause, Executive may elect to bypass the claims procedure set forth in Section 14 hereof and file for settlement of the dispute in arbitration as provided in Section 15 hereof; provided that if the arbitrator rules in favor of the Executive, the time for the execution of the Release under Section 5(d) shall be extended twenty-two (22) days after the final decision by the arbitrator, and in the event the Executive executes the Release during said twenty-two (22) day period and does not revoke the Release within seven (7) days after execution, the Executive shall be paid Severance Benefits and the Non-Compete Payment as provided in Section 5(d) and Section 8 hereof commencing on the first payroll payment date following the expiration of thirty (30) days after the final decision of the arbitrator (or if earlier, the December 31 coincident with or immediately following the final decision of the arbitrator); and Executive shall be reimbursed for any COBRA premiums that were paid by Executive in the interim period (but not exceeding the maximum period specified under Section 5(a) or 5(b) hereof) between the termination of employment for COBRA purposes and the Date of Termination as determined by the arbitrator, with such reimbursement to be made on the first payroll payment date following the decision of the arbitrator (or if earlier, the December 31 coincident with or immediately following the final decision of the arbitrator).

8. Non-Competition; Nonsolicitation of Employees.

(a) In the event Executive’s employment with the Companies is terminated for any reason, the Executive will not during the Restricted Period (herein defined):

(i) become Employed by a Competitor Company that offers, sells, or markets any Workers’ Compensation Insurance Product or Service in any state that an Insurance Subsidiary actively markets any Workers’ Compensation Insurance Product or Service, except that Executive may be employed with a Competitor Company so long as and on the condition that the Executive is not employed and does not participate in the Workers’ Compensation Insurance Product or Service provided by the Competitor Company in any state in which an Insurance Subsidiary actively markets any Workers’ Compensation Insurance Product or Service; or

(ii) solicit or induce any employees of the Companies to leave such employment or accept employment with any other person or entity, or solicit or induce any insurance agent of an Insurance Subsidiary to offer, sell or market any Workers’ Compensation Insurance Product or Service for a Competitor Company in any state in which an Insurance Subsidiary actively markets any Workers Compensation Insurance Product or Service.

(b) In consideration of the covenants of Executive set forth in Section 8(a) hereof, Executive shall receive a payment equal to $600,000 (the “Non-Compete Payment”), which, subject to the provision of Section 8(c) hereof, shall be payable in equal monthly installments over a three year period commencing on the first payroll payment date following the third anniversary of the Effective Date (unless payment of the Non-Compete Payment has previously commenced under Section 5(a)(ii) hereof); provided that the obligation of the Companies to pay such Non-Compete Payment to the Executive shall be subject to termination as provided in Section 10 hereof in the event the Executive violates the covenants under either Section 8(a) or Section 9 hereof. The Companies shall withhold from any amounts payable under this Section 8 all federal, state, city or other income and employment taxes that shall be required. The noncompetition payments shall vest on date hereof and shall be payable to Executive as herein provided (including payment after termination of employment for any reason other than Cause). If Executive is terminated for Cause all noncompetition payments will be forfeited after the Date of Termination.

(c) Notwithstanding the provisions of Section 8(b) hereof, the payment of the Non-Compete Payment shall be subject to the following terms and conditions if the Executive’s employment with the Companies is terminated for any reason during the Initial Term:

(i) if the Companies terminate the Executive without Cause or if the Executive terminates employment for Good Reason, the Non-Compete Payment shall be made to Executive as part of the Cash Severance Benefits as provided in Section 5(a) hereof; or

(ii) if the Executive terminates employment with the Companies other than for Good Reason, the payment of the Non-Compete Payment shall be subject to and conditioned upon the execution of the Release within twenty-two days after the Date of Termination without subsequent revocation by Executive within seven (7) days after execution of the Release. Subject to the foregoing, payment of the Non-Compete Payment shall be made to Executive in cash or good funds in equal monthly installments during the Restricted Period in accordance with the normal payroll practices of PROASSURANCE in effect on the Date of Termination. The payment of the Cash Severance Benefits shall commence on the first payroll payment date following the expiration of thirty (30) days after the Date of Termination; provided

