Exhibit 10.7

EMPLOYMENT AGREEMENT

THIS AGREEMENT made the 21st day of September, 2004, between and among EASTERN
SERVICES CORPORATION (“ESC”), a business corporation having its principal place
of business at 25 Race Avenue, Lancaster, Pennsylvania; and SUZANNE M. EMMET
(the “Executive”), an individual residing Cumberland County.

WITNESSETH

WHEREAS, ESC is a member of Eastern Holding Company Ltd., an insurance holding
company system and operating as a management company for the members of the
holding company system; and

WHEREAS, the Executive has served ESC faithfully and well in various capacities
for an extended period of time; and

WHEREAS, ESC desires to formally retain the Executive as a senior officer and
set forth the terms by which her employment is to be governed; and

WHEREAS, the Executive is willing to enter into a formal agreement governing her
employment by ESC under the terms and conditions set forth below.

NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as
follows:

1. Employment. ESC hereby employs the Executive, and the Executive hereby
accepts employment with ESC, on the terms and conditions set forth in this
Agreement.

2. Duties of the Executive. The Executive shall perform and discharge well and
faithfully such duties as an executive officer of ESC as may be consistent with
this Agreement and assigned to her from time to time by the Board of Directors
of ESC (the “Board”). The Executive shall be employed in such capacities and
with such duties as are set forth on Exhibit A attached hereto, and shall hold
such other titles of substantial stature as may be given to her from time to
time by the Board or, with the approval of the Board, by the board of directors
of any company affiliated with ESC. The Executive shall devote her full time,
attention and energies to the business of ESC during the Employment Period (as
defined in Section 3); provided, however, that this Section 2 shall not be
construed as preventing the Executive from (a) engaging in activities incident
or necessary to personal investments, (b) acting as an officer or a member of
the board of directors of a company affiliated with ESC, or (c) being involved
in any other activity (including community or civic activities) with the prior
approval of the Board. The Executive shall not engage in any business or
commercial activities, duties or pursuits which compete with the business/or
commercial activities of ESC or any of its affiliated companies.

3. Term of Agreement.

(a) Except as otherwise provided in this Section 3 or Section 5, this Agreement
shall be for a one-year period (the “Employment Period”) beginning on the date
first set

 

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forth above. Beginning with the second day of this Agreement, and on each day
thereafter, the Employment Period shall be extended by one day, so that, at all
times, the Employment Period shall be for a period of one year. Notwithstanding
the preceding terms of this subsection, ESC may, at any time, deliver to the
Executive a written notice advising her that it desires to terminate the
foregoing automatic renewal provisions, in which event the Employment Period
shall, subject to the terms of this Agreement, continue through the remainder of
its term in effect on the date such notice of nonrenewal is given.

(b) Notwithstanding the provisions of Section 3(a), this Agreement shall
terminate, as provided below, for Cause upon the giving of written notice by the
Board to the Executive. As used in this Agreement, “Cause” means any of the
following:

(i) the Executive’s conviction of or plea of guilty or nolo contendere to a
felony, a crime of falsehood, or a crime involving moral turpitude, or the
actual incarceration of the Executive for a period of 60 consecutive days or
more;

(ii) the Executive’s willful refusal to follow the good faith written lawful
instructions of the Board or the Executive’s immediate supervisor, with respect
to (or on behalf of) ESC’s operations, and the failure to cure such refusal
within ten days after such written notice is given, unless it is apparent under
the circumstances that the Executive is unable to cure such refusal within such
period (in which case termination shall be immediate);

(iii) the Executive’s intentional violation of the provisions of this Agreement,
after written notice is given to her by the Board, and the failure to cure such
violation within ten days of such written notice, unless it is apparent under
the circumstances that the Executive is unable to cure such violation within
such period (in which case termination shall be immediate); or

(iv) material dishonesty of the Executive in the performance of her duties.

Notwithstanding the preceding provisions of this subsection, the Executive’s
employment under this Agreement shall not be deemed to have been terminated for
Cause under any of the above clauses if such termination took place solely as a
result of:

(i) questionable judgment on the part of the Executive;

(ii) any act or omission believed by the Executive, in good faith, to have been
in, or not opposed to, the best interests of ESC or any of its affiliated
companies; or

(iii) any act or omission in respect of which a determination could properly be
made that the Executive met the applicable standard of conduct prescribed for
indemnification or reimbursement or payment of expenses under

 

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the Articles of Incorporation or Bylaws of ESC or the directors’ and officers’
liability insurance of ESC, in each case as in effect at the time of such act or
omission.

If this Agreement is terminated for Cause, all of the Executive’s rights under
this Agreement shall cease as of the effective date of such termination, except
for accrued compensation, unreimbursed expenses described in Section 4(e), and
accrued rights under the benefit plans and other programs of ESC, in accordance
with the terms of the same.

(c) Notwithstanding the provisions of Section 3(a), the Executive’s employment
under this Agreement may be terminated at any time during the Employment Period
without Cause by action of the Board, upon giving notice of such termination to
the Executive at least 30 days prior to the date upon which such termination
shall take effect. If the Executive’s employment is terminated under the
provisions of this Section 3(c), then the Executive shall be entitled to receive
accrued compensation, unreimbursed expenses described in Section 4(e), as well
as the compensation set forth in Section 6, in lieu of Section 4. In addition,
she will be entitled to such accrued benefits to which she is then entitled
under the benefit plans and programs of ESC, in accordance with the terms of the
same.

