AMENDMENT TO EMPLOYMENT AGREEMENT
Exhibit
10.23
AMENDMENT
TO EMPLOYMENT AGREEMENT
This is
an Amendment dated December 17, 2008 to that certain Amended and Restated
Executive Employment Agreement (the “Employment Agreement”) made and entered
into as of the 15th day of
March, 2006, by and between PMA Capital Corporation, a Pennsylvania corporation,
with its principal place of business at 000 Xxxxxx Xxxxxxx, Xxxx Xxxx,
Xxxxxxxxxxxx 00000-0000 and/or such of its affiliates and/or subsidiaries it
designates (the “PMA Capital”), and XXXXXXX X. XXXXXXXXXXXX, residing at 0
Xxxxxxxxxx Xxxxx, Xxxx Xxxxxxx, Xxx Xxxxxx 00000 (“Executive”).
W
I T N E S S T H:
WHEREAS,
the Company wishes to amend certain provisions of the Employment Agreement to
satisfy the requirements of Section 409A of the Internal Revenue Code of 1986,
as amended and to make certain other changes; and
WHEREAS,
Executive is willing to accept the changes desired by the Company.
NOW
THEREFORE, in consideration of the facts, mutual promises and covenants
contained herein and intending to be legally bound hereby, the Company and
Executive agree as follows:
1. Paragraph
3 of the Employment Agreement be and hereby is amended and restated in its
entirety to read as follows:
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“3.
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Expenses.
PMA Capital will reimburse Executive for such of his out-of-pocket
expenses as are reasonably necessary in connection with services rendered
by Executive pursuant to this Agreement, as provided in the business
expense policies adopted by PMA Capital from time to
time. Notwithstanding the foregoing, the amount of expenses
eligible for reimbursement during any calendar year shall not affect the
expenses eligible for reimbursement in any other calendar year, and the
reimbursement of an eligible expense shall be made as soon as practicable
after Executive requests such reimbursement, but not later than December
31 following the calendar year in which the expense was
incurred.”
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2. Subparagraph
5(e) of the Employment Agreement be and hereby is amended and restated in its
entirety to read as follows:
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“(e)
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By
Executive’s voluntary resignation (before the end of the term), other than
during February 2009, for other than Good Reason upon not less than thirty
(30) days prior written notice to PMA Capital;
or”
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3. Subparagraph
5(f) of the Employment Agreement be and as hereby described herein is amended
and restated in its entirety to read as follows:
“(f) By
Executive’s voluntary resignation for Good Reason, which shall mean Executive
has given thirty (30) days prior written notice that he intends to resign
due
to: (i) a material adverse change in his duties, authority or
responsibilities without his agreement; (ii) his being required to relocate his
office to executive offices outside of an area within a fifty (50) mile radius
of PMA Capital’s existing executive offices in Blue Xxxx, Pennsylvania; (iii)
there being a material reduction in the overall value of the employee benefits
being provided to him pursuant to paragraph 2(b) unless the reduction is
effective for all senior executive employees; or (iv) a material breach by PMA
Capital of any of its obligations to Executive under this Agreement (“Good
Reason Events”). For a voluntary resignation to constitute a
voluntary resignation for Good Reason Executive (i) must provide PMA Capital
notice within sixty (60) days of the initial existence of one or more of the
Good Reason Events (“Good Reason Notice”) and PMA Capital fails to remedy the
Good Reason Event(s) within thirty (30) days of receipt of the notice and (ii)
must voluntarily incur a “separation from service” from PMA Capital within the
meaning of section 409A of the Code” within 120 days of the initial existence of
the Good Reason Event described in the Good Reason Notice.”
4. Subparagraph
5(g) of the Employment Agreement be and hereby is amended and restated in its
entirety to read as follows:
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“(g)
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By
Executive’s voluntary resignation between twelve and fourteen months
following a Section 409A Change in Control of PMA Capital Corporation,
upon not less than thirty (30) days prior written notice to PMA Capital,
which notice is given not earlier than eleven (11) months and not later
than thirteen (13) months following a Section 409A Change in Control. For
purposes of this Agreement, a “Section 409A Change in Control” is a
“Change in Control” as set forth in paragraph 9(b) of the PMA Capital
Corporation 2007 Omnibus Incentive Compensation Plan that is also a change
in the ownership or effective control of PMA Capital Corporation, or in
the ownership of a substantial portion of the assets of PMA Capital
Corporation, as described in Section 409A(2)(A)(v) of the Internal Revenue
Code of 1986, as amended (the “Code”) and the Treasury regulations
promulgated thereunder; or”
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5. A new
subparagraph 5(h) is hereby added to the Employment Agreement to read in its
entirety as follows:
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“(h)
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By
Executive’s voluntary resignation for other than Good Reason during the
month of February 2009, upon not less than thirty (30) days prior written
notice to PMA Capital.”
