Document:

EX-10.5 RELEASE AND SEVERANCE COMP. AGRMT./ADAMO

 

Exhibit 10.5

Execution Copy

January 1, 2008

RELEASE AND SEVERANCE COMPENSATION AGREEMENT

          THIS RELEASE AND SEVERANCE COMPENSATION AGREEMENT (the “Agreement”) is made and entered into
effective January 1, 2008 (the “Effective Date”), between and among ProAssurance Group Services
Corporation, an Alabama corporation, and ProAssurance Corporation, a Delaware corporation
(“ProAssurance”), and Victor T. Adamo, an individual (the “Executive”). ProAssurance and its
direct and indirect subsidiaries are hereinafter collectively referred to as the “Companies.”

RECITALS:

          The Executive currently provides services to the Companies as an at will employee of
ProAssurance Group Services Corporation which is a wholly owned subsidiary of ProAssurance.
Executive is currently employed at the Companies’ offices in Jefferson County, Alabama, which is
Executive’s primary location of employment on date of this Agreement. ProAssurance has offered to
expand protection to the Executive in the form of severance benefits payable on termination of
employment under certain circumstances in consideration of Executive’s agreement to continue his
employment with the Companies. ProAssurance and Executive have entered into this Agreement to
evidence the terms and conditions for payment of severance benefits upon termination of Executive’s
employment with the Companies.

AGREEMENT

          NOW, THEREFORE, These Premises Considered, and in consideration of the mutual covenants and
promises in this Agreement, the sufficiency of which is hereby acknowledged, 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 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 base rate of compensation in effect as of the date of the
Agreement; or (B) the Executive’s base rate of compensation in effect as of the end of the last
calendar quarter preceding the Date of Termination

          (b) “Beneficial Ownership” is used as such term is used within the meaning of Rule 13d-3
promulgated under the Exchange Act.

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

 

 

          (d) “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; or (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.

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

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

               (i) an acquisition of the voting securities of ProAssurance by any Person, immediately after
which such Person has Beneficial Ownership of more than 50.1% of the combined voting power of
ProAssurance’s then outstanding voting securities;

               (ii) a merger, consolidation or reorganization involving ProAssurance in which an entity other
than ProAssurance is the surviving entity or in which ProAssurance is the surviving entity and the
stockholders of ProAssurance immediately preceding such transaction will own less 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) and ProAssurance ceases to function on a
going forward basis as an insurance holding company system that provides medical professional
liability insurance.

          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) “Disability” means a serious injury or illness that requires Executive to be under regular
care of a licenses medical physician and renders the Executive incapable of performing the
essential function of the Executive’s position for twelve (12) consecutive months as determined by
the Board in good faith and upon receipt of and in reliance on competent medical advice from one or
more individuals selected by the Board, who are qualified to give professional medical advice.
Executive will submit to such medical or psychiatric examinations

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and tests as such medical professional deems necessary to make any determination of
Executive’s Disability and consent to such medical professional sharing the results of such
examination with a representative of the Board.

          (i) “Date of Termination” means (i) if Executive’s employment is terminated by Executive for
any reason other than death or Disability, the Date of Termination shall be the last day of
employment of Executive; (ii) if Executive’s employment is terminated by reason of death of the
Executive, the date of death shall be the Date of Termination; (iii) if the Executive’s employment
is terminated by reason of Disability, the Date of Termination shall be the date of determination
of Disability by the Board; or (iv) if Executive’s employment is terminated by ProAssurance for any
reason, the Date of Termination shall be the last day of employment of Executive unless otherwise
provided in Section 6 hereof.

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

          (k) “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
holds a position with executive level responsibilities consistent with the Executive’s training and
experience; (ii) the Companies require a material change in the Executive’s primary location of
employment of more than 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 is provided
to other executives of comparable rank with the Companies; (iv) a material breach by the Companies
of any provision of this Agreement; (v) a material reduction by the Companies in the Executive’s
Annual Base Salary (herein defined); (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; or
(vii) the election of Executive to terminate his employment with the Companies during the Initial
Term pursuant to Section 3(g) hereof.

          (l) “Severance Benefits” means the payments and other benefits to be provided to the Executive
under Section 3(a) hereof.