(d) Notwithstanding the provisions of Section 3(a), if the Executive dies, this
Agreement shall terminate as of the date of the Executive’s death, and all
rights of the Executive under Section 4 shall cease as of the date of such
termination (except for accrued compensation and unreimbursed expenses described
in Section 4(e)); provided, however, that her beneficiaries shall also be
entitled to accrued benefits to which she was then entitled at the time of death
under the benefit plans and programs of ESC, in accordance with the terms of the
same. In addition, if the Executive is survived by a spouse, ESC will continue
to pay such spouse one year of the Executive’s Annual Base Salary (as defined in
Section 4(a)) in effect on the date of her death. Payment shall be made monthly,
commencing no later than 30 days after the date of her death.

(e) Notwithstanding the provisions of Section 3(a), this Agreement shall
terminate automatically upon the Executive’s Disability and her rights under
this Agreement shall cease (except for accrued compensation and unreimbursed
expenses described in Section 4(e)) as of the date of such termination;
provided, however, that the Executive shall nevertheless be absolutely entitled
to receive an amount equal to and no greater than 100% of her Annual Base Salary
(as defined in Section 4(a)), less amounts payable under any disability plan of
ESC, until the earliest of (i) her return to any employment, (ii) her attainment
of age 65, or (iii) her death; and provided further that the Executive shall be
entitled to the accrued benefits to which she is then entitled under the benefit
plans and programs of ESC, in accordance with the terms of the same. For
purposes of this Agreement, the term “Disability” shall mean the Executive’s
incapacitation by accident, sickness or otherwise which renders her mentally or
physically incapable of performing all of the essential functions of her job,
taking into account any reasonable accommodation required by law, without posing
a direct threat to herself or others, for a period of six months.

 

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(f) Notwithstanding the provisions of Section 3(a), this Agreement shall
terminate automatically upon the Executive’s voluntary termination of employment
without Good Reason, prior to the end of the Employment Period. In such event,
ESC shall have no further obligation to Executive under this Agreement, except
for the payment of accrued compensation and unreimbursed expenses described in
Section 4(e). The Executive’s rights under ESC’s benefit plans and programs
shall be determined in accordance with their respective terms.

(g) The Executive agrees that, if her employment terminates under this
Agreement, she will resign as a director of ESC and each of its affiliated
companies, if she is then serving as a director of any of such entities.

(h) Notwithstanding the expiration of this Agreement in the ordinary course
under Section 3(a) or the earlier termination of this Agreement provided
elsewhere in this section, the provisions of Sections 7, 8 and 9 shall continue
to apply in accordance with their respective terms.

4. Employment Period Compensation.

(a) Base Salary. For services performed by the Executive under this Agreement,
ESC shall pay the Executive a salary during the Employment Period, at an
annualized rate of $119,000.00, payable at the same times as salaries are
payable to other executive employee’s of ESC. ESC may, from time to time,
increase the Executive’s salary, and any and all such increases shall be deemed
to constitute amendments to this Section 4(a) to reflect the increased amounts,
effective as of the dates established for such increases by the Board in the
resolutions authorizing such increases. The Executive’s salary in effect from
time to time under this section is herein referred to as her “Annual Base
Salary”.

(b) Bonus. For services performed by the Executive under this Agreement, ESC
shall pay the Executive bonuses during the Employment Period, in such amounts
and at such times, annually or more frequently, as may be provided by the Board
in its sole discretion. To the extent ESC maintains an annual bonus plan for its
senior executive officers, the Executive shall be entitled to participate in the
same at a level commensurate with her position(s). The payment of any such
bonuses shall not reduce or otherwise affect any other obligation of ESC,
including the payment of Annual Base Salary, to the Executive provided for in
this Agreement.

(c) Vacations. During the term of this Agreement, the Executive shall be
entitled to paid annual vacation in accordance with the policies established
from time to time by the Board; provided, however, that in no event shall the
number of weeks of vacation be less than four. The Executive shall not be
entitled to receive any additional compensation from ESC for failure to take her
full vacation entitlement, nor shall she be able to accumulate unused vacation
time from one year to the next, except to the extent authorized by the Board.

 

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(d) Employee Benefits. During the term of this Agreement, the Executive shall be
entitled to participate in and receive the benefits of each of ESC’s employee
benefit plans from time to time in effect in accordance with their terms.
Nothing paid to the Executive under any plan or arrangement presently in effect
or made available in the future shall be deemed in lieu of the Annual Base
Salary payable to the Executive pursuant to Section 4(a).

(e) Business Expenses. During the term of this Agreement, the Executive shall be
entitled to prompt reimbursement for all reasonable expenses incurred by her,
which are properly accounted for, in accordance with the policies and procedures
established by the Board. Estimated expense advancements may be made, subject to
a subsequent proper accounting in accordance with such policies and procedures.

(f) Club Membership. The Board may, solely at its discretion, provide for the
payment or reimbursement of dues to dinner, country or other clubs. Any such
payment or reimbursement shall be subject to such accounting procedures as the
Board may deem necessary or appropriate for tax, accounting or other purposes.

(g) Automobile. During the term of this Agreement, the Executive shall be
provided with an automobile allowance of $ - 0 - per month toward the use of her
automobile for business and other use. The Executive shall be responsible for
keeping such records as may be necessary for tax purposes.

(h) Stock Options, Etc. During the term of this Agreement, the Executive shall
be entitled to participate in stock option, equity compensation and similar
plans (if any) maintained by ESC at a level commensurate with her position(s).