that the obligation of the Companies to pay such Cash Severance Benefits to the Executive shall be subject to termination as provided in Section 10 hereof in the event the Executive violates the covenants under either Section 8(a) or Section 9 hereof. The Companies shall withhold from any the Non-Compete Payment all federal, state, city or other income and employment taxes that shall be required. Notwithstanding the foregoing, if the Executive is a “specified employee” within the meaning of Code Section 409A(a)(2)(B)(i), the payment schedule for the Non-Compete Payment shall be modified or adjusted to provide that no payments shall be made until the expiration of six (6) months following the Date of Termination. In the event that payments are so delayed, a lump sum payment of the accumulated unpaid amounts attributable to the six (6) month period shall

be made to Executive on the first day of the seventh month following the Date of Termination. In no event shall the aggregate amount of the Non-Compete Payment be reduced as a result of such modification or adjustment. For purposes of Code Section 409A, the right to the series of installment payments is to be treated as the right to receive a series of separate payments; or

(iii) if the Executive’s employment with the Companies is terminated by reason of death or Disability, the Non-Compete Payment shall be made to Executive, or the Executive’s beneficiary, upon termination of employment on the second payroll date immediately following the Executive’s Date of Termination due to death or Disability, but in no event later than seventy-five (75) days after the end of the year in which the Executive’s Date of Termination occurs. In the event that the Executive and the Companies dispute whether Executive’s termination of employment is by reason of Disability, the Executive follows the procedure for dispute resolution set forth in Section 14 and/or 15 hereof, and a final decision is rendered finding termination by reason of Disability, the Non-Compete Payment shall be payable to Executive on the first payroll date after the date of the final decision (or if earlier, the December 31 coincident with or immediately following the date of the final decision); or

(iv) if the Companies terminate the employment of Executive for Cause, the Non-Compete Payment shall be forfeited and shall not be payable to the Executive.

(d) For purposes of this Section 8 only, the following terms shall have the meanings set forth below:

“Companies” has the meaning set forth in the initial paragraph of this Agreement.

“Competitor Company” means an insurance company, insurance agency, business, for profit or not for profit organization (other than the Companies) that provides, or offers to provide any Workers Compensation Insurance Product or Service.

“Employed” includes activities as an owner, proprietor, employee, agent, solicitor, partner, member, manager, principal, shareholder (owning more than 1% of the outstanding stock), consultant, officer, director or independent contractor.

“Insurance Subsidiary” means any direct or indirect subsidiary of PROASSURANCE that offers to provide Workers Compensation Products and Services.

“Workers Compensation Insurance Product or Service” means any workers compensation insurance product or service.

“Restricted Period” means a period of three years after the Date of Termination if terminated during the Initial Term; or a period two years after termination if terminated during a Renewal Term.

9. Confidentiality. Executive will remain obligated under any confidentiality or nondisclosure agreement with or policy of the Companies (or any of them) that is currently in effect or to which the Executive may in the future be bound. In addition to and without limitation of the foregoing Executive understands, acknowledges and agrees to the following:

(a) During the course of Executive’s employment with the Companies, certain confidential information may have been divulged to or become known by Executive in the nature of, but not limited to (i) information concerning the Companies’ and their affiliates’ current, former and prospective employees; (ii) business practices and business plan; (iii) customer information; (iv) contract information; (v) marketing strategies; (vi) business plans; (vii) product information; (viii) policies and procedures; (ix) financial, pricing and wage information; (x) administrative information; (xi) future plans of the Companies and their affiliates; (xii) and other trade secrets, which is valuable, confidential information of Companies and their affiliates (all of which is referred to herein as “Confidential Information”), which Confidential Information has been uniquely developed by the Companies and their affiliates and cannot be readily obtained by third parties from outside sources.

(b) The Confidential Information is important and is an essential asset of the Companies.

(c) Executive’s knowledge of the Confidential Information could be useful to a competitor of the Companies, and their affiliates which do or intend to do business in competition with the Companies or their affiliates.

In recognition of the facts expressed above, Executive expressly agrees that Executive shall not use for Executive’s personal benefit, or disclose, communicate or divulge to, or use for the direct or indirect benefit of any person, firm, association or company, any confidential or competitive material or information of the Companies or their affiliates, or Confidential Information.