          (m) “Term” means the Initial Term or a Renewal Term (as each is defined in Section 2 hereof),
where no distinction is required in this Agreement

     2. Term of Agreement. This Agreement shall continue in effect for a initial period
commencing on the Effective Date and ending on December 31, 2010 (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 shall terminate automatically and
without any action of the Companies or the Executive at the expiration of the Term in which 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 months prior to the commencement of any Renewal
Term.

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     3. Severance Benefits.

          (a) If (A) during the 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 that is
attached to and incorporated in this Agreement (“Release”) within sixty (60) days after the Date of
Termination, the Executive shall receive the following benefits:

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

               (ii) An amount equal to two (2) times the average annual incentive award(s) and bonus(es).
The “average annual incentive award(s) 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 or, if shorter, in each of the complete calendar
years during the Executive’s entire period of employment with the Companies. The “annual incentive
award(s) and bonus(es)” shall mean the dollar value of the cash or other consideration paid to the
Executive by the Companies as annual performance based compensation (whether or not deferred) in
each calendar year during said period. The Executive’s annual incentive awards and bonuses do not
include long-term incentive compensation; therefore, annual incentive awards and bonuses shall be
calculated excluding the value of options to purchase stock, performance shares, or other long-term
incentives;

               (iii) Payment of the Executive’s monthly COBRA premiums for continued health and dental
insurance coverage for the shorter of the following: (A) eighteen (18) 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; and

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

          (b) Subject to the delivery of the executed Release by Executive, the Severance Benefits
described in subparagraphs (i) and (ii) of Section 3(a) hereof shall be paid in cash or good funds
in equal monthly installments during the Restricted Period (as defined in Section 7hereof)
commencing no later than the fifteenth day of the calendar month that occurs not less than seven
(7) days after the execution of the Release and ending on the first day of the last full calendar
month in the Restricted Period; provided that the obligation of the Companies to pay such Severance
Benefits to the Executive shall be subject to termination as herein provided in the event the
Executive violates the covenants under Section 7 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

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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.

          (c) 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.

          (d) 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 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.

          (e) The Executive shall not be entitled to receive Severance Benefits if employment with the
Companies is terminated by reason of death or Disability of Executive; or by reason of termination
of employment by the Executive without Good Reason (herein defined); or by reason of termination of
employment by the Companies with Cause.

          (f) 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 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 this Agreement shall cease.

          (g) Notwithstanding any provisions of this Agreement and this Section 3 to the contrary, the
Executive may unilaterally and of his own accord terminate his employment relationship with the
Companies during the Initial Term by delivery of notice to ProAssurance in accordance with Section
10 hereof. In the event the Executive elects to terminate employment with the Companies pursuant
to this subparagraph (g), the Executive shall be deemed to have terminated his employment for Good
Reason and shall be entitled to Severance Benefits pursuant to Section 3 hereof, and neither
Executive nor the Companies shall be required to comply with the provisions of Section 5 hereof;
provided that if the Companies deliver a notice of termination for Cause under Section 6 hereof
which sets forth reasons for termination for Cause that occurred prior to the date of delivery of
Executive’s notice of termination pursuant to this subparagraph (g) and the Executive’s employment
is terminated for Cause for the reasons set forth in said notice of termination for Cause, the
employment of the Executive shall be deemed to have been terminated by the Companies for Cause, and
not by the Executive for Good Reason, and the Executive shall not be entitled to any Severance
Benefits hereunder.

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     4. Parachute Payment Tax Reimbursement.

          (a) If any payment or benefit within the meaning of Section 280G(b)(2) of the Code to
Executive for his benefit paid or payable or distributed or distributable pursuant to the terms of
this Agreement or otherwise in connection with, or arising out of, Executive’s employment with the
Companies or a Change of Control (a “Payment” or “Payments”) will be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with such interest and penalties are
collectively referred to as the “Excise Tax”), then the Executive will be entitled to receive an
additional payment (a “Gross Up Payment”). The amount of the Gross Up Payment will be such that
after payment by the Executive of all taxes (including any interest or penalties, other than
interest and penalties imposed by reason of the Executive’s failure to file a timely tax return or
pay taxes shown due on his return, imposed with respect to such taxes and the Excise Tax),
including any Excise Tax imposed upon the Gross Up Payment, the Executive retains an amount of the
Gross Up Payment equal to the Excise Tax imposed upon the Payments. The Executive shall be deemed
to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar
year for which the Excise Tax is to be paid.