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6. Paragraph
5 of the Employment Agreement be and hereby is amended by adding new
subparagraph 5(i) to read as follows:
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“(i)
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By
Executive’s voluntary resignation for other than Good Reason after being
employed for at least 80% of the term of the Agreement (“Service Period”),
upon not less than thirty (30) days prior written notice to PMA Capital,
provided Executive incurs a “separation from service” from PMA Capital,
within the meaning of Section 409A of the Code, on or prior to the
expiration of this Agreement.”
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7. Subparagraph
6(a) of the Employment Agreement be and hereby is amended and restated in its
entirety to read as follows:
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“(a)
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If
Executive’s employment is terminated under subparagraph 5(a), (b), (c) or
(e) above, PMA Capital shall have no further obligation under this
Agreement, except as provided under paragraph 16 and except the obligation
to: (i) pay Executive an amount equal to the portion of his
compensation and out-of-pocket business expenses, as defined in paragraph
3, as may be accrued and unpaid on the date of termination; (ii) pay
Executive such portion of Executive’s annual incentive compensation for
the year in which termination occurs as the Compensation Committee of the
Board of Directors of PMA Capital shall determine was earned by Executive;
and (iii) provide all benefits set forth pursuant to the benefit, medical,
pension or other plans and programs provided by PMA Capital for which
Executive qualifies (collectively “Benefits”) as are due under the terms
of the Benefits plans and programs, recognizing that Executive’s
employment has terminated. In the event of Executive’s death,
any sums and benefits due to Executive under any provision of this
Agreement shall be paid to his estate or heirs, as
applicable. Any accrued compensation and annual incentive
compensation payable pursuant to this subparagraph 6(a)(1) shall be paid
no later than March 15 of the year following the year in which the
Executive’s employment terminates.”
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8. Subparagraph
6(b) of the Employment Agreement be and hereby is amended and restated in its
entirety to read as follows:
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“(b)(1)
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Except
as stated in subparagraph 6(d) below, if Executive’s employment is
terminated under subparagraph 5(d), 5(f), 5(h) or 5(i) above (and such
termination constitutes a “separation from service” within the meaning of
section 409A of the Code), then PMA Capital shall pay Executive as
described in paragraph 6(a) above and as described in Exhibit B, plus it
will pay any cash portion of the annual incentive compensation for the
year in which termination occurs that is earned because Executive
accomplished certain identifiable tasks as of the date of
termination. With regard only to payment of the cash portion of
the annual incentive compensation for the year in which termination
occurs, it is specifically understood that objectives related to
profitability, revenue growth, stock price and similar performance
measures are not intended to be measured other than at year end and
accordingly will not qualify as identifiable tasks on an interim basis and
these are not eligible for payment of incentive compensation unless deemed
appropriate by the Compensation Committee of the Board of Directors of PMA
Capital in connection with their consideration of payments as discussed
above. Any cash portion of the annual incentive compensation payable
pursuant to this subparagraph 6(b)(1) shall be paid no later than March 15
of the year following the year in which the Executive’s employment
terminates. In addition, PMA Capital shall pay Executive eighteen (18)
months of severance pay with each monthly payment being equal to the sum
of Executive’s then current monthly base salary plus 1/12th of Executive’s
minimum targeted annual incentive compensation for the year in which
employment terminates,
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minus
any appropriate withholdings and deductions, without regard to whether
Executive obtains another position with a new employer. These severance
payments will be made on or about the regular pay dates recognized by PMA
Capital, beginning on the next regular pay date following Executive’s last
regular pay date on which he is paid his base salary, provided that any
severance triggered by a termination of Executive’s employment that occurs
within the fourteen (14) month period following a Section 409A Change in
Control shall be paid in a lump sum on the first business day following
the six (6) month anniversary of Executive’s termination
date.