10. Reasonableness of Restrictions; Available Remedies.

(a) The Companies acknowledge and agree that the duties of Executive may require that Executive must have and continue to have throughout the period of employment the benefits and use of its goodwill, confidential information and trade secrets to properly carry out Executive’s responsibilities, and that the Companies accordingly promise to provide Executive with access to new and additional confidential information and trade secrets as they are generated, without regard to the duration of his employment, and to authorize Executive to engage in activities that will create new and additional confidential information and trade secrets. Executive and the Companies agree that the restrictions contained in Sections 8 and 9 of this Agreement are fair and reasonable in all respects, including the geographic and temporal restrictions, and that the benefits described in this Agreement, to the extent any separate or special consideration is necessary, are fully sufficient for Executive’s obligations under this Agreement.

(b) If the Executive is deemed to have materially breached the non-competition covenants set forth in Section 8 hereof or the confidentiality covenants set forth in Section 9 hereof, the Companies may, in addition to seeking an injunction or any other remedy they may have, withhold or cancel any remaining payments or benefits due to the Executive pursuant to Section 5 and Section 8 of this Agreement. The Companies shall give prior or contemporaneous written notice of such withholding or cancellation of payments in accordance with Section 5 hereof. If the Executive violates any of these covenants, the Companies shall be further entitled to an immediate preliminary and permanent injunctive relief, without bond, in addition to any other remedy which may be available to the Companies.

11. Policies Regarding Executive Compensation. The Board of Directors of the Corporation has adopted, and may from time to time adopt, certain policies with regard to executive compensation to conform with applicable laws and regulations, listing requirements, and best practices for public companies. This Agreement shall be subject to such policies, including without limitation the following policies which became effective December 1, 2010:

(a) Holding Period for Stock Awards. The Board of Directors requires certain executive level employees of the Companies to agree to hold shares of Common Stock issued as stock-based compensation for a minimum period of one year from the date of the payment of the stock-based compensation. Executive hereby agrees to hold the shares of Common Stock issued to Executive as stock-based compensation incentive compensation, including without limitation, the Retention Payments payable hereunder (other than shares of Common Stock withheld by the companies to pay income and employment taxes), until the later of either (i) one year from the date of the payment of the stock-based compensation; or (ii) Executive satisfies PROASSURANCE’S minimum holding requirements for senior level executives.

(b) Recoupment of Incentive Compensation. The Board of Directors has adopted a policy which sets forth conditions under which the Companies will require reimbursement with respect to incentive compensation paid or awarded to an executive level employee when the incentive compensation is based on publicly reported financial statements that are required to be restated to correct an accounting error due to material noncompliance with the federal securities laws, gross negligence, fraud or misconduct. Executive agrees that incentive compensation (exclusive of the Retention Payments) paid to Executive by the Companies after the Effective Date shall be subject to the policy of the Board of Directors known as the “ProAssurance Corporation Policy Regarding the Recoupment of Certain Performance-Based Compensation Payments,” as currently in effect on date of this Agreement or as the same may be amended from time to time (the “Policy”). In addition and notwithstanding the foregoing, it is agreed that the policy shall be expanded and applicable to the Retention Payments, and to any incentive compensation paid to Executive after the Effective Date that would be affected, in the event the publicly reported financial statements of EASTERN are required to be restated to correct an accounting error due to material noncompliance with the federal securities laws, gross negligence, fraud or misconduct by EASTERN prior to the Effective Date.

12. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Companies and Executive and their respective devisees, heirs, legal or personal representatives, successors and assigns. Notwithstanding the foregoing, this Agreement is

personal to the Executive and the rights and obligations hereunder may not be assigned by Executive without the prior written consent of PROASSURANCE. In the event the Executive dies while receiving Severance Benefits and the Non-Compete Payment (as applicable) under this Agreement, any remaining unpaid Severance Benefits and Non-Compete Payments shall be paid to the designated beneficiary of the Executive (or if none, to the estate of the Executive) following the payment schedule set forth in Section 5(d) and Section 8 hereof in accordance with the payment instructions from the representative of the estate of the Executive.

13. Notice. For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered by hand or commercial courier or mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses as set forth below or to such other address as one party may have furnished to the other in writing in accordance herewith.