5. Resignation of the Executive for Good Reason.

(a) The Executive may resign for Good Reason at any time during the Employment
Period, as hereinafter set forth. As used in this Agreement, “Good Reason” means
any of the following:

(i) any reduction in title or a material adverse change in the Executive’s
responsibilities or authority which are inconsistent with, or the assignment to
the Executive of duties inconsistent with, the Executive’s positions and duties
described in Exhibit A attached hereto or otherwise contemplated herein;

(ii) any reassignment of the Executive which requires the Executive to move her
principal residence more than 100 miles from ESC’s principal executive office on
the date of this Agreement;

(iii) any reduction in the Executive’s Annual Base Salary;

(iv) any failure by ESC to provide the Executive with broad-based employee
benefits required hereunder, or the taking of any action that would materially
reduce any of such benefits, unless such failure or reduction is applicable in
each case to all plan participants;

 

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(v) the termination by ESC of the automatic renewal provisions of Section 3; or

(vi) any material breach of this Agreement of any nature whatsoever on the part
of ESC.

(b) At the option of the Executive, exercisable by the Executive, within 15
months after the occurrence of the event constituting Good Reason, the Executive
may resign from employment under this Agreement by a notice in writing (the
“Notice of Termination”) delivered to ESC and the provisions of Section 6 hereof
shall thereupon apply.

(c) In addition to the foregoing, in the event of the occurrence of a Change in
Control (as defined in Section 5(d)), the Executive may voluntarily terminate
her employment, for any or no reason, during the period beginning 12 months and
one day following the occurrence of the Change in Control and ending 15 months
following such occurrence. In the case of such termination, it shall be deemed a
termination for Good Reason and she will be entitled to the payments and
benefits provided in Section 6.

(d) For purposes of this Agreement, the term “Change in Control” means any
change described in Section 280G(b)(2)(A)(i) of the Internal Revenue Code of
1986, as amended (the “Code”), or any other event or series of events described
as such by the Board. Notwithstanding the foregoing, a transaction that would
otherwise constitute a Change in Control under the Code, and that occurs within
the lesser of the Employment Period or the first 18 months of this Agreement,
shall not be deemed to constitute a Change in Control unless declared as such by
the Board.

6. Rights in Event of Certain Termination of Employment. In the event that the
Executive resigns from employment for Good Reason, by delivery of a Notice of
Termination to ESC, or the Executive’s employment is terminated by ESC without
Cause (but excluding a Disability termination), Executive shall be entitled to
receive the amounts and benefits set forth in this section, in addition to
accrued compensation, unreimbursed expenses described in Section 4(e), and the
benefits to which she may be entitled under the terms of any plans or programs
of ESC in which she is a participant or to which she is a party.

(a) The Executive will be paid an amount equal to one time the sum of (i) the
highest Annual Base Salary paid to her at any time under this Agreement, and
(ii) the average of the annual bonuses paid to her with respect to the three
calendar years immediately preceding the year of termination (or such lesser
number of whole calendar years during which this Agreement has then been in
effect). Such amount will be paid to the Executive in 12 equal monthly
installments (without interest), beginning 30 days following the date of
termination of employment.

 

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(b) In lieu of any additional benefits, except those to which she may be
entitled under the terms of ESC’s employee benefit and other plans, contracts or
arrangements, the executive will also be paid an amount equal to (i) 22.5%,
times (ii) the highest Annual Base Salary paid to her under this Agreement,
times (iii) one. Such amount shall be paid to her in 12 equal monthly
installments at the same time as the payments in Subsection (a) are paid.

(c) In the event that the amounts and benefits payable under this section, when
added to other amounts and benefits which may become payable to the Executive by
ESC, are such that she becomes subject to the excise tax provisions of
Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), ESC
shall pay her such additional amount or amounts as will result in her retention
(after the payment of all federal, state and local excise, employment, and
income taxes on such payments and the value of such benefits) of a net amount
equal to the net amount she would have retained had the initially calculated
payments and benefits been subject only to income and employment taxation. For
purposes of the preceding sentence, the Executive shall be deemed to be subject
to the highest marginal federal, state, local and (if relevant) foreign tax
rates. All calculations required to be made under this subsection shall be made
by ESC’s independent public accountants, subject to the right of Executive’s
representative to review the same. All such amounts required to be paid shall be
paid at the time any withholding may be required under applicable law, and any
additional amounts to which the Executive may be entitled shall be paid or
reimbursed no later than 15 days following confirmation of such amount by ESC’s
independent accountants. In the event any amounts paid hereunder by ESC are
subsequently determined to be in excess of the amounts owed because estimates
were required or otherwise, the Executive will reimburse ESC to correct the
error upon written notice from ESC, together with written confirmation of the
same by ESC’s independent accountants, as appropriate, and to pay interest
thereon at the applicable federal rate (as determined under Code Section 1274
for the period of time such erroneous amount remained outstanding and
unreimbursed). In the event any amounts paid hereunder by ESC are subsequently
determined to be less than the amounts owed (or paid later than when due) for
any reason, ESC will pay to the Executive the deficient amount, together with
(i) interest at the greater of the above- referenced rate or the interest she is
required to pay taxing authorities, plus (ii) any penalties assessed against her
by such authorities. Prior to its payment to the Executive, ESC shall be
entitled to request the delivery of proof (by calculations made by the
Executive’s accountant or, in the case of tax assessments, the Executive’s
delivery of copies of such assessments) of the underpaid amounts and any
interest or penalties assessed by taxing authorities. The parties recognize that
the actual implementation of the provisions of this subsection are complex and
agree to deal with each other in good faith to resolve any questions or
disagreements arising hereunder.