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(b)(2)
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Notwithstanding
the foregoing, the severance payments described in subparagraph 6(b)(1)
which otherwise would be paid during the six (6) month period beginning on
the day following Executive’s separation from service described in
subparagraph 5(d), 5(f), 5(h) or 5(i) shall instead be paid to Executive
in a single lump sum payment on the first business day following the end
of such six (6) month period. The lump sum payment shall be
adjusted for simple interest that accrues during the initial six (6) month
period following Executive’s termination of employment at the interest
rate used to determine lump sum payments under the PMA Capital Corporation
Pension Plan.”
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(3)
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Further,
if Executive elects to continue his health insurance benefits under COBRA,
PMA Capital will continue to pay the same monthly subsidy of the premiums
for such insurance continuation as was being paid by PMA Capital before
Executive’s employment terminated, with the remainder of the premium being
deducted from Executive’s severance payments to the extent severance is
paid in installments pursuant to subparagraph 6(b)(1), through the earlier
of eighteen (18) months from the termination date or the date Executive
becomes eligible to receive and/or obtain alternative health insurance
coverage through new employment. During the six (6) month
period in which Executive’s severance benefits are delayed (as described
in subparagraph 6(b)(2)), PMA Capital shall pay the full premium for
Executive’s continued health insurance benefits, and shall be reimbursed
for the Executive’s portion of such premiums out of the lump sum severance
payment to be made to Executive on the first business day following the
six (6) month period. It is intended that this provision of
continuation health coverage shall run concurrently with any period of
continuation coverage required under
COBRA.
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(4)
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PMA
Capital’s obligation to provide the severance pay and benefits provided in
this paragraph is conditioned upon Executive signing and not revoking a
valid general release agreement in the form attached hereto as Exhibit
C. The severance payments and benefits provided for in this
Agreement shall be in lieu of and not in addition to any severance pay or
benefits that are payable to Executive upon termination of employment
under the PMA Capital Corporation and PMA Capital Insurance Company
Severance Pay Plan or any other applicable severance plan or severance
policy of PMA Capital.”
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9. Subparagraph
6(c) of the Employment Agreement be and hereby is amended and restated in its
entirety to read as follows:
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“(c)
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If
Executive’s employment is terminated under subparagraphs 5(b), (c), (d),
(f), (g), (h) or (i) above (and such termination constitutes a “separation
from service” within the meaning of section 409A of the
Code):”
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(1)
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Executive
shall have a fully (100%) vested and nonforfeitable interest in his
“Retirement Benefit” under the EMPP or any successor or replacement plan,
except to the extent his Retirement Benefit is reduced pursuant to the
terms of the EMPP to take into account the twenty-five (25) year service
limit; and
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“(2)
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Executive’s
benefit under the PMA Capital Corporation Retirement Savings Excess Plan
shall be increased to the extent necessary so that his aggregate benefit
payable under the EMPP, and PMA Capital Corporation Retirement Savings
Excess Plan (amounts attributable to Retirement Credits only)
(collectively, the Ongoing Pension Arrangements) is not less than the
aggregate benefit that would have been payable under such Ongoing Pension
Arrangements if Executive’s employment had continued through the end of
the calendar quarter that contains the 18-month anniversary following
Executive’s termination date (or, in the case of a termination under
subparagraph 5(g), above, through the end of the calendar quarter
containing the 24-month anniversary following such termination date),
assuming the executive is paid at the same salary rate during such period
as in effect as of his termination of
employment. Notwithstanding the foregoing, subparagraph 6(c)(2)
shall apply only to the extent that it has the effect of increasing the
present value of the aggregate benefit payable under the Ongoing Pension
Arrangements. Executive shall be entitled to receive the
increased benefit described in subparagraph 6(c)(2) during the calendar
quarter containing the 18-month anniversary following Executive’s
termination date (or, in the case of a termination under subparagraph
5(c), (d), (f), (g), (h) or (i), above, that occurs within fourteen (14)
months following a Section 409A Change in Control, the first business day
following the 6-month anniversary of Executive’s termination
date).”