          (b) An initial determination as to whether a Gross Up Payment is required pursuant to this
Agreement and the amount of such Gross Up Payment shall be made by the Compensation Committee or
the Board of Directors of ProAssurance. In making such determination, the value of any noncash
benefits or any deferred payment or benefit shall be determined in accordance with the principles
set forth in Sections 280G(d)(3) and (4) of the Code. ProAssurance shall provide the determination
(“Determination”) together with detailed supporting calculations and documentation to the Executive
within a reasonable time after the Date of Termination but not later than March 15 in the calendar
year following the year in which the Date of Termination occurred. If ProAssurance determines that
no Excise Tax is payable by the Executive with respect to a Payment or Payments, it shall furnish
the Executive with an opinion of its income tax accountant or tax counsel to the effect that no
Excise Tax will be imposed with respect to any Payment or Payments. Within ten days of the
delivery of the Determination to the Executive, the Executive shall have the right to dispute the
Determination. The Gross Up Payment, if any, as determined pursuant to this Section 4(b) shall be
paid by the Companies to the Executive within 20 days of the receipt of the Determination. The
existence of the Dispute shall not in any way affect the Executive’s right to receive Gross Up
Payments in accordance with the Determination. Upon the final resolution of a Dispute, the
Companies shall promptly pay the Executive any additional amount required by such resolution. If
there is no Dispute, the Determination shall be binding, final and conclusive upon the Companies
and the Executive.

     5. 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. Following the Executive’s notice, the Companies shall have 45 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 45 day period after the Executive’s notice, or if any
of the Companies delivers to the Executive written notice stating that the circumstances cannot or
shall not be rectified, the Executive shall be entitled to assert

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Good Reason and terminate employment on or before 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.

     6. 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 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 11
hereof and file for settlement of the dispute in arbitration as provided in Section 12 hereof, in
which event the Date of Termination shall be deemed to occur on the date determined by the
arbitrator; provided that if the arbitrator rules in favor of the Executive, the time for the
execution of the Release under Section 3(a) hereof shall be extended until sixty (60) days after
the decision by the arbitrator, and in such event, the Executive shall be paid Severance Benefits
after the execution of the Release as provided in Section 3(b) hereof and 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 3(a) hereof) between the termination of employment for COBRA
purposes and the Date of Termination as determined by the arbitrator .

     7. Non-Competition; Nonsolicitation of Employee. The Executive will not during the
Restricted Period (herein defined):

          (a) become Employed by a Competitor Company that offers, sells or markets medical professional
liability insurance in a primary market area of an Insurance Subsidiary, except that Executive may
be employed with a Competitor Company so long as and on the condition that the Executive does not
participate in the medical professional liability insurance business of the Competitor Company; or

          (b) 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 medical professional liability insurance for a
Competitor Company in a primary market area of an Insurance Subsidiary.

          For purposes of this Section 7 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 medical
professional liability insurance to health care providers.

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          “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.

          “Health care providers” means physicians, dentists, podiatrists, physician assistants, nurse
practitioners, other individual health care providers and hospital and other institutional health
care providers.

          “Insurance Subsidiary” means any direct or indirect subsidiary of ProAssurance that offers
medical professional liability insurance or non-risk bearing products and services related to
underwriting, claims or risk management, or indemnification for medical professional liability.

          “Medical professional liability insurance” means medical malpractice insurance and
reinsurance, and equivalent services such as administration of self-insured trusts, claims
management services and risk management services for health care providers. “Medical professional
liability insurance” does not include services provided as an employee of a health care provider if
such services are rendered solely for the purpose of servicing medical professional liability risk
of the employer or that of its employees.

          “Primary market area” means any state in which the Insurance Subsidiaries derived more than
$15 million in aggregate revenues from the sale of medical professional liability insurance and
non-risk bearing medical professional liability services or products to health care providers in
the most recent complete fiscal year prior to the Date of Termination.

          “Restricted Period” means a period of 36 months from the Date of Termination.

          (b) If the Executive is deemed to have materially breached the non-competition covenants set
forth in Section 7 of this Agreement, 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 3 of this Agreement. The Companies shall give prior or
contemporaneous written notice of such withholding or cancellation of payments in accordance with
Section 3 hereof. If the Executive violates any of these restrictions, 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.