 

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7. Covenant Not to Compete, Etc.

(a) Covenant. The Executive hereby acknowledges and recognizes the highly
competitive nature of the business of ESC and its affiliated companies and
accordingly agrees that, during the Employment Period and for a period of one
year thereafter, she shall not:

(i) be engaged, directly or indirectly, either for her own account or as agent,
consultant, employee, partner, officer, director, proprietor, investor (except
as an investor owning less than 5% of the stock of a publicly owned company) or
otherwise of any person, firm, corporation, or enterprise engaged, in (A) the
underwriting of workers’ compensation insurance, or (B) any other line of
insurance or activity in which ESC or any of its affiliated companies is engaged
during the Employment Period or at the date of termination of the Executive’s
employment, in any state in which ESC or any of its affiliated companies is
licensed to do business (the “Non-Competition Area”);

(ii) provide financial or other assistance to any person, firm, corporation, or
enterprise engaged in (A) the underwriting of workers’ compensation insurance,
or (B) any other line of insurance or activity in which ESC or any of its
affiliated companies is engaged during the Employment Period or at the date of
termination of the Executive’s employment, in the Non-Competition Area;

(iii) solicit current or former customers of ESC or any of its affiliated
companies in the Non-Competition Area; or

(iv) solicit for hire or otherwise hire current or former employees of ESC or
its affiliated companies.

(b) Judicial Cut-Back. It is expressly understood and agreed that, although the
Executive and ESC consider the restrictions contained in Section 7(a) hereof
reasonable for the purpose of preserving for ESC and its affiliated companies
their good will and other proprietary rights, if a final determination is made
by a court or arbitrator having jurisdiction that the time or territory or any
other restriction contained in Section 7(a) hereof is an unreasonable or
otherwise unenforceable restriction against the Executive, the provisions of
Section 7(a) shall not be rendered void but shall be deemed amended to apply as
to such maximum time and territory and to such other extent as such court or
arbitrator may determine or indicate to be reasonable.

8. Unauthorized Disclosure. During the Employment Period, or at any later time,
the Executive shall not, without the written consent of the Board or a person
authorized thereby, knowingly disclose to any person, other than an employee of
ESC or a person to whom disclosure is reasonably necessary or appropriate in
connection with the performance by the Executive of her duties as an executive
of ESC, any material confidential information obtained by her while in the
employ of ESC with respect to any of ESC’s or any of its affiliated companies’
services, products, improvements, formulas, designs or styles, processes,
customers, methods of business or any business practices the disclosure of which
could be or will be damaging to ESC or any of its affiliated companies;
provided, however, that confidential information shall not include any
information known generally to the public (other than as a result of
unauthorized disclosure by the Executive or any person with the assistance,
consent or

 

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direction of the Executive) or any information of a type not otherwise
considered confidential by persons engaged in the same business or a business
similar to that conducted by ESC or its affiliated companies, or any information
that must be disclosed as required by law.

9. Return of Company Property and Documents. The Executive agrees that, at the
time of termination of her employment, regardless of the reason for termination,
she will deliver to ESC and its affiliated companies, any and all company
property, including, but not limited to, automobiles, keys, security codes or
passes, mobile telephones, pagers, computers, devices, confidential information,
records, data, notes, reports, software programs, equipment, other documents or
property, or reproductions of any of the aforementioned items obtained by the
Executive during the course of her employment.

10. Liability Insurance. ESC shall use its best efforts to obtain insurance
coverage for the Executive under an insurance policy covering the officers and
directors of ESC against lawsuits, arbitrations and other legal or regulatory
proceedings; provided, however, that nothing herein shall be construed to
require ESC to obtain such insurance, if the Board determines that such coverage
cannot be obtained at a reasonable price.

11. Notices. Any notice required or permitted to be given under this Agreement
shall, to be effective hereunder, be given to ESC, in the case of notices given
by the Executive, and be given by ESC, in the case of notices given to the
Executive. Any such notice shall be deemed properly given if in writing and if
mailed by registered or certified mail, postage prepaid with return receipt
requested, to the last known residence of the Executive, in the case of notices
to the Executive, and to the principal executive office of ESC, in the case of
notices to ESC.

12. Waiver. No provision of this Agreement may be modified, waived, or
discharged unless such waiver, modification, or discharge is agreed to in
writing and signed by the Executive and an executive officer of ESC specifically
designated by the Board for such purpose. No waiver by any party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time.

13. Assignment. This Agreement shall not be assignable by any party hereto,
except by ESC to any successor in interest to its business.

14. Entire Agreement. This Agreement contains the entire agreement of the
parties relating to the subject matters of this Agreement, and it supersedes all
prior written or unwritten understandings between the parties with respect to
such subject matters.

15. Successors, Binding Agreement.

(a) ESC will require any successor (whether direct or indirect, by purchase,
merger, consolidation, or otherwise) to all or substantially all of the business
and/or assets of ESC to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that ESC would be required to perform if
no such succession had taken

 

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place. Failure by ESC to obtain such assumption and agreement prior to the
effectiveness of any such succession shall constitute a material breach of this
Agreement. As used in this Agreement, “ESC” shall mean ESC as hereinbefore
defined and any successor to the business and/or assets of ESC as aforesaid
which assumes and agrees to perform this Agreement by operation of law, or
otherwise.

(b) This Agreement shall inure to the benefit of and be enforceable by the
Executive’s personal or legal representatives, executors, administrators, heirs,
distributees, devisees, and legatees, as appropriate. If the Executive should
die while any amount or benefit would be payable to the Executive under this
Agreement if the Executive had continued to live, all such amounts and benefits,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the Executive's surviving spouse, if any, and, if there is no
surviving spouse, to her estate.