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10. Subparagraph
6(d)(1) of the Employment Agreement be and hereby is amended and restated in its
entirety to read as follows:
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“(d)(1)
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If
Executive’s employment is terminated under subparagraph 5(g) or if it is
terminated under subparagraph 5(d) within twelve (12) months following a
Section 409A Change in Control (and such termination constitutes a
“separation from service” within the meaning of section 409A of the Code),
then PMA Capital shall pay Executive as described in paragraph 6(a) above
and as described in Exhibit B, plus it will pay any cash portion of the
annual incentive compensation for the year in which termination occurs if
it is earned because Executive accomplished certain identifiable tasks as
of the date of termination. With regard only to payment of the
cash portion of the annual incentive compensation for the year in which
termination occurs, it is specifically understood that objectives related
to profitability, revenue growth, stock price and similar performance
measures are not intended to be measured other than at year end and
accordingly will not qualify as identifiable tasks on an interim basis and
these are not eligible for payment of incentive compensation
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unless
deemed appropriate by the Compensation Committee of the Board of Directors
of PMA Capital in connection with their consideration of payments as
discussed above. Any cash portion of the annual incentive
compensation payable pursuant to this subparagraph 6(d)(1) shall be paid
no later than March 15 of the year following the year in which the
Executive’s employment
terminates.”
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11. Subparagraph
6(d)(3) of the Employment Agreement be and hereby is amended and restated in its
entirety to read as follows:
“(3) Further,
if Executive elects to continue health insurance benefits under COBRA, PMA
Capital will continue to pay the same monthly subsidy of the premiums for such
insurance continuation as was being paid by PMA Capital before Executive’s
employment terminated, with the remainder of the premium payable by Executive,
through the earlier of the end of three (3) years from the termination date or
the date Executive becomes eligible to receive and/or obtain alternative health
insurance coverage through new employment. Notwithstanding the
foregoing (i) the Executive will pay the entire premium cost for the health
insurance benefit for the six months of coverage which following the Executive’s
termination date and (ii) on the first business day following the six month
anniversary of the Executive’s termination date PMA Capital will pay Executive
in a single lump sum the portion of the premiums that would otherwise have been
paid by PMA Capital during such six month period, but for the provisions of
clause (i) in this paragraph.” For the period of health insurance
continuation coverage after the expiration of the COBRA coverage period provided
for and used by Executive pursuant to this provision, Executive shall pay the
entire amount of the applicable insurance premium. PMA Capital shall
pay Executive a bonus equal to the amount of each premium paid by Executive
after the expiration of the COBRA coverage period, grossed up for taxes
(computed consistent with the method for computing a Gross Up under Section 7)
in the same month in which the premium is paid.
12. Subparagraph
6(d)(4) of the Employment Agreement be and hereby is amended and restated in its
entirety to read as follows:
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“(4)
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PMA
Capital’s obligation to provide the severance pay and benefits provided in
this paragraph is conditioned upon Executive signing and not revoking a
valid general release agreement in the form attached hereto as Exhibit
C. The severance payments and benefits provided for in this
Agreement shall be in lieu of and not in addition to any severance pay or
benefits payable to Executive upon termination of employment under the PMA
Capital Corporation and PMA Capital Insurance Company Severance Pay Plan
or any other applicable severance plan or severance policy of PMA
Capital.”
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13. Paragraph
7 of the Employment Agreement be and hereby is amended and restated in its
entirety to read as follows:
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“7.
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Excise
Taxes. If the value of any compensation (in whatever form) provided
pursuant to this Agreement (a) is counted as a
“parachute
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payment”
within the meaning of section 28OG of the Code, and the value of all such
parachute payments would be subject to the excise tax imposed by section
4999 of the Code (the “4999 Excise Tax”), or (b) is treated as “deferred
compensation” within the meaning of section 409A of the Code and is
subject to interest and additional tax under section 409A(a)(1)(B) (the
“409 A Penalties,” and together with the 4999 Excise Tax, the
“Penalties”), then Executive shall be entitled to receive from PMA Capital
an additional payment (a “Gross-Up Payment”) in an amount such that after
payment by Executive of all taxes (but not including any interest or
penalties imposed with respect to such taxes), including any Penalty
imposed upon the Gross-Up Payment, Executive retains an amount of the
Gross-Up Payment equal to the Penalties imposed upon such
payments. The Gross-Up Payment shall be paid to the Executive
no later than the end of the calendar year following the calendar year in
which Executive remits the taxes to which such Gross-Up Payment
relates.”
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14. Paragraph
12 of the Employment Agreement be and hereby is amended and restated in its
entirety to read as follows:
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“12.