Notice to the Executive:

Michael L. Boguski

25 Race Avenue

Lancaster, PA 17608

Notice to the Companies:

ProAssurance Corporation

100 Brookwood Place

Birmingham, AL 35209

Attention: Secretary; with copy to Chief Executive Officer

14. Claims Procedure.

(a) The administrator for purposes of this Agreement shall be PROASSURANCE (“Administrator”), whose address is 100 Brookwood Place, Birmingham, Alabama 35209 Telephone: (205)  ###-###-####. The “Named Fiduciary” as defined in Section 402(a)(2) of ERISA, also shall be PROASSURANCE. PROASSURANCE shall have the right to designate one or more employees of the Companies as the Administrator and the Named Fiduciary at any time, and to change the address and telephone number of the same. PROASSURANCE shall give the Executive written notice of any change in the Administrator and Named Fiduciary, or in the address or telephone number of the same.

(b) The Administrator shall make all determinations as to the right of any person to receive benefits under the Agreement. Any denial by the Administrator of a claim for benefits by the Executive (“the claimant”) shall be stated in writing by the Administrator and delivered or mailed to the claimant within ten (10) days after receipt of the claim, unless special circumstances require an extension of time for processing the claim. If such an extension is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial 10-day period. In no event shall such extension exceed a period of ten (10) days from the end of the initial period. Any notice of denial shall set forth the specific

reasons for the denial, specific reference to pertinent provisions of this Agreement upon which the denial is based, a description of any additional material or information necessary for the claimant to perfect the claim, with an explanation of why such material or information is necessary, and any explanation of claim review procedures, written to the best of the Administrator’s ability in a manner that may be understood without legal or actuarial counsel.

(c) A claimant whose claim for benefits has been wholly or partially denied by the Administrator may request, within ten (10) days following the receipt of such denial, in a writing addressed to the Administrator, a review of such denial. The claimant shall be entitled to submit such issues or comments in writing or otherwise, as the claimant shall consider relevant to a determination of the claim, and the claimant may include a request for a hearing in person before the Administrator. Prior to submitting the request, the claimant shall be entitled to review such documents as the Administrator shall agree are pertinent to the claim. The claimant may, at all stages of review, be represented by counsel, legal or otherwise, of the claimant’s choice.

All requests for review shall be promptly resolved. The Administrator’s decision with respect to any such review shall be set forth in writing and shall be mailed to the claimant not later than ten (10) days following receipt by the Administrator of the claimant’s request unless special circumstances, such as the need to hold a hearing, require an extension of time for processing, in which case the Administrator’s decision shall be so mailed not later than twenty (20) days after receipt of such request.

15. Arbitration. The parties to this Agreement agree that final and binding arbitration shall be the sole recourse to settle any claim or controversy arising out of or relating to a breach or the interpretation of this Agreement, except as either party may be seeking injunctive relief. Either party may file for arbitration. A claimant seeking relief on a claim for benefits, however, must first follow the procedure in Section 14 hereof and may file for arbitration within sixty (60) days following claimant’s receipt of the Administrator’s written decision on review under Section 14(c) hereof, or if the Administrator fails to provide any written decision under Section 14 hereof, within sixty (60) days of the date on which such written decision was required to be delivered to the claimant as therein provided. The arbitration shall be held at a mutually agreeable location, and shall be subject to and in accordance with the arbitration rules then in effect of the American Arbitration Association; provided that if the location cannot be agreed upon the arbitration shall be held in either Birmingham, Alabama, or Lancaster, Pennsylvania, whichever location is closer to the principal office where the Executive was employed on the Date of Termination. The arbitrator shall consider the claim de novo, and shall not be required to give deference to the findings of the Administrator. The arbitrator may award any and all remedies allowable by the cause of action subject to the arbitration, but the arbitrator’s sole authority shall be to interpret and apply the provisions of this Agreement. In reaching its decision the arbitrator shall have no authority to change or modify any provision of this Agreement or other written agreement between the parties. The arbitrator shall have the power to compel the attendance of witnesses at the hearing. Any court having jurisdiction may enter a judgment based upon such arbitration. All decisions of the arbitrator shall be final and binding on the parties without appeal to any court. Upon execution of this Agreement, the Executive shall be deemed to have waived any right to commence litigation proceedings regarding this Agreement outside of arbitration or injunctive relief without the express consent of PROASSURANCE. The Companies shall pay all arbitration fees and the arbitrator’s compensation. If the Executive prevails in the arbitration proceeding, the arbitrator shall require

the Companies to reimburse the Executive for the reasonable fees and expenses of Executive’s personal counsel for his or her professional services rendered to the Executive in connection with the enforcement of this Agreement.