16. Arbitration. ESC and the Executive recognize that in the event a dispute
should arise between them concerning the interpretation or implementation of
this Agreement, lengthy and expensive litigation will not afford a practical
resolution of the issues within a reasonable period of time. Consequently, each
party agrees that all disputes, disagreements and questions of interpretation
concerning this Agreement (except for any enforcement sought with respect to
Section 7, 8 or 9, which may be litigated in court through an action for an
injunction or other relief, including monetary damages resulting from a breach
of any of such sections) are to be submitted for resolution in Lancaster,
Pennsylvania, to the American Arbitration Association (the “Association”) in
accordance with the Association’s National Rules for the Resolution of
Employment Disputes or other applicable rules then in effect (the “Rules”). ESC
or the Executive may initiate an arbitration proceeding at any time by giving
notice to the others in accordance with the Rules. ESC and the Executive, may,
as a matter of right, mutually agree on the appointment of a particular
arbitrator from the Association’s pool. The arbitrator shall not be bound by the
rules of evidence and procedure of the courts of the Commonwealth of
Pennsylvania but shall be bound by the substantive law applicable to this
Agreement. The decision of the arbitrator, absent fraud, duress, incompetence or
gross and obvious error of fact, shall be final and binding upon the parties and
shall be enforceable in courts of proper jurisdiction. Following written notice
of a request for arbitration, ESC and the Executive, shall be entitled to an
injunction restraining all further proceedings in any pending or subsequently
filed litigation concerning this Agreement, except as otherwise provided in this
Agreement or any enforcement sought with respect to Section 7, 8 or 9, which may
be litigated through an action for injunction or other relief.

17. Legal Expenses. ESC shall pay to the Executive (or her surviving spouse or
estate) all reasonable legal fees and expenses when incurred by the Executive
(or her surviving spouse or estate), in good faith, in seeking to obtain or
enforce any right or benefit provided by this Agreement; provided she (or her
spouse or estate) prevails with respect to any material issue in dispute.

18. No Mitigation or Offset. The Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking employment or
otherwise; nor shall any amounts or benefits payable or provided hereunder be
reduced in the event she does secure employment.

 

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19. Validity. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.

20. Applicable Law. This Agreement shall be governed by and construed in
accordance with the domestic internal laws (but not the law of conflict of laws)
of the Commonwealth of Pennsylvania.

21. Headings. The headings of the sections and subsections of this Agreement are
for convenience only and shall not control or affect the meaning or construction
or limit the scope or intent of any of the provisions of this Agreement.

22. Guaranty. Eastern Holding Company Ltd., a Caymanian company, hereby
irrevocably and unconditionally guarantees to the Executive the full and timely
performance by ESC of each and every obligation of ESC contained in this
Agreement. Such obligation shall continue notwithstanding the occurrence of a
Change in Control or an event described in Section 15(a).

23. Compliance With American Jobs Creation Act of 2004. To the extent any
provision of this Agreement (or any document referred to herein) is in conflict
with the proposed American Jobs Creation Act of 2004 (the “2004 Act”), the
parties agree to modify this Agreement, in good faith and to the extent
possible, to mitigate any adverse tax consequences that may otherwise result to
the Executive, ESC and/or Eastern Holding Corporation.

24. Effective Date. This Agreement shall become effective immediately upon its
execution and delivery by the parties hereto.

IN WITNESS WHEREOF, the parties have executed this Agreement, or caused it to be
executed, as of the date first above written.

 

ATTEST   EASTERN SERVICES CORPORATION

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  By  

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WITNESS:   EXECUTIVE

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  SUZANNE M. EMMET

 

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Agreed to as of the date first set forth above: EASTERN HOLDING COMPANY LTD. By
 

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EXHIBIT A

 

Job Title:   Vice President of Claims FLSA Class:   Exempt Department:  
Executive Reports To:   President and Chief Operating Officer
Issued/Date Revised:   As of September 2004

 

Expectations For All Employees:

Supports the organization’s mission, vision, and values by exhibiting the
following behaviors: excellence and competence, collaboration, innovation,
respect personalization, commitment to our community, and accountability and
ownership.

Job Summary:

The Vice President of Claims is responsible for managing all hand-on operational
aspects and managing all claims functions for the Company. This position
provides leadership, management and vision to ensure the strategic operational
and claims functions of the Company are viable. This position ensures the
company has the proper operational and claims controls, administrative and
reporting procedures, and people systems in place to effectively grow the
organization and advises regarding the operating and strategic decision making
activities of the President and senior management. This position has a key role
in ensuring the Company’s revenue and profitability objectives and overall
business plan are met.

Essential Functions:

 

  •  

Oversee and mange all aspect of the day-to day operations of the claims
division. This includes finance, budget planning, contract negotiations, legal
and regulatory compliance, etc.

 

  •  

Provide technical advice and knowledge to others within the company; effectively
develop solutions to business challenges.

 

  •  

Analyze operating performance and results of the Company and initiates
corrective actions as necessary.

 

  •  

Foster a success-oriented, accountable environment within the company.

 

  •  

Reviews operating results of the organization, compares them to established
objectives, and takes steps to ensure that appropriate measures are taken to
correct unsatisfactory results.

 

SE Employment Contract f    14   

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  •  

Reviews activity reports and financial statements to determine progress and
status in attaining objectives and revises objectives and plans in accordance
with current conditions.