          (c) Both parties agree that the restrictions in 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 consideration for the Executive’s obligations under this Agreement.

     8. 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 the event that the Executive is at
any time not the subject of a separate confidentiality or nondisclosure agreement with the
Companies (or any of them), Executive expressly agrees that Executive shall not use for the
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

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material or information of the Companies or their subsidiaries, including without limitation,
any information regarding insureds or other customers, actual or prospective, and the contents of
their files; marketing, underwriting or financial plans or analyses which is not a matter of public
record; claims practices or analyses which are not matters of public record; pending or past
litigation in which the Companies have been involved and which is not a matter of public record;
and all other strategic plans, analyses of operations, computer programs, personnel information and
other proprietary information with respect to the Companies which are not matters of public record.
Executive shall return to the Companies promptly, and in no event later than the Date of
Termination, all items, documents, lists and other materials belonging to the Companies or their
subsidiaries, including but not limited to, credit, debit or service cards, all documents, computer
tapes, or other business records or information, keys and all other items in the Executive’s
possession or control.

     9. 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.

     10. 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 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:	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	[Executive]	 	 
	 
	 	 	 	 	 	 
	 	 	Notice to the Companies:	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	ProAssurance Corporation
	 	Street Address:
	 

	 	 	 	Mailing Address:
	 	100 Brookwood Place
	 

	 	 	 	P. O. Box 590009
	 	Birmingham, Alabama 35209
	 

	 	 	 	Birmingham, Alabama 35259-0009	 	 
	 	 	 	 	Attention: Chief Executive Officer: cc Secretary

     11. 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) 877-4400. The
“Named Fiduciary” as defined in Section 402(a) (2) or ERISA, also shall be ProAssurance.
ProAssurance shall have the right to designate one or more

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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.

     12. 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 11 hereof and may file for
arbitration within sixty (60) days following claimant’s receipt of the Administrator’s written
decision on review under Section 11(c) hereof, or if the Administrator fails to provide any written
decision under Section 11 hereof, within 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 Chicago, Illinois,
whichever location is closer to the principal office where the Executive was employed on the Date
of Termination. The arbitrator

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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 may 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.

     13. 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 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).

11

 

          (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 any employment agreement 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 supercedes 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) If any provision of this Agreement is determined to be unenforceable, at the discretion of
ProAssurance 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.

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

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

[Signatures on following page.]

12

 

          IN WITNESS WHEREOF, the parties have duly executed this Agreement on this 26th day
of February, 2008.

	 	 	 	 	 	 	 
	 	 	EXECUTIVE:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	Victor T. Adamo	 	 
	 
	 	 	 	 	 	 
	 	 	PROASSURANCE CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	W. Stancil Starnes, C.E.O.	 	 
	 
	 	 	 	 	 	 
	 	 	PROASSURANCE GROUP SERVICES

CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Howard H. Friedman, Vice President	 	 

13

 

RELEASE IN CONJUNCTION WITH SEVERANCE COMPENSATION

          This Release of Claims (“Release”) is between ProAssurance Corporation (“ProAssurance”), for
itself and for its subsidiaries 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 Victor T. Adamo (“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. Executive hereby 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.

     2. 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 Release
and Severance Compensation Agreement between Companies and Executive, effective as of January 1,
2008 (“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.

     3. 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.

     4. 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.

     5. 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.

     6. 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 (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.

 

 

     7. 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 after the Date of Termination

     8. 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.

     9. 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.

     10. 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.

     11. 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, P. O. Box 590009, Birmingham, Alabama 35259-0009, 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.

     12. 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

2

 

they are knowingly and voluntarily entering into this Release, and that they are competent to
enter into this Release.

     13. 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.

     14. 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.

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

     16. 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.

     17. 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.