16. Miscellaneous.

(a) Except insofar as this provision may be contrary to applicable law, no sale, transfer, alienation, assignment, pledge, collateralization or attachment of any benefits under this Agreement shall be valid or recognized by the Companies.

(b) This Agreement is an unfunded deferred compensation arrangement for a member of a select group of the Companies’ management and any exemptions under ERISA, as applicable to such arrangement, shall be applicable to this Agreement. Nothing in this Agreement shall require or be deemed to require the Companies or any of them to segregate, earmark or otherwise set aside any funds or other assets to provide for any payments made or required to be made hereunder.

(c) It is understood, acknowledged and agreed that Executive is and will be an “at will” employee of any one or more of the Companies. Nothing in this Agreement shall be deemed to create an employment agreement between the Executive and the Companies or any of them providing for Executive’s employment for any fixed duration, nor shall it be deemed to modify or undercut the Executive’s at will employment status with the Companies.

(d) It is understood and agreed by the Companies and Executive that the terms of this Agreement relating to the payment of Severance Benefits are intended to comply in all respects with the requirements of Code Section 409A. For purposes of determining whether Severance Benefits may be payable to an Executive in compliance with Code Section 409A, the Executive’s employment will be considered as having been terminated for purposes of this Agreement if the parties reasonably anticipate either (i) that Executive will no longer perform any services for the Companies or (ii) that the level of bona fide services performed for the Companies (whether as an employee or independent contractor) will permanently decrease to no more than 20% of the average level of bona fide services performed by Executive over the immediately preceding 36-month period (or the full period of services to the Companies if Executive has been providing services to the Companies for less than 36 months).

(e) Neither the provisions of this Agreement nor the severance benefits provided hereunder shall reduce any amounts otherwise payable, or in any way diminish the Executive’s rights as an employee of the Companies, whether existing now or hereafter, under any benefit, incentive, retirement, stock option, stock bonus or stock purchase plan, or other plan or arrangement.

(f) This Agreement sets forth the entire agreement between the parties with respect to the matters set forth herein and supersedes in their entirety any prior written or oral agreements or understandings between Executive and the Companies regarding the subject matter of this Agreement. This Agreement may not be modified or amended except by written agreement intended as such and signed by all parties.

(g) The Companies, from time to time, shall provide government agencies with such reports concerning this Agreement as may be required by law, and shall provide Executive with such disclosure concerning this Agreement as may be required by law or as the Companies may deem appropriate.

(h) Executive and the Companies respectively acknowledge that each of them has read and understand this Agreement, that they have each had adequate time to consider this Agreement and discuss it with each of their attorneys and advisors, that each of them understands the consequences of entering into this Agreement, that each of them is knowingly and voluntarily entering into this Agreement, and that they are each competent to enter into this Agreement.

(i) Executive shall not during the Initial Term and the Renewal Term or any time thereafter, disparage the Companies, its affiliates, and /or respective officers, employees or directors, or engage in conduct resulting in, or likely to result in, damage to the business or professional reputation of the Companies or their affiliates. The Companies agree that they will not at anytime disparage Executive or engage in conduct resulting in, or likely to result in, the damage to the business or professional reputation of Executive.

(j) The provisions of this Agreement shall survive the expiration of the terms set forth in Section 2 hereof. If any provision of this Agreement is determined to be unenforceable, the remainder of this Agreement shall not be affected but each remaining provision shall continue to be valid and effective and shall be modified so that it is enforceable to the fullest extent permitted by law. Moreover, in the event this Agreement is determined to be unenforceable against any of the Companies, it shall continue to be valid and enforceable against the other Companies.

(k) This Agreement will be interpreted as a whole according to its fair terms. It will not be construed strictly for or against either party.

(l) Except to the extent that federal law controls, this Agreement is to be construed according to Delaware law.

IN WITNESS WHEREOF, the parties have duly executed this Agreement on this 20 day of September, 2013.

 

This Release of Claims (“Release”) is made in favor of ProAssurance Corporation (“PROASSURANCE”), for itself and for its subsidiaries (including, but not limited to, ProAssurance Group Services Corporation) and any successor company that has assumed the Agreement to which this Release was an attachment (all such organizations being referred to in this Release as the “Companies”) and Michael L. Boguski (“Executive”).