 

  •  

Accountable for complying with all laws and regulations that are associated with
duties and responsibilities.

 

  •  

Foster a success-oriented, accountable business environment within the company;
motivate and lead high-performance management teams, provide mentoring as
guidance as appropriate.

 

  •  

Provide day-today leadership and management that mirrors the adopted mission and
values of the company.

 

  •  

Recommends and implements strategic changes in Company practices and operations.

 

  •  

Establishes and maintains relationships with industry influencers and key
strategic partners.

 

  •  

Participates in developing and executing Company strategic plans and objectives.

 

  •  

Provide technical advice and knowledge to others within the Company regarding
claims administration; effectively develop solutions to business challenges.

Secondary Functions:

 

  •  

Direct supervision of the assigned staff, provide guidance, support and growth
opportunities as appropriate. Provide timely feedback on a regular basis and
complete formal reviews according to company policies.

 

  •  

Periodic evaluation of day-to-day claims department functions in conjunction
with other managers in order to implement improvements of efficiency and
effectiveness.

 

  •  

Maintain contact with key agency partners through periodic visits and updates.

 

  •  

[Serve as member of the Board and present and assist in proposing strategies,
initiatives and policies for Board review/approval.]

 

  •  

Stay current with market (internal and external) challenges, opportunities and
trends that may affect the company and ensure that appropriate strategies are
implemented.

 

  •  

Participate in a wide variety of special projects.

 

SE Employment Contract f    15   

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Knowledge, Skills and Abilities Required:

 

  •  

Substantial number of years of progressive experience in a corporate insurance;
Bachelor’s Degree required in Business, Insurance or related field; CPCU or
other advanced certification required or equivalent combination of education and
experience.

 

  •  

Forward thinking individual with high ethical standards and an appropriate
professional image; broad based knowledge of entrepreneurial business
environment.

 

  •  

Understanding of governmental regulations and reporting requirements and the
ability to interpret the requirements as business necessitates.

 

  •  

Strategic visionary with sound technical skills, analytical ability, good
judgment and strong operational focus.

 

  •  

Ability to represent the organization with major customers/clients, the
financial community, the public and others.

 

  •  

Highly developed organizational, planning and management skills and the ability
to lead people and get results through others.

 

  •  

Ability to anticipate and solve practical problems or resolve issues.

 

  •  

Ability to communicate effectively and professionally both verbally and in
writing with various constituencies and at all levels; both in and outside of
the organization.

 

  •  

Ability to read, analyze, and interpret complex documents.

 

  •  

Ability to attend insurance and industry/business functions to promote and
present a positive image of the Company; ability to participate in
presentations; ability to travel as necessitated by business needs.

 

 

The above are not intended to be an all-inclusive list of the duties,
responsibilities and requirements of the job described. Rather, they are
intended only to describe the general nature of the job.

 

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Supervisor Signature   Employee Signature

 

SE Employment Contract f    16   

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AMENDMENT

TO EMPLOYMENT AGREEMENT

AGREEMENT made this 17th day of December 2008, by and between EASTERN SERVICES
CORPORATION (“ESC”), a business corporation having its principal place of
business at 25 Race Avenue, Lancaster, Pennsylvania, and SUZANNE M. EMMET (the
“Executive”), an individual residing Cumberland County.

WITNESSETH:

WHEREAS, the parties entered into an agreement effective September 21, 2004,
relating, among other things, to the Executive’s employment by ESC (the
“Employment Agreement”); and

WHEREAS, the parties desire to amend the Employment Agreement to comply with
Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), by
executing this document (the “Amendment”).

NOW, THEREFORE, the parties, intending to be legally bound hereby, further agree
as follows:

1. The second to last paragraph of Section 3(b) of the Employment Agreement is
amended and restated to read as follows—

Prior to January 1, 2009, no termination of the Executive may be effected under
this subsection unless such termination is approved in advance by two-thirds
(2/3) of the ESC directors (other than the Executive) then in office. Any
termination in violation of the preceding sentence shall be deemed a termination
without Cause and shall be governed by the provisions of Subsection (c),
provided, however, that any amounts payable under Subsection (c) as a result of
such termination shall be paid no earlier than the date that is six (6) months
following such termination.

2. Section 3(e) of the Employment Agreement is amended and restated to read as
follows—

(e) Notwithstanding the provisions of Section 3(a), Executive’s employment shall
be terminated automatically by ESC upon the Executive’s Disability and her
rights under this Agreement shall cease (except for accrued compensation and
unreimbursed expenses described in Section 4(e)) as of the date of such
termination; provided, however, that the Executive shall nevertheless be
absolutely entitled to receive, in equal monthly installments (without
interest), beginning 30 days following the Executive’s Disability, an amount
equal to and no greater than 100% of her Annual Base Salary (as defined in
Section 4(a)), less

 

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amounts payable under any disability plan of ESC, until the earliest of (i) her
return to any employment, (ii) her attainment of age 65, or (iii) her death; and
provided further that the Executive shall be entitled to the accrued benefits to
which she is then entitled under the benefit plans and programs of ESC, in
accordance with the terms of the same. For purposes of this Agreement, the term
“Disability” shall mean the Executive’s incapacitation by accident, sickness or
otherwise which renders her mentally or physically incapable of performing all
of the essential functions of her job, taking into account any reasonable
accommodation required by law, without posing a direct threat to herself or
others, for a period of six months. (ESC shall be entitled to fund the benefits
contemplated by this subsection in such manner as it deems most cost effective
or otherwise desirable from a corporate perspective and to the extent ESC seeks
the Executive’s cooperation to implement the funding alternative chosen by ESC,
the Executive hereby agrees to take all steps as may be reasonably requested by
ESC to implement the funding alternative.)

Notwithstanding the foregoing, any payments made pursuant to this Section 3(e),
to the extent of payments made from the date of termination of Executive’s
employment through March 15th of the calendar year following such termination,
are intended to constitute separate payments for purposes of Treas. Reg.
§1.409A- 2(b)(2) and thus payable pursuant to the “short-term deferral” rule set
forth in Treas. Reg. §1.409A-1(b)(4); to the extent such payments are made
following said March 15th, they are intended to constitute separate payments for
purposes of Treas. Reg. §1.409A-2(b)(2) made upon an involuntary termination
from service and payable pursuant to Treas. Reg. §1.409A-1(b)(9)(iii), to the
maximum extent permitted by said provision. Notwithstanding the foregoing, if
ESC determines that any other payments hereunder fail to satisfy the
distribution requirement of Code Section 409A(a)(2)(A), the payment of such
benefit shall be delayed to the minimum extent necessary so that such payments
are not subject to the provisions of Code Section 409A(a)(l).

3. Section 4(b) of the Employment Agreement is amended and restated to read as
follows—

(b) Bonus. For services performed by the Executive under this Agreement, ESC
shall pay the Executive bonuses during the Employment Period, in such amounts
and at such times, annually or more frequently, as may be provided by the Board
in its sole discretion, provided that in no event shall any such bonuses be paid

 

2

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later than March 15 of the calendar year next following the year to which the
bonus relates. To the extent ESC maintains an annual bonus plan for its senior
executive officers, the Executive shall be entitled to participate in the same
at a level commensurate with her position(s). The payment of any such bonuses
shall not reduce or otherwise affect any other obligation of ESC, including the
payment of Annual Base Salary, to the Executive provided for in this Agreement.

4. Sections 5(a) and (b) of the Employment Agreement are amended and restated to
read as follows—

(a) The Executive may resign for Good Reason at any time during the Employment
Period, as hereinafter set forth. As used in this Agreement, “Good Reason” means
any of the following:

(i) any reduction in title or a material adverse change in the Executive’s
responsibilities or authority which are inconsistent with, or the assignment to
the Executive of duties inconsistent with, the Executive’s positions and duties
described in Exhibit A attached hereto or otherwise contemplated herein, all of
which results in a material negative change to the Executive in the employment
relationship;

(ii) any reassignment of the Executive to a location more than 100 miles from
ESC’s principal executive office on the date of this Agreement;

(iii) any material reduction in the Executive’s Annual Base Salary; provided,
however, that a reduction in the annual base salary for all similarly situated
executives of ESC with a comparable responsibility level shall not constitute
Good Reason under this Agreement;

(iv) any failure by ESC to provide the Executive with broad-based employee
benefits required hereunder, or the taking of any action that would materially
reduce any of such benefits, unless such failure or reduction is applicable in
each case to all similarly situated plan participants;

(v) the termination by ESC of the automatic renewal provisions of Section 3,
other than as permitted in such section, provided that such action by ESC
results in a material negative change to the Executive in the employment
relationship; or

 

3

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(vi) any material breach of this Agreement of any nature whatsoever on the part
of ESC.

(b) At the option of the Executive, exercisable by the Executive, within 90 days
after the occurrence of the event constituting Good Reason, and after ESC has
failed to cure or otherwise fully remedy such event within 30 days following
written notice of such event by the Executive, the Executive may resign from
employment under this Agreement by a notice in writing (the “Notice of
Termination”) delivered to ESC and the provisions of Section 6 hereof shall
thereupon apply. Notwithstanding the foregoing, any amounts payable upon
termination by the Executive upon the occurrence of any of the foregoing Good
Reason events shall be paid only if the Executive actually terminates employment
within two years following the initial existence of such event.

5. Section 6(b) of the Employment Agreement is amended and restated to read as
follows—

(b) In lieu of any additional benefits, except those to which she may be
entitled under the terms of ESC’s employee benefit and other plans, contracts or
arrangements not referred to in Clause (ii) of this subsection, the Executive
will be paid or provided the lesser value of (i) a lump sum cash payment of
(A) 22.5%, times (B) the highest Annual Base Salary paid to her under this
Agreement, times (C) one, payable within 30 days of Executive’s termination
under this Section, or (ii) 12 months of tax-effected (determined based on the
highest relevant marginal federal, state and local rates) employee welfare
benefits substantially similar to those the Executive enjoyed during the
12-month period immediately prior to her termination. (To the extent any “in
kind” benefit cannot be provided for any reason, and Clause (ii) is applicable,
a tax- effected lump sum cash payment in lieu thereof shall be made to the
Executive within 30 days of Executive’s termination under this Section.) Any
applicable COBRA health care continuation coverage period under Code
Section 4980B shall run consecutively with the 12-month period described in
Clause (ii), if such clause applies.

To the extent it is determined that any benefits under Clause (ii) of this
subsection are taxable to the Executive, if such clause applies, they are
intended to constitute payments made upon an involuntary termination from
service and payable pursuant to Treas. Reg. § 1.409A-1 (b)(9)(iii), to the
maximum extent permitted by said provision and to the extent the payment of such
taxable benefits would exceed the specified time period under Treas. Reg.

 

4

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§1.409A-l(b)(9)(iii), Executive shall be paid, within 30 days of the date of
termination, a lump sum amount in cash equal to the present value (determined
based upon 120% of the then prevailing monthly short-term applicable federal
rate) of ESC’s cost, as of the date of termination, of otherwise providing such
benefit beyond the specified time period under Treas. Reg. §1.409A-1(b)(9)(iii).

6. The second paragraph of Section 6(c) of the Employment Agreement is amended
and restated to read as follows—

For purposes of determining the Gross-Up Payment, the Executive shall be deemed
to be subject to the highest marginal federal, state, local and (if relevant)
foreign tax rates. All calculations required to be made under this subsection
shall be made by ESC’s independent public accountants, subject to the right of
Executive’s representative to review the same. All such amounts required to be
paid shall be paid at the time any withholding may be required under applicable
law, and any additional amounts to which the Executive may be entitled shall be
paid or reimbursed no later than 15 days following confirmation of such amount
by ESC’s independent accountants, but in no event later than the end of the
Executive’s taxable year next following the Executive’s taxable year in which
the Executive or ESC (as applicable) remits the related taxes. In the event any
amounts paid hereunder by ESC are subsequently determined to be in excess of the
amounts owed because estimates were required or otherwise, the Executive will
reimburse ESC to correct the error upon written notice from ESC, together with
written confirmation of the same by ESC’s independent accountants, as
appropriate, and to pay interest thereon at the applicable federal rate (as
determined under Code Section 1274 for the period of time such erroneous amount
remained outstanding and unreimbursed). In the event any amounts paid hereunder
by ESC are subsequently determined to be less than the amounts owed (or paid
later than when due) for any reason, ESC will pay to the Executive the deficient
amount, together with (i) interest at the greater of the above-referenced rate
or the interest she is required to pay taxing authorities, plus (ii) any
penalties assessed against her by such authorities. Prior to its payment to the
Executive, ESC shall be entitled to request the delivery of proof (by
calculations made by the Executive’s accountant or, in the case of tax
assessments, the Executive’s delivery of copies of such assessments) of the
underpaid amounts and any interest or penalties assessed by taxing authorities.
The parties recognize that the actual implementation of the provisions of this
subsection are complex and agree to deal with each other in good faith to
resolve any questions or disagreements arising hereunder.

 

5

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7. A new Section 6(e) is added to the Employment Agreement, reading as follows—

(e) Any payments made pursuant to this Section 6, to the extent of payments made
from the date of termination of Executive’s employment through March 15th of the
calendar year following such termination, are intended to constitute separate
payments for purposes of Treas. Reg. § 1.409A-2(b)(2) and thus payable pursuant
to the “short-term deferral” rule set forth in Treas. Reg. §1.409A-1(b)(4); to
the extent such payments are made following said March 15th, they are intended
to constitute separate payments for purposes of Treas. Reg. §1.409A-2(b)(2) made
upon an involuntary termination from service and payable pursuant to Treas. Reg.
§1.409A-1(b)(9)(iii), to the maximum extent permitted by said provision.
Notwithstanding the foregoing, if ESC determines that any other payments
hereunder fail to satisfy the distribution requirement of Code
Section 409A(a)(2)(A), the payment of such benefit shall be delayed to the
minimum extent necessary so that such payments are not subject to the provisions
of Code Section 409A(a)(1).

8. A new Section 6(f) is added to the Employment Agreement, reading as follows—

(f) Notwithstanding the foregoing, and anything herein to the contrary, the
receipt of any benefits under this Agreement as a result of a termination of
employment shall be subject to satisfaction of the condition precedent that the
Executive undergo a “separation from service” within the meaning of Treas. Reg.
§ 1.409A-1(h) or any successor thereto.

9. Section 23 of the Employment Agreement is amended and restated to read as
follows—

Compliance With American Jobs Creation Act of 2004. If a payment or benefit is
considered to be a deferral of compensation subject to Code Section 409A and the
Executive is deemed to be a “specified employee” within the meaning of that term
under Code Section 409A(a)(2)(B), then with regard to any payment or the
provisions of any benefit that is required to be delayed pursuant to Code
Section 409A(a)(2)(B), such payment or benefit shall not be made or provided
prior to the earlier of (i) the expiration of the six (6) month period measured
from the date of the Executive’s “separation from service” (as such term is
defined in Treas. Reg. § 1.409A-1(h)), or (ii) the date of the Executive’s death
(the “Delay Period”). Within 10 days following the expiration of the Delay
Period, all payments and benefits delayed pursuant to this Section (whether they
would have otherwise been payable in a single sum

 

6

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or in installments in the absence of such delay) shall be paid or reimbursed to
the Executive in a lump sum, and any remaining payments and benefits due under
this Agreement shall be paid or provided in accordance with the normal payment
dates specified for them herein. Notwithstanding the foregoing, to the extent
that the foregoing applies to the provision of any ongoing welfare benefits to
the Executive that would not be required to be delayed if the premiums therefore
were paid by the Executive, the Executive shall pay the full costs of premiums
for such welfare benefits during the Delay Period and ESC shall pay the
Executive an amount equal to the amount of such premiums paid by the Executive
during the Delay Period within 10 days after the conclusion of such Delay
Period.

10. In all other respects, the terms of the Employment Agreement are hereby
affirmed.

IN WITNESS WHEREOF, the parties have executed this Amendment, or caused it to be
executed, on Dec 18, 2008.

 

  EASTERN SERVICES CORPORATION   By  

LOGO [g284560ex10_7pg22a.jpg]

  Date:   12 - 17 -, 2008 [CORPORATE SEAL]   Attest  

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  Date:   12/18/, 2008  

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Suzanne M. Emmet

  Date:   12/18, 2008

 

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