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	EXECUTIVE	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Dated:
	 	 	 	 	 	 	 	 	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	PROASSURANCE CORPORATION	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Dated:

	 	 	 	 	 	By:	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Its:	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 

3EX-10.6(B) AMENDMENT TO EMPLOYMENT AGREEMENT

 

Exhibit 10.6b

January 1, 2008

Mr. W. Stancil Starnes

ProAssurance Corporation

100 Brookwood Place, Suite 300

Birmingham, AL 35209

Re: Employment Agreement

Dear Stan:

          Effective as of May 1, 2007, you entered into an Employment Agreement with ProAssurance Corporation
(the “Agreement”). Since that date, we have been engaged in an extensive review of all of the
company’s agreements, plans, and practices to determine whether modifications are required in order
to comply with the requirements of Section 409A of the Internal Revenue Code and the final
regulations that were issued by the Internal Revenue Service in the spring. Based on a review of
the Agreement, it has been determined that minor modifications to the Agreement are required. This
letter and your acceptance of its provisions will be considered an amendment to the Agreement.

          Sections 3.2(a) and 3.2(b) of the Agreement are amended to provide that annual incentive
compensation will be paid by March 15th of the year following the year to which such compensation
is attributable.

          Section 4.3 of the Agreement is amended to revise the definition of “Good Reason” to conform to the
Code Section 409A safe harbor for involuntary separation from service by deleting the first two
sentences in Section 4.3 from the Agreement and by substituting the following in lieu thereof as
the first two sentences in Section 4.3 of the Agreement:

4.3 Termination by Executive for Good Reason. Executive may terminate his
employment with ProAssurance for Good Reason. For purposes of this Agreement, “Good
Reason” shall constitute any of the following circumstances if they occur without
the Executive’s express written consent during the Term: (i) if the Board shall
refuse or fail to reelect Executive to the office of Chief Executive Officer of
ProAssurance or should change the duties and responsibilities of Executive in a
manner that is a material diminution of the duties and responsibilities of the Chief
Executive Officer under the bylaws of ProAssurance as currently in effect; (ii)
ProAssurance shall require that the Executive’s primary location of employment be
more than 100 miles from the location of ProAssurance’s principal offices as of the
date of this Agreement; (iii) a material reduction in the Executive’s Base Salary as
set forth in Section 3.1 hereof; (iv) a material breach by ProAssurance of any
provision of this Agreement; or (v) the

 

 

Mr. W. Stancil Starnes

January 1, 200

Page 2

election by ProAssurance not to automatically extend the Term of this Agreement as
provided in Section 1 hereof.

          Section 5.2 of the Agreement is amended to provide for the payment of Severance Benefits in
accordance with the requirements of Code Section 409A by deleting Section 5.2(a) in its entirety
from the Agreement and substituting the following in lieu thereof as Section 5.2(a) of the
Agreement:

(a) If, (I) during the Term, (x) ProAssurance terminates the employment of Executive
for any reason other than Cause, death, Disability or Retirement, or (y) Executive
terminates his employment with ProAssurance for Good Reason, or (z) this Agreement
is automatically terminated upon a Change of Control (as provided in Section 8.2
hereof), and (II) the Executive signs the release form that is attached to this
Agreement as Exhibit C (the “Release”) within sixty (60) days after either the Date
of Termination or the effective date of the Change of Control, whichever is
applicable, the Executive shall receive an amount equal to a sum of the amounts
payable as Base Salary from the Date of Termination to the end of the Term at the
then current rate (the “Severance Benefits”). Subject to the delivery of the
executed Release by Executive, the Severance Benefits shall be paid in cash or good
funds in equal monthly installments during the Restricted Period (as defined in
Section 6.1 hereof) commencing on the fifteenth day of the calendar month that
occurs not less than seven (7) days after the execution of the Release and ending on
the first day of the last full calendar month in the Restricted Period; provided
that the obligation of ProAssurance to pay such Severance Benefits to the Executive
after termination of employment shall be subject to termination as herein provided
in the event Executive violates the covenants under Section 6.1 hereof; and provided
further that the payment of such Severance Benefits shall be payable by ProAssurance
in lump sum on the automatic termination of this Agreement upon a Change of Control.
ProAssurance 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 (i) their being separation pay
upon an involuntary separation from service or their being paid on account of a
Change of Control and (ii) their otherwise

 

 

Mr. W. Stancil Starnes

January 1, 200

Page 3

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.

          The amendments to the Agreement will be effective January 1, 2008. If you are in agreement with
these amendments, please return a signed copy of this letter to me.

Sincerely,

ProAssurance Corporation

	 	 	 	 	 
	By

	 	 	 	 
	 

	 	 

	 	 

Accepted on this 26th day of February, 2008.

	 	 	 
	 
	 

W. Stancil Starnes

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