The Companies and Executive have agreed to terminate their employment relationship. To effect an orderly termination, the Executive, and the Companies are entering into this Release.

1. Effective with the Date of Termination, Executive is relieved of all duties and obligations to the Companies, except as provided in this Release or any applicable provisions of the Retention and Severance Compensation Agreement between Companies and Executive, dated             , 2013 (“Agreement”), which survive termination of the employment relationship. Unless otherwise specifically defined herein, capitalized terms shall have the meaning attributed to them in the Agreement.

2. Executive hereby resigns as an officer and director, as applicable, of each of the Companies effective on Date of Termination and waives any and all rights Executive may otherwise have to continued employment with or re-employment by the Companies or any parent, subsidiary or affiliate of Companies.

3. Executive agrees that he will not at any time disparage the Companies, their affiliates, and/or respective officers, employees or directors, or engage in conduct resulting in, or likely to result in, damage to the business or professional reputation of the Companies or their affiliates. The Companies agree that they will not at any time disparage Executive or engage in conduct resulting in, or likely to result in, the damage to the business or professional reputation of Executive.

4. Executive agrees that this Release, the Agreement, and the Severance Benefits provided under the Agreement are confidential and shall not be disclosed or published directly or indirectly to third persons, except as necessary to enforce its terms, by Executive or to Executive’s immediate family upon their agreement not to disclose the fact or terms of this Release, or to Executive’s attorney, financial consultant or accountant, except that Executive and the Companies may disclose, as necessary, (i) the fact that Executive has terminated Executive’s employment with the Companies and (ii) the terms of this Agreement and Severance Benefits as required under the securities laws and regulations and the listing requirements of any stock exchange or national market system and as otherwise required by law.

5. Any fringe benefits that Executive has received or currently is receiving from the Companies or its affiliates shall cease effective with the Date of Termination, except as otherwise provided for in this Release, in the Agreement or by law.

6. The parties agree that the terms contained and payments provided for in the Agreement are compensation for and in full consideration of Employee’s release of claims under this Release, and Executive’s confidentiality, non-compete, non-solicitation and non-disclosure agreements contained in the Agreement.

7. The Executive shall be under no duty or obligation to seek or accept other employment and shall not be required to mitigate the amount of the Severance Benefits and Non-Compete Payment (as defined and provided under the Agreement) by seeking employment or otherwise, provided, however, that the Executive shall be required to notify the Companies if the Executive becomes covered by a health or dental care program providing substantially similar coverage, at which time health or dental care continuation coverage provided under the Agreement shall cease.

8. Executive waives, releases, and forever discharges the Companies and each of their direct or indirect parents, subsidiaries, affiliates, and any partnerships, joint ventures or other entities involving or related to any of the Companies, their parents, subsidiaries or affiliates, and all present or former employees, officers, agents, directors, successors, assigns and attorneys of any of these corporations, persons or entities (all collectively referred to in this Release as the “Released”) from any and all claims, charges, suits, causes of action, demands, expenses and compensation whatsoever, known or unknown, direct or indirect, on account of or growing out of Executive’s employment with and termination from the Companies, or relationship or termination of such relationship with any of the Released, or arising out of related events occurring through the date on which this Release is executed. This includes, but is not limited to, claims for breach of any employment contract; handbook or manual; any express or implied contract; any tort; continued employment; loss of wages or benefits; attorney fees; employment discrimination arising under any federal, state, or local civil rights or anti-discrimination statute, including specifically any claims Executive may have under the federal Age Discrimination in Employment Act, as amended, 29 USC §§ 621, et seq.; emotional distress; harassment; defamation; libel; slander; and all other types of claims or causes of action whatsoever arising under any other state or federal statute or common law of the United States. Notwithstanding anything in this Release to the contrary, nothing in this Release shall be construed to waive, release or discharge the Companies from making any payments or providing any benefits to Executive in accordance with the terms of the Agreement.

9. The Executive does not waive or release any rights or claims that may arise under the federal Age Discrimination in Employment Act, as amended, after the date on which this Release is executed by the Executive.

10. The Executive acknowledges and agrees that Executive has been advised in writing by this Release, and otherwise, to CONSULT WITH AN ATTORNEY before Executive executes this Release.