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Remedies. Executive
agrees that if he should breach any of the covenants contained in
paragraphs 8, 9 or 10, irreparable damage would result to PMA Capital and
that damages arising out of such breach may be difficult to
determine. Executive therefore further agrees that, in addition
to all other remedies provided at law or at equity (including without
limitation damages and an equitable accounting of all earnings, profits
and other benefits arising from any such breach), PMA Capital shall be
entitled as a matter of course to specific performance and temporary and
permanent injunctive relief from any court of competent jurisdiction to
prevent any further breach of any such covenant by Executive, without the
necessity of proving actual damage to PMA Capital by reason of any such
breach, and Executive acknowledges that his employers, employees,
partners, agents or other associates, or any of them, may similarly be
enjoined. If either party prevails in any lawsuit claiming
breach of paragraphs 8, 9 or 10 of this Agreement, the other party shall
reimburse the prevailing party for its or his expenses incurred in
connection with such a lawsuit, including without limitation attorney’s
fees and costs. (For purposes of this paragraph, PMA Capital
will be considered to have prevailed in a lawsuit if it is established by
written adjudication that Executive has breached in any material respect
any provision of paragraphs 8, 9 or 10 as written or as modified under
paragraph 11. Executive will be considered to have prevailed in
a lawsuit if it is established by written adjudication that he did not
breach in any material respect any provision of paragraphs 8, 9 or 10 as
written or as modified under paragraph 11). Any reimbursement
made by PMA Capital pursuant to this paragraph 12 shall be payable as
follows: (i) the amount of such expenses eligible for
reimbursement in any calendar year shall not affect the expenses eligible
for reimbursement in any other calendar year and (ii) all such
reimbursements must be made on or before the last day of the calendar year
following the calendar year in which the expense was
incurred.”
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15. Paragraph
21 of the Employment Agreement be and hereby is amended and restated in its
entirety to read as follows:
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“21.
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Arbitration. In
order to obtain the many benefits of arbitration over court proceedings,
including speed of resolution, lower costs and fees and more flexible
rules of evidence, all disputes between Executive and PMA Capital (except
those relating to unemployment compensation and workers’ compensation and
except as provided in paragraph 12 of this Agreement) arising out of
Executive’s employment or concerning the interpretation or application of
this Agreement or its subject matter (including without limitation those
relating to any claimed violation of any federal, state or local law,
regulation or ordinance, such as Title VII of the Civil Rights Act, the
Age Discrimination in Employment Act, the Americans with Disabilities Act
and their state and local counterparts, if any) shall be resolved
exclusively by binding arbitration in Philadelphia, Pennsylvania pursuant
to the National Rules for the Resolution of Employment Disputes of the
American Arbitration Association, with PMA Capital bearing its own
attorney’s fees and costs and Executive being awarded his reasonable
attorney’s fees and costs so long as the Arbitrator determines that
Executive’s claim(s) or defense(s) (whichever is applicable) is not
frivolous. Any award of attorney’s fees and costs to Executive
shall not affect the award of any attorney’s fees and costs eligible for
reimbursement in any other calendar year and all such reimbursements must
be made on or before the last day of the calendar year following the
calendar year in which the expense was incurred. The parties
expressly waive their rights to have any such claims resolved by jury
trial. The arbitration opinion and award shall be final,
binding and enforceable by any court under the Federal Arbitration
Act.”
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IN
WITNESS WHEREOF, this Amendment has been duly executed by and on behalf of the
parties hereto as of the day and year first above written.
PMA
CAPITAL CORPORATION
PMA
CAPITAL INSURANCE COMPANY;
PENNSYLVANIA
MANUFACTURERS
ASSOCIATION
INSURANCE COMPANY;
MANUFACTURERS
ALLIANCE INSURANCE
COMPANY;
PENNSYLVANIA
MANUFACTURERS
INDEMNITY COMPANY;
AND PMA
MANAGEMENT CORP.
By:/s/ Xxxxxxx X.
Xxxxxxxx
Name: Xxxxxxx X. Xxxxxxxx
Title: Chief Executive
Officer
Date: 12/17,
2008
By: /s/ Xxxxxxx X.
Xxxxxxxxxxxx
Name: XXXXXXX X.
XXXXXXXXXXXX
Date: 12/17, 2008
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