EXHIBIT 99.2
EMPLOYMENT AGREEMENT
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This
Employment Agreement (the "Agreement") is made and entered into by
and
between ProAssurance Corporation, a Delaware corporation
("ProAssurance") and A.
Derrill Crowe,
an individual ("Crowe") effective as of July 1, 2007 (the
"Commencement Date").
RECITALS:
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Crowe has served as the chief executive officer of ProAssurance and its
predecessors and subsidiaries, Medical Assurance, Inc. ("MAI") and The Medical
Assurance Company,
Inc. ("TMAC") since
their respective dates of organization.
During this period,
the terms of Crowe's employment have been set forth in that
certain employment Agreement dated as of January 1, 1982, between
Crowe and TMAC
(then known as Mutual
Assurance Society of Alabama) (the "Prior Employment
Agreement"), and the
terms of the Prior Employment Agreement have been amended
and continued in effect through the date hereof.
Effective June 29, 2007, Crowe has resigned as chief
executive officer
of
ProAssurance and its
subsidiaries.
Crowe will continue as an employee of
ProAssurance (or a subsidiary) in a non-executive capacity, but he
will continue
as a director of ProAssurance and will serve as the non-executive Chairman of
the Board of ProAssurance's Board of Directors. ProAssurance and
Crowe desire to
terminate the Prior
Employment Agreement
as of the date of his
resignation as
chief executive
officer and to enter into this agreement to set forth the terms
and conditions
of Crowe's employment with ProAssurance from and after his
resignation.
NOW,
THEREFORE, THESE
PREMISES CONSIDERED,
Crowe and ProAssurance
hereby
agree as follows:
1.
Resignation and Termination of Prior Employment Agreement.
Crowe hereby
resigns as Chief
Executive Officer of ProAssurance and as an officer and
director of
each of the
direct and indirect subsidiaries of ProAssurance
effective June 29,
2007 (the "Effective
Date"). Crowe agrees that the Prior
Employment Agreement
shall terminate and be of no further
force and effect on
and as of the Effective Date, and that neither Crowe, ProAssurance nor TMAC
shall have any further rights under said Prior Employment Agreement except for
accrued and unpaid base salary through and including the Effective
Date.
2.
Employment Term.
ProAssurance
hereby employs Crowe,
and Crowe accepts
employment, upon the terms and conditions of this Agreement for the
term running
from the Commencement Date to and including December 31, 2009 (the "Term").
At
the expiration of the Term, Crowe's employment with ProAssurance
may continue on
such terms as may be
agreed upon by Crowe
and the Chief
Executive Officer
of
ProAssurance, subject to approval by the Board of Directors of
ProAssurance.
3.
Offices; Directorship; Other Activities.
3.1
Office and Duties.
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(a)
From and after the Commencement Date, Crowe shall serve as
Chairman of
the Board of
ProAssurance. Crowe
shall have the duties
and authority
as are
prescribed by the
bylaws of ProAssurance
for such office on the date of this
Agreement, and other
duties and
responsibilities as
may be assigned to him by
ProAssurance's Board of Directors (the "Board"), provided that such assignments
by the Board are
customary and
appropriate for the
non-executive
serving as
Chairman of the Board of ProAssurance. Crowe shall be given such
authority as is
appropriate to carry out his duties.
(b)
At the request of the Chief Executive Officer of ProAssurance, Crowe
shall assist the Chief Executive Officer by performing such duties consistent
with the office of
non-executive
Chairman, including
appearance
at industry
conferences and assistance with merger and acquisition
activities.
(c)
Crowe shall devote such attention and time to the business
and affairs
of ProAssurance as may be reasonably required to discharge his
duties under this
Agreement.
3.2
Other Activities. Crowe may directly or indirectly participate in
other
business ventures, investments or charitable organizations, and may
also deliver
lectures, fulfill
speaking engagements or teach at educational institutions and
may manage personal
investments,
so long as such
activities do not materially
interfere with Crowe's responsibilities to ProAssurance; provided
that Crowe may
not invest
in any business that does business with, or competes with,
ProAssurance except
for investment in a
business where Crowe's
percentage of
ownership is insignificant; and provided further that Crowe shall
remain subject
to the restrictions set forth in the ProAssurance Code of Ethics
and Conduct.
4.
Compensation and Benefits.
4.1
Base Salary.
Crowe will continue his current base salary at the
annualized rate of $715,000 through December 31, 2007. For calendar
years 2008
and 2009, ProAssurance
will pay to Crowe a
base salary at the rate of $500,000
per annum ("Base Salary"). Base Salary will be payable in
periodic installments
in accordance with ProAssurance's customary practices. Amounts payable will be
reduced by standard withholding and other authorized
deductions.
4.2
Other Incentive
Compensation.
ProAssurance will pay
Crowe the annual
incentive compensation
previously awarded to Crowe for the calendar year ending
December 31,
2007, if and to the extent that the
incentive compensation is
earned in accordance with the 2007 Incentive Award Guidelines as adopted by the
Board on March 7, 2007; provided that the amount of the
earned annual incentive
compensation payable
to Crowe shall be subject to proration reflecting Crowe's
six months of service as Chief Executive Officer such that Crowe shall
receive
50% of the annual
incentive compensation
that would have been
awarded for the
full calendar year 2007. The annual incentive compensation will be paid at
such
time and manner as the annual incentive compensation is paid to
ProAssurance's
senior executive officers consistent with past practice but not
later than March
15, 2008.
4.3
Outstanding Equity Compensation. During the Term, Crowe shall
continue
as a participant under
the 1995 Incentive
Compensation Stock
Plan, as amended
(the "1995 Plan") and
the 2004 Equity
Incentive Plan,
as amended
(the "2004
Plan"). All grant
agreements for stock
options granted under the 1995 Plan and
the 2004 Plan and performance share agreements for performance
shares granted
under the 2004 Plan in effect on the Effective Date shall continue
and remain in
effect in accordance with their respective terms.
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<PAGE>
4.4
Other Savings and
Retirement Plans.
During the Term,
Crowe shall be
entitled to participate in all savings and retirement plans,
practices, policies
and programs
applicable generally
to other employees of ProAssurance. The
current savings and retirement plans, all of which may be
terminated or amended
by the Board, include
the Equity Plan, the Executive Non-Qualified Excess Plan
and Trust, the Amended
and Restated
ProAssurance
Corporation Stock
Ownership
Plan, and the ProAssurance Group Savings and Retirement Plan.
4.5
Welfare Benefit
Plans. During the Term, Crowe shall be eligible for
participation in and
shall receive all
benefits under
welfare benefit plans
(including group
health, disability and
life insurance plans
and programs) as
shall be in
effect from time to time, to the extent applicable to other
employees of ProAssurance.
4.6
Personal Use of Airplane. During such time that ProAssurance owns or
regularly leases corporate aircraft for business purposes during
the Term, Crowe
shall be entitled to
personal use of corporate aircraft owned or leased by
ProAssurance, if any,
in accordance with policies and procedures established by
the Board; provided that the policies and procedures shall allow
Crowe an annual
allowance of up to 50
hours of personal
use on an owned or
leased corporate
aircraft in each year during the Term. For purposes of calendar year
2007, the
personal use of the airplane shall include Crowe's hours of personal use
before
and after the Effective Date.
4.7
Reimbursement
of Expenses.
Crowe shall be
entitled to receive prompt
reimbursement for all
reasonable expenses
incurred by Crowe in accordance with
the policies,
practices and procedures generally applicable to senior
Executive
officers of ProAssurance.
4.8
Office and Support
Staff. ProAssurance
shall provide Crowe an
office
and clerical support.
4.9
Vacations and Leave.
(a)
Crowe shall be entitled to vacation and sick leave (without loss of
pay) in accordance with ProAssurance's policies in effect from time
to time, and
other personal and family leave as may be provided by law.
(b)
During the Term, at
such reasonable
times as the Board
shall permit,
Crowe shall be entitled, without loss of pay, to be absent
from the performance
of his duties under this Agreement.
4.10
Conflict. In the event
of any conflict between this Agreement and the
terms of any benefit,
severance, deferred
compensation,
incentive or
similar
plan or agreement
in which Crowe is or
becomes a participant
during the Term
(other than a
stockholder-approved
plan or ERISA plan), the provisions of this
Agreement shall apply unless Crowe makes specific written election otherwise,
but Crowe shall not be entitled to duplicative payments or
benefits.
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5.
Termination of Employment.
5.1
Death, Disability or
Retirement. Crowe's
employment
shall terminate
upon Crowe's death, Disability or Retirement during the Term.
(a)
For purposes of this Agreement, "Disability" means a serious
injury or
illness that
requires Crowe to be under regular care of a licensed medical
physician and renders Crowe incapable of performing
the essential
function of
Crowe'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. Crowe will submit to such medical
or psychiatric
examinations and tests as such medical professional deems necessary to
make any
determination of
Crowe's Disability
and consent to such
medical
professional
sharing the results of such examination with a representative of
the Board.
(b)
For purposes of this Agreement, "Retirement" means voluntary
retirement
by Crowe when eligible to receive retirement benefits under a retirement
plan
then in effect for
ProAssurance, Crowe
having reached the age of mandatory
retirement (if such requirement then exists for ProAssurance's
senior Executive
officers) or any other
retirement
by Crowe with the consent of the Board.
ProAssurance acknowledges that Crowe is eligible for retirement at
his election.
5.2
Termination by
ProAssurance
with Cause.
ProAssurance
may terminate
Crowe's employment
during the Term for
Cause. For purposes of
this Agreement,
the term "Cause" means: (i) Crowe has been convicted in a federal
or state court
of a crime classified
as a felony;
(ii) action or inaction by Crowe (A)
that
constitutes
embezzlement, theft,
misappropriation
or conversion of
assets of
ProAssurance or its subsidiaries 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 Crowe's office, and
(B) such action or inaction has adversely affected or is
likely to adversely
affect the business of
ProAssurance or its
subsidiaries,
taken as a whole, or
has resulted
or is intended to result in a direct or
indirect gain or personal enrichment of Crowe to the
detriment of ProAssurance;
or (iii) Crowe has been grossly inattentive to, or in a grossly
negligent manner
failed to competently perform, Crowe's job duties and the failure
was not cured
within 45 days after
written notice
from ProAssurance. Any termination of
Crowe's employment by
ProAssurance for Cause
shall be communicated by a Notice
of Termination
(as defined in Section 5.4 below) to Crowe, which Notice of
Termination shall be
in writing and shall
set forth in
reasonable detail
the
facts and
circumstances claimed
to provide a basis for
termination of Crowe's
employment under
this provision. Crowe shall not be deemed to have been
terminated for Cause
unless and until (x)
he receives a Notice of Termination
from ProAssurance; (y) he is given the opportunity to be heard
before the Board;
and (z) the Board
finds in its good
faith opinion,
Crowe was guilty of the
conduct set forth in the Notice of Termination.
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5.3
Termination
by Crowe for Good Reason. Crowe 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 Crowe's
express written consent during the Term: (i) a material
reduction in Crowe's
Base Salary as set forth in Section 4.1 hereof; or (ii) a
breach by ProAssurance
of any provision of this Agreement in any material
respect; or (iii) the
occurrence
of a Change of Control
(as herein
defined).
Except with respect to a Change of Control, Crowe must provide
ProAssurance with
a Notice of
Termination no later
than 45 calendar
days after
Crowe knows or
should have known that Good Reason has occurred. Following delivery of Crowe's
Notice of Termination,
ProAssurance shall
have 45 calendar days to rectify the
circumstances causing
the Good Reason.
If ProAssurance fails to rectify the
events causing
Good Reason within said 45 day period, or if ProAssurance
delivers to Crowe written notice stating that the circumstances
cannot or shall
not be rectified,
Crowe shall be
entitled to assert Good Reason and terminate
employment as of the
expiration of the 45 day period after delivery of Crowe's
Notice of Termination.
Should Crowe fail to provide the required Notice of
Termination in a timely manner, Good Reason shall not be deemed to
have occurred
as a result of the event. The Term shall not be deemed to
have expired
during
the notice period,
however, as long as Crowe has provided Notice of Termination
within the Term.
For
purposes of this
Agreement, the
following terms have the meanings set
forth below:
(a)
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(b) "Person" is used
as such term is used for purposes of Section 13(d) or
14(d) of the Exchange Act.
(c)
"Beneficial Ownership"
is used as such term is used within the meaning
of Rule 13d-3 promulgated under the Exchange Act.
(d)
"Change of Control"
shall mean the
occurrence during the
Term of any
one of the following events:
(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.
The
transactions
as described in (i),
(ii) and (iii) shall be referred to
as "Change of Control
Transactions." In no
event shall a Change
of Control be
deemed to have occurred, with respect to Crowe, if Crowe is part of
a purchasing
group which consummates a Change of Control Transaction. Crowe shall be deemed
"part of a purchasing group" for purposes of the preceding
sentence if Crowe
is
an equity participant
or has agreed to become an equity participant in the
purchasing company or group (except for passive ownership of less
than 5% of the
stock of the
purchasing company or
ownership of equity
participation
in the
purchasing company
or group as a
result of the conversion or exchange of
ProAssurance's common stock beneficially owned by Crowe.
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5.4
Notice and Date of Termination. Any termination by ProAssurance,
or by
Crowe, shall be
communicated by Notice
of Termination to the other party given
in accordance with Section 10 hereof. For purposes of this
Agreement, a
"Notice
of Termination"
is a written notice
which indicates the
specific
termination
provision in
this Agreement relied upon and sets forth such additional
information as may be
required in Section
5.2 or Section
5.3 hereof,
to the
extent applicable. The
"Date of Termination" means (i) if Crowe's employment is
terminated by ProAssurance for Cause, the Date of Termination shall
be as of the
date of Crowe's receipt of ProAssurance's Notice of Termination;
(ii) if Crowe's
employment is terminated by Crowe for Good Reason, the Date of
Termination shall
be the last day of the
45 day period
after delivery of Crowe's Notice of
Termination; (iii) if
Crowe's employment is terminated due to a Change of
Control, the Date of
Termination shall be
the date of closing of the Change of
Control Transaction; (iv) if Crowe's employment is terminated by
reason of death
of Crowe, the date of death shall be the Date of Termination;
or (v) if Crowe's
employment is terminated by reason of Disability, the Date of Termination shall
be the date of
determination
of Disability by the Board; (vi) if Crowe's
employment is terminated by