11. The Executive agrees that Executive received a copy of this Release prior to executing the Agreement, that this Release incorporates the Companies’ FINAL OFFER; that Executive has been given a period of at least twenty-two (22) calendar days within which to consider this Release and its terms and to consult with an attorney should Executive so elect.

12. The Executive shall have seven (7) calendar days following Executive’s execution of this Release to revoke this Release. Any revocation of this Release shall be made in writing by the Executive and shall be received on or before the time of close of business on the seventh calendar day following the date of the Employee’s execution of this Release at PROASSURANCE’S address at 100 Brookwood Place, Birmingham, Alabama 35209, Attention: President: cc Secretary, or such other place as the Companies may notify Executive in writing. This Release shall not become effective or enforceable until the eighth (8th) calendar day following the Executive’s execution of this Release.

13. Executive and the Companies acknowledge that they have read and understand this Release, that they have had adequate time to consider this Release and discuss it with their attorneys and advisors, that they understand the consequences of entering into this Release, that they are knowingly and voluntarily entering into this Release, and that they are competent to enter into this Release.

14. This Release shall benefit and be binding upon the parties and their respective directors, officers, employees, agents, heirs, successors, assigns, devisees and legal or personal representatives.

15. This Release, along with the attached Agreement, sets forth the entire agreement between the parties at the time and date these documents are executed, and fully supersedes any and all prior agreements or understandings between them pertaining to the subject matter in this Release. This Release may not be modified or amended except by a written agreement intended as such, and signed by all parties.

16. Except to the extent that federal law controls, this Release is to be construed according to the law of the state of Delaware.

17. If any provision of this Release is determined to be unenforceable, at the discretion of PROASSURANCE the remainder of this Release shall not be affected but each remaining provision or portion shall continue to be valid and effective and shall be modified so that it is enforceable to the fullest extent permitted by law.

18. To signify their agreement to the terms of this Release, the parties have executed it on the date set forth opposite their signatures, or those of their authorized agents, which follow.

 

President of the Eastern Group subsidiaries of ProAssurance with senior executive duties as assigned by the CEO of ProAssurance.

Lancaster, Pennsylvania

$430,850 with automobile allowance and club membership ending December 31, 2013

For 2013 – Continuation of Eastern’s existing Management Incentive Plan including percentage of base pay and measuring criteria

 

Measuring Criteria = Eastern calendar year Consolidated Combined Ratio (CCR) to be calculated in accordance with Exhibit C attached hereto.

 

For 2015 and thereafter – Bonus potential as a percentage of base salary to be no less than as specified for 2014; measuring criteria to remain as stated for 2014 for remainder of Initial Term and thereafter subject to adjustment in accordance with overall ProAssurance incentive compensation plan and strategy.

Subject to approval of ProAssurance Compensation Committee, senior executive level award of Restricted Stock Units and Qualified Performance Shares.

Restricted Stock Units vest after 3-year restricted period (December 31, 2016 for any award in 2014)

Qualified Performance Shares are subject to 3-year measuring period with units awarded according to the better result on either of two performance measures:

Measure #1 – Stock performance versus the SNL Property/Casualty Insurance Index for the 3-year period

 

Measure #2 – Average weighted calendar year CCR for Eastern during the 3-year period

 

Continuation of Eastern benefits package through December 31, 2014

Eligible for ProAssurance 2011 Employee Stock Ownership Plan upon merger closing

Full ProAssurance benefits beginning January 1, 2015

The objective of this ratio is to capture the results of the insurance operations before any transaction related expenses or any allocated overhead expenses (which does not include either (1) overhead budgeted within Eastern’s projections or (2) any charges for direct expenses of Eastern) of the Eastern Group of Companies, including:

Eastern Insurance Holdings, Inc.

Global Alliance Holdings Ltd.

Allied Eastern Indemnity Company

Eastern Alliance Insurance Company

Eastern Advantage Assurance Company

Employers Security Insurance Company (if it exists)

Eastern Re Ltd., S.P.C

Because the management of the Eastern Group of Companies will not control investment and capital decisions it is appropriate to exclude these items and also to exclude any purchase accounting related charges and any allocated overhead charges (which does not include either (1) overhead budgeted within Eastern’s projections or (2) any charges for direct expenses of Eastern) from the metric used for compensation.

The combined ratio described herein will capture the entirety of the Eastern operations as set forth below:

 

 

As an example here is the calculation using Eastern’s March 31, 2013 Projections for 2014: