8-K

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities

Exchange Act of 1934

Date of Report (Date of earliest event reported):  October 13, 2008

ProAssurance Corporation

(Exact name of registrant as specified in its charter)

Delaware                                        001-16533                                        63-1261433

(State of Incorporation)                                                                                     (Commission File No.)(IRS Employer I.D. No.)

100 Brookwood Place, Birmingham, Alabama                                                                                                                35209

  (Address of Principal Executive Office )                                                                                         (Zip code)

Registrant’s telephone number, including area code:     (205)  877-4400

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Securities Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-(c) under the Exchange Act (17CFR 240.13e-(c))

Item 8.01                           Other Events

On October 28, 2008, we announced that we had entered into a Stock Purchase Agreement with Podiatry Insurance Company of America, A Mutual Company ("PICA") pursuant to which we will acquire all of the stock of PICA in a sponsored demutualization in which PICA will convert from a mutual to a stock insurance company as permitted under the laws of Illinois (PICA's state of domicile).  On November 13, 2008, PICA filed with the Illinois Director of Insurance the Plan of Conversion which sets forth the terms and conditions of its proposed demutualization.  On the same date, we filed with the Illinois Director of Insurance our Statement on Form A regarding the acquisition of control of PICA through our purchase of all of PICA's newly authorized stock under the terms set forth in the Plan of Conversion and the Stock Purchase Agreement.  The demutualization of PICA under the Plan of Conversion and our purchase of PICA's stock pursuant to the Stock Purchase Agreement are subject to approval of the Illinois Director of Insurance and the policyholder-members of PICA.

The Illinois Insurance Code requires PICA to mail to its policyholder-members within 15 business days after filing the Form A a notice that summarizes the information in the Form A.  We included a form of this notice in our Form A filing, and we are required  to provide copies of the notice to PICA for mailing to its policyholder-members.  Instead of including a summary of the proposed transactions in the notice, we have elected to provide interested policyholder-members access to the copies of the Plan of Conversion and the Stock Purchase Agreement by filing them as exhibits to this report and by including a reference to this Form 8-K report in the notice to be mailed by PICA to its policyholder members.  The notice will advise the policyholder-members of PICA that a copy of this report together with copies of the Plan of Conversion and the Stock Purchase Agreement will be posted on our website at www.ProAssurance.com.

PICA will also be required to mail to its eligible policyholder members a notice of the policyholder meeting to be held to consider and vote upon the Plan of Conversion and the Stock Purchase Agreement.  That notice will be mailed after the Plan of Conversion has been approved by the Director and will be accompanied by an information statement that includes detailed information regarding the transactions contemplated by the Form A, the Plan of Conversion and the Stock Purchase Agreement if they are approved by the Illinois Director of Insurance.

Item 9.01 Financial Statements and Exhibits

99.1 Plan of Conversion of PICA as filed with the Illinois Director of Insurance on November 13, 2008.

99.2 Stock Purchase Agreement executed by ProAssurance Corporation and PICA dated October 28, 2008.

SIGNATURE

Pursuant to the requirements of the Securities Exchange act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: November 14, 2008

PROASSURANCE CORPORATION

By:  /s/ Frank B. O’Neil

-----------------------------------------------------

Frank B. O’Neil

Senior Vice-President

EX-99.1

EXHIBIT 99.1

PLAN OF CONVERSION

OF

PODIATRY INSURANCE COMPANY OF AMERICA

A MUTUAL COMPANY

Under Section 59.1(8) of the

Illinois Insurance Code, 215 ILCS 5/59.1(8)

As Approved on October 15, 2008

by the Board of Directors

TABLE OF CONTENTS
ARTICLE 1
REASONS FOR THE CONVERSION		1
ARTICLE 2
DEFINITIONS		3
2.01. Certain Terms		3
2.02. Terms Generally		6
ARTICLE 3
ADOPTION BY THE BOARD OF DIRECTORS		7
3.01. Adoption by the Board		7
ARTICLE 4
APPROVAL BY THE DIRECTOR		7
4.01. Application for Approval		7
4.02. Director Approval		8
ARTICLE 5
APPROVAL BY ELIGIBLE MEMBERS		8
5.01. Special Meeting		8
5.02. Notice of the Special Meeting		8
ARTICLE 6
THE CONVERSION AND PURCHASE		9
6.01. Effect on PICA		9
6.02. Effect on Existing Policies		9
6.03. Filing of Plan of Conversion and Amended and Restated Articles		10
6.04. Effectiveness of Plan of Conversion and Stock Purchase Agreement		10
6.05. Tax Considerations		12
6.06. Other Opinions		12
ARTICLE 7
POLICIES		13
7.01. Policies		13
7.02. Determination of Ownership		13
7.03. In Force		14
ARTICLE 8
ALLOCATION OF CONSIDERATION		14
8.01. Allocation of Consideration		14
8.02. Allocation and Distribution of Policy Credits		16
8.03. Determination of the Allocation		18
ARTICLE 9
SUBSEQUENT POLICYHOLDERS		18
9.01. Notice to Subsequent Policyholders		18
9.02. Option to Rescind		18
ARTICLE 10
OFFICERS AND BOARD OF DIRECTORS		18
10.01. Directors		18
10.02. Officers		19
ARTICLE 11
ADDITIONAL PROVISIONS		19
11.01. Continuation of Corporate Existence		19
11.02. Conflict of Interest		19
11.03. No Preemptive Rights		20
11.04. Amendment or Withdrawal of Plan of Conversion		20
11.05. Corrections		20
11.06. Notices		20
11.07. Limitation of Actions		20
11.08. Costs and Expenses		20
11.09. Headings		20
11.10. Governing Law		20
Exhibits and Schedules
Exhibit A	Stock Purchase Agreement
Exhibit B	Amended and Restated Articles of Incorporation
Exhibit C	Amended and Restated Bylaws
Exhibit D	Notice of Special Meeting
Exhibit E	Subsequent Policyholder Notice
Exhibit F	Directors
Schedule I	Executive Officer Agreements and Payments

PLAN OF CONVERSION

OF

PODIATRY INSURANCE COMPANY OF AMERICA

A MUTUAL COMPANY

Under Section 59.1(8) of the

Illinois Insurance Code, 215 ILCS 5/59.1(8)

This Plan of Conversion provides for the conversion of Podiatry Insurance Company of America, a Mutual Company, a mutual insurance company organized under the laws of Illinois (such entity, both before and after the Conversion, being referred to as “PICA”) from a mutual insurance company into a stock insurance company (the “Conversion”) and the purchase and sale (the “Purchase”) of newly-issued shares of common stock of PICA to ProAssurance Corporation, a Delaware corporation (the “Sponsor”) pursuant to that certain Stock Purchase Agreement, by and between PICA and the Sponsor, dated October 28, 2008, attached hereto as Exhibit A (the “Stock Purchase Agreement”), as authorized by Section 59.1(8) of the Illinois Insurance Code, 215 ILCS 5/59.1(8) (together, the Conversion and Purchase, the “Sponsored Demutualization”).  In the Conversion, all Eligible Members will receive cash, and certain Qualified Policyholders will also receive Policy Credits, in exchange for the extinguishment of their Membership Interests in PICA.  As required by Section 59.1(2) of the Illinois Insurance Code, this Plan of Conversion has been unanimously approved and adopted by the Board of Directors (the “Board”) of PICA, at a meeting duly called and held on October 15, 2008 (the “Adoption Date”).  Capitalized terms used herein without definition have the meaning set forth in Article 2 hereof.

ARTICLE 1

REASONS FOR THE CONVERSION

The principal purpose of the Conversion is to convert PICA from a mutual insurance company into a stock insurance company in order to enhance its strategic and financial flexibility and make possible a distribution of value to Eligible Members pursuant to this Plan of Conversion and the Stock Purchase Agreement. The Board believes that the Sponsored Demutualization is in the best interest of PICA because it should provide PICA with (i) the ability to compete more effectively, (ii) a more cost effective capital structure and (iii) an affiliation with an enterprise that is better positioned to make strategic acquisitions, as well as allow a distribution of cash and, and in certain cases, Policy Credits to Eligible Members.  The Board further believes that the transaction is fair and equitable, is consistent with the purpose and intent of Section 59.1(8) and will not prejudice the interests of the Members.  The distribution made possible by the Sponsored Demutualization could not have occurred under the current mutual insurance company structure of PICA, other than in the unlikely event of a liquidation of PICA in which any distribution would be limited to PICA’s liquidation value.

Although the amounts distributed to Eligible Members will vary according to the nature of their Policies and certain other factors described herein, PICA intends that all Eligible Members will receive fair and equitable consideration, as described in Article 8 of this

Plan of Conversion and Article 2 of the Stock Purchase Agreement, in respect of the extinguishment of all Membership Interests.

In its present structure as a mutual insurance company, PICA can increase its statutory capital only through earnings contributed by its operating businesses, through the use of financial reinsurance arrangements, through the issuance of guaranty fund certificates or by divestiture of all or a portion of its interest in subsidiaries or other investments.  These methods, however, are limited as to the extent to which they can provide a long-term source of permanent capital to allow PICA to develop new businesses, make acquisitions or provide greater stability and protection for its  policyholders.

Through the transactions contemplated by this Plan of Conversion and the Stock Purchase Agreement, PICA will become a wholly owned subsidiary of, and thereby affiliated with, the Sponsor, a larger enterprise with significant financial strength as well as strong business, operations, financial condition, operating results and prospects.  The Sponsor is a specialty insurer with over $4.0 billion in assets as of June 30, 2008 and is the nation’s fifth largest writer of medical professional liability insurance through its insurance subsidiaries.  The Board believes that the resulting affiliation with the Sponsor will be in the best interests of PICA because, among other things:

· such affiliation will help ensure the continuity of PICA’s professional liability insurance and other business, will enhance the competitiveness of PICA and will generate greater efficiencies and significant opportunities for improved financial performance;

· the Board has considered PICA’s position as an independent company, and the constraints on PICA’s ability to pursue its strategic objectives due to its present size and status as a mutual insurance company, and believes that PICA’s  ability to pursue its strategic objectives would be enhanced by this affiliation;

· such affiliation will provide PICA with greater flexibility to obtain capital as compared to the current mutual insurance company structure, will enhance PICA’s financial strength and will provide PICA with greater resources to back its obligations to policyholders;

· such affiliation will provide PICA with increased flexibility to support the growth of existing product lines and take advantage of investment and acquisition opportunities;

· such affiliation will benefit both the short-term and long-term interests of PICA, its policyholders and its employees, its producers, the communities in which PICA does business, and its other constituents;

· Sponsor has made certain commitments to maintain PICA as a wholly-owned separate subsidiary and free-standing operation and to maintain a presence and certain business functions (including underwriting, claims and risk management) in Franklin, Tennessee, subject to operating constraints and reasonable financial performance consistent with past practice as described in the Stock Purchase Agreement;

· this affiliation will establish a strategic fit, matching the compatible corporate cultures and visions of the future of PICA and the Sponsor; and

· the Board has received the opinion of Raymond James & Associates, Inc. (“Raymond James”), dated as of the Adoption Date, to the effect that, as of the Adoption Date and based upon the assumptions made therein, the aggregate consideration to be received by the Eligible Members and DR Former Members, as a group, pursuant to the transactions contemplated by the Plan of Conversion is fair from a financial point of view to such Eligible Members and DR Former Members, as a group.

Furthermore, as a result of the Sponsored Demutualization, the Sponsor will compensate the Eligible Members for their respective Membership Interests, which will be extinguished as part of the Conversion, by giving them cash and, in certain cases described herein, Policy Credits.  Such cash and Policy Credits would not be available to the Eligible Members as long as PICA continues its operations as a mutual insurance company.  In addition, Sponsor is a larger company with greater economies of scale, a wider variety of products and an excellent record of providing service to policyholders.

In addition, the financial condition of PICA will not be diminished by the Plan of Conversion.  Following the Sponsored Demutualization, PICA estimates that it will have stockholders’ equity and surplus in excess of $95 million, which is substantially in excess of the levels required by law and more than adequate to provide for PICA’s liabilities.  The Conversion will not adversely affect in any material respect the risk-based capital ratios of PICA.  The assets of PICA will not be decreased by the Conversion.

The Sponsored Demutualization will not, in any way, increase premiums or reduce policy benefits, or other policy obligations of PICA to policyholders.  Subject to Section 6.02, following the Conversion, Owners of participating Policies In Force on the Adoption Date shall continue to have the right to receive dividends as provided in such Policies (although other than with respect to the Policy Credits to be distributed in the form of dividends in accordance with Section 8.02, as always, policyholder dividends are not guaranteed and may vary from year to year due to changes in experience).  Certain participating Policies, generally those individual Policies held by Eligible Members on the Adoption Date with an expectation of dividends under PICA’s current policyholder dividend plan, will receive Policy Credits in the form of dividends for up to three calendar years following the calendar year in which the Conversion occurs, as more fully described in Section 8.02 below.

ARTICLE 2

DEFINITIONS

2.1           Certain Terms.  As used in this Plan of Conversion, the following terms have the meanings set forth below:

“Adoption Date” has the meaning specified in the preamble.

“Amended and Restated Articles of Incorporation” has the meaning specified in Section 5.01(a).

“Amended and Restated Bylaws” has the meaning specified in Section 6.04(a).

“Application” has the meaning specified in Section 4.01.

    “Board” has the meaning specified in the preamble.

“Cash Consideration” has the meaning specified in Section 6.04(c)(ii).

    “Code” means the federal Internal Revenue Code of 1986, as amended.

    “Consulting Agreement” has the meaning specified in Section 10.01.

"Conversion” has the meaning specified in the preamble.

    “Conversion Agent” means BNY Mellon Shareowner Services or such other bank, trust company or investor services company as designated by the Sponsor and acceptable to PICA and the Director to act as paying agent in connection with this Plan of Conversion and the Stock Purchase Agreement for distributing cash amounts payable to Eligible Members pursuant to this Plan of Conversion.

    “Conversion Factor” has the meaning specified in Section 8.01(b)(i)(3).

“Conversion Payment” has the meaning specified in Section 8.01(b)(i).

    “Decision and Order” means the final and effective decision and order issued by the Director and evidencing the Director’s approval of the Application and this Plan of Conversion.

“Declaration Date” has the meaning specified in Section 8.02(b)(i).

    “Director” means the Director of the Division.

    “Division” means the Division of Insurance of the State of Illinois.

           “DR Former Members” means any former Member of PICA that, according to the PICA Records, has, within the two years immediately preceding the Adoption Date, (a) terminated its policy due to such Member’s retirement or disability and (b) purchased or earned an extended reporting endorsement (tail coverage).

“Effective Date Filing” has the meaning specified in Section 6.03.

“Effective Time” means 12:01 a.m., Illinois time, on the Plan Effective Date.  This is the time that this Plan of Conversion is deemed to be effective.

“Eligible Member” means a Member who is the Owner of an Eligible Policy.  PICA may deem a Person to be an Eligible Member in order to correct any immaterial administrative errors or oversights in the context of the Conversion.

“Eligible Policy” means any Policy that is In Force on the Adoption Date.

“Eligible Premium” has the meaning specified in Section 8.01(b)(i)(1).

“Estimated Policy Credit Distributions” means, with respect to any Qualified Policyholder, the good faith estimate by PICA, based on the PICA Records, of the total Policy Credit Distributions that will be paid to such Qualified Policyholder pursuant to Section 8.02(c), assuming such Qualified Policyholder’s Policy is renewed in each of the calendar years beginning on January 1, 2010, January 1, 2011 and January 1, 2012.

“Illinois Insurance Code” means 215 ILCS 5/1 et seq.

“In Force” has the meaning specified in Section 7.03(a).

“Member” means a person who, according to the PICA Records and pursuant to its bylaws, is deemed to be a holder of a Membership Interest in PICA, but shall not include a person named in a Policy as an additional insured.

“Membership Interests” means, with respect to PICA, the interests of Members arising under Illinois law and the articles of incorporation and bylaws of PICA prior to the Conversion, including the right to vote and the right to participate in any distribution of surplus in the event that PICA is liquidated.  “Membership Interests” do not include the rights expressly conferred upon Members by their Policies (other than the right to vote and rights related thereto), such as the right to any declared policyholder dividends.

“Notice of Special Meeting” has the meaning specified in Section 5.02(a).

“Owner” means, with respect to any Policy, the Person or Persons specified or determined pursuant to the provisions of Section 7.02.

“Person” means an individual, partnership, firm, association, corporation, joint-stock company, limited liability company, trust, government or governmental agency, state or political subdivision of a state, public or private corporation, board, association, estate, trustee, or fiduciary, or any similar entity.

“PICA” has the meaning specified in the preamble.

“PICA Records” means the books, records and accounts of PICA.

“PICA Shares” means the duly authorized shares of common stock of PICA to be issued to the Sponsor on the Plan Effective Date in accordance with this Plan of Conversion and the Stock Purchase Agreement.

“Plan Effective Date” has the meaning specified in Section 6.04(a).

“Plan of Conversion” means this Plan of Conversion (including all Exhibits hereto), as it may be amended from time to time in accordance with Section 11.04 or corrected in accordance with Section 11.05.  Any reference to the term “Plan of Conversion” shall be deemed to incorporate by reference all of the Exhibits thereto.

“Policy” or “Policies” has the meaning specified in Section 7.01(a).

“Policy Credit” means consideration to be paid to certain Qualified Policyholders in the form of credits against future premium payments distributed as a dividend to be paid under a participating Policy.

“Policy Credit Distribution” has the meaning specified in Section 8.02(b).

“Purchase” has the meaning specified in the preamble.

“Purchase Price” means an amount equal to $135,000,000, consisting of (i) $120,000,000 in cash to be paid to the Eligible Members and DR Former Members and (ii) an additional $15,000,000 in Policy Credits to be paid to Qualified Policyholders, in each case, in exchange for, with regard to the Eligible Members (including the Qualified Policyholders), the extinguishment of their Membership Interests pursuant to this Plan of Conversion and the Stock Purchase Agreement.

“Qualified Policyholder” means, (a) an Eligible Member whose annual premium under its Policy In Force on the Adoption Date exceeds $3,000.00 and (b) as of any date following the Plan Effective Date, the Owner of a Policy (i) whose annual premium on its Policy In Force on such date exceeds $3,000.00 and (ii) who was an Eligible Member whose annual premium under its Policy In Force on the Adoption Date exceeded $3,000.00.

“Raymond James” has the meaning specified in Article 1.

“Section 59.1(8)” means Section 59.1(8) of the Illinois Insurance Code, 215 ILCS 5/59.1(8).

“Special Meeting” has the meaning specified in Section 5.01.

“Sponsor” has the meaning specified in the preamble.

“Sponsored Demutualization” has the meaning specified in the preamble.

“Stock Purchase Agreement” has the meaning specified in the preamble.

“Total Eligible Premium” has the meaning specified in Section 8.01(b)(i)(2).

2.2           Terms Generally.  As used in this Plan of Conversion, except to the extent that the context otherwise requires:

(a)           when a reference is made in this Plan of Conversion to an Article, Section or Exhibit, such reference is to an Article or Section of, or an Exhibit to, this Plan of Conversion unless otherwise indicated;

(b)           the words “hereby”, “herein”, “hereof”, “hereunder” and words of similar import refer to this Plan of Conversion as a whole (including any Exhibits hereto) and not merely to the specific section, paragraph or clause in which such word appears;

(c)           whenever the words “include,” “includes,” or “including” (or similar terms) are used in this Plan of Conversion, they are deemed to be followed by the words “without limitation”;

(d)           the definitions contained in this Plan of Conversion are applicable to the singular as well as the plural forms of such terms; and

(e)           whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.

ARTICLE 3

ADOPTION BY THE BOARD OF DIRECTORS

Adoption by the Board.  This Plan of Conversion has been unanimously approved and adopted by the Board ata meeting duly called and held on October 15, 2008.  This Plan of Conversion provides for the conversion of PICA into a stock insurance company in accordance with the requirements of Section 59.1(8) and the Purchase pursuant to the Stock Purchase Agreement.

ARTICLE 4

APPROVAL BY THE DIRECTOR

Application for Approval.  Following the adoption of this Plan of Conversion by the Board, PICA shall file an application (the “Application”) with the Director for approval of this Plan of Conversion in accordance with Section 59.1(3) of the Illinois Insurance Code.  The Application shall include true and complete copies of the following documents:

(a)           this Plan of Conversion;

(b)           the independent appraisal of market value of PICA provided by Raymond James as part of their opinion provided in accordance with Section 6.06, required by Section 59.1(8);

(c)           the form of notice of the Special Meeting, required by Section 59.1(4)(b) of the Illinois Insurance Code;

(d)           the form of information statement and proxy to be solicited from Eligible Members, required by Section 59.1(4)(c)(ii) of the Illinois Insurance Code;

(e)           the form of notice to persons whose Policies are issued after the Adoption Date but before the Plan Effective Date, required by Section 59.1(10)(a) of the Illinois Insurance Code;

(f)           the proposed amended and restated articles of incorporation and amended and restated bylaws of PICA; and

(g)           any other information or documentation as the Director may request.

If the Director requires modifications to this Plan of Conversion, the Board shall submit any amended Plan of Conversion to the Director for his review and approval.

4.2           Director Approval.

(a)           This Plan of Conversion is subject to the approval of the Director.

(b)           The Director shall approve this Plan of Conversion upon finding that (i) the applicable provisions of Section 59.1 of the Illinois Insurance Code have been complied with, (ii) this Plan of Conversion will not prejudice the interests of the Members, (iii) this Plan of Conversion is fair and equitable and (iv) this Plan of Conversion is based upon (A) an independent appraisal of the market value of PICA by a qualified Person and (B) a fair and equitable allocation of consideration to Eligible Members.

(c)           The Director may, at his discretion, order a hearing prior to approving the Plan of Conversion.

ARTICLE 5

APPROVAL BY ELIGIBLE MEMBERS

Special Meeting.

(a)           After the approval of the Application by the Director, PICA shall hold a special meeting of Eligible Members to vote on this Plan of Conversion (the “Special Meeting”).  At the Special Meeting, each Eligible Member shall be entitled to one vote on a single proposal (the “Proposal”) to (i) adopt and approve this Plan of Conversion and the other transactions contemplated by this Plan of Conversion, including without limitation, the transactions contemplated by the Stock Purchase Agreement and (ii) amend and restate the articles of incorporation of PICA to read in the form attached as Exhibit B (the “Amended and Restated Articles of Incorporation”).

(b)           Adoption of this Plan of Conversion and the Amended and Restated Articles of Incorporation, pursuant to Section 59.1(4)(c)(i) of the Illinois Insurance Code, is subject to the approval of at least two-thirds of the votes cast by Eligible Members in person or by proxy at the Special Meeting.

5.2           Notice of the Special Meeting.

(a)           PICA shall mail notice of the Special Meeting substantially in the form of Exhibit D (the “Notice of Special Meeting”).  The Notice of Special Meeting shall be mailed within forty-five (45) days following the Director’s approval of this Plan of Conversion.  Such notice shall inform each Eligible Member of such Eligible Member’s right to vote upon the Proposal and the place, the day, and the hour of the Special Meeting.  Such notice and other materials set forth in Sections 5.02(c) shall be mailed by first class or priority mail or an equivalent of first class or priority mail, to the last-known address of each Eligible Member as it appears on the PICA Records, at least sixty (60) days prior to the date of the Special Meeting, and shall be in a form satisfactory to the Director.

(b)           Beginning on the date that the first Notice of Special Meeting is mailed pursuant to Section 5.02(a) and continuing until the Plan Effective Date, PICA shall also make available at its statutory home office located at 601 West Monroe Street, Springfield, Illinois, 62704, during regular business hours, copies of the Notice of Special Meeting, this Plan of Conversion and its Exhibits, including the Stock Purchase Agreement, each in its entirety, for inspection by Eligible Members and the general public.

(c)           The Notice of the Special Meeting shall be accompanied by information relevant to the Special Meeting, including a copy or summary of this Plan of Conversion, a form of proxy allowing the Eligible Members to vote for or against the Proposal, policyholder information statement regarding this Plan of Conversion and the Purchase and such other explanatory information that the Director approves or requires, all of which shall be in a form satisfactory to the Director.  With the prior approval of the Director, PICA may also send supplemental information relating to this Plan of Conversion and the Purchase to Eligible Members either before or after the date of the Special Meeting.

ARTICLE 6

THE CONVERSION AND PURCHASE

Effect on PICA.  On the Plan Effective Date, PICA shall be converted from a mutual insurance company into a stock insurance company in accordance with Section 59.1(8) and the Purchase shall occur in accordance with this Plan of Conversion and the Stock Purchase Agreement.  Under the terms of the Stock Purchase Agreement, Sponsor will acquire all of the PICA Shares.  Sponsor thereupon will become the sole shareholder of PICA and will have all the rights, privileges, immunities and powers and will be subject to all of the duties and liabilities to the extent provided by law of a shareholder of an insurance company organized under the laws of the State of Illinois.

Effect on Existing Policies.

(a)           Any Policy In Force on the Plan Effective Date will remain In Force under the terms of such Policy, except that the following rights, to the extent they existed in PICA, shall be extinguished on the Plan Effective Date:

(i) any voting rights of the policyholder provided under or as a result of the policy;

(ii) any right to share in the surplus of PICA, except as provided in Section 6.02(b).

(b)           Except as otherwise provided in Section 6.02(c), an Owner of a participating Policy In Force on the Plan Effective Date will continue to have a right to receive policyholder dividends as provided in the participating Policy, if any.

(c)           Upon the renewal date of any Qualified Policyholder’s participating Policy that occurs after December 31, 2012, PICA may issue the insured a nonparticipating Policy as a substitute for the participating Policy.  Upon the renewal date of any Policy of any policyholder that is not a Qualified Policyholder that occurs after the Plan Effective Date, PICA may issue the

insured a nonparticipating Policy as a substitute for the participating Policy, provided, however, that if any dividend has been declared by PICA but not paid with respect to such Policy, PICA may not issue such insured a nonparticipating Policy until such policyholder’s renewal date occurring after such dividend is paid by PICA.

Filing of Plan of Conversion and Amended and Restated Articles.  As soon as practicable following (i) the receipt of the Decision and Order, (ii) the Director’s determination that all conditions to such approval contained in the Decision and Order have been satisfied, except for those conditions required by the Decision and Order to be satisfied after the Plan Effective Date and with respect to which the Director has received commitments from PICA and/or the Sponsor to satisfy after the Plan Effective Date acceptable to the Director, (iii) the adoption of this Plan of Conversion and the Amended and Restated Articles of Incorporation by the Eligible Members as provided in this Plan of Conversion, and (iv) the satisfaction or waiver of all of the conditions contained in Article 8 of the Stock Purchase Agreement, PICA shall file with the Director (A) the minutes of the Special Meeting, (B) a certificate of the Secretary of PICA setting forth the results of the vote on the Plan of Conversion and the Amended and Restated Articles of Incorporation and certifying as to whether or not it was approved by not less than two-thirds of the Eligible Members voting in person or by proxy at the Special Meeting and (C) the Amended and Restated Articles of Incorporation and the Amended and Restated Bylaws of PICA (the filing described in clauses (A), (B) and (C) above, the “Effective Date Filing”).

6.2           Effectiveness of Plan of Conversion and Stock Purchase Agreement.

(a)           The “Plan Effective Date” of the Plan of Conversion shall be the date and time as of which all of the following steps have been completed:  (i) the Plan of Conversion has been approved by the Director, (ii) the Eligible Members have approved the Plan of Conversion by the requisite vote, (iii) the Amended and Restated Articles of Incorporation have been duly adopted and (iv) the Effective Date Filing shall have been made by PICA.  Subsequent to the Plan Effective Date, the bylaws of PICA shall be substantially in the form attached hereto as Exhibit C (the “Amended and Restated Bylaws”).  This Plan of Conversion shall be deemed to have become effective at the Effective Time.

(b)            At the Effective Time:

(i) PICA shall by operation of Section 59.1 of the Illinois Insurance Code become a stock insurance company;

(ii) the Amended and Restated Articles of Incorporation and the Amended and Restated Bylaws shall without further action become effective;  and

(iii) all of the Membership Interests shall be extinguished and Eligible Members shall be entitled to receive, in exchange for their Membership Interests, cash and, if applicable, Policy Credits, as provided in this Plan of Conversion.

(c)           On the Plan Effective Date:

(i)           PICA shall issue all of the authorized PICA Shares to the Sponsor, representing all of the issued and outstanding common stock of PICA;

(ii) the Sponsor shall deposit or shall have deposited, or cause to be deposited, via wire transfer of immediately available funds, a portion of the Purchase Price in the amount of $120,000,000 (the “Cash Consideration”) with the Conversion Agent for distribution to the Eligible Members and DR Former Members in accordance with Section 6.04(d) hereof and Section 3.2 of the Stock Purchase Agreement;

(iii) the Sponsor shall pay to PICA, via wire transfer of immediately available funds, a portion of the Purchase Price in the amount of $15,000,000 to fund the crediting of Policy Credits to Qualified Policyholders pursuant to Sections 6.04(d) hereof and Section 2.9 of the Stock Purchase Agreement. The Sponsor has committed to cause PICA to deposit such amount in a segregated account to be held in trust by PICA, separate and apart from any other assets of PICA, for the sole purpose of funding the payment of the Policy Credits. The Sponsor has made no further monetary commitment with respect to the payment of Policy Credits;

(iv) the Sponsor shall pay to PICA, via wire transfer of immediately available funds, a capital contribution in the amount of $15,000,000 in accordance with Section 7.10 of the Stock Purchase Agreement; and

(v) The Sponsor or the Conversion Agent will be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Plan of Conversion and the Stock Purchase Agreement to any Eligible Member or DR Former Member such amounts as the Sponsor or the Conversion Agent is required to deduct and withhold with respect to the making of such payment under the Code, or any other applicable provision of U.S. federal, state, local or non-U.S. tax law.  To the extent that such amounts are properly withheld by the Sponsor or the Conversion Agent, such withheld amounts will be treated for all purposes of this Plan of Conversion as having been paid to the Eligible Member or DR Former Member in respect of whom such deduction and withholding were made by the Sponsor or the Conversion Agent.

(d)           As promptly as practicable following the Plan Effective Date, but in any event no later than ten (10) business days following the Plan Effective Date:

(i) PICA shall credit Policy Credits to the Eligible Members that are entitled to be credited Policy Credits under this Plan of Conversion and the Stock Purchase Agreement.  No interest shall be payable on the Policy Credits;

(ii) the Conversion Agent shall distribute the Cash Consideration, by check, to the Eligible Members and DR Former Members pursuant to this Plan of

Conversion and in accordance with the Stock Purchase Agreement.  No interest shall be payable on Cash Consideration; and

(iii) PICA shall send or cause to be sent to each Eligible Member being credited Policy Credits or receiving a cash payment (at the time of the distribution of the cash payment) a notice of the method by which the amount of such Policy Credits to be credited and payable in 2010 or cash payment was derived from that Eligible Member’s allocation of the Purchase Price and, in the case of any Policy Credits, when such Policy Credits will be distributed.  The form of such notice shall be subject to the prior review and comment of the Division.

6.3           Tax Considerations.  This Plan of Conversion shall not become effective and the Conversion and the Purchase shall not occur unless, on or prior to the Plan Effective Date:

(a)           PICA shall have received a favorable opinion of Sidley Austin LLP, special counsel to PICA, or other nationally-recognized independent tax counsel to PICA, dated as of the Plan Effective Date, addressed to the Board and in form and substance satisfactory to PICA, which, notwithstanding any qualifications expressed therein, is substantially to the effect that PICA will not recognize any gain or loss for U.S. federal income tax purposes as a result of the Conversion and Purchase.

(b)           The Division shall have received copies of the opinion described in this Section 6.05, together with a statement that the Division shall be entitled to rely upon such opinion as though they were addressed to it in connection with its review of this Plan of Conversion, the Application and the Stock Purchase Agreement.

6.4           Other Opinions.

(a)           This Plan of Conversion shall not become effective and the Conversion and Purchase shall not occur unless, on or prior to the Plan Effective Date, PICA’s Board of Directors shall have received the opinion of Raymond James that, based upon the assumptions made therein, the aggregate consideration to be received by Eligible Members and DR Former Members, as a group, pursuant to the transactions contemplated by this Plan of Conversion is fair from a financial point of view to such Eligible Members and DR Former Members, as a group.

(b)           Copies of the opinion described in Sections 6.06(a) shall be delivered to the Director on or prior to the Plan Effective Date.  The Director shall be entitled to rely upon such opinion as though such opinion were addressed to him in connection with his review of this Plan pursuant to Section 59.1(8).

ARTICLE 7

POLICIES

Policies.

(a)           For the purposes of this Plan of Conversion, the term “Policy” means each insurance policy that has been issued or will be issued or assumed through assumption reinsurance, if any, by PICA.

(b)           The following policies and contracts shall be deemed not to be Policies for purposes of this Plan of Conversion:

(i) any reinsurance assumed by PICA as a reinsurer on an indemnity basis (but assumption certificates may constitute Policies if they otherwise fall within the definition of Policies as provided in Section 7.01(a));

(ii) all administrative services agreements; and

(iii) any policy or contract issued by PICA and ceded to another insurance company through assumption reinsurance.

7.2           Determination of Ownership.  Unless otherwise stated herein, the Owner of any Policy as of any date shall be determined on the basis of the PICA Records as of such date in accordance with the following provisions:

(a)           the Owner shall be the owner of the Policy as shown on the PICA Records;

(b)           except as otherwise set forth in this Article 7, the identity of the Owner of a Policy shall be determined without giving effect to any interest of any other Person in such Policy;

(c)           in any situation not expressly covered by the foregoing provisions of this Section 7.02, the owner of the Policy, as reflected on the PICA Records, and as determined in good faith by PICA, shall conclusively be presumed to be the Owner of such Policy for purposes of this Section 7.02, and except for administrative errors, PICA shall not be required to examine or consider any other facts or circumstances;

(d)           the mailing address of an Owner as of any date for purposes of this Plan of Conversion shall be the Owner’s last known address as shown on the PICA Records as of such date;

(e)           in no event may there be more than one Owner of a Policy, although more than one Person may constitute a single Owner.  If a Person owns a Policy with one or more other Persons, they will constitute a single Owner with respect to the Policy; and

(f)           any dispute as to the identity of the Owner of a Policy or the right to vote or receive compensation shall be resolved in accordance with the foregoing and such other procedures as PICA may determine.  Any determinations made by PICA shall be conclusive as between PICA and any Owner of a Policy or any other Person with an interest therein but shall not preclude any actions among such Persons.

7.3           In Force.

(a)           A Policy shall be deemed to be in force (“In Force”) as of any date if, as shown in the PICA Records:

(i) the Policy has been issued or coverage has been bound by PICA or assumed by PICA through assumption reinsurance as of such date; and

(ii) such Policy has not expired, cancelled, non-renewed or otherwise terminated, provided that a Policy shall be deemed to be In Force after lapse for nonpayment of premiums until expiration of any applicable grace period (or similar period however designated in such Policy) during which the Policy is in full force for its basic benefits.

(b)           The date of expiration, cancellation or termination of a Policy shall be as shown on the PICA Records.

(c)           A Policy shall not be deemed to be In Force as of a given date if the Policy is returned to PICA and all premiums are refunded within thirty (30) days of such date.

(d)           Any dispute as to whether a Policy is In Force shall be resolved in accordance with the foregoing.

ARTICLE 8

ALLOCATION OF CONSIDERATION

8.1           Allocation of Consideration. The consideration to be paid to Eligible Members in exchange for their Membership Interests shall be cash and, in certain cases described in this Article 8, Policy Credits.  For purposes of calculating the amount of consideration payable to the Eligible Members and DR Former Members pursuant to this Plan of Conversion and the Stock Purchase Agreement, each Eligible Member’s and DR Former Member’s allocation of the Purchase Price shall be determined in accordance with this Article 8.

(a)           Each Eligible Member and DR Former Member shall be paid cash consideration in an amount equal to (i) $12,000,000 divided by (ii) the total number of Eligible Members plus the total number of DR Former Members.

(b)           In addition to the consideration set forth in Section 8.01(a) above, each Qualified Policyholder shall be paid additional consideration:

(i)           in cash in an amount equal to such Qualified Policyholder’s Conversion Payment.  For any Qualified Policyholder, the “Conversion Payment” is an

amount equal to the product of (A) the Conversion Factor multiplied by (B) such Qualified Policyholder’s Eligible Premium. As used herein:

(1) Any Qualified Policyholder’s “Eligible Premium” is the sum of the premium under such Qualified Policyholder’s Policy In Force on the Adoption Date (calculated as if all premiums under such Policy were paid in full) and the premium actually paid for the previous four policy years under all of such Qualified Policyholder’s Policies, as reflected in the PICA Records;

(2) “Total Eligible Premium” means the sum of all the premium of all In Force Policies Owned by Qualified Policyholders on the Adoption Date (calculated as if all premiums under such Policies were paid in full) and all the premiums actually paid for the previous four policy years under all such Policies, as reflected in the PICA Records; provided, however, with respect to Policies issued by PICA as a result of a merger, acquisition, or the acquisition of renewal rights (as reflected on the PICA Records), the premium under such Policy for purposes of determining such Qualified Policyholder’s Eligible Premium and the Total Eligible Premium shall be (I) the sum of the premium under such Qualified Policyholder’s Policy In Force on the Adoption Date (calculated as if all premiums under such Policy were paid in full) and the premium actually paid for the previous four policy years under all of such Qualified Policyholder’s Policies, including policies with the prior carrier or (II) if the premium actually paid for any of the previous four policy years is not available in the PICA Records, then the sum of (x) the premium under such Qualified Policyholder’s Policy In Force on the Adoption Date (calculated as if all premiums under such Policy were paid in full), plus (y) the premium actually paid for any of the previous four complete policy years available in the PICA Records plus (z) the premium for the earliest known complete policy year available in the PICA Records multiplied by the number of complete years out of the previous four policy years for which the premium actually paid is unavailable on the PICA Records; and

(3) “Conversion Factor” means an amount equal to $108,000,000 divided by the Total Eligible Premium.

(ii) in Policy Credits in an amount calculated and distributed in accordance with Section 8.02.

8.2 Allocation and Distribution of Policy Credits.

(a)           Pursuant to Section 8.01(b)(ii) above and Section 2.9 of the Stock Purchase Agreement, at the Effective Time, each Qualified Policyholder shall be credited with Policy Credits in an amount equal to such Qualified Policyholder’s Estimated Policy Credit Distributions.  The amount of Policy Credits payable to each Qualified Policyholder will be adjusted in accordance with Sections 8.02(b) and (c).

(b)           Pursuant to this Plan of Conversion and the Stock Purchase Agreement, PICA will, and the Sponsor has agreed to cause PICA to, declare dividends and distribute Policy Credits credited to a Qualified Policyholder in accordance with Section 8.02(c) in the following amounts and on the following Policies (each distribution described below, a “Policy Credit Distribution”):

(i) a total of $5,000,000 shall be declared as a dividend prior to September 30, 2009 (the “Declaration Date”) and paid to the Qualified Policyholders who are Owners of Policies that are In Force at such Declaration Date and who renew a Policy during the calendar year beginning on January 1, 2010, upon such renewal.  Any amount declared as a dividend in accordance with this Section 8.02(b)(i) but not paid to Qualified Policyholders due to such Qualified Policyholders’ failure to renew their Policies shall be added to the dividend declared and paid in accordance with Section 8.02(b)(ii) (such unpaid amount, the “2010 Rollover Amount”);

(ii) a total of (A) $5,000,000 plus (B) any 2010 Rollover Amount, shall be declared as a dividend and paid to the Qualified Policyholders who are Owners of Policies that are In Force on the first anniversary of the Declaration Date and who renew a Policy during the calendar year beginning on January 1, 2011, upon such renewal. Any amount declared as a dividend in accordance with this Section 8.02(b)(ii) but not paid to Qualified Policyholders due to such Qualified Policyholders’ failure to renew their Policies shall be added to the dividend declared and paid in accordance with Section 8.02(b)(iii) (such unpaid amount, the “2011 Rollover Amount”); and

(iii) a total of (A) $5,000,000 plus (B) any 2011 Rollover Amount, shall be declared as a dividend and paid to the Qualified Policyholders who are Owners of Policies that are In Force on the second anniversary of the Declaration Date and who renew a Policy during the calendar year beginning on January 1, 2012, upon such renewal.  No later than March 31, 2013, any amount declared as a dividend in accordance with this Section 8.02(b)(iii) but not paid to Qualified Policyholders due to such Qualified Policyholders’ failure to renew their Policies shall be divided equally among all Qualified Policyholders who were Owners of a Policy In Force on December 31, 2012 and paid to such Qualified Policyholders, in cash, by check.

(c) In accordance with and following PICA’s declaration of a dividend pursuant to Section 8.02(b)(i), (ii) or (iii), each Qualified Policyholder shall receive Policy Credits in the form of a dividend in an amount equal to such Qualified Policyholder’s Credit Share with respect to such declared dividend.  For any Qualified Policyholder, its “Credit Share” is an amount equal to the product of (i) the Credit Factor multiplied by (ii) such Qualified Policyholder’s Eligible Credit Premium.  As used herein:

(i) The “Credit Factor” is an amount equal to the total dividend declared by PICA divided by the Total Eligible Credit Premium;

(ii) Any Qualified Policyholder’s “Eligible Credit Premium” is the sum of the premium under such Qualified Policyholder’s Policy In Force on the Declaration Date or applicable anniversary thereof (calculated as if all premiums under such Policy were paid in full) and the premium actually paid for the previous four policy years under all of such Qualified Policyholder’s Policies, as reflected in the PICA Records;

(iii) “Total Eligible Credit Premium” means the sum of all the premium of all In Force Policies Owned by Qualified Policyholders on the Declaration Date or applicable anniversary thereof (calculated as if all premiums under such Policy were paid in full) and all the premiums actually paid for the previous four policy years under all such Policies, as reflected in the PICA Records; provided, however, with respect to Policies issued by PICA as a result of a merger, acquisition, or the acquisition of renewal rights (as reflected on the PICA Records), the premium under such Policy for purposes of determining such Qualified Policyholder’s Eligible Credit Premium and the Total Eligible Credit Premium shall be (A) the sum of the premium under such Qualified Policyholder’s Policy In Force on the Declaration Date or applicable anniversary thereof (calculated as if all premiums under such Policy were paid in full) and the premium actually paid for the previous four policy years under all of such Qualified Policyholder’s Policies, including policies with the prior carrier or (B) if the premium actually paid for any of the previous four policy years is not available in the PICA Records, then the sum of (I) the premium under such Qualified Policyholder’s Policy In Force on the Declaration Date or applicable anniversary thereof (calculated as if all premiums under such Policy were paid in full), plus (II) the premium actually paid for any of the previous four complete policy years available in the PICA Records plus (III) the premium for the earliest known complete policy year available in the PICA Records multiplied by the number of complete policy years out of the previous four policy years for which the premium actually paid is unavailable on the PICA Records.

8.3           Determination of the Allocation.  The determination of the allocation of the Cash Consideration and the Policy Credits among the Eligible Members and DR Former Members set forth in this Article 8 are (i) consistent with PICA’s historical allocation of its policyholder

dividends in accordance with PICA’s policyholder dividend plan and (ii) based on the estimated historical contributions of Eligible Policies to PICA’s surplus and expected future contributions to surplus of those Eligible Policies.

ARTICLE 9

SUBSEQUENT POLICYHOLDERS

Notice to Subsequent Policyholders.  Upon the issuance of a Policy that becomes effective after the Adoption Date and before the Plan Effective Date (excluding renewals of Policies In Force on the Adoption Date), PICA shall send to the Owner of such Policy (a “Subsequent Policyholder”) a written notice regarding this Plan of Conversion, substantially in the form attached as Exhibit E hereto.  Such notice shall specify such Subsequent Policyholder’s right to rescind such Policy as provided in Section 9.02 within forty-five (45) days after the Plan Effective Date and shall be accompanied by a copy or summary of this Plan of Conversion.  The form of such notice shall be filed with and approved by the Director.

9.1           Option to Rescind.  Each Subsequent Policyholder shall be entitled to rescind his Policy and receive a full refund of any amounts paid for the Policy within ten (10) days after the receipt of the notice.  No Subsequent Policyholder that has made or filed a claim under a Policy will be entitled to rescission or refund of any premiums paid for such policy.  If a Subsequent Policyholder rescinds its Policy pursuant to the right described in this section 9.02, such Subsequent Policyholder will have no insurance coverage under such Policy and may not make or file a claim under such Policy.

ARTICLE 10

OFFICERS AND BOARD OF DIRECTORS

10.1           Directors.  Each of the members of PICA’s Board immediately prior to the Effective Time shall resign as of the Effective Time and the Sponsor, as the sole shareholder of PICA, shall elect the new directors set forth on Exhibit F to serve on the Board of PICA.  The Sponsor has agreed to offer to each Person who, as of the date of the Stock Purchase Agreement, is a member of PICA’s Board, but is not a full-time employee of PICA or one of its subsidiaries, a Consulting and Noncompetition Agreement (each a “Consulting Agreement”).  Pursuant to his or her Consulting Agreement, each such Person shall be paid an initial payment of $50,000, plus a consulting fee of $250,000 payable in 48 monthly installments beginning at the Effective Time.  The Sponsor has agreed to cause each Person who executes a Consulting Agreement to be appointed to an advisory committee maintained by PICA for the term of such Person’s Consulting Agreement.

10.2           Officers.  The officers of PICA immediately prior to the Effective Time shall serve as officers of PICA after the Effective Time until new officers are duly elected pursuant to the Amended and Restated Articles of Incorporation and the Amended and Restated Bylaws.  Pursuant to the Stock Purchase Agreement, at the Effective Time PICA will (i) satisfy any retirement payments or obligations due to Jerry D. Brant, DPM, pursuant to the Employment Agreement dated July 20, 2000, as amended through the Adoption Date, between Dr. Brant and PICA, (ii) credit current participants in PICA’s Executive Retention and Deferred Compensation Plan dated January, 1, 2007 with all amounts that would otherwise be credited to their accounts in 2009, 2010 and 2011 and accelerate the vesting of all benefits for the current participants under such plan, and PICA shall pay the total accrued benefits under such plan to each of the current participants promptly, but in no event later than 60 days, after the Effective Time and (iii) employ certain executives, in each case as more fully described on Schedule I hereto.

ARTICLE 11

ADDITIONAL PROVISIONS

11.1           Continuation of Corporate Existence.  Upon the conversion of PICA to a stock insurance company in accordance with the terms of this Plan of Conversion and the provisions of Section 59.1(8):

(a)           the corporate existence of PICA as a mutual insurance company shall be continued in PICA’s corporate existence as a stock insurance company;

(b)           all the rights, franchises and interests of PICA as a mutual insurance company in and to every type of property, real, personal and mixed, and things in action thereunto belonging, shall be deemed transferred to and vested in PICA as a stock insurance company without any deed or transfer;

(c)           PICA (as converted to a stock insurance company) shall be deemed to have assumed all the obligations and liabilities of PICA (as the former mutual insurance company);

(d)           All outstanding surplus notes, guaranty fund interests or other surplus debentures issued by PICA prior to the Effective Time shall remain in full force and effect following the Conversion and, in accordance with Section 11.01(c), all liabilities and obligations thereunder shall be deemed to have been assumed by PICA (as the converted stock company).

11.2           Conflict of Interest.  Except as otherwise set forth in this Plan of Conversion, including as described in Section 10.02 and Schedule I hereto, no director, officer, agent or employee of PICA, or any of its subsidiaries or affiliates or any other person shall receive any fee, commission or other valuable consideration whatsoever, other than his or her usual regular salary and compensation, for in any manner aiding, promoting or assisting in the transactions contemplated by this Plan of Conversion; provided, that PICA may pay reasonable fees and compensation to attorneys, accountants and actuaries for services performed in the independent practice of their professions, even if such attorney, accountant or actuary is also a director or agent of PICA.

11.3           No Preemptive Rights.  No Member or other Person shall have any preemptive right to acquire PICA Shares in connection with this Plan of Conversion.

11.4           Amendment or Withdrawal of Plan of Conversion.

(a)           At any time prior to the Plan Effective Date, PICA may, by resolution of not less than two-thirds of the Board, amend or withdraw this Plan of Conversion (including the Exhibits hereto).  Any amendment shall require the written consent of the Director.  No amendment may change the Plan of Conversion after its approval by the Eligible Members in a manner that the

Director determines is material unless the Plan of Conversion, as amended, is submitted for reconsideration by the Eligible Members of PICA pursuant to the provisions of Sections 5.01 and 5.02.  No amendment may change the Adoption Date of the Plan of Conversion.

(b)           After the Plan Effective Date, the Amended and Restated Articles of Incorporation adopted pursuant to this Plan of Conversion may be amended pursuant to the provisions of such articles of incorporation, the Illinois Insurance Code and the statutory provisions generally applicable to the amendment of the articles of incorporation of insurance companies, or such other statutory provisions as may be applicable at the time of the amendment.

11.5           Corrections.  Prior to the Plan Effective Date, PICA, with the prior consent of the Director, may make such modifications as are appropriate to correct errors, cure ambiguities, clarify existing items or make additions to correct manifest omissions in this Plan of Conversion or any exhibits hereto.

11.6           Notices.  If PICA complies substantially and in good faith with the notice requirements of Section 59.1 of the Illinois Insurance Code with respect to the giving of any required notice to Members, the failure of PICA to give any Member any required notice does not impair the validity of any action taken under Section 59.1 of the Illinois Insurance Code.

11.7           Limitation of Actions.  Any action or proceeding challenging the validity of or arising out of acts taken or proposed to be taken pursuant to Section 59.1(8) shall be commenced within 30 days after the Plan Effective Date.  No Person shall have any rights or claims against PICA or its Board based upon the withdrawal or termination of this Plan of Conversion.

11.8           Costs and Expenses.  All the costs and expenses related to the Plan of Conversion, including the costs of outside advisors and consultants of the regulatory agencies, shall be borne by PICA.

11.9           Headings.  Article and Section headings contained in this Plan of Conversion are for convenience only and shall not be considered in construing or interpreting any of the provisions hereof.

11.10                      Governing Law.  The Plan of Conversion shall be governed by and construed in accordance with the laws of the State of Illinois, without regard to such State’s principles of conflicts of law.

[Remainder of this page intentionally left blank]

IN WITNESS WHEREOF, PICA by authority of its Board, has caused this Plan of Conversion to be duly executed as of the day and year first above written.

Podiatry Insurance Company of America,

a Mutual Company

By:          /s/ Jerry Brant____________________

Name:                       Jerry Brant

Title:    Pres/CEO

EXHIBIT A

STOCK PURCHASE AGREEMENT

The Stock Purchase Agreement, including exhibits, is filed as a separate Exhibit to this 8-K.

EXHIBIT B

AMENDED AND RESTATED ARTICLES OF INCORPORATION

AMENDED AND RESTATED

ARTICLES OF INCORPORATION

OF

PODIATRY INSURANCE COMPANY OF AMERICA

Article 1.                      The name of the corporation is PODIATRY INSURANCE COMPANY OF AMERICA.

Article 2.                      The principal office of the Company is located in the State of Illinois.

The Company may also have, maintain and operate such other offices, either within or without the State of Illinois, as shall be deemed proper and advisable in the discretion of the officers or board of directors of the Company.  From time to time, the company may transact business in any state or county in which it hereafter becomes duly qualified for the business to be undertaken.

Article 3.                      The duration of the corporation is perpetual.

Article 4.                      The purposes of the Company are:

1.           To engage in the business of and transact the following kinds of insurance and reinsurance as defined in Class 2 of Section 4 of the Illinois Insurance Code, to wit:

Class 2

(b) Vehicle. Insurance against any loss or liability resulting from or incident to the ownership, maintenance or use of any vehicle (motor or otherwise), draft animal or aircraft. Any policy insuring against any loss or liability on account of the bodily injury or death of any person may contain a provision for payment of disability benefits to injured persons and death benefits to dependents, beneficiaries or personal representatives of persons who are killed, including the named insured, irrespective of legal liability of the insured, if the injury or death for which benefits are provided is caused by accident and sustained while in or upon or while entering into or alighting from or through being struck by a vehicle (motor or otherwise), draft animal or aircraft, and such provision shall not be deemed to be accident insurance.

(c) Liability. Insurance against the liability of the insured for the death, injury or disability of an employee or other person, and insurance against the liability of the insured for damage to or destruction of another person’s property.

(h) Miscellaneous. Insurance against loss or damage to property and any liability of the insured caused by accidents to boilers, pipes, pressure containers, machinery and apparatus of any kind and any apparatus connected thereto, or used for creating, transmitting or applying power, light, heat, steam or refrigeration, making inspection of and issuing certificates of inspection upon elevators, boilers, machinery and apparatus of any kind and all mechanical apparatus and appliances appertaining thereto; insurance against loss or damage by water entering through leaks or openings in buildings, or from the breakage or leakage of a sprinkler, pumps, water pipes, plumbing and all tanks, apparatus, conduits and containers designed to bring water into buildings or for its storage or utilization therein, or caused by the falling of a tank, tank platform or supports, or against loss or damage from any cause (other than causes specifically enumerated under Class 3 of this Section) to such sprinkler, pumps, water pipes, plumbing, tanks, apparatus, conduits or containers; insurance against loss or damage which may result from the failure of debtors to pay their obligations to the insured; and insurance of the payment of money for personal services under contracts of hiring.

(i) Other casualty risks. Insurance against any other casualty risk not otherwise specified under Classes 1 or 3, which may lawfully be the subject of insurance and may properly be classified under Class 2.

(j) Contingent losses. Contingent, consequential and indirect coverages wherein the proximate cause of the loss is attributable to any one of the causes enumerated under Class 2. Such coverages shall, for the purpose of classification, be included in the specific grouping of the kinds of insurance wherein such cause is specified.

(l) Legal expense insurance.  Insurance against risk resulting from the cost of legal services as defined under Class 1(c).

2.           To engage in the business of and transact the following kinds of insurance and reinsurance as defined in Class 3 of Section 4 of the Illinois Insurance Code, to wit:

Class 3

(a) Fire. Insurance against loss or damage by fire, smoke and smudge, lightning or other electrical disturbances.

(b) Elements. Insurance against loss or damage by earthquake, windstorms, cyclone, tornado, tempests, hail, frost, snow, ice, sleet, flood, rain, drought or other weather or climatic conditions including excess or deficiency of moisture, rising of the waters of the ocean or its tributaries.

(h) Contingent losses. Contingent, consequential and indirect coverages wherein the proximate cause of the loss is attributable to any of the causes enumerated under Class 3. Such coverages shall, for the purpose of classification, be included in the specific grouping of the kinds of insurance wherein such cause is specified.

(i) Legal expense insurance. Insurance against risk resulting from the cost of legal services as defined under Class 1(c).

3.           To engage directly in any of the following businesses:

(a) rendering services related to the functions involved in the operation of its insurance business including, but not limited to, actuarial, loss prevention, safety engineering, data processing, accounting, claims, appraisal and collection services;

(b) any other business activity reasonably complementary or supplementary to its. insurance business, either to the extent necessarily or properly incidental to the insurance business the Company is authorized to do or to the extent approved by the Director of Insurance of the State of Illinois if such approval is required by law at the time; and

Article 5.                      The corporate powers shall be exercised by a Board of Directors composed of at least six (6) and not more than eleven (11) natural persons who are at least eighteen (18) years of age, and three (3) of whom shall be residents and citizens of the State of Illinois.  The term of office of each director shall be one (1) annual meeting of the shareholders of the Company.  Directors may be removed at any time, with or without cause, by a 2/3 majority vote of the holders of the outstanding shares of the Company who are present in person or by proxy at a meeting called, in whole or in part, for that purpose.

Article 6.                      The Company’s authorized capital is Five Million Dollars ($5,000,000). The total number of common shares that the Company shall have authority to issue is 5,000,000, no par value.  Any part of the authorized shares shall be issued at such times and in such manner as the Board of Directors may designate, and as permitted by law. Each share of the capital stock shall be fully paid before being issued.

The Company has received subscriptions for the issuance and sale of 5,000,000 shares of common stock upon the adoption these Amended and Restated Articles of Incorporation  at a price of $27 per share of which $1,000,000 will be allocated to paid-up capital and $1,000,000 will be allocated to paid-in surplus in order to satisfy the requirements for the certificate of authority issued to the Company prior to the adoption of these Amended and Restated Articles of Incorporation.

Article 7.                      These Articles of Incorporation may only be amended upon a two-thirds majority vote of the holders of the outstanding shares of the Company who are present in person or by proxy at a meeting called, in whole or in part, for that purpose.

Article 8.                      The By-Laws of the Company may be amended as set forth in the By-Laws.

Article 9.                      The Company shall be subject to and comply with all terms and provisions of the Illinois Insurance Code as are, or may become applicable to similar domestic stock insurance companies organized and incorporated thereunder.

[Signatures on following page]

IN WITNESS WHEREOF, the undersigned President and Secretary of the Company have executed these Articles of Incorporation on [________________].

[___________________]

President

[___________________]

  Secretary

OATH & ACKNOWLEDGMENT

I, [_________], a Notary Public do hereby certify that on [_________], [____________] personally appeared before me and being first duly sworn by me acknowledging that they signed the foregoing document in the capacity herein set forth and declared that the statements therein contained are true.

IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year above written.

_________________________

[_______________]

Notary Public

EXHIBIT C

AMENDED AND RESTATED BYLAWS

AMENDED AND RESTATED

BY-LAWS

OF

PODIATRY INSURANCE COMPANY OF AMERICA

ARTICLE 1

Name and Principal Office

The name of the Company shall be Podiatry Insurance Company of America (“PICA”) and the principal office of the corporation shall be in the State of Illinois.

ARTICLE 2

Meeting of Stockholders

Section 1.  Annual Meeting:  The annual meeting of the shareholders shall be held at such place and at such time during the second orthird calendar quarters of each year as the Board of Directors may designate. If the annual meeting is not held as herein provided, the Chairman, President and Chief Executive Officer or the Board of Directors shall call a special meeting which shall be held in lieu of and for the same purposes and with the same force and effect as the annual meeting.

Section 2.  Special Meetings.  Special meetings of the shareholders may be called by the Chairman, President and Chief Executive Officer or the Board of Directors at any time. The purpose of each meeting shall be stated in the request therefor and in any-notice thereof. No business shall be conducted at a special meeting, except as stated in the notice of such meeting.

Section 3.  Notice of Meetings:  Notice of the annual meeting shall be mailed, postage prepaid, not less than thirty (30) days before the meeting to each shareholder at his address as it appears on the books` of the Company. Notice of a special meeting, stating the time, place, and purpose therefor, shall be mailed, postage prepaid, at least ten (10) days before such meeting to each shareholder at his address as it appears on the books of the corporation.  Such notice shall set forth the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes thereof, and the business transacted at any special meeting shall be confined to the purposes stated in such notice.  No such notice of any given meeting need be given to any shareholder who files a written waiver of notice thereof with the Secretary, either before or after the meeting.  Attendance of a person at a meeting of shareholders, in person, present by telephone conference or other communications equipment by means of which all persons participating in the meeting can hear each other, or by proxy, shall constitute a waiver of notice of such meeting, except when the shareholder attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.

Section 4.  Quorum:  A quorum for the transaction of business at meetings of the shareholders shall consist of the holders of a majority of the shares entitled to vote thereat, present in person, present by telephone conference or other communications equipment by means of which all persons participating in the meeting can hear each other, or represented by proxy.  Whether or not a quorum is present, a majority in interest of the shareholders present in person, present by telephone conference or other communications equipment by means of which all persons participating in the meeting can hear each other, or represented by proxy at any duly called meeting and entitled to vote thereat may adjourn the meeting from time to time to another time or place, at which time, if a quorum is present, any business may be transacted which might have been transacted at the meetings as originally scheduled.  Notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken, unless the adjournment is for more than thirty (30) days or a new record date is fixed for adjourned meeting, in which event a notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting.

Section 5.  Voting of Shares; Proxies:  Every shareholder having to right to vote at a meeting of shareholders shall be entitled to exercise such vote in person or by proxy appointed by an instrument in writing subscribed by such shareholder or by his duly authorized attorney-in-fact.  Each shareholder shall have one vote for each share of common stock held by him.  No shares of preferred-stock are entitled to vote at a meeting of shareholders.  Except as otherwise provided by the laws of the State of Illinois, by the Articles of Incorporation or by the By-Laws, all elections shall be determined and all questions decided by a majority of the votes cast in respect thereof, except in the case of merger or consolidation, in which case such questions shall be decided by the affirmative vote of two thirds of all outstanding shares, a quorum being present.

Section 6.  Voting Lists:  The Secretary shall prepare and make, at least five (5) days before every meeting of the shareholders, a complete list of the shareholders entitled to vote at the meeting, arranged in alphabetical order and showing the address of each shareholder and the number of shares registered in the name of each shareholder.  Such list shall be open to the examination of any shareholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least five (5) days prior to the meeting, either at one place within each city in which the meeting is to be held, which places shall be specified in the notice of meeting, or, if not so specified, at the places where the meeting is to be held.  The list shall also be produced and kept at the time and places of the meeting during the whole time thereof, and may be inspected by any shareholder who is present.

Section 7.  Informal Actions:  Unless otherwise provided in the Articles of Incorporation, any action required by the By-Laws to be taken at any annual or special meeting of the shareholders of the Company, or any other action which may be taken at a meeting of the shareholders, may be taken without a meeting and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by all of the shareholders entitled to vote with respect to the subject matter thereof.

Section 8.  Fixing of Record Date:  In order that the Company may determine the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange or

shares or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than thirty nor less than five (5) days before the date of such meeting, nor more than thirty (30) days prior to any other action.  The record date for actions taken by unanimous written consent pursuant to Section 7 shall be the date of the unanimous written consent.

ARTICLE 3

Board of Directors

Section 1.  Election and Term:  The Board of Directors shall be composed of at least six (6) and not more than eleven (11) natural persons who are at least eighteen (18) years of age.  Three (3) directors shall be residents of the State of Illinois. Each director shall be elected by the shareholders as set forth in the Articles of Incorporation, with expired terms to be filled at each annual meeting, provided that (subject to the maximum number of directors specified herein) the Board of Directors may appoint qualified individuals to newly created positions on the Board of Directors, or individuals designated pursuant to agreements of merger and/or acquisition, to serve until the next annual meeting.

Notwithstanding any other provision of this section to the contrary, each of the Chairman and the  President and Chief Executive Officer shall be appointed as a director by the Board of Directors and shall serve at the pleasure of the Board of Directors.

Section 2.  Vacancies:  Vacancies in the Board of Directors may be filled for the unexpired term by a majority of the remainder of the Board.

Section 3.  Meetings and Notice:  Regular meetings of the Board may be held without notice at such time and place, whether within or without the State of Illinois, as shall from time to time be determined by the Board.  At least two (2) days written notice shall be given to each director.  Special meetings of the Board may be called by the Chairman or President and Chief Executive Officer or at the request of any five (5) directors addressed to the Secretary, who upon receipt of such request shall give at least two (2) days written notice to each director. Notice of meetings may be waived in writing, either before or after the meeting. Any defect in the notice of meetings shall be waived by each director whoattends the meeting.

Section 4.  Telephone Conference Meetings:  Members of the Board of Directors, or of any committee of the Board of Directors, may participate in and act at any meeting of the Board of Directors or any such committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute attendance and presence in person at the meeting.

Section 5.  Quorum and Manner of Acting:  At any meeting of the Board of Directors, a majority of the directors shall constitute a quorum for thetransaction of business.  In the absence of a quorum, the meeting may be adjourned to a future time by those present, and no further notice of such meeting shall be required. Except as otherwise provided by law or by the By-Laws, all resolutions adopted and all business transacted by the Board of Directors shall require the affirmative vote of a majority of the directors present at the meeting.

Section 6.  Powers and Duties:

3.1           The Board of Directors shall manage and conduct all of the business and affairs of the Company and shall be vested with all of the powers granted the Company in its charter and possessed by it under the applicable laws of the State of Illinois.

3.2           The Board of Directors shall be authorized to enter into a contract with respect to the investment of the assets of the Company.

3.3           The Board of Directors shall elect officers as hereinafter set forth.

3.4           The Board of Directors shall establish committees and determine their membership in accordance with Article V.

Section 7.  Fees and Expenses:  Unless otherwise restricted by the Articles of Incorporation or the By-Laws, the Board of Directors shall have the authority to fix a reasonable fee for service as a director and to reimburse directors for reasonable out-of-pocket expenses.  No payment for fees or expenses shall preclude any director from serving the corporation in any other capacity and receiving compensation or reimbursement for expenses thereof.

Section 8.  Written Consent:  Any action required to be taken at a meeting of directors or any action that may be taken at a meeting of directors may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all the directors and filed with the minutes of the proceedings of the directors.

Section 9.  Presumption of Assent:  A director of the Company who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be conclusively presumed to have assented to the action taken unless the dissent of such director shall be entered in the minutes of the meeting or unless the director shall file a written dissent to such action with the person acting as the Secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the Secretary of the Company immediately after the adjournment of the meeting.  Such right to dissent shall not apply to a director who voted in favor of such action.

Section 10.  Removal of Directors:  Any one or more directors may be removed, with or without cause, by the affirmative vote of two-thirds of the shareholders present in person or by proxy at a regular or special meeting or by unanimous written consent.

ARTICLE 4

Officers

Section 1.  Election of Officers:  Following the adjournment of the annual meeting of shareholders of the Company, the Board of Directors shall proceed without further notice to meet. At such meeting, the Board of Directors shall elect a Chairman, a President and Chief Executive Officer, one or more Vice Presidents, a Secretary and a Treasurer, and may elect one or more Vice Chairmen.  All officers shall serve at the pleasure of the Board of Directors.  The Board of Directors may elect other officers and assistant officers when it deems it to be in the

best interest of the corporation.  Except as otherwise provided by law, the same person may be elected to more than one office.

Section 2.  Term:  All officers shall hold office until the next annual meeting of the corporation and until their respective successors are elected and qualified.

Section 3.  Duties of Officers:  Each officer of the corporation shall perform such duties as are provided in the By-Laws and as may from time to time be assigned to him by theBoard of Directors, by the Chairman, or by the President and Chief Executive Officer. He shall also perform such duties as may be imposed upon him by law.

Section 4.  Chairman:  The Chairman shall be a chairman of the Executive Committee and shall preside at all Board meetings, appoint committees as directed by the By-Laws and/or the Board of Directors and shall be authorized to sign corporate checks and other negotiable instruments.  The Chairman shall serve as ex-officio member of all committees, with voting privileges in the event of a tie or to assure a quorum.

Section 5.  Vice-Chairman:  The Vice-Chairman shall perform the duties of the Chairman in the event of the Chairman's absence, incapacity or prolonged illness.  In the event that there is more than one Vice-Chairman, the Board of Directors shall determine the order of succession to the duties of Chairman.  The Vice-Chairman shall have such other duties as established by the Board of Directors consistent with the By-laws.

Section 6.  President and Chief Executive Officer:  The President and Chief Executive Officer shall have general supervisory authority over the affairs of the Company.  His responsibilities shall be specifically delineated by the Board of Directors, and may be revised or modified as required.  He shall act as Chairman in the absence of the Chairman or Vice Chairman, shall be authorized to sign corporate checks and other negotiable instruments and represent the Company as directed by the Board of Directors.

Section 7.  Vice President:  The Vice President shall assist the President and Chief Executive Officer in the performance of his duties as defined in the By-Laws, and shall perform such other functions as are assigned to him by the President and Chief Executive Officer or the Board of Directors.  He shall perform the duties of the President and Chief Executive Officer in the event of the latter’s absence, incapacity or prolonged illness.  In the event that there is more than one Vice President, the Board of Directors shall determine the order of succession to the duties of President and Chief Executive Officer.

Section 8.  Secretary:  The Secretary shall keep a record of all meetings of the Company and of the Board of Directors..  He shall take minutes or see that minutes are taken in an orderly manner.  He shall see that they are reproduced and distributed in a timely manner.  He shall perform such other duties as would normally be required of a Secretary of a corporation.  He shall be charged with responsibility for the general records of the Company’s business, and shall sign,countersign or attest such instruments as the President and Chief Executive Officer or Board may from time to time require.  He shall be responsible for giving the notices required by law and by the By-Laws of meetings of the Company and the Board.

Section 9.  Treasurer:  The Treasurer shall exercise such powers and duties with respect to the safekeeping of monies, funds, and securities of the Company, the signing, endorsing and acceptance of checks, notes and drafts in behalf of the Company, and its accounts and records in connection therewith as the President and Chief Executive Officer or the Board of Directors may from time to time direct.  He shall see that the financial records of the corporation are kept in a proper and timely manner.  He shall see that an auditing firm is selected by the Board to render the necessary reports to the Board of Directors, the Insurance Commissioner and others.  He shall co-sign checks and other negotiable instruments when necessary or appropriate.  In the absence of the Treasurer, his duties shall be performed by another officer designated by the President and Chief Executive Officer.

Section 10.  Removal of Officer:  Any officer or assistant officer may be removed by the Board of Directors, with or without cause, whenever in its judgment the best interests of the Company will be served thereby.

Section 11.  Vacancies:  Any vacancy, however occurring, in any office may be filled by the Board of Directors.

Section 12.  Compensation:  The directors may fix the compensation of the officers of the Company.

Section 13.  Bond of Officers and Employees:  Any officer or employee of the Company handling funds or negotiable instruments or any other property of the company shall furnish such bond or shall be covered by a blanket bond in such amounts and with such surety and sureties as may be required by the Board of Directors.  The premium of any such bond shall be paid by the Company.

ARTICLE 5

Committees

Section 1.  Executive Committee of the Board.  The Executive Committee of the Board shall be appointed by the Chairman and shall consist of at least two (2) directors, one of whom shall be the Chairman and one of whom shall be the President and Chief Executive Officer. By vote, the Board of Directors may delegate to such Executive Committee any or all of the powers granted to the Board of Directors by law and the By-Laws and not specifically delegated to any other committee or reserved to the Board by law.

Section 2.  Investment Committee:  The Investment Committee shall be appointed by the Chairman. The Committee shall superintend the investment, of the funds of the corporation following such guidelines as the Board of Directors has established.  The Board of Directors may modify the guidelines at any regular or special meeting.  The Investment Committee shall also recommend to the Board of Directors an investment firm to administer the investments of the Company.

Section 3.  Reinsurance Committee:  The Board of Directors shall establish and maintain a Reinsurance Committee with not fewer than three (3) members, at least one of which must be a member of the Board.  The members of the Reinsurance Committee shall be appointed by the Chairman.  The Reinsurance Committee shall review and approve all treaty reinsurance

placements and review and approve guidelines for facultative placements for the Company, with the exception of a reinsurance agreement in which the aggregate premium ceded in any one year is less than 1% of the Company’s annual gross written premium.  The Reinsurance Committee shall give special attention to reinsurers’ financial strength and performance record.

Section 4.  Other Committees:  The Board of Directors may establish other committees and determine their membership and purposes.  Any such committee which is authorized to act on behalf of the Board of Directors shall consist of at least two (2) members.

Section 5.  Membership on Committees:  Except as is otherwise provided in Section 1 of this Article, any Director shall be eligible to serve on a Committee.

ARTICLE 6

Execution of Contracts

Section 1.  Insurance Contracts:  All contracts of insurance entered into by the Company shall be signed by, or bear the facsimile signatures of, the President and Chief Executive Officer or the Vice President and the Secretary.

Section 2.  Countersignature of Insurance Contracts:  All contracts of insurance bearing facsimile signatures shall be countersigned, if required, by a duly empowered representative of the Company. The President and Chief Executive Officer or the Secretary shall appoint and empower representatives of the Company to countersign such contracts.

Section 3.  Powers of Attorneys:  The President and Chief Executive Officer or the Secretary, subject to such limitations as the Board may prescribe, shall execute such powers of attorneys as are necessary to make effective the insurance policies and contracts of the Company.

ARTICLE 7

Indemnification of Directors, Officers and Others

To the fullest extent permitted by the Illinois Insurance Code, the Company shall indemnify each director, officer, agent, employee or member of a committee of the Company (and his heirs, executors and administrators), and each person serving at the Company’s request as a director, officer, employee or agent of another company (and his heirs, executors and administrators), against all expenses and liabilities reasonably incurred by such persons in connection with or arising out of any action, suit or proceeding in which such person may be involved by reason of being or having been a director, officer, agent, employee or member of a committee of the Company (whether or not such person continues to be a director, officer, agent, employee or member of a committee at the time of incurring such expenses or liabilities), such expenses and liabilities to include, but not to be limited to, judgments, courtcosts and attorney’s fees and the cost of reasonable settlements.  The foregoing right of indemnification shall not be exclusive of other rights to which any director, officer, agent, employee or member of a committee may be entitled as a matter of law.  The Company may purchase and maintain insurance, at its expense, to protect itself and any such person against any such liability, cost, payment or expense, whether or not the Company shall have the power to indemnify such person against such liability under the Illinois Insurance Code.

ARTICLE 8

Capital Stock

Section 1.  Certificates:  The certificates of shares of the Company shall be numbered and shall be entered in the books of the Company as they are issued.  They shall exhibit the holders’ name and number of shares and shall be signed by (i) the Chairman of the Board or President and (ii) the Treasurer or the Secretary.

Section 2.  Transfers:  Transfers of shares shall be made on the books of the Company only by the person named in the certificate or by his attorney, lawfully constituted in writing, and upon surrender of the certificate therefor.

Section 3.  Claims Upon Shares:  The Company shall be entitled to treat the holder of record of any share or shares as the holder in fact thereof, and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof.

Section 4.  Lost or Destroyed Certificates:  Any person claiming a certificate of shares to be lost, stolen or destroyed shall furnish proof of that fact satisfactory to the Secretary and to the Treasurer, and shall give the Company a bond of indemnity in form and amount and with one or more sureties satisfactory to such officers, whereupon a new certificate may be issued of the same tenor and for the same number of shares as the one alleged to be lost stolen or destroyed upon such other lawful terms and conditions as the Board shall prescribe.

ARTICLE 9

Dividends

Dividends.  The Board of Directors from time to time may declare and pay dividends to the shareholders of the outstanding shares of stock of the Company in accordance with the provisions of the Illinois Insurance Code.  Such dividends shall be paid in cash, property or in shares of stock of the Company.  The determination of dividends to be paid shall be the sole discretion of the Board of Directors.  No dividend shall be paid contrary to any law or regulation of any duly constituted public authority.

ARTICLE 10

Fiscal Year

The fiscal year of the Company shall begin on January 1 and end on December 31 of each year..

ARTICLE 11

Amendments of By-Laws

The By-Laws may be amended, altered or repealed in whole or in part, and new By-Laws may be adopted (i) at any annual or special meeting of the shareholders by the affirmative vote of the holders of two-thirds of the shares issued and outstanding and entitled to vote thereat or (ii) at any annual or special meeting of the Board of Directors by the affirmative vote of a

majority of the directors then in office; provided, however, that notice of the proposed alteration or amendment shall have been contained in the notice of the meeting.

ARTICLE 12

Miscellaneous Provisions

Section 1.  Transaction with Affiliates:  Nothing in the By-Laws shall preclude the Company from having or sharing a common management or a cooperative or joint use of personnel, property, or services with one or more affiliated persons under the arrangements meeting the standards and requirements of Sections 131.20 and 131.20a of the Illinois Insurance Code as it may from time to time be amended.

Section 2.  Notice:  Whenever, under the provisions of the By-Laws, notice is required to be given to any director, officer or shareholder, it shall be construed to mean personal notice, but such notice may be given in writing, (i) by mail, by depositing the same in the United States mail in a postpaid wrapper, (ii) by telegram, by delivering the same with payment of the applicable tariff charge to a telegraph company for transmission, or (iii) by telecopier, in any case addressed to such director, officer or shareholder at such address as appears on the records of the Company.  Such notice shall be deemed to be given at the time when the same shall be mailed, so delivered to a telegraph company, or when the telecopier prints a record indicating a successfully completed transmission.

Section 3.  Company Accounts:  The Board of Directors may from time to time designate officers or other persons to make arrangements for the opening, modification or termination of bank, trust, custodial, broker, and investment accounts of the Company and to deposit, withdraw and direct funds and investments in said accounts.

Section 4.  Wording of By-Laws:  Throughout the By-Laws, the pronouns “he”, “his”, and “him” shall be intended to mean a person of either sex.

EXHIBIT D

NOTICE OF SPECIAL MEETING

PODIATRY INSURANCE COMPANY OF AMERICA,

A MUTUAL COMPANY

601 West Monroe Street

Springfield, Illinois, 62704

[insert date]

NOTICE OF SPECIAL MEETING OF MEMBERS

To be held on [insert date], 2009

______________________

To the Members of Podiatry Insurance Company of America, A Mutual Company:

NOTICE IS HEREBY GIVEN that a special meeting of the members of Podiatry Insurance Company of America, A Mutual Company, an Illinois mutual insurance company (“PICA”), will be held on [insert date], 2009, at 5:00 p.m., Central time, at PICA’s offices at 3000 Meridian Road, Franklin, Tennessee, 37067, and any adjournment or postponement thereof (the “Special Meeting”), for the following purposes:

· To consider and vote upon a proposal to approve and adopt the Plan of Conversion dated October 15, 2008 (the “Plan of Conversion”) and the transactions contemplated thereby, including, without limitation, the Stock Purchase Agreement dated October 28, 2008 (the “Stock Purchase Agreement”) by and among PICA and ProAssurance Corporation, a Delaware corporation, and a proposal to amend and restate the articles of incorporation of PICA (collectively referred to as the “Proposal”); and

· To transact such other business, if any, as may properly come before the Special Meeting or any adjournments, postponements, reschedulings or continuations thereof.

In accordance with Illinois law and the Plan of Conversion, only members of PICA with policies in force on October 15, 2008 are entitled to notice of, and to vote at, the Special Meeting (such members are referred to herein as “Eligible Members”).  Each Eligible Member is entitled to cast one vote at the Special Meeting regardless of the number of policies held by such Eligible Member.  PICA’s by-laws provide that the presence, in person or by proxy,

of at least thirty-five percent (35%) of Eligible Members shall constitute a quorum for purposes of considering the matters presented at the Special Meeting.  Approval and adoption of the Proposal requires the affirmative vote of at least two-thirds of the votes cast by the Eligible Members voting, in person or by proxy, at the Special Meeting.

YOUR VOTE IS IMPORTANT.  WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD PROMPTLY TO PICA IN THE ENCLOSED POSTAGE PAID REPLY ENVELOPE.

FOR INFORMATION REGARDING THE PROPOSAL, CONTACT:

Scott Meert, Director of Marketing, or

Margaret Hooper, Vice President, Podiatry Insurance Operations

Podiatry Insurance Company of America, A Mutual Company

3000 Meridian Road

Franklin, Tennessee  37067

(800) 913-0153

Proxies are valid only if the proxy card is received by PICA at least five days in advance of the Special Meeting or any adjournment thereof.  If you attend the Special Meeting, you may vote personally whether or not you have previously submitted a proxy card and such vote shall be in lieu of your previously submitted proxy card.

By Order of the Board of Directors

Winfield E. Butlin, D.P.M.

Secretary

_________, 2008

Nashville, Tennessee

EXHIBIT E

SUBSEQUENT POLICYHOLDER NOTICE

[PICA Letterhead]

NOTICE TO HOLDERS OF INSURANCE POLICIES

ISSUED AFTER OCTOBER 15, 2008

Effective as of October 15, 2008 (the “Adoption Date”), Podiatry Insurance Company of America, A Mutual Company, an Illinois mutual insurance company (the “Company”) adopted a plan of conversion (the “Plan of Conversion”), pursuant to which the Company has proposed to convert from a mutual insurance company to a stock insurance company (the “Conversion”).  In addition, the Company has also entered into a Stock Purchase Agreement (the “Agreement”), pursuant to which the newly converted stock insurance company will issue 100% of the shares of its common stock to, and be acquired by, ProAssurance Corporation, a publicly traded Delaware corporation (the “Purchase”).  The Conversion along with the Purchase is collectively referred to as the “Plan”.  The Company has filed the Plan and other required documentation for approval by the Director of the Illinois Division of Insurance (the “Director”).  If the Plan is approved by the Director and is adopted by two-thirds of the votes cast at a special meeting of eligible members of the Company who owned insurance policies that were in force on the Adoption Date, then the Plan will be effectuated and such eligible members will receive cash compensation and, in certain cases, credits against future premium payments distributed as dividends, in exchange for their membership interests in the Company, including, but not limited to, their right to vote in the elections of Directors.

The Plan will not cause any change to your insurance coverage under the terms of your policy.  However, because your policy was issued subsequent to the Adoption Date, (i) you are not eligible to vote on the Plan; (ii) all of your membership rights in the Company including, but not limited to, your right to vote in the elections of Directors, will be extinguished on the effective date of the Plan; and (iii) you will not be entitled to receive any consideration upon the Conversion or Purchase.

Accordingly, the Company hereby notifies you of your right to rescind your insurance policy and receive a full refund of the premiums you have paid to the Company for such rescinded insurance policy.  In order to rescind your policy, you must provide the Company with written notice of your decision to exercise your right to rescind such policy within 10 days after your receipt of this notice.  If you fail to provide written notice to the Company of your decision to rescind your policy within 10 days of your receipt of this notice, you will have no right to rescind your policy.

If you have made or filed a claim under your insurance policy, you are not entitled to the rescission of your policy or of any refund of the premiums you have paid under such policy.  If you elect to rescind your policy you will have no insurance coverage under such policy and you may not make or file a claim under such policy.

THIS NOTICE APPLIES ONLY TO NEWLY ISSUED POLICIES AND NOT RENEWAL OF POLICIES THAT WERE IN FORCE ON OCTOBER 15, 2008.

Should you have any questions regarding this notice, please feel free to contact the Company at the following number 1-800-913-0153.

PODIATRY INSURANCE COMPANY OF AMERICA, A MUTUAL COMPANY

______________________________________

By:

Title:

EXHIBIT F

DIRECTORS

W. Stancil Starnes, Chairman

Victor T. Adamo

Jerry D. Brant

Howard H. Friedman

Kirk Petersen

Edward L. Rand, Jr.

Zack Stamp

Darryl K. Thomas

Adam Wilczek

SCHEDULE I

EXECUTIVE OFFICER AGREEMENTS AND PAYMENTS

DR. JERRY BRANT EMPLOYMENT AGREEMENT

EXECUTIVE SUMMARY

JOB RESPONSIBILITIES

· CEO of PICA, located in Williamson County, Tennessee

· Reports to CEO of ProAssurance and Board

COMPENSATION PAYABLE PURSUANT TO SECTION 7.5(e) OF STOCK PURCHASE AGREEMENT

· $600,000, originally payable $10,000 per month over sixty (60) months

· $150,000, originally payable $50,000 per year for three years

TERM OF EMPLOYMENT

· Three year Initial Term, followed by a three year Term during which Executive may  either continue to work for some or all of the Term, or resign and elect severance pay for any portion of the second three year Term not worked

· Standard non-competition agreement, change in control provisions, arbitration provision, etc.

COMPENSATION

· For remainder of 2009, compensation as established by PICA, plus the monetized value of car and country club benefits currently provided by PICA. For 2010 and after, to be determined by ProAssurance, with a minimum increase of 4%.

· Bonus up to 50% to be based achievement of established objective goals

· Retention bonus of $400,000 to be paid upon closing of merger

· Other benefits consistent with Senior Executives for ProAssurance

SEVERANCE COMPENSATION

· During Initial Term, if termination is by ProAssurance without Cause, or by Executive for Good Reason, then severance compensation will be payment for balance of Initial Term and subsequent Term

· During Initial Term, if termination is by Executive for Good Health Reason, then one year severance benefits

· Executive may terminate at any time following the Initial Term and receive severance for the balance of the subsequent three year term

· For termination as a result of death or disability, severance benefits will be the lesser of either three years or the balance of the second three year Term.

SCHEDULE I

ADAM WILCZEK, DOUG WEBB AND GARY DITTMAN

EXECUTIVE SUMMARY

JOB RESPONSIBILITIES

· Executive Officer of PICA with executive duties as assigned by CEO and Board of PICA

· “At will” employment

· Located in Williamson County, Tennessee

COMPENSATION PAYABLE PURSUANT TO SECTION 7.5(e) OF STOCK PURCHASE AGREEMENT

•           $250,000 each under Executive Retention and Deferred Compensation Plan

COMPENSATION AND BENEFITS

· For remainder of 2009, compensation as established by PICA, plus the monetized value of car and country club benefits currently provided by PICA. For 2010 and after, to be determined by CEO of PICA in consultation with CEO of ProAssurance

· Bonus up to 30% to be based achievement of established objective goals

· Staged severance.  During first two years, either party may terminate, and if done during first six months of employment, then three year benefit package is paid, and if done after the first six months, the executive will receive a benefit package equal to the sum of the remaining full calendar months in the initial term plus twelve months.  After the first two years, a one year benefit package is paid if employment is terminated by ProAssurance without cause, or by Executive for Good Reason.  No benefits are payable in event of death or disability of the Executive.

· Standard benefits.  Standard Release and Severance Compensation Agreement

EX-99.2

EXHIBIT 99.2

STOCK PURCHASE AGREEMENT

THIS STOCK PURCHASE AGREEMENT (the “Agreement”), dated as of October 28, 2008, is entered into by and between PROASSURANCE CORPORATION, a Delaware corporation (“PRA”) and PODIATRY INSURANCE COMPANY OF AMERICA, A MUTUAL COMPANY, an Illinois mutual insurance company (“PICA”).  Capitalized terms used herein and not otherwise defined have the meanings set forth in Section 10.16.

WITNESSETH:

WHEREAS, PRA is an insurance holding company which provides, through its insurance subsidiaries, medical professional liability insurance; and

WHEREAS, PICA is a mutual insurance company which provides, directly and through its subsidiaries, medical professional liability insurance to podiatric and chiropractic physicians throughout the United States; and

WHEREAS, the Board of Directors of PICA has agreed to adopt a Plan of Conversion in accordance with Section 1.1 of this Agreement (as amended or supplemented from time to time, the “Plan of Conversion”), pursuant to which PICA will be converted (the “Conversion”) from a mutual insurance company to a stock insurance company pursuant to 215 ILCS 5/59.1 of the Illinois Insurance Code; and

WHEREAS, the Plan of Conversion will provide for and be contingent on the sale (the “Sale”) of all of the shares of common stock of PICA (the “Common Stock”) as part of the Conversion to PRA upon the terms and subject to the conditions set forth in this Agreement; and

WHEREAS, the Boards of Directors of PRA and PICA have determined that it is in the best interests of their respective companies for PRA to acquire PICA through the purchase of its newly authorized Common Stock as provided for in this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements contained in this Agreement, and intending to be legally bound by this Agreement, the parties to this Agreement agree as follows:

ARTICLE 1

PLAN OF CONVERSION

1.1           PICA Plan of Conversion.  PICA has adopted the Plan of Conversion, substantially in the form of Exhibit A attached hereto.  PICA shall file the Plan of Conversion with the Director (“Director”) of the Illinois Division of Insurance (the “Division”) in accordance with 215 ILCS 5/59.1 (Conversion to a stock company) of the Illinois Insurance Code (“215 ILCS 5/59.1”).  Following such filing, PICA shall take such additional actions, consistent with the terms set forth in the form of Plan of Conversion, as may be required under

215 ILCS 5/59.1 or otherwise by the Director to complete its demutualization pursuant to the provisions hereof and the Plan of Conversion.  The Plan of Conversion may contain such additional terms not set forth in the form of Plan of Conversion included as Exhibit A or modifications to terms set forth in the form of the Plan of Conversion as PICA may determine; provided, however, that any such additional term or modification that modifies the (i) total cash consideration or the method for allocating such cash consideration among PICA’s current and former Members, (ii) the sale of the PICA Common Stock to PRA, (iii) amount or timing of the Conversion Credits, or (iv) the Amended and Restated Articles or the Amended and Restated Bylaws shall require the prior written consent of PRA, which consent shall not be unreasonably withheld or delayed.

1.2           Approval of the Plan of Conversion.  Subject to Section 7.9 hereof, the Company, in accordance with the Plan of Conversion and Applicable Law, shall submit a proposal to Eligible Members to approve the Plan of Conversion (the “Proposal”) and shall give such notice to Eligible Members containing the date, time and place for voting on the Proposal as may be required under Applicable Law (including 215 ILCS 5/59.1).  Subject to Section 7.9 hereof, the Proposal shall include the determination of PICA’s Board of Directors that the Plan of Conversion does not prejudice the interests of the Members and is fair and equitable to the Members and shall include the Board of Directors’ recommendation that the Eligible Members approve the Plan of Conversion.

1.3           Information Statement.  PICA, with PRA’s assistance at PICA’s reasonable request, shall prepare and provide to Eligible Members, in connection with the solicitation of approval of the Plan of Conversion, an information statement relating to the Plan of Conversion and the Sale, including a copy of the Plan of Conversion (the “Information Statement”) and use commercially reasonable efforts to obtain and furnish the information required to be included by state and federal law, including 215 ILCS 5/59.1, and to obtain the approval of the Director of the Division for the Information Statement.  Each of PICA and PRA agrees that the information provided and to be provided by PICA or PRA, as the case may be, specifically for use in the Information Statement shall not, with respect to the information supplied by such party (i) on the date upon which the Information Statement is mailed to Eligible Members, (ii) on the date of the public hearing before the Director in respect of the Plan of Conversion, if any or (iii) on the last date on which Eligible Members are entitled to vote on the Proposal, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  No less than three days prior to the filing of the Information Statement with the Director of the Division, PICA shall provide PRA a draft of the Information Statement and an opportunity to comment on such draft; provided, however, that PICA shall have the right to accept or reject any such comments in its sole discretion.  Each of PRA and PICA agrees to correct as promptly as practicable any such information provided by it that shall have become false or misleading in any material respect and to take all steps necessary to furnish to the Director and obtain the approval of the Director for any amendment or supplement to the Information Statement so as to correct the same and to cause the Information Statement as so corrected to be disseminated to Eligible Members to the extent required by or advisable under Applicable Law.

1.4           Approval of the Change of Control.  Promptly after the execution of this Agreement, PRA shall request the Director to approve the change of control of PICA and the PICA Insurance Subsidiaries (as defined in Section 4.2 hereof) as contemplated by the Plan of Conversion and this Agreement in accordance with the requirements of 215 ILCS 5/131.4 of the Illinois Insurance Code.  PRA shall prepare and file with the Division a Form A and shall take such commercially reasonable actions consistent with the terms of this Agreement as may be required under 215 ILCS 5/131.4 of the Illinois Insurance Code and the regulations promulgated thereunder to obtain the Director's approval of the change of control of PICA and the PICA Insurance Subsidiaries as contemplated in the Plan of Conversion and this Agreement.

1.5           Effective Time of the Plan of Conversion. The “Effective Time” of the Plan of Conversion shall be 12:01 a.m. Illinois time, on the date and time as of which all of the following steps have been completed:  (i) the Plan of Conversion has been approved by the Director, (ii) the Eligible Members have approved the Plan of Conversion by the requisite vote in accordance with the Plan of Conversion, (iii) the Amended and Restated Articles of Incorporation have been duly adopted and (iv) the Effective Date Filing shall have been made by PICA.

1.6           Alternative Structure.  In the event that the Plan of Conversion or the transactions contemplated by this Agreement cannot be consummated in accordance with the transaction structure provided for in the Plan of Conversion and this Agreement, despite the parties’ exercise of their commercially reasonable efforts to obtain regulatory approvals and satisfy the other conditions to Closing set forth in Article 8, the parties shall discuss in good faith consummation of the acquisition of PICA by PRA using a different structure that is in compliance with Applicable Law and reasonably acceptable to both PICA and PRA and that substantially preserves for the parties the economic and other material benefits of the Plan of Conversion and the transactions contemplated by this Agreement and satisfies all other conditions to closing set forth in Article VIII hereof.

ARTICLE 2

SALE AND PURCHASE

2.1           Sale and Purchase of the Shares.  Subject to the terms and conditions of this Agreement, at the Effective Time on the Closing Date without any action on the part of any Member or DR Former Member, in accordance with the Plan of Conversion, PICA will issue and sell all of the newly authorized shares of Common Stock (the “Shares”) to PRA, which shall constitute all of the issued and outstanding stock of PICA, and PRA will purchase the Shares from PICA.

2.2           Purchase Price.  The purchase price (the “Purchase Price”) to be paid by PRA for the purchase of the Shares shall be equal to $135,000,000, consisting of (i) $120,000,000in cash (the “Cash Consideration”), payable to the Eligible Members and the DR Former Members pursuant to Section 3 hereof and in accordance with the Plan of Conversion and (ii) $15,000,000 payable to the Qualified Policyholders (as such term is defined in the Plan of Conversion) as Conversion Credits in accordance with the Plan of Conversion and Section 2.9 hereof.  The Cash Consideration will be allocated among the Eligible Members and the DR Former Members in the manner set forth in the Plan of Conversion.

2.3           Articles of Incorporation.  Subject to the terms and conditions of this Agreement, at the Effective Time, the Amended and Restated Articles of PICA shall be and continue in effect until amended in accordance with Applicable Law.

2.4           Bylaws.  Subject to the terms and conditions of this Agreement, at the Effective Time, the Amended and Restated Bylaws of PICA shall be and continue in effect until amended in accordance with Applicable Law.

2.5           Management and Officers.  At the Effective Time, each of the directors of PICA and each PICA Insurance Subsidiary shall resign from their respective board of directors, and PRA as the sole stockholder of PICA or PICA, as applicable, shall elect new directors indicated on Exhibit B to serve on the board of directors of PICA and each PICA Insurance Subsidiary.  At the Effective Time, the officers of PICA and each PICA Subsidiary shall continue as the officers of PICA and each PICA Subsidiary, as applicable, until their successors are elected and qualified.

2.6           Advisory Committees.  PRA shall offer to each Person who, as of the date of this Agreement, is a member of the Board of Directors of PICA, but is not a full-time employee of PICA or a PICA Subsidiary, a Consulting and Noncompetition Agreement (each a “Consulting Agreement”), substantially in the form set forth in Exhibit C attached hereto.  Pursuant to his or her Consulting Agreement, each such Person shall be paid an initial payment of $50,000, plus a consulting fee of $250,000 payable in 48 monthly installments beginning at the Effective Time.  Notwithstanding the foregoing, no fees of any type shall be paid to such Person unless he or she shall have executed a Consulting Agreement.  PRA shall cause each Person who executes a Consulting Agreement to be appointed to an advisory committee to be maintained by PICA substantially in accordance with PRA’s current practice during the term of such Person’s Consulting Agreement.

2.7           PRA Board of Directors.  PRA shall cause Jerry D. Brant, DPM to be elected as a director of PRA at or before the next annual meeting of the PRA stockholders occurring after the Effective Time for a minimum term of three (3) years.  As a condition to such nomination, Dr. Brant shall consent in writing to being named as a director of PRA and shall provide to PRA such information relating to him as is required to be disclosed in PRA’s proxy statement under Regulation A promulgated by the Securities and Exchange Commission (“SEC”) and the Securities Exchange Act of 1934, as amended (“Exchange Act”).  At such time as Dr. Brant no longer serves as a director of PRA, PRA shall cause its Nominating/Corporate Governance Committee to consider the inclusion of a podiatrist insured by PICA among the physician members nominated for election to PRA's Board of Directors.

2.8           Insurance Operations.  Each party hereto recognizes and acknowledges that the ongoing, independent operation and continuity of the podiatric and chiropractic insurance operations and related business activities of PICA and the PICA Subsidiaries following the completion of the transactions contemplated hereby is important to the other party hereto and PICA’s policyholders and PRA hereby agrees, subject to operating constraints and reasonable financial performance consistent with past practice, to continue to operate PICA and its Subsidiaries as a freestanding operation (including underwriting, claims and risk management operations) from its current offices in Franklin, Tennessee located at 3000 Meridian Road,

37067, and subject to Section 7.5 hereof, under its current management team with respect to podiatric and chiropractic related business activities conducted by PICA and PRA and their respective Subsidiaries.  The chief executive officer of PICA will continue to direct the management of PICA subject to the direction of the chief executive officer of PRA and the Board of Directors of PICA.

2.9           Policyholder Conversion Credits.

(a)           In accordance with and pursuant to the Plan of Conversion, PRA hereby agrees to cause PICA to declare dividends and distribute such declared dividends as premium credits to its Qualified Policyholders in amounts credited to such Qualified Policyholders in accordance with the Plan of Conversion and adjusted pursuant thereto (collectively, the “Conversion Credits”).

(b)           The Conversion Credits shall be allocated among the Qualified Policyholders entitled thereto in accordance with the Plan of Conversion.  The Conversion Credits shall be payable as a credit against premium payments on PICA insurance policies that are renewed by Qualified Policyholders in accordance with the Plan of Conversion.  If a Qualified Policyholder fails to renew its PICA insurance policy in the year in which the Conversion Credit is payable pursuant to the Plan of Conversion, such Qualified Policyholder shall not be entitled to be paid the Conversion Credit for such year.

(c)           PRA shall (i) pay to PICA, via wire transfer of immediately available funds, a portion of the Purchase Price in the amount of $15,000,000 to fund the crediting of the Conversion Credits to Qualified Policyholders pursuant to the Plan of Conversion and Section 2.9(a) hereof and (ii) cause PICA to deposit such amount in a segregated account established by PICA on or before the Closing Date to be held in trust by PICA, separate and apart from any other assets of PICA, for the sole purpose of funding the payment of the Conversion Credits as required by the Plan of Conversion and Section 2.9(a) (the “Credit Account”).

(d)           It is the intent of the parties hereto that all amounts held in trust in the Credit Account will qualify as admitted assets of PICA.  Any interest earned on amounts held in trust in the Credit Account shall be transferred to the general account of PICA and such amounts shall be distributable to PRA in accordance with Applicable Law and following the approval of the Director, if required, on or after April 1, 2013.  No interest shall be accrued or payable to the Qualified Policyholders on the Conversion Credits.  PICA shall not, and PRA shall cause PICA not to, declare, make or pay any dividend, distribution or other payment to its shareholders prior to April 1, 2013 that would require the approval of the Director or other Insurance Regulator under the Insurance Laws, regardless of whether such approval has been received.

(e)           It is the specific intent of the parties hereto that each Qualified Policyholder is and will be a third party beneficiary of this Agreement for the purposes of enforcing its rights to receive the Conversion Credits in the amounts credited to such Qualified Policyholder as set forth on the Distribution List, as adjusted in accordance with the Plan of Conversion.

ARTICLE 3

CONVERSION PROCEDURES

3.1           Conversion Agent.  (a)  As soon as practicable after the execution and delivery of this Agreement and, in any event, not less than five days prior to the mailing of the Information Statement to Eligible Members, PRA shall designate a bank to act as conversion agent (the “Conversion Agent”) acceptable to PICA, to act as paying agent in effecting the distribution of the Cash Consideration to Eligible Members and DR Former Members pursuant to this Agreement and the Plan of Conversion.  PRA shall be solely responsible for and pay the charges and expenses of the Conversion Agent.

3.2           Conversion Procedures.

(a)           Prior to the Effective Time, PICA shall deliver to the Conversion Agent and PRA a complete and correct copy of the Plan of Conversion as approved by the Director and the Eligible Members, and PICA shall deliver to the Conversion Agent the certificate(s) to be dated as of the date of the Effective Time for the Shares registered in the name of PRA.

(b)           Prior to the Effective Time, PRA shall deposit in trust with the Conversion Agent for the benefit of the Eligible Members and DR Former Members receiving cash pursuant to the Plan of Conversion, cash in the amount of the Cash Consideration (the "Conversion Fund"), for distribution to such Eligible Members and DR Former Members in accordance with this Agreement and the Plan of Conversion.  The cash deposited with the Conversion Agent pursuant to this Section 3.2(b) shall be held in cash and cash equivalents.

(c)           No less than thirty calendar days prior to the Closing Date, PICA shall provide to the Conversion Agent and PRA (i) a list setting forth the (A) names and addresses of each of the Eligible Members (including the Qualified Policyholders) and the DR Former Members, (B) amount of the cash payment that each of the Eligible Members (including the Qualified Policyholders) and the DR Former Members is entitled to receive under the Plan of Conversion, (C) amount of Conversion Credits credited to each Qualified Policyholder pursuant to the Plan of Conversion, which amounts are subject to adjustment in accordance with the Plan of Conversion (the “Distribution List”) and (ii) forms of the Consideration Notices.

(d)           On the Closing Date, the Conversion Agent shall deliver to PRA the certificates for the Shares.  As promptly as practicable, but in no event more than ten (10) Business Days after the Closing Date, the Conversion Agent shall distribute to each Eligible Member (including the Qualified Policyholders) and DR Former Member (i) the cash in the Conversion Fund, in the form of a check for good funds, in the amount set forth on the Distribution List and required to be paid to (A) such Eligible Member (including such Qualified Policyholder) in exchange for such Member’s Membership Interest or (B) such DR Former Member, in each case, pursuant to the Plan of Conversion and (ii) a notice setting forth the method by which the amount of such cash, and with respect to each Qualified Policyholder the amount of Conversion Credits to be credited to such Qualified Policyholder and payable in 2010, was derived from such Eligible Member’s or DR Former Member’s allocation of the Purchase Price and, in the case of the Conversion Credits, when such Conversion Credits will be distributed (the “Consideration Notices”).  Each Eligible Member (including each Qualified Policyholder) and DR Former Member shall be a third party beneficiary of this Agreement for purposes of receiving amounts set forth in the Distribution List in accordance with this Section 3.2(d).

3.3           Conversion Fund.  All cash that remains in the Conversion Fund undistributed to the Eligible Members or DR Former Members for six (6) months after the Effective Time shall be delivered to PRA, on demand, and the Conversion Agent’s duties hereunder shall terminate.  Thereafter and subject to applicable abandoned property, escheat and similar laws, each Eligible Member and DR Former Member that has not yet received the Cash Consideration to which it is entitled pursuant to the Plan of Conversion and Section 3.2(d) hereof may contact PRA and PRA shall pay to such Eligible Member or DR Former Member the cash to which it is entitled.  None of PRA, PICA or the Conversion Agent shall be liable to any Person in respect of any such cash delivered to a public official pursuant to any applicable abandoned property, escheat or similar law unless the failure to pay such cash to such Person is due to a violation by PRA, PICA or the Conversion Agent of the requirements of Applicable Law, the Plan of Conversion or any order of the Director.

3.4           Withholding.                                PRA or the Conversion Agent will be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement or the transactions contemplated hereby to any Eligible Member or DR Former Member such amounts as PRA (or any Affiliate thereof) or the Conversion Agent is required to deduct and withhold with respect to the making of such payment under the Code, or any applicable provision of U.S. federal, state, local or non-U.S. tax law.  To the extent that such amounts are properly withheld by PRA or the Conversion Agent, such withheld amounts will be treated for all purposes of this Agreement as having been paid to the Eligible Member or DR Former Member in respect of whom such deduction and withholding were made by PRA or the Conversion Agent.  At least 10 Business Days prior to the Closing Date, PRA shall notify PICA of any amounts that PRA intends to deduct and withhold pursuant to this Section 3.4.  PRA agrees to consult with PICA in good faith to determine whether such deduction and withholding is required under Applicable Law.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF PICA

Concurrently with the execution and delivery of this Agreement, PICA shall deliver to PRA a disclosure schedule (the “PICA Disclosure Schedule”).  The PICA Disclosure Schedule will be arranged in paragraphs corresponding to the sections contained in this Article and Sections 6.1 and 6.2;provided, however, (i) that each exception set forth in the PICA Disclosure Schedule shall be deemed disclosed for purposes of all representations and warranties if such exception is contained in a section of the PICA Disclosure Schedule corresponding to a section in this Article 4, and (ii) the mere inclusion of an exception in the PICA Disclosure Schedule shall not be deemed an admission by PICA that such exception represents a material fact, event or circumstance or would result in a material adverse change or Material Adverse Effect on PICA or any PICA Subsidiary.  All documents and instruments attached as exhibits or annexes to the PICA Disclosure Schedule are incorporated by reference into the PICA Disclosure Schedule.  Except as set forth in the PICA Disclosure Schedule and in any changes to the PICA Disclosure Schedule that are disclosed by PICA to PRA in accordance with Section 7.7 hereof, PICA hereby represents and warrants to PRA, as of the date hereof or such other date as specified, as follows:

4.1           Corporate Organization.

(a)           PICA is a mutual insurance company duly organized and validly existing under the laws of the State of Illinois.  PICA has the corporate power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted, and is duly licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified would not have a Material Adverse Effect on PICA.

(b)           PICA is (i) duly licensed or authorized as an insurance company in Illinois, (ii) duly licensed or authorized to carry on an insurance business in each other jurisdiction where it is required to be so licensed or authorized, and (iii) duly authorized in Illinois and each other applicable jurisdiction to write its lines of business as required by Applicable Law except, in each case, where such failure to be so licensed or authorized would not individually or in the aggregate have a Material Adverse Effect on PICA and the PICA Subsidiaries, taken as a whole (collectively, all such licenses and authorizations, the “PICA Permits”).  Section 4.1 of the PICA Disclosure Schedule identifies the type of insurance lines that PICA is authorized or licensed to write in each state.  All of such licenses are in full force and effect, and there is no proceeding or investigation by any Governmental Authority pending or, to the Knowledge of PICA, threatened which would reasonably be expected to lead to the revocation, failure to renew, suspension, material limitation or material restriction of such license.  To the Knowledge of PICA, PICA has conducted its business in all respects in compliance with all terms and conditions of such licenses and Applicable Law, except where failure to so comply has not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

4.2           Subsidiaries.

(a)           Section 4.2(a) of the PICA Disclosure Schedule sets forth a complete and correct list of each Subsidiary of PICA (the “PICA Subsidiaries”), together with the state of incorporation or organization of each PICA Subsidiary.  Each PICA Subsidiary (i) is duly organized and validly existing as a corporation under the laws of its jurisdiction of organization, (ii) is duly qualified to do business and in good standing in all jurisdictions (whether federal, state, local or foreign) where its ownership or leasing of property or the conduct of its business requires it to be so qualified and in which the failure to be so qualified would have a Material Adverse Effect on PICA and the PICA Subsidiaries, taken as a whole, and (iii) has all requisite corporate power and authority to own or lease its properties and assets and to carry on its business as now conducted.

(b)           Section 4.2(b) of the PICA Disclosure Schedule identifies the PICA Subsidiaries that write insurance and the states or other jurisdictions in which they are authorized or licensed to write insurance, and the type of insurance lines that they are authorized or licensed to write in each such sate (the "PICA Insurance Subsidiaries").  Each PICA Insurance Subsidiary is (i) duly licensed or authorized as an insurance company in its jurisdiction of incorporation, (ii) duly licensed or authorized to carry on an insurance business in each other jurisdiction where it is required to be so licensed or authorized, and (iii) duly authorized in its

jurisdiction of incorporation and each other applicable jurisdiction to write its line of business as required by Applicable Law except, in each case, where such failure to be so licensed or authorized would not individually or in the aggregate have a Material Adverse Effect on PICA and the PICA Subsidiaries, taken as a whole (collectively, all such licenses and authorizations, the “PACO Permits” and together with the PICA Permits, the “Permits”).  All of such licenses are in full force and effect and there is no proceeding or investigation by any Governmental Authority pending or, to the Knowledge of PICA, threatened which would reasonably be expected to lead to the revocation, failure to renew, suspension, material limitation or material restriction of such license.  To the Knowledge of PICA, each PICA Insurance Subsidiary has conducted its respective businesses in all respects in compliance with all terms and conditions of such licenses and Applicable Law, except where any failure to so comply has not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(c)           Except as set forth in Section 4.2(c) of the PICA Disclosure Schedule, PICA is, directly or indirectly, the record and beneficial owner of all of the outstanding shares of capital stock of each of the PICA Subsidiaries.  There are no irrevocable proxies granted by PICA or any PICA Subsidiary with respect to such shares.  There are no equity securities of any of the PICA Subsidiaries that are or may become required to be issued by reason of any options, warrants, scrips, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, shares of any capital stock of any of the PICA Subsidiaries except shares of the PICA Subsidiaries issued to, or required to be issued to, other wholly owned PICA Subsidiaries.  There are no contracts, commitments, understandings or arrangements by which any of the PICA Subsidiaries is bound to issue additional shares of its capital stock or options, warrants or rights to purchase or acquire any additional shares of its capital stock or securities convertible into or exchangeable for such shares.  All of the shares of the PICA Subsidiaries described in the first sentence of this Section 4.2(c) are validly issued, fully paid and nonassessable and free of preemptive rights, and are owned by PICA or a PICA Subsidiary free and clear of any and all Liens.

4.3           Corporate Affairs.

(a)           PICA has made available to PRA correct and complete copies of the Articles of Incorporation and Bylaws of PICA and each of the PICA Subsidiaries (as amended to date).  PICA has made available to PRA all of the minute books containing the records of the meetings of the shareholders, the Board of Directors and any committee of the Board of Directors of PICA and each of the PICA Subsidiaries (except for confidential portions of such minutes relating to the Plan of Conversion).  To the Knowledge of PICA, the minute books of PICA and the PICA Subsidiaries reflect all of the material actions taken at a meeting or by written consent of the Board of Directors of PICA.

(b)           The Plan of Conversion and the Amended and Restated Articles and Amended and Restated Bylaws have been approved by the Board of Directors of PICA and, when the Plan of Conversion and the Amended and Restated Articles have been approved by the Director of the Division and the Eligible Members of PICA as required under Section 1.2, PICA will be converted from a mutual insurance company to a stock insurance company at the Effective Time in accordance with the Applicable Law of the state of Illinois, including 215 ILCS 5/59.1.  At the Effective Time, the Amended and Restated Articles and the Amended and Restated Bylaws shall be duly authorized and validly adopted and in full force and effect.

4.4           Capitalization.

(a)           At the Effective Time, the authorized capital stock of PICA under the Amended and Restated Articles will be issued and sold to PRA pursuant to the Plan of Conversion and this Agreement.  The shares of PICA Common Stock issued to PRA pursuant to the Plan of Conversion will constitute all of the issued and outstanding shares of PICA Common Stock, all of which will be duly authorized and validly issued and fully paid, nonassessable and free of preemptive rights.  As of the date of this Agreement and other than as provided in the Plan of Conversion or this Agreement, PICA does not have and is not bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character calling for the purchase or issuance of any shares of PICA Common Stock or any other equity securities of PICA or any securities representing the right to purchase or otherwise receive any shares of PICA Common Stock or any other equity securities of PICA.  As of the date of this Agreement no shares of PICA Common Stock were reserved for issuance except as provided in the Plan of Conversion.

(b)           As of the date of this Agreement and other than as required in connection with that certain Indenture between PICA and Wilmington Trust Company dated May 22, 2003, PICA does not have and is not bound by any outstanding subscriptions, warrants, commitments or agreements of any character calling for the purchase or issuance of any guaranty fund certificates, surplus notes or other subordinated indebtedness that would be considered as an equity equivalent under SAP (as defined in Section 4.6(b) hereof).

4.5           Authority; No Violation; Consents and Approvals.

(a)           Subject to the receipt of all Requisite Regulatory Approvals, PICA has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby and PICA has the authority, assuming all Requisite Regulatory Approvals are duly received, to adopt the Plan of Conversion and carry out its obligations thereunder.  The execution and delivery of this Agreement by PICA and the consummation of the transactions contemplated hereby have been authorized by the Board of Directors of PICA.  The Board of Directors of PICA has adopted the Plan of Conversion and directed that the Plan of Conversion and this Agreement and the transactions contemplated by the Plan of Conversion and this Agreement be submitted to the Eligible Members for approval at a meeting of such Eligible Members and, other than obtaining Eligible Member approval and adoption of the Plan of Conversion and this Agreement by the affirmative vote of at least two-thirds of the Eligible Members voting thereon in accordance with Section 1.2 and any actions required to obtain all Requisite Regulatory Approvals (as defined in Section 8.1(c) of this Agreement), no other corporate proceedings on the part of PICA are necessary to approve the Plan of Conversion and this Agreement and to consummate the transactions contemplated by this Agreement.  Subject to the foregoing, this Agreement has been duly and validly executed and delivered by PICA and (assuming this Agreement constitutes a valid and binding obligation of PRA) constitutes a valid and binding obligation of PICA, subject to applicable bankruptcy, fraudulent conveyance,

insolvency and similar laws affecting creditors’ rights generally, and subject, as to enforceability, to general principles of equity.  On or prior to the date of this Agreement, the Board of Directors of PICA received the opinion of Raymond James & Associates that the Purchase Price is fair, from a financial point of view, to the Eligible Members and DR Former Members, as a group.

(b)           Neither the execution and delivery of this Agreement by PICA nor the consummation by PICA of the transactions contemplated by the Plan of Conversion and this Agreement, nor compliance by PICA with any of the terms or provisions of the Plan of Conversion and this Agreement, will (i) violate any provision of the Articles of Incorporation or Bylaws of PICA or (ii) assuming that all Requisite Regulatory Approvals and all of the consents and approvals referred to in Section 4.5(c) of this Agreement are duly obtained, (x) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to PICA or any of its properties or assets, or (y) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien upon any of the properties or assets of PICA under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, surplus debentures, deed of trust, license, lease, agreement or other instrument or obligation to which PICA is a party, or by which it or any of its properties or assets may be bound or affected, except (in the case of clause (y) above) as set forth in Section 4.5(b) of the PICA Disclosure Schedule, or (in the case of clauses (x) and (y) above) for such violations, conflicts, breaches, terminations, cancellations, accelerations, Liens or defaults which, either individually or in the aggregate, would not have a Material Adverse Effect on PICA and the PICA Subsidiaries, taken as a whole.

(c)           Except for (i) the filing of applications, notices and forms with, and the obtaining of approvals from, the Insurance Regulators pursuant to the Insurance Laws, with respect to the transactions contemplated by this Agreement, including all Requisite Regulatory Approvals, (ii) the approval of the Plan of Conversion and the Amended Articles of Incorporation with the Director of the Division pursuant to the Illinois Insurance Code as contemplated in Section 1.2 hereof, (iii) the filing of a notification and report form (the “HSR Act Report”) with the Premerger Notification Office of the Federal Trade Commission and with the Antitrust Division of the Department of Justice (collectively, the “Premerger Notification Agencies”) pursuant to the Hart-Scott-Rodino Anti-Trust Improvements Act, as amended, and the rules and regulations thereunder (collectively, the “HSR Act”), (iv) any consents, authorizations, orders and approvals required under the HSR Act, (v) the approval of the Plan of Conversion and this Agreement by the requisite votes of the Eligible Members, (vi) the consents and approvals referred to in Section 4.5(b) of the PICA Disclosure Schedule, and (vii) the approvals set forth in Section 4.5(c) of the PICA Disclosure Schedule, no consents or approvals of or filings or registrations with any Governmental Authority, or with any other Person are necessary in connection with the execution and delivery by PICA of this Agreement or the consummation by PICA of the transactions contemplated by this Agreement.

4.6           Insurance Reports.

(a)           “PICA SAP Statements” means (i) the annual statutory statements of each of PICA and the PICA Insurance Subsidiaries filed with the Insurance Regulator of the jurisdiction of domicile of PICA or the applicable PICA Insurance Subsidiary, as applicable, as of and for each of the years ended December 31, 2007, 2006 and 2005, (ii) the quarterly unaudited statutory statements of PICA and each of the PICA Insurance Subsidiaries filed with the Insurance Regulator of the jurisdiction of domicile of PICA or the applicable PICA Insurance Subsidiary, as applicable, as of and for the quarter ended June 30, 2008, and (iii) all exhibits, interrogatories, notes and schedules thereto.

(b)           Each PICA SAP Statement was prepared in accordance with statutory accounting principles (“SAP”) prescribed or permitted by the Division in conformity with practices consistently applied by PICA or the PICA Insurance Subsidiary, as applicable, without modification of the accounting principles used in the preparation thereof and presents fairly the statutory financial position and results of operations of PICA or the PICA Insurance Subsidiary, as applicable, as of the dates and for the periods indicated in accordance with SAP.  The annual balance sheets and income statements included in the PICA SAP Statements have been, where required by Insurance Laws, audited by an independent accounting firm.  Since January 1, 2005 PICA and each PICA Insurance Subsidiary have filed all PICA SAP Statements and all other reports and statements, together with all amendments and supplements thereto, required to be filed with any Insurance Regulator under the Insurance Laws.  Section 4.6(b) of the PICA Disclosure Schedule sets forth a list of, and PICA has made available to PRA, complete copies of, all such PICA SAP Statements and all audit opinions related thereto.

(c)           Since January 1, 2005 PICA and each PICA Insurance Subsidiary (i) have filed or submitted with all applicable Insurance Regulators all registration statements, notices and reports, together with all supplements and amendments thereto required by Article VIII ½ of the Illinois Insurance Code or similar Applicable Laws governing Insurance holding company systems in other states (the “PICA Holding Company Act Reports”), and (ii) have paid all material fees and assessments due and payable by them under the Insurance Laws.  Section 4.6(c) of the PICA Disclosure Schedule (x) sets forth a list of, and PICA has made available to PRA, complete copies of, all PICA Holding Company Act Reports filed with the Division, and (y) identifies each denial of a request for rate increases received by PICA from any Insurance Regulator since December 31, 2004.  All such PICA SAP Statements, PICA Holding Company Act Reports and other reports and statements substantially complied with the Insurance Laws when filed and, as of their respective dates, contained substantially all information required under the Insurance Laws and did not contain any false statements or material misstatements of fact or omit to state any material facts necessary to make the statements set forth therein not materially misleading in light of the circumstances in which such statements were made.  This Section 4.6(c) does not apply to Taxes, which are covered exclusively by Section 4.12.

(d)           Except for normal examinations conducted by a Governmental Authority in the regular course of the business of PICA and its Subsidiaries, and except as set forth in Section 4.6(d) of the PICA Disclosure Schedule, to the Knowledge of PICA, no Governmental Authority has initiated any proceeding or investigation into the business or operations of PICA, any PICA Subsidiary, or any director or officer of PICA or any PICA Subsidiary, since January 1, 2005 that remains open on the date hereof.  There is no unresolved violation or exception that is not capable of being cured without an incurrence of a material adverse penalty or monetary fine by any Governmental Authority with respect to any examinations of PICA or any of its Subsidiaries.

(e)           Section 4.6(e) of the PICA Disclosure Schedule lists all financial examinations that any Insurance Regulator has conducted with respect to PICA or any of the PICA Insurance Subsidiaries since December 31, 2004.  PICA has made available to PRA complete copies of the reports issued by the applicable Insurance Regulator with respect to such financial examinations.

(f)           Other than as contemplated herein and, except as set forth in Section 4.6(f) of the PICA Disclosure Schedule, since January 1, 2005, neither PICA nor any PICA Subsidiary has received from any Person any notice on Form A or such other form as may be prescribed under Applicable Law indicating that such Person intends to make or has made a tender offer for or a request or invitation for tenders of, or intends to enter into or has entered into any agreement to exchange securities for, or intends to acquire or has acquired (in the open market or otherwise), any voting security of PICA or a PICA Insurance Subsidiary, if after the consummation thereof such Person would directly or indirectly be in control of PICA or a PICA Insurance Subsidiary.

4.7           Financial Statements; Financial Reporting.

(a)           PICA has made available to PRA complete copies of (i) the audited consolidated balance sheets of each of PICA and the consolidated PICA Subsidiaries as of December 31, 2007, 2006 and 2005, and the related audited consolidated statements of earnings, policyholders’ equity and cash flows for PICA and the consolidated PICA Subsidiaries for the years ended December 31, 2007, 2006 and 2005, together with reports on all such financial statements by Ernst & Young LLP, and (ii) the unaudited consolidated balance sheets for PICA and the consolidated PICA Subsidiaries as of June 30, 2008 and the related unaudited consolidated statements of earnings, policyholders’ equity and cash flows for the six (6) month period ended June 30, 2008 (such financial statements are collectively referred to as the "Consolidated Financial Statements").

(b)           The Consolidated Financial Statements including all notes and schedules thereto, have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") throughout the periods involved (except in case of unaudited financial statements that do not contain all footnotes and year-end adjustments which may be required by GAAP) and fairly present in all material respects the consolidated financial position of PICA and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and their consolidated cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments and to any other adjustments described therein).

(c)           PICA maintains internal controls designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements of PICA and the PICA Subsidiaries.  Neither the Board of Directors nor audit committee of PICA

or any PICA Subsidiary have been advised by their accountants or consultants of: (x) any significant deficiencies or material weaknesses in the design or operation of the internal controls over financial reporting (as such term is defined in Section 13(b)(2)(B) and Rules 13a-15(f) and 15d-15(d) of the Exchange Act) of PICA or any PICA Subsidiary which could adversely affect its ability to record, process, summarize and report financial data, or (y) any fraud, whether or not material, that involves management or other employees who have a role in the internal controls over financial reporting of PICA or any PICA Subsidiary.

(d)           As of the date hereof, neither PICA nor any of the PICA Subsidiaries had any liabilities or obligations of any nature, whether accrued, absolute, contingent or otherwise which would be required to be reflected, reserved for or disclosed in a consolidated balance sheet of PICA and the consolidated PICA Subsidiaries, including the notes thereto, prepared in accordance with GAAP except (A) as reflected, reserved for or disclosed in the consolidated balance sheet of PICA and the consolidated PICA Subsidiaries as of June 30, 2008, including the notes thereto, (B) as incurred since June 30, 2008 in the ordinary course of business consistent with past practice, (C) as incurred or to be incurred by PICA or any Subsidiary pursuant to, in connection with, or as a result of, the Plan of Conversion and the other transactions contemplated by this Agreement, or (D) other than liabilities pursuant to contractual obligations identified in this Agreement or the PICA Disclosure Schedule.

(e)           Section 4.7(e) of the PICA Disclosure Schedule lists, and PICA has made available to PRA copies of the documentation creating or governing, all “off-balance sheet arrangements” (as defined in Item 303(a)(4)(ii) of Regulation S-K of the SEC) effected by PICA or any of the PICA Subsidiaries since December 31, 2005.

(f)           Ernst & Young LLP, which has expressed its opinion with respect to the Consolidated Financial Statements (including the related notes), is and has been throughout the periods covered by such financial statements a registered public accounting firm (as defined in Section 2(a)(12) of Sarbanes Oxley Act of 2002 (“SOX”).  Section 4.7(f) of the PICA Disclosure Schedule lists all non-audit services (as such term is defined by SOX) performed by Ernst & Young LLP for PICA and each PICA Subsidiary for each year commencing after December 31, 2004.

(g)           The books and records of PICA and each of the PICA Subsidiaries (i) are and have been properly prepared and maintained in form and substance adequate for preparing audited consolidated financial statements, in accordance with regulatory accounting principles required by GAAP and any other applicable legal and accounting requirements and, (ii) reflect only actual transactions.

4.8           Broker’s Fees.  Except as set forth in Section 4.8 of the PICA Disclosure Schedule (which sets forth amounts paid or to be paid and names of parties to which such amounts were or will be paid), none of PICA, the PICA Subsidiaries and Persons acting on their respective behalf, has employed any broker or finder or incurred any liability for any broker’s fees or commissions, or investment banker fees or commissions, or finder’s fees in connection with the transactions contemplated by this Agreement.

4.9           Absence of Certain Changes or Events.

(a)           Since December 31, 2007, and except as set forth in Section 4.9(a) of the PICA Disclosure Schedule, neither PICA nor any PICA Subsidiary has (except as required by Applicable Law):  (i) increased the wages, salaries, compensation, pension, or other fringe benefits or perquisites payable to any executive officer, employee, or director from the amount thereof in effect as of December 31, 2007, except for changes in benefits in the ordinary course of business, (ii) granted any equity based compensation or severance or termination pay, entered into any contract to make or grant any equity based compensation or severance or termination pay, or paid any bonuses, or (iii) suffered any strike, work stoppage, slowdown, or other labor disturbance.

(b)           Since December 31, 2007, and except as set forth in Section 4.9(b) of the PICA Disclosure Schedule, there has not been:  (i) any Material Adverse Effect on PICA and the PICA Subsidiaries taken as a whole; (ii) any material change in any method of accounting or accounting principles or practice by PICA or any PICA Subsidiary, except as required by GAAP or SAP and disclosed in the notes to the unaudited financial statements of PICA and the PICA Subsidiaries; (iii) any material change in the actuarial, investment, reserving, underwriting or claims administration policies, practices, procedures or methods of PICA or any PICA Insurance Subsidiary; (iv) any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the properties or business of PICA or any PICA Subsidiary; (v) any discharge or cancellation, whether in part or in whole, of any material indebtedness owed by PICA or any PICA Subsidiary to any Person, except reimbursement to employees of ordinary business expenses or other debts arising in the ordinary course of business; (vi) any sale or transfer of any material asset or property of PICA or any PICA Subsidiary, except in the ordinary course of business; (vii) any sale, assignment or transfer of any trademarks, trade names, or other intangible assets of PICA or any PICA Subsidiary; or (viii) any material amendment to or termination of any PICA Contract or Permit.

4.10           Legal Proceedings and Judgments.

(a)           Except as set forth in Section 4.10(a) of the PICA Disclosure Schedule and excluding claims made with respect to insurance policies or insurance contracts issued by PICA or any PICA Insurance Subsidiary for which a claims reserve has been established, there are no pending or, to the Knowledge of PICA, threatened, suits, actions, proceedings, claims or Governmental Authority investigations (whether at law or equity, before or by any Governmental Authority or before any arbitrator) against PICA, any PICA Subsidiary, any of their respective businesses or assets, any directors or officers of PICA or any PICA Subsidiary, in their respective capacities as directors and officers, or challenging the validity or propriety of the transactions contemplated by this Agreement or otherwise seeking to enjoin the transactions contemplated by this Agreement.  Section 4.10(a) of the PICA Disclosure Schedule further identifies any such suits, actions, proceedings, investigations or claims with pleadings, judgments or orders that are subject to confidentiality restrictions of the type described in 4.10(b).

(b)           Subject to any applicable confidentiality obligations of PICA or any PICA Subsidiary as to each matter, if any, described in Section 4.10(a) of the PICA Disclosure Schedule, accurate and complete copies of all relevant pleadings, judgments and orders have been made available to PRA.

4.11           Insurance.

(a)           Except as set forth in Section 4.11(a) of the PICA Disclosure Schedule, PICA and the PICA Subsidiaries maintain policies of general liability, fire and casualty, automobile, directors and officers, errors and omissions, fiduciary, and other forms of insurance (the “PICA Insurance Policies”) in such amounts, with such deductibles and against such risks and losses, which PICA’s management has reasonably determined to be prudent in accordance with industry practices, for the business and assets of PICA and the PICA Subsidiaries.  All such policies are in full force and effect, all premiums due and payable thereon have been paid (other than retroactive or retrospective premium adjustments that are not yet, but may be, required to be paid with respect to any period ending prior to the Closing Date under comprehensive general liability and worker’s compensation insurance policies), and no notice of cancellation or termination has been received with respect to any such policy which has not been replaced on substantially similar terms prior to the date of such cancellation.  To the Knowledge of PICA, the activities and operations of PICA and the PICA Subsidiaries have been conducted in a manner so as to conform in all material respects to all applicable provisions of such insurance policies.

(b)           No issuer of the PICA Insurance Policies has issued a reservation-of-rights letter, or entered into a nonwaiver agreement, or otherwise denied or limited coverage (in whole or in part), under any of the PICA Insurance Policies, and to the Knowledge of PICA, no declaratory judgment has been sought by any Person or entered by any court of competent jurisdiction that denies or limits coverage (in whole or in part) under any of the PICA Insurance Policies.

4.12           Taxes and Tax Returns.

(a)           As used in this Agreement:  “Tax” or “Taxes” means all federal, state, county, local, and foreign income, excise, gross receipts, gross income, profits, franchise, license, ad valorem, profits, gains, capital, sales, transfer, use, payroll, employment, severance, withholding, duties, intangibles, franchise, backup withholding, stamp, occupation, premium, social security (or similar), unemployment, disability, real property, personal property, sales, use, registration, alternative or add on minimum, estimated, and other taxes, charges, levies or like assessments (together with all penalties and additions to tax and interest thereon).  “Tax Return” or “Tax Returns” means any and all returns, declarations, claims for refunds, reports, information returns and information statements (including, without limitation, Form 1099, Form W-2 and W-3, Form 5500, and Form 990) with respect to Taxes filed (including any attached schedules), or required to be filed, by any Person or any Subsidiary of such Person with the Internal Revenue Service (“IRS”) or any other Governmental Authority or tax authority or agency, whether domestic or foreign (including consolidated, combined and unitary tax returns).

(b)           PICA and the PICA Subsidiaries have duly filed all material Tax Returns  required to be filed by them on or prior to the date of this Agreement (all such Tax Returns being accurate and complete in all material respects) and have duly paid or made sufficient provisions for the payment of all Taxes shown thereon as owing on or prior to the date of this Agreement other than Taxes which are not yet delinquent or are being contested in good faith and have not

been finally determined for which adequate reserves have been made on the Consolidated Financial Statements.  Except as disclosed in Section 4.12(b) of the PICA Disclosure Schedule, neither PICA nor any PICA Subsidiary has waived in writing any statute of limitations in respect of Taxes or agreed in writing to any extension of time with respect to a Tax Return or tax assessment or deficiency, other than extensions that are automatically granted by the taxing authorities upon filing an application therefor, which waiver or extension is currently in effect.  The unpaid Taxes of PICA and the PICA Subsidiaries do not exceed the reserve for tax liability set forth on the balance sheets referenced in Section 4.7 of this Agreement as adjusted for the passage of time through the Closing Date in accordance with past custom and practice of PICA in filing its returns.  To the Knowledge of PICA, no claim has been made since December 31, 2003 by any Governmental Authority in a jurisdiction where PICA or any PICA Subsidiary does not file Tax Returns that it is or may be subject to taxation by that jurisdiction.

(c)           There is no claim, audit, action, suit, proceeding or investigation now pending or, proposed or threatened in writing against or with respect to PICA or any PICA Subsidiary in respect of any material Tax.  PICA and each PICA Subsidiary in connection with amounts paid or owed to any employee, independent contractor, creditor, shareholder or other third party have complied with applicable tax withholding in all material respects.  PICA and each PICA Subsidiary have reported such withheld amounts to the appropriate taxing authority and to each such employee, independent contractor, creditor, shareholder or other third party as required by Applicable Law.

(d)           There are no Tax Liens upon any property or assets of PICA or its Subsidiaries except Liens for current Taxes not yet due.  Neither PICA nor any PICA Subsidiary has been required to include in income any adjustment pursuant to Section 481 of the Code by reason of a voluntary change in accounting method initiated by PICA or any PICA Subsidiary, and the IRS has not initiated or proposed any such adjustment or change in accounting method.  Except as set forth in the Consolidated Financial Statements, neither PICA nor any PICA Subsidiary has entered into a transaction which is being accounted for as an installment obligation under Section 453 of the Code.  Neither PICA nor any PICA Subsidiary is a party to or bound by any tax indemnity, tax sharing or tax allocation agreement (other than such agreements as exist by and among themselves).  Except as set forth in Section 4.12(d) of the PICA Disclosure Schedule, neither PICA nor any PICA Subsidiary has ever been a member of an affiliated group of corporations within the meaning of Section 1504 of the Code other than an affiliated group in which PICA has been the common parent corporation.  Except with respect to membership in the affiliated groups disclosed in Section 4.12(d) of the PICA Disclosure Schedule, neither PICA nor any PICA Subsidiary is liable for the Taxes of any Person under Section 1.1502-6 of the Treasury Regulations (or any similar provision of state, local or foreign Tax law) or by contract, as a successor or otherwise.  During the five (5) year period ending on the date of this Agreement, neither PICA nor any PICA Subsidiary was a distributing corporation or a controlled corporation in a transaction intended to be governed by Section 355 of the Code.  Neither PICA nor any PICA Subsidiary is a party to any joint venture, partnership or other arrangement or contract that could be treated as a partnership for federal income tax purposes.  PICA’s basis and excess loss account, if any, in each PICA Subsidiary is set forth in Section 4.12(d) of the PICA Disclosure Schedule.

(e)           Except as set forth in Section 4.12(e) of the PICA Disclosure Schedule, any amount that is reasonably likely to be received (whether in cash or property or the vesting of property) as a result of any of the transactions contemplated by this Agreement by any employee, officer or director of PICA or any of its affiliates who is a “Disqualified Individual” (as such term is defined in proposed Treasury Regulation Section 1.280G-1) under any employment, severance or termination agreement, other compensation arrangement or PICA Employee Plan (as defined in Section 4.13 of this Agreement) currently in effect will not be characterized as an “excess parachute payment” (as such term is defined in Section 280G(b)(1) of the Code).

(f)           To the Knowledge of PICA, there is no dispute or claim concerning any tax liability of PICA or any PICA Subsidiary except as disclosed in Section 4.12(f) of the PICA Disclosure Schedule.  Section 4.12(f) of the PICA Disclosure Schedule identifies the last Tax Returns that have been audited by the taxing authority with whom they were filed, and indicates those Tax Returns that currently are the subject of an audit procedure or that PICA or any PICA Subsidiary has received written notice will be subject to an audit procedure.  PICA has made available to PRA correct and complete copies of all federal income Tax Returns (including amendments thereto) of, all examination reports of, and statements of deficiencies assessed against or agreed to by, PICA or any PICA Subsidiary since December 31, 2004.  Except to the extent other representations and warranties in this Article 4 relate expressly to Taxes, the representations and warranties made in this Section 4.12 are the only representations and warranties made by PICA with respect to matters relating to Taxes (including Tax Returns and Tax allocation agreements).

4.13           Employee Plans; Labor Matters.

(a)           Section 4.13(a) of the PICA Disclosure Schedule sets forth a true and complete list of all of the Employee Plans (as defined in Section 10.16(a)) for employees of PICA and any PICA Subsidiary (“PICA Employee Plans”).  Those PICA Employee Plans which are non-qualified deferred compensation plans for purposes of Section 409A of the Code are separately identified in Section 4.13(a) of the PICA Disclosure Schedule.  Except with respect to the PICA Employee Plans, neither PICA nor any PICA Subsidiary sponsors, maintains or contributes to, or has any ongoing obligation or liability whatsoever with respect to:  (i) any employee benefit plan as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or (ii) any other program, plan, trust agreement or arrangement for any bonus, severance, hospitalization, vacation, sick pay, deferred compensation, pension, profit sharing, post-employment, retirement, payroll savings, stock option, stock purchase, group insurance, self insurance, death benefit, fringe benefit, welfare or any other employee benefit plan or fringe benefit arrangement of any nature whatsoever including those for the benefit of former employees.  PICA and the PICA Subsidiaries have not made or entered into any written or oral agreement, arrangement, commitment, or understanding to create any additional PICA Employee Plan or to continue, modify, change, or terminate, in any material respect, any PICA Employee Plan.

(b)           PICA has heretofore delivered or made available to PRA complete copies or descriptions of each PICA Employee Plan and certain related documents, including where applicable, (i) the plan document and the related trust agreement or annuity contract for such PICA Employee Plan; (ii) the summary plan description and material employee communication

document for such PICA Employee Plan; (iii) the actuarial report for such PICA Employee Plan for each of the last two years; (iv) all determination letters from the IRS for such PICA Employee Plan; (v) all insurance policies relating thereto and any written materials used by PICA to describe employee benefits to employees of PICA and the PICA Subsidiaries; (vi) the most recent annual return on Form 5500 (including all schedules  thereto along with the accompanying auditor’s opinion) and tax return (Form 990) for such PICA Employee Plan; (vii) the most current actuarial, valuation, and trustee’s  reports for such PICA Employee Plan; and (viii) all material communications with any Governmental Authority (including the Department of Labor, the IRS, the Pension Benefit Guaranty Corporation, and the SEC) with respect to such PICA Employee Plan.  Each such actuarial or valuation report correctly shows the value of the assets of such PICA Employee Plan as of the date thereof, the total accrued and vested liabilities, all contributions by PICA and the PICA Subsidiaries, and the assumptions on which the calculations are based.

(c)           Except as set forth in Section 4.13(c) of the PICA Disclosure Schedule, each of the PICA Employee Plans has been operated and administered in substantial compliance with Applicable Laws, including, but not limited to, ERISA and the Code.  To the Knowledge of PICA, there has not been any material violation of the reporting and disclosure provisions of the Code and ERISA with respect to any PICA Employee Plan.  There has not been any termination or partial termination (including any termination or partial termination attributable to the transactions contemplated by this Agreement) of such plans.  Neither PICA nor any PICA Subsidiary nor any of their respective ERISA affiliates, nor any predecessor thereof, contributes to, or has within the past six years contributed to, any multiemployer plans, as defined in Section 3(37) of ERISA, or any multiple employer welfare arrangements, as defined in Section 3(40) of ERISA.  Neither PICA nor any PICA Subsidiary nor any of their respective ERISA affiliates, nor any predecessor thereof, sponsors, participates in, or contributes to, or has at any time in the past sponsored, participated in, or contributed to (i) any plan which is subject to the funding standards or requirements described in Section 412 of the Code, or (ii) any plan which is subject to any of the requirements, obligations, and liabilities imposed by Title IV of ERISA.

(d)           Each PICA Employee Plan which is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter or has pending or has time remaining in which to file, an application for such determination from the IRS, and PICA is not aware of any reason why any such determination letter should be revoked or not be reissued, and any related trust is intended to be exempt from taxation under Section 501(a) of the Code.  PICA has made available to PRA copies of the most recent Internal Revenue Service determination letters with respect to each such PICA Employee Plan (if applicable).  To the Knowledge of PICA, no prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code, or breach of fiduciary duty under Title I of ERISA has occurred with respect to any PICA Employee Plan or with respect to PICA or any PICA Subsidiary, and no events have occurred with respect to any PICA Employee Plan that could result in payment or assessment by or against PICA or any of its Subsidiaries of any material excise taxes under Sections 4972, 4975, 4976, 4977, 4979, 4980B, 4980D, 4980E or 5000 of the Code.

(e)           There has been no amendment to, written interpretation or announcement (whether or not written) by PICA or any of the PICA Subsidiaries relating to, or change in employee participation or coverage under, any PICA Employee Plan which would increase materially the expense of maintaining PICA Employee Plans above the level of the expense incurred in respect thereof for the fiscal year ended December 31, 2007.  No event has occurred or circumstances exist that could result in a material increase in the premium costs of PICA Employee Plans that are insured, or a material increase in benefit costs of the PICA Employee Plans that are self-insured.

(f)           Except as set forth in Section 4.13(f) of the PICA Disclosure Schedule, there is no action, suit, investigation, audit or proceeding pending against or involving or, to the Knowledge of PICA, threatened against or involving any PICA Employee Plan before any court or arbitrator or any state, federal or local governmental body, agency or official, except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on PICA.  Other than claims for benefits submitted by participants or beneficiaries, no claim against, or legal proceeding involving, any PICA Employee Plan is pending or, to the Knowledge of PICA, threatened.

(g)           Except as described in Section 4.13(g) of the PICA Disclosure Schedule,neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated by the Plan of Conversion and this Agreement will (i) result in any material payment (including severance, unemployment compensation, golden parachute or otherwise) becoming due to any director or employee of PICA or any of its Subsidiaries from PICA or any of its Subsidiaries under any PICA Employee Plan or otherwise; (ii) materially increase any benefits otherwise payable under any PICA Employee Plan; (iii) result in any acceleration of the time of payment or vesting of any such benefits to any material extent (in each case under clauses (i), (ii) or (iii) whether or not such payment or benefit would constitute a parachute payment within the meaning of Section 280G of the Code); or (iv) constitute a prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code, or breach of fiduciary duty under Title I of ERISA.

(h)           Neither PICA nor any PICA Subsidiary has any direct or indirect material liability or obligation under any PICA Employee Plan other than as described in the terms of such PICA Employee Plans.  There are no circumstances arising out of the sponsorship of any PICA Employee Plan which will result in any direct or indirect material liability to PICA or any PICA Subsidiary, other than liability for contributions, benefit payments, administrative costs and liabilities incurred in accordance with the terms of the PICA Employee Plans consistent with past practice.

(i)           PICA and each PICA Subsidiary have made all payments and contributions due from them to each PICA Employee Plan.  There are no funded benefit obligations under any PICA Employee Plan for which contributions have not been made or properly accrued, and there are no unfunded benefit obligations that have not been accounted for by reserves, or otherwise properly footnoted in the Consolidated Financial Statements.

(j)           Each PICA Employee Plan which is an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA that is not qualified under Section 401(a) or 403(a) of the Code is exempt from Parts 2, 3, and 4 of Title I of ERISA as an unfunded plan that is maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees, pursuant to Sections 201(2), 301(a)(3), and 401(a)(1) of ERISA.  Except as set forth in Section 4.13(j) of the PICA Disclosure Schedule, no assets of PICA or any PICA Subsidiary are allocated to or held in a “rabbi trust” or similar funding vehicle.

(k)           Each PICA Employee Plan that is a “group health plan” (as defined in Section 607(1) of ERISA or Section 5001(b)(1) of the Code) has been operated at all times in compliance in all material respects with the provisions of Section 4980B of the Code and Part 6 of Subtitle B of Title I of ERISA (“COBRA”), with the provisions of the Code and ERISA enacted by the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), and with the provisions of any applicable similar state law.

4.14           Employees.

(a)           PICA has made available to PRA a complete list of the names of the current employees of PICA and the PICA Subsidiaries, their birth dates, hire dates, base salary and hourly wages, name of employer and position/job title, and accrued vacation and sick leave, if any, all as of September 30, 2008.  Except as limited by any employment agreements and severance agreements listed in Section 4.14(a) of the PICA Disclosure Schedule, and except for any limitations of general application which may be imposed under Applicable Laws, PICA and the PICA Subsidiaries have the right to terminate the employment of any of their respective employees at will and without payment to such employees.

(b)           PICA and the PICA Subsidiaries are in compliance, in all material respects, with all Applicable Laws regarding labor and employment and the compensation therefor, labor and employment matters, discrimination in employment, terms and conditions of employment, wages, hours and occupational safety and health, and employment practices, whether state or federal (including to the extent applicable (which applicability PICA and the PICA Subsidiaries are not conceding), wage and hour laws; workplace safety laws; workers’ compensation laws; equal employment opportunity laws; equal pay laws; civil rights laws; the Occupational Safety and Health Act of 1970, as amended; the Equal Employment Opportunity Act, as amended; the Americans With Disabilities Act, 42 U.S.C. Sec. 12101 et seq., as amended; the Fair Labor Standards Act, 29 U.S.C. Sec. 201 et seq., as amended; the Equal Pay Act, 29 U.S.C. Sec. 206d, as amended, the Portal-to-Portal Pay Act of 1947, 29 U.S.C. Sec. 255 et seq., as amended; Title VII of the Civil Rights Act of 1964, 42 U.S.C. Sec. 2000e, as amended and 42 U.S.C. Sec. 1981, as amended; the Rehabilitation Act of 1973, as amended; the Vietnam-Era Veterans’ Readjustment Assistance Act of 1974, as amended; the Immigration Reform and Control Act, 8 U.S.C. Sec. 1324A et seq., as amended; the Employee Polygraph Protection Act of 1988, as amended; the Veterans Re-employment Act - Handicap Bias, 38 U.S.C. Sec. 2027 et seq., as amended; the Civil Rights Act of 1991, as amended; the Family and Medical Leave Act of 1993, as amended; and the Age Discrimination and Employment Act of 1967, as amended).  To the Knowledge of PICA, no action or investigation has been instituted or is threatened to be conducted by any state or federal agency regarding any potential violation by PICA or any PICA Subsidiary of any Applicable Laws regarding labor and employment or the compensation therefor (including, without limitation, any of the aforementioned statutes) during the past five (5) years.

(c)           Neither PICA nor any PICA Subsidiary is a party to or bound by any collective bargaining contract, nor is any such contract currently being negotiated by PICA or any PICA Subsidiary. To the Knowledge of PICA, there are no pending activities or proceedings of any labor union to organize any employees of PICA or any PICA Subsidiary.  Since December 31, 2007, no executive officer of PICA or any PICA Subsidiary has stated to the Chief Executive Officer of PICA an intention to terminate his or her employment.

(d)           PICA and each PICA Subsidiary have complied in all material respects with all applicable notice provisions of and have no material obligations under COBRA with respect to any former employees or qualifying beneficiaries thereunder.  Except as set forth in Section 4.14(d) of the PICA Disclosure Schedule, all sums due from PICA or any PICA Subsidiary for employee compensation (including, without limitation, wages, salaries, bonuses, relocation benefits, stock options and other incentives) have been paid, accrued or otherwise provided for, and all employer contributions for employee benefits, including deferred compensation obligations, and all benefits under any PICA Employee Plan have been duly and adequately paid, accrued or provided for in accordance with plan documents.  To the Knowledge of PICA, no person treated as an independent contractor by PICA or any PICA Subsidiary is an employee as defined in Section 3401(c) of the Code, nor has any employee been otherwise improperly classified, as exempt, nonexempt or otherwise, for purposes of federal or state income tax withholding or overtime laws, rules, or regulations.

(e)           Since December 31, 2007, neither PICA nor any PICA Subsidiary has effectuated (i) a “plant closing” (as defined in the Worker Adjustment and Retraining Notification Act (the “WARN Act”)) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of PICA or any PICA Subsidiary; (ii) a “mass layoff” (as defined in the WARN Act); or (iii) such other transaction, layoff, reduction in force or employment terminations sufficient in number to trigger application of any similar foreign, state or local law.

4.15           Compliance with Applicable Law.

(a)           Other than generally applicable requirements of Applicable Laws, neither PICA nor any PICA Subsidiary is subject to any cease-and-desist or other order issued by, or is a party to any written agreement, consent agreement or memorandum of understanding with, or is a party to any commitment letter or similar written undertaking to, or is subject to any order or directive by, or has been a recipient of any supervisory letter from, or has adopted any board resolutions at the request of any Governmental Authority that is currently in effect and:  (i) requires any investments of PICA or any PICA Subsidiary to be treated as non-admitted assets, (ii) requires divestiture of any investments of PICA or any PICA Subsidiary, (iii) in any manner imposes any requirements on PICA or any PICA Insurance Subsidiary in respect of risk based capital requirements that add to or otherwise modify the risk based capital requirements imposed under the Insurance Laws, (iv) in any manner relate to the ability of PICA or any PICA Subsidiary to pay or declare dividends, distributions, or other payments to securityholders or policyholders of PICA or any PICA Subsidiary, respectively or (v) restricts in any material respect the conduct of the business, credit policies or PICA’s management or any PICA Subsidiary (each, whether or not set forth in the PICA Disclosure Schedule, a “PICA Regulatory Agreement”), nor has PICA or any of the PICA Subsidiaries been advised by any Governmental Authority that it is considering issuing or requesting any such PICA Regulatory Agreement.

(b)           Except as set forth in Section 4.15(b) of the PICA Disclosure Schedule, there are no material contracts (other than contracts relating to employment), real estate leases, loans, guarantees or other arrangements or transactions of any nature between PICA or any PICA Subsidiary, on the one hand, and any of their respective officers, directors, or other Affiliates, on the other hand.  PICA has not extended or maintained credit, arranged for the extension of credit, or renewed an extension of credit, in the form of a personal loan to or for any director or executive officer (or equivalent thereof) of PICA or any PICA Subsidiary that is now or will be outstanding on the Closing, except for advancement of expenses incurred in the performance of business for PICA consistent with the expense policy of PICA.

(c)           None of PICA, the PICA Subsidiaries, and, to the Knowledge of PICA, any of their respective current or former officers or directors or current or former employees, agents or representatives have: (i) used any corporate funds for any illegal contributions, gifts, entertainment or other unlawful expenses relating to political activity, (ii) used any corporate funds for any direct or indirect unlawful payments to any foreign or domestic governmental officials or employees, (iii) violated any provision of the Foreign Corrupt Practices Act of 1977, (iv) established or maintained any unlawful or unrecorded fund of corporate monies or other assets, (v) made any false or fictitious entries on the books and records of PICA or any PICA Subsidiary, (vi) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment of any nature, or (vi) made any material favor or gift which is not deductible for federal income tax purposes.

4.16           Certain Contracts.

(a)           Section 4.16(a) of the PICA Disclosure Schedule lists all contracts, agreements, arrangements, commitments, or understandings (whether written or oral) other than insurance policies issued by PICA or any PICA Insurance Subsidiary to which PICA or a PICA Subsidiary is a party or bound by:  (i) with respect to the employment of any directors, officers or employees; (ii) which, upon the consummation of the transactions contemplated by this Agreement will (either alone or upon the occurrence of any additional acts or events) result in any payment (whether of severance pay or otherwise) becoming due from PICA, PRA, or any of their respective Subsidiaries to any director, officer or employee thereof; (iii) which contains obligations for PICA or any PICA Subsidiary to pay in excess of $100,000 in any twelve month period or provides for PICA or any PICA Subsidiary to receive in excess of $100,000 in any twelve month period; (iv) that concerns a partnership or joint venture that is not consolidated with PICA for financial reporting purposes; (v) that contractually limits the ability of PICA or any PICA Subsidiary to compete with respect to any product, service or territory; (vi) that is in the nature of a collective bargaining agreement, employment agreement, consulting agreement or severance agreement that is not cancelable by PICA or any PICA Subsidiary without penalty or compensation on thirty (30) days notice or less; (vii) that provides for the payment to an employee of PICA or any PICA Subsidiary any incentive or bonus compensation based on the productivity or performance of such employee or of PICA or any PICA Subsidiary; or (viii) any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement, or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement.  PICA has made available to PRA complete copies of all employment and deferred compensation agreements which are in writing and to which PICA or

any PICA Subsidiary is a party.  Each contract, agreement, arrangement, commitment, or understanding (whether written or oral) of the type described in Section 4.16(a) of this Agreement, whether or not set forth in the PICA Disclosure Schedule, is referred to in this Agreement as a “PICA Contract,” and neither PICA nor any PICA Subsidiary has received notice of any, and to the Knowledge of PICA there has been no, violation of any PICA Contract by any of the other parties thereto.  For the avoidance of doubt, the term "PICA Contracts" does not include any insurance policy or contract issued by PICA or a PICA Insurance Subsidiary.

(b)           With respect to each PICA Contract, such PICA Contract is (assuming due power and authority of, and due execution and delivery by, the other parties thereto) in full force and effect (except for contracts that have expired pursuant to the terms thereof) and is legally valid, binding and enforceable against PICA or any of the PICA Subsidiaries and to the Knowledge of PICA, the other party thereto in accordance with its terms (except as may be limited by bankruptcy, fraudulent conveyance, insolvency, moratorium, reorganization or similar laws affecting the rights of creditors generally and the availability of equitable remedies).  There are no material defaults by PICA or any PICA Subsidiary, or, to the Knowledge of PICA, any other party, under such PICA Contract.  Neither PICA nor any PICA Subsidiary has received written or, to the Knowledge of PICA, oral notice of any default, offset, counterclaim or defense under such PICA Contract.  No condition or event has occurred which with the passage of time or the giving of notice or both would constitute a default or breach by PICA or any PICA Subsidiary, or, to the Knowledge of PICA, any other party under the terms of such PICA Contract.

4.17           Investments and Interest Rate Risk Management Instruments.

(a)           Except as set forth in Section 4.17(a) of the PICA Disclosure Schedule, PICA and each PICA Subsidiary are the record or beneficial owners of all of its investment securities (except securities sold under repurchase agreements or held in any fiduciary or agency capacity), free and clear of any Lien.  Such securities are valued on the books of PICA in accordance with GAAP other than where the failure to be so valued has not had, or would not be reasonably expected to have, a Materially Adverse Effect.  Section 4.17(a) of the PICA Disclosure Schedule sets forth a list of the securities which are in default in the payment of principal, interest or dividends or which PICA has recorded as impaired to any material extent.  PICA has provided to PRA a copy of the investment policies of PICA and the PICA Subsidiaries as of June 30, 2008.  There has been no material change in investment policy of PICA and the PICA Subsidiaries or in the composition of the investments of PICA and the PICA Subsidiaries since June 30, 2008.

(b)           All interest rate swaps, caps, floors and option agreements and other interest rate risk management arrangements entered into for the account of PICA or any of the PICA Subsidiaries were entered into in the ordinary course of business and, to the Knowledge of PICA, in accordance with Applicable Laws and with counterparties reasonably determined by PICA's management to be financially responsible at the time.  All of such interest rate swaps, caps, floors and option agreements and other interest rate risk management arrangements are (assuming due power and authority of, and due execution and delivery by, the other parties thereto) legal, valid and binding obligations of PICA or any of the PICA Subsidiaries enforceable in accordance with their terms (except as may be limited by bankruptcy, fraudulent

conveyance, insolvency, moratorium, reorganization or similar laws affecting the rights of creditors generally and the availability of equitable remedies), and are in full force and effect.  PICA and each PICA Subsidiary have duly performed in all material respects all of their material obligations thereunder to the extent that such obligations to perform have accrued; and, to the Knowledge of PICA, there are no material breaches, violations or defaults or allegations or assertions of such by any party thereunder.

4.18           Intellectual Property.

(a)           PICA or a PICA Subsidiary owns or has the right to use, pursuant to license, sublicense, agreement or permission, all Intellectual Property necessary for the operation of the businesses of PICA and the PICA Subsidiaries as presently conducted except for such Intellectual Property, the absence of which is not reasonably likely to have a Material Adverse Effect.  As used in this Agreement, “Intellectual Property” means all trademarks, service marks, logos, domains and domain names, trade names and corporate names and registrations and applications for registration thereof, copyrights and registrations and applications for registration thereof, computer software (including computer software used in insurance operations or for accounting operations), data and documentation, trade secrets and confidential business information (including financial, marketing and business data, pricing and cost information, business and marketing plans, and customer and supplier lists and information), other proprietary rights, and copies and tangible embodiments thereof (in whatever form or medium).  Section 4.18(a) of the PICA Disclosure Schedule lists all material registered Intellectual Property owned by PICA and each PICA Subsidiary and used in their respective businesses.

(b)           To the Knowledge of PICA, neither the businesses of PICA nor any PICA Subsidiary infringes, violates or misappropriates any Intellectual Property of third parties.  Since December 31, 2007, none of PICA, the PICA Subsidiaries, or any of the directors, officers or employees with responsibility for intellectual property matters of PICA or any PICA Subsidiary in their respective capacities as directors, officers or employees has received any written charge, complaint, claim or notice alleging any such infringement, misappropriation or violation.  Except as set forth in Section 4.18(b) of the PICA Disclosure Schedule, to the Knowledge of PICA, no third party has interfered with, infringed upon, misappropriated or otherwise come into conflict with any Intellectual Property rights of PICA or any PICA Subsidiary.

(c)           Section 4.18(c) of the PICA Disclosure Schedule identifies each item of Intellectual Property that any third party owns and is material to the business of PICA or any PICA Subsidiary and further identifies each item that is subject to confidentiality restrictions of the type set forth in the following sentence; provided that Section 4.18(c) of the PICA Disclosure Schedule omits Intellectual Property that constitutes commercially available computer software (and associated documentation).  Subject to any applicable confidentiality obligations of PICA or any PICA Subsidiary, PICA has made complete copies of all such licenses, sublicenses, agreements and permissions (as amended to date) available to PRA.  With respect to each such item of such Intellectual Property:  (i) the license, sublicense, agreement or permission covering the item is legal, valid, binding and enforceable against PICA or the applicable PICA Subsidiary and, to the Knowledge of PICA, against the third party thereto, and in full force and effect; (ii) except as set forth in Section 4.5(b) of the PICA Disclosure Schedule, the license, sublicense,

agreement or permission will continue to be legal, valid, binding and enforceable against PICA or the applicable PICA Subsidiary and, to the Knowledge of PICA, the third party thereto, and in full force and effect on identical terms on and after the Closing Date; (iii) to the Knowledge of PICA, no party to the license, sublicense, agreement or permission is in breach or default, and no event of default has occurred which with notice or lapse of time, or both, would constitute a breach or default or permit termination, modification or acceleration thereunder; (iv) to the Knowledge of PICA, no party to the license, sublicense, agreement or permission has repudiated any provision thereof; and (v) neither PICA nor any PICA Subsidiary has granted any sublicense or similar right with respect to the license, sublicense, agreement or permission.

4.19           Real Property; Environmental Liability.

(a)           Neither PICA nor any PICA Subsidiary owns any right, title or interest in any real property except as described in Section 4.19(a) of the PICA Disclosure Schedule (collectively, the “PICA Real Property”).  Section 4.19(a) of the PICA Disclosure Schedule sets forth a complete and accurate list and general description of all material leases for real property (“PICA Real Property Leases”) to which PICA or any PICA Subsidiary is a party or by which any of them are bound.  PICA or any PICA Subsidiary owns all right, title and interest in, and has good and marketable title to, the PICA Real Property, and PICA or any PICA Subsidiary has a valid leasehold interest in each PICA Real Property Lease, in each case free and clear of all Liens except for (i) rights of lessors, co-lessees or sublessees that are reflected in each PICA Real Property Lease; (ii) current taxes or other charges or assessments of any Governmental Authority, in each case, not yet due and payable; and (iii) such imperfections of title and encumbrances, if any, as do not materially detract from the value of or materially interfere with the present use of the subject property.  To the Knowledge of PICA, the activities of PICA and the PICA Subsidiaries with respect to all PICA Real Property and PICA Real Property Leases used in connection with their operations are in all material respects permitted and authorized by applicable zoning laws, ordinances and regulations.

(b)           PICA and the PICA Subsidiaries enjoy peaceful and undisturbed possession under all PICA Real Property Leases.  PICA has made available to PRA complete and correct copies of all of the PICA Real Property Leases.  Each PICA Real Property Lease is (assuming due power and authority of, and due execution by, the other party thereto) in full force and effect and is legally valid, binding and enforceable against PICA or the applicable PICA Subsidiary and, to the Knowledge of PICA, the third party thereto in accordance with its terms (except as may be limited by bankruptcy, fraudulent conveyance, insolvency, moratorium, reorganization or similar laws affecting the rights of creditors generally and the availability of equitable remedies).  There are no monetary defaults and no material nonmonetary defaults by PICA or any PICA Subsidiary, or, to the Knowledge of PICA, any other party, under any PICA Real Property Lease.  Neither PICA nor any PICA Subsidiary has received written or, to the Knowledge of PICA, oral notice of any default, offset, counterclaim or defense under any PICA Real Property Lease.  Except as set forth in Section 4.5(b) of the PICA Disclosure Schedule, no condition or event has occurred which with the passage of time or the giving of notice or both would constitute a default or breach by PICA or any PICA Subsidiary, or, to the Knowledge of PICA, any other party, under of the terms of any PICA Real Property Lease.  To the Knowledge of PICA, there are no purchase contracts, options or other agreements of any kind whereby any Person has acquired or will have any basis to assert any right, title or interest in, or right to the possession, use, enjoyment or proceeds of, any part or all of the interests in the real property subject to the PICA Real Property Leases.

(c)           PICA and the PICA Subsidiaries are and have been in compliance with all applicable Environmental Laws and all Environmental Permits, except for instances of non-compliance which would not have a Material Adverse Effect on PICA and the PICA Subsidiaries taken as a whole.  There are no legal, administrative, arbitral or other proceedings pending, no claims, actions, or causes of action filed or asserted in writing, or, to the Knowledge of PICA, private environmental investigations or remediation activities or governmental investigations of any nature ongoing or threatened seeking to impose on PICA or any PICA Subsidiary, or that could reasonably be expected to result in the imposition on PICA or any PICA Subsidiary of, any liability or obligation arising under any Environmental Law which would have a Material Adverse Effect on PICA.  To the Knowledge of PICA, there is no reasonable basis for any such proceeding, claim, action, investigation or remediation activity.  Neither PICA nor any PICA Subsidiary is subject to any agreement, order, judgment, decree, or binding agreement by or with any Governmental Authority or private Person imposing any liability or obligation under any Environmental Law that would have a Material Adverse Effect on PICA.  For purposes of this Section 4.19, the terms “PICA” and “PICA Subsidiaries” include any Person that is, in whole or in part, a predecessor of PICA or any of its Subsidiaries.

4.20           Personal Property.

(a)           None of the personal property owned by PICA or any PICA Subsidiary is subject to any Lien except Permitted Liens.

(b)           Section 4.20(b) of the PICA Disclosure Schedule lists each personal property lease to which PICA or any PICA Subsidiary is a party that is not cancelable upon ninety (90) days notice without penalty and has monthly rent that exceeds $1,500 (collectively, the “PICA Personal Property Leases”).  PICA has made available to PRA complete and correct copies of all of the PICA Personal Property Leases.  Each PICA Personal Property Lease (assuming due power and authority of, and due execution by, the other  party) is in full force and effect and is legally valid, binding and enforceable against PICA or the applicable PICA Subsidiary and, to the Knowledge of PICA, against the third party thereto, in accordance with its terms (except as may be limited by bankruptcy, fraudulent conveyance, insolvency, moratorium, reorganization or similar laws affecting the rights of creditors generally and the availability of equitable remedies).  There are no material defaults by PICA or any PICA Subsidiary, or, to the Knowledge of PICA, any other party, under any PICA Personal Property Lease.  Neither PICA nor any PICA Subsidiary has received written or, to the Knowledge of PICA, oral notice of any material default, offset, counterclaim or defense under any PICA Personal Property Lease.  No condition or event has occurred which with the passage of time or the giving of notice or both would constitute a material default or breach by PICA or any PICA Subsidiary, or, to the Knowledge of PICA, any other party under of the terms of any PICA Personal Property Lease.  To the Knowledge of PICA, there are no purchase contracts, options or other agreements of any kind whereby any Person has acquired or will have any basis to assert any right, title or interest in, or right to the possession, use, enjoyment or proceeds of, any part or all of the interests in the personal property subject to the PICA Personal Property Leases and material to the business of PICA.

4.21           Insurance Matters.

(a)           Except as set forth in Section 4.21(a) of the PICA Disclosure Schedule, all policies, binders, slips, certificates and other agreements of insurance in effect as of the date hereof (including all applications, endorsements, supplements, riders and ancillary agreements in connection therewith) issued by PICA and the PICA Insurance Subsidiaries, and any and all marketing materials, agents agreements, brokers agreements, service contracts, and managing general agents agreements to which PICA or any PICA Subsidiary is a party, are, to the extent required under Applicable Law, on forms approved by the Insurance Regulators or have been filed with and not objected to by such Insurance Regulators within the period provided for objection subject to such exceptions that, individually or in the aggregate, have not had and would not reasonably be expected to have, a Material Adverse Effect on PICA and the PICA Subsidiaries taken as a whole, and all of such forms comply with the Insurance Laws in all material respects.  As to premium rates established by PICA or any PICA Insurance Subsidiary which are required to be filed with or approved by any Insurance Regulators, such rates have been so filed or approved and the premiums charged conform thereto.  Section 4.21(a) of the PICA Disclosure Schedule sets forth all increases in premium rates for medical professional liability insurance submitted by PICA and the PICA Insurance Subsidiaries which have been disapproved by any Insurance Regulators since December 31, 2004.  Section 4.21(a) of the PICA Disclosure Schedule lists all written correspondence or written communications from any Insurance Regulator received by PICA or any PICA Insurance Subsidiary after December 31, 2004 that requests or states that its premium rates, if applicable, for professional liability insurance should be reduced below the current approved premium levels.

(b)           Except as set forth in Section 4.21(b) of the PICA Disclosure Schedule, neither PICA nor any PICA Insurance Subsidiary has issued any participating policies or any retrospectively rated policies of insurance and neither PICA nor any PICA Insurance Subsidiary has declared any policyholder dividend which has not been paid prior to the date of this Agreement.

(c)           All reinsurance treaties or agreements, including retrocessional agreements, to which PICA or any PICA Insurance Subsidiary is a party and under which PICA or any PICA Insurance Subsidiary has any existing rights, obligations or liabilities are listed in Section 4.21(c) of the Disclosure Schedule (the “PICA Reinsurance Treaties”).  Except as disclosed in Section 4.21(c) of the PICA Disclosure Schedule, (i) PICA has made available to PRA complete copies of all of such PICA Reinsurance Treaties and all such PICA Reinsurance Treaties are in full force and effect, and the consummation of the transactions contemplated by this Agreement will not result in any party having the right to terminate a PICA Reinsurance Treaty solely as a result of the consummation of the transactions contemplated hereby and (ii) PICA or the PICA Insurance Subsidiary, as applicable, has received credit for reinsurance on its most recent PICA SAP Statement, with respect to the reinsurance provided under each PICA Reinsurance Treaty to which PICA or the PICA Insurance Subsidiary is the ceding company.  The PICA SAP Statements accurately reflect as of and for the dates indicated therein the extent to which, pursuant to Insurance Laws, PICA is entitled to take credit for reinsurance under the PICA Reinsurance Treaties.  To the Knowledge of PICA, all reinsurance recoverable amounts reflected in the PICA SAP Statements are collectible, and PICA is unaware of any material adverse change in the financial condition of its reinsurers that might raise concern regarding their

ability to honor their reinsurance commitments, except as set forth in Section 4.21(c) of the PICA Disclosure Schedule.  No party to any of the PICA Reinsurance Treaties has given written notice to PICA or any PICA Insurance Subsidiary that such party intends to terminate or cancel any of the PICA Reinsurance Treaties as a result of or following consummation of the Plan of Conversion.  Assuming due power and authority of, and due execution by, the other party, each PICA Reinsurance Treaty is valid and binding on PICA and each applicable PICA Subsidiary and, to the Knowledge of PICA, on the other parties thereto, and none of PICA, any PICA Insurance Subsidiary, and, to the Knowledge of PICA, any other party thereto, is in default in any material respect with respect to any such PICA Reinsurance Treaty.  Except as disclosed on Section 4.21(c) of the PICA Disclosure Schedule, no PICA Reinsurance Treaty contains any provision providing that the other party thereto may terminate the same solely by reason of the transactions contemplated by this Agreement, and no party to a PICA Reinsurance Treaty has issued a reservation of rights notice or otherwise denied or limited coverage (in whole or in part) under any PICA Reinsurance Treaty.  Since December 31, 2007 no PICA Reinsurance Treaty has been canceled and there has not been any change in the retention level under any of such PICA Reinsurance Treaties.

(d)           The reserves for the losses and loss adjustment expenses of PICA and each of the PICA Insurance Subsidiaries ( the "PICA Reserves") reflected in the PICA SAP Statements as of and for the quarter ended June 30, 2008 (the “June 30, 2008 Statements”) were determined in accordance with generally accepted actuarial methods and standards, consistently applied except as set forth therein.  The insurance reserving practices and policies of PICA and the PICA Insurance Subsidiaries have not changed, in any material respect, since June 30, 2008 and the results of the application of such practices and policies are reflected in the June 30, 2008 Statements.  All reserves of PICA and the PICA Insurance Subsidiaries set forth in the June 30, 2008 Statements were fairly stated in accordance with sound actuarial principles consistently applied and met the requirements of the Insurance Laws of the applicable Insurance Regulator as of the dates indicated therein.  To the Knowledge of PICA, since June 30, 2008, there has not been any event or occurrence affecting the reserves of PICA and the PICA Insurance Subsidiaries that has resulted, or would be reasonably likely to result, in a Material Adverse Effect on PICA or the PICA Subsidiaries taken as a whole.  Subject to confidentiality objections of PICA, PICA has made available to PRA copies of all internally prepared work papers used as the basis for establishing the PICA Reserves.  Except for regular periodic or special assessments based on developments that are publicly known within the insurance industry generally or the medical professional liability insurance industry, to the Knowledge of PICA, no claim or assessment is pending or threatened against PICA or any PICA Insurance Subsidiary which is peculiar or unique to PICA or such PICA Insurance Subsidiary by any state insurance guaranty association in connection with such association’s fund relating to insolvent insurers.

(e)           Section 4.21(e) of the PICA Disclosure Schedule lists each actuary, independent or otherwise, that has reviewed, on behalf of PICA or any PICA Insurance Subsidiary, the reserves for losses and loss adjustment expenses of PICA or any PICA Insurance Subsidiary, and their premium rates for liability insurance in each of the years commencing after December 31, 2005 (collectively the “PICA Actuaries” and separately an “PICA Actuary”).  Section 4.21(e) of the PICA Disclosure Schedule lists each and every actuarial report, and all attachments, supplements, addenda and modifications thereto prepared for or on behalf of PICA or any PICA Insurance Subsidiary by the PICA Actuaries, or delivered by the PICA Actuaries to

PICA or any PICA Insurance Subsidiary, since December 31, 2005, in which a PICA Actuary has (i) either expressed an opinion on the adequacy of reserves for losses and loss adjustment expenses or made recommendations as to either the amount of reserves for losses and loss adjustment expenses that should be maintained by PICA or any PICA Insurance Subsidiary, or (ii) expressed an opinion as to the adequacy of such premiums or made a recommendation as to the premiums that should be charged by PICA or any PICA Insurance Subsidiary for liability insurance (collectively, the “PICA Actuarial Analyses”).  To the Knowledge of PICA, the information and data furnished by PICA to the PICA Actuaries in connection with the PICA Actuarial Analyses were accurate in all material respects.  To the Knowledge of PICA, each PICA Actuarial Analysis was based upon an accurate inventory of policies in force for PICA and the PICA Insurance Subsidiaries, as the case may be, at the relevant time of preparation, was prepared using appropriate modeling procedures accurately applied and in conformity with generally accepted actuarial principles consistently applied, and the projections contained therein were properly prepared in accordance with the assumptions stated therein.  PICA has made available to PRA complete copies of each of the PICA Actuarial Analyses.

4.22           No Investment Company.  Neither PICA nor any PICA Subsidiary is an “investment company,” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended.

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF PRA

Except as disclosed by PRA to PICA in accordance with Section 7.7 of this Agreement, PRA hereby represents and warrants to PICA, as of the date hereof or such other date as specified, as follows

5.1           Corporate Organization.  PRA is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has the corporate power and authority to own or lease all of its properties and assets and to carry on its business as now being conducted.

5.2           Authority; No Violation; Consents and Approvals.

(a)           PRA has full corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated by this Agreement.  The execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement have been duly and validly approved by the Board of Directors of PRA, and no other corporate proceedings on the part of PRA (including any approval of the stockholders of PRA) are necessary to approve this Agreement and to consummate the transactions contemplated by this Agreement.  This Agreement has been duly and validly executed and delivered by PRA and (assuming due authorization, execution and delivery by PICA and the receipt of all Requisite Regulatory Approvals) constitutes a valid and binding obligation of PRA, subject to applicable bankruptcy, fraudulent conveyance, insolvency and similar laws affecting creditors’ rights generally, and subject, as to enforceability, to general principles of equity.

(b)           Neither the execution and delivery of this Agreement by PRA nor the consummation by PRA of the transactions contemplated by this Agreement, nor compliance by

PRA with any of the terms or provisions of this Agreement, will (i) violate any provision of the certificate of incorporation or bylaws of PRA or (ii) assuming that all Requisite Regulatory Approvals and all of the consents and approvals referred to in Section 5.2(c) of this Agreement are duly obtained, (x) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to PRA or any of its properties or assets, or (y) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any Lien upon any of the properties or assets of PRA under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which PRA is a party, or by which it or any of its properties or assets may be bound or affected, except for such violations, conflicts, breaches or defaults which, either individually or in the aggregate, would not have a Material Adverse Effect on PRA.

(c)           Except for (i) the filing of applications, notices and forms with, and the obtaining of approvals from, the Insurance Regulators pursuant to the Insurance Laws, with respect to the transactions contemplated by this Agreement, (ii) the approval of the Plan of Conversion, Amended and Restated Articles, and the change of control of, and capital contribution to, PICA contemplated by this Agreement by the Director of the Division pursuant to the Illinois Insurance Code, (iii) the filing of the HSR Act Report with the Premerger Notification Agencies pursuant to the HSR Act, (iv) any consents, authorizations, orders and approvals required under the HSR Act, and (v) the approval of the Plan of Conversion and this Agreement by the requisite votes of the Eligible Members of PICA, no consents or approvals of, or filings or registrations with any Governmental Authority or with any other Person are necessary in connection with the execution and delivery by PRA of this Agreement or the consummation by PRA or any PRA Subsidiary of the transactions contemplated by this Agreement.

5.3           SEC Reports; Financial Statements.

(a)           PRA has on a timely basis filed all forms, reports and documents required to be filed by it with the SEC since January 1, 2005, including (i) Annual Reports on Form 10-K for each fiscal year of PRA commencing after December 31, 2004, (ii) its Quarterly Reports on Form 10-Q for each of the first three fiscal quarters in each of the fiscal years of PRA commencing after December 31, 2004, (iii) all proxy statements relating to PRA’s meetings of stockholders (whether annual or special) held, and all information statements relating to stockholder consents, since December 31, 2004, (iv) all certifications and statements required by Rule 13a-14 or 15d-14 under the Exchange Act or 18 U.S.C. Sec.1350 with respect to any report referred to in clause (i) or (ii) of this sentence, (v) all other forms, reports, registration statements and other documents (the forms, reports, registration statements and other documents referred to in clauses (i), (ii), (iii), (iv) and (v) of this sentence together with any and all amendments thereto are, collectively, the “PRA SEC Reports.”

(b)           The PRA SEC Reports (i) were prepared in accordance with the requirements of the Securities Act of 1933, as amended (the "Securities Act") and the Exchange Act, as the case may be, in all material respects, and (ii) did not at the time they were filed with

the SEC, or if thereafter amended, at the time of such amendment, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.  No Subsidiary of PRA is or has been required to file any form, report, registration statement or other document with the SEC.  As used in this Section 5.3, the term “file” shall be broadly construed to include any manner in which a document or information is furnished, supplied or otherwise made available to the SEC.

(c)           The financial statements of PRA and its Subsidiaries included in the PRA SEC Reports (including the related notes) complied as to form, as of their respective dates of filing with the SEC, in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto (including, without limitation, Regulation S-X), were prepared in accordance with GAAP during the periods and at the dates involved (except as may be indicated in the notes thereto and except, in the case of unaudited statements, to the extent permitted by Regulation S-X for Quarterly Reports on Form 10-Q), and fairly present the consolidated financial condition of PRA and its Subsidiaries at the dates thereof and the consolidated results of operations and cash flows for the periods then ended.  Except (x) as reflected in PRA’s unaudited balance sheet at June 30, 2008, or liabilities described in any notes thereto (or liabilities for which neither accrual nor footnote disclosure is required pursuant to GAAP), or (y) for liabilities incurred in the ordinary course of business since June 30, 2008, consistent with past practice, neither PRA nor its Subsidiaries has any material liabilities or obligations of any nature.

5.4           Broker’s Fees.  None of PRA, the PRA Subsidiaries and their respective officers and directors has employed any broker or finder or incurred any liability for any broker’s fees or commissions, or investment banker fees or commissions, or finder’s fees in connection with the transactions contemplated by this Agreement, except for the engagement of Fox-Pitt Kelton Cochran Caronia Waller as PRA's financial adviser for which PRA shall be solely responsible.

5.5           Absence of Certain Changes or Events.  Since June 30, 2008, there has not been:  (i) any change in the financial condition, assets, liabilities, prospects (financial and otherwise) or business of PRA or any of its subsidiaries which, either individually or in the aggregate, has had or would have a Material Adverse Effect on PRA; or (ii) any material change in any method of accounting or accounting principals or practice by PRA, except as required by GAAP or statutory accounting principles and disclosed in the notes to the consolidated financial statements of PRA and its Subsidiaries.

5.6           Securities Laws Considerations.  PRA understands and agrees that the PICA Common Stock has not been registered under the Securities Act or under any state securities laws.  PRA will receive the shares of PICA Common Stock solely for PRA’s own account and not with a view toward the transfer, sale, fractional subdivision or other disposition of the PICA Common Stock.

5.7           Financial Ability.  PRA has the financial ability to consummate the transactions contemplated by this Agreement.

ARTICLE 6

COVENANTS

6.1           Conduct of Businesses of PICA Prior to the Effective Time.

(a)           During the period between the date of this Agreement and the Effective Time, except as expressly contemplated or permitted by this Agreement, PICA shall, and shall cause each PICA Subsidiary to:  (a) conduct its business in the usual, regular and ordinary course consistent with past practice and its current business plan, and (b) use commercially reasonable efforts to maintain and preserve intact its business organization, employees, agents and advantageous business relationships and retain the services of its key employees and agents.

(b)           During the period between the date of this Agreement and the Effective Time, PICA shall permit PRA’s senior officers to meet with the Chief Financial Officer of PICA and officers of PICA responsible for the financial statements, the internal controls, and disclosure controls and procedures of PICA to discuss such matters as PRA may deem reasonably necessary or appropriate for PRA to satisfy its obligations under Sections 302, 404 and 906 of SOX and any rules and regulations relating thereto.

(c)           Subject to applicable confidentiality obligations of PICA, PICA agrees to inform and have discussions with PRA with respect to reserve policies and practices with respect to (i) losses and loss adjustment expenses of PICA and the PICA Insurance Subsidiaries and (ii) litigation against PICA and the PICA Subsidiaries; provided, however, this Section 6.1(c) shall not require PICA to discuss or disclose any information, where such discussion or disclosure would jeopardize the attorney-client and work privileges of the entity in possession or control of such information or contravene any Applicable Law, fiduciary duty or binding agreement entered into prior to the date of this Agreement.  PRA and PICA shall also inform and have discussions with each other with respect to the character, amount and timing of restructuring charges to be taken by each of them in connection with the transactions contemplated hereby.

6.2           PICA Forbearances.  During the period from the date of this Agreement to the Effective Time, except as set forth in the PICA Disclosure Schedule, and, except as expressly contemplated or permitted by the Plan of Conversion or this Agreement, PICA shall not, and PICA shall not permit any PICA Subsidiary to, without the prior written consent of PRA (which consent will not be unreasonably withheld):

(a)           incur any indebtedness for borrowed money (other than short-term indebtedness incurred on commercially reasonable terms to refinance indebtedness of PICA or any PICA Subsidiary, on the one hand, to PICA or any PICA Subsidiary, on the other hand), or assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any other individual, corporation or other entity, or make any loan or advance (other than, in each case, in the ordinary course of business consistent with past practice, including with regard to any premium finance activities of PICA and its Subsidiaries, it being understood and agreed that incurrence of indebtedness in the ordinary course of business shall include entering into repurchase agreements and reverse repurchase agreements);

(b)           redeem, repay, discharge or defease any guaranty fund certificate, surplus note, unless such redemption, repayment, discharge or defeasance is an express condition of any Requisite Regulatory Approval;

(c)           grant any stock options or stock awards or stock appreciation rights or right with respect to the PICA Common Stock to be authorized under the Plan of Conversion;

(d)           other than paying dividends that have been declared prior to the date hereof, make, declare or pay any dividend or make any other distribution on or with respect to insurance policies written by PICA or any PICA Subsidiary;

(e)           sell, transfer, mortgage, encumber or otherwise dispose of any of its material properties or material assets to any Person other than a PICA Subsidiary, or cancel, release or assign any material indebtedness of any such Person or any material claims held by any such Person, except in the ordinary course of business consistent with past practice;

(f)           except pursuant to contracts or agreements in force at the date of this Agreement, make any material investment (by purchase of stock or securities, contributions to capital, property transfers, or purchase of any property or assets) in any Person other than a PICA Subsidiary for which the aggregate consideration paid or payable in any individual transaction is in excess of $100,000 or in the aggregate in excess of $1,000,000 and that results in a non-admitted asset;

(g)           enter into, change or terminate any PICA Contract, except in the ordinary course of business consistent with past practice and other than renewals of contracts, leases and agreements without material adverse changes of terms;.

(h)           except as contemplated by the agreements and plans set forth in Section 6.2 of the PICA Disclosure Schedule, increase in any manner the compensation of the employees of PICA and the PICA Subsidiaries, or pay any bonus or incentive compensation to such employees; provided that PICA and the PICA Subsidiaries (i) may make annual increases in the salaries and wages of their employees in the ordinary course of business and consistent with past practice so long as the amount, on an individualized basis, of the increase in compensation on an annualized basis does not exceed four percent (4%) of the aggregate amount of the compensation paid to the affected employees in the twelve (12) months preceding the effective date of the increase in compensation, (ii) may grant promotions and establish new salaries commensurate with the employees’ new duties and past compensation practices, and (iii) may pay bonuses earned or accrued by employees of PICA and the PICA Subsidiaries under PICA and PICA Subsidiary bonus and incentive compensation programs in existence as of the date of this Agreement in accordance with the terms of such bonus and incentive compensation programs as in effect as of the date of this Agreement for the performance years ending on December 31, 2008 and 2009;

(i)           except as contemplated in Section 7.5 hereof, pay any pension or retirement allowance not required by any existing plan or agreement to any of its employees or become a party to, amend (except as may be required by law) or commit itself to any pension, retirement, profit-sharing or welfare benefit plan or agreement or employment agreement with or for the benefit of any employee or accelerate the vesting of any deferred compensation plan;

(j)           settle any claim, action or proceeding involving money damages against PICA or a PICA Subsidiary, except in the ordinary course of business consistent with past practice; provided, however, that prior to the settlement of any lawsuit, claim, action or proceeding against PICA or any PICA Subsidiary or otherwise in which PICA or any PICA Subsidiary is a named defendant involving a payment by PICA or any PICA Subsidiary in excess of $1,000,000 or the settlement of any ECO, XPL or bad faith claim involving any insurance policy of PICA involving a payment by PICA in excess of $1,000,000, PICA will notify PRA of the terms of the proposed settlement and will consult with PRA regarding the terms of the settlement, but shall not be required to obtain PRA’s consent to the terms of the settlement;

(k)           take any action that would cause the Plan of Conversion to result in the recognition of gain by PICA under the Code;

(l)           amend its articles of incorporation or bylaws, except as provided for in the Plan of Conversion and this Agreement;

(m)           other than in accordance with its current investment guidelines, restructure or materially change its investment securities portfolio through purchases, sales or otherwise, or the manner in which such portfolio is classified or reported;

(n)           offer or sell insurance or reinsurance of any type other than such lines of insurance and reinsurance that it offers and sells on the date of this Agreement or lines that are substantially similar to such lines;

(o)           take any action that is intended or may reasonably be expected to result in any of its representations and warranties set forth in this Agreement being or becoming untrue in any material respect at any time prior to the Effective Time, or in any of the conditions set forth in Article 8 of this Agreement not being satisfied, or in a violation of any provision of this Agreement, except, in every case, as may be required by Applicable Law; or

(p)           agree to, or make any commitment to, take any of the actions prohibited by this Section 6.2; provided that except for and subject to Section 6.2(n), nothing in this Section 6.2 shall prohibit PICA or any PICA Insurance Subsidiary from issuing any insurance policy or contract, including any certificates of insurance, riders and endorsements thereto.

6.3           PRA Forbearances.  During the period from the date of this Agreement to the Effective Time and, except as expressly contemplated or permitted by this Agreement, PRA shall not, and PRA shall not permit any PRA Subsidiary to, without the prior written consent of PICA, which consent shall not be unreasonably withheld:

(a)           take any action that would cause the Plan of Conversion to result in the recognition of gain by PICA under the Code;

(b)           take any action that is intended or may reasonably be expected to result in any of its representations and warranties set forth in this Agreement being or becoming untrue in any material respect at any time prior to the Effective Time, or in any of the conditions set forth in Article 8 of this Agreement not being satisfied, or in a violation of any provision of this Agreement, except, in every case, as may be required by Applicable Law;

(c)           take any action that is intended or likely to adversely affect its ability to perform its covenants and agreements under this Agreement; or

(d)           agree to, or make any commitment to, take any of the actions prohibited by this Section 6.3.

ARTICLE 7

ADDITIONAL AGREEMENTS

7.1           Regulatory Matters.

(a)           The parties shall promptly make all filings and notifications with, and shall use commercially reasonable efforts to promptly obtain all authorizations, consents, orders and approvals of all Governmental Authorities that may be or become necessary for their respective execution and delivery of, and the performance of their respective obligations pursuant to, and the consummation of the transactions contemplated by, this Agreement, including as set forth in Sections 7.1(b), (c) and (d) below, and shall take all actions as may be requested by any such Governmental Authorities to obtain such authorizations, consents, orders and approvals; provided, however, that in no event shall PRA or PICA or any of their respective Affiliates be required to agree to (i) the divestiture of any business or entity of PRA or PICA or any of their Subsidiaries or (ii) any requirement imposed by a Governmental Authority that would reasonably be expected to have a (A) Material Adverse Effect on PICA and the PICA Subsidiaries, taken as a whole, or (B) material and adverse effect on the aggregate economic value and business benefits that would reasonably be expected to be obtained by PRA and its Affiliates from the transactions contemplated by this Agreement (each requirement or limitation specified in clauses (i) or (ii) of this paragraph, a “Burdensome Condition”).  Neither PRA nor PICA shall take any action that they should be reasonably aware would have the effect of delaying, impairing or impeding the receipt of any required approvals.

(b)           Promptly after the execution of this Agreement, PICA shall use commercially reasonable efforts to prepare and file with the Division in accordance with the requirements of the Illinois Insurance Code: (i) the Plan of Conversion; (ii) the notice of the Plan of Conversion proposed to be given to the Eligible Members in accordance with the requirements of Section 59.1(4) of the Illinois Insurance Code (215 ILCS 5/59.1(4)); (iii) the form of proxies to be solicited from the Eligible Members; (iv) the form of notice required to be provided to persons who are issued policies after the adoption of the Plan of Conversion as required under Section 59.1(10) of the Illinois Insurance Code (215 ILCS 5/59.1(10)); and (v) copies of the Amended and Restated Articles and Amended and Restated Bylaws.  Upon approval of the Plan of Conversion by the Director of the Division, PICA shall call a meeting of the Eligible Members to be held for the purpose of voting on the approval of the Plan of Conversion and mail the notice of the meeting to the Eligible Members in accordance with the requirements of Section 59.1(4)(b) of the Illinois Insurance Code (215 ILCS 5/59.1(4)(b)).  As soon as practicable

following (i) the receipt of the Decision and Order, (ii) the Director’s determination that all conditions to such approval contained in the Decision and Order have been satisfied, except for those conditions required by the Decision and Order to be satisfied after the Closing Date and with respect to which the Director has received PICA’s and PRA’s written commitment to satisfy after the Closing Date, (iii) the adoption of the Plan of Conversion and the Amended and Restated Articles of Incorporation by the Eligible Members as provided in the Plan of Conversion, and (iv) the satisfaction or waiver of all of the conditions contained in Article 8 hereof, PICA shall file with the Director (A) the minutes of the special meeting, (B) a certificate of the Secretary of PICA setting forth the results of the vote on the Plan of Conversion and the Amended and Restated Articles of Incorporation and certifying as to whether or not it was approved by not less than two-thirds of the Eligible Members voting in person or by proxy at the special meeting and (C) the Amended and Restated Articles of Incorporation and the Amended and Restated Bylaws of PICA.

(c)           To the extent applicable, PRA shall use commercially reasonable efforts to prepare and file with all necessary Governmental Authorities (i) a request for approval of the transactions contemplated by this Agreement by all applicable Insurance Regulators on Form A or on such other form as may be required by such Insurance Regulators and Applicable Law; (ii) the preacquisition notification and report forms and related material on Form E or any other forms required by a necessary Governmental Authority in connection with the transactions contemplated by this Agreement; and (iii) a notice on Form D if required, with the Division in advance of the Capital Contribution required by Section 7.10.

(d)           Pursuant to the HSR Act, PRA and PICA will use commercially reasonable efforts to promptly prepare and file, or cause to be filed, the HSR Act Report with the Premerger Notification Agencies in respect of the transactions contemplated by this Agreement, which filing shall comply as to form with all requirements applicable thereto and all of the data and information reported therein shall be accurate and complete in all material respects.  Each of PRA and PICA will use commercially reasonable efforts to promptly comply with all requests, if any, of the Premerger Notification Agencies for additional information or documentation in connection with the HSR Act Report forms filed by or on behalf of each of such parties pursuant to the HSR Act, and all such additional information or documentation shall comply as to form with all requirements applicable thereto and shall be accurate and complete in all material respects.

(e)           Each party shall provide to the other, (i) promptly after filing thereof, copies of all statements, applications, correspondence or forms filed by such party prior to the Closing Date with the Premerger Notification Agencies, the Insurance Regulators and any other Governmental Authority in connection with the transactions contemplated by this Agreement and (ii) promptly after delivery to, or receipt from, such regulatory authorities, all written communications, letters, reports or other documents relating to the transactions contemplated by this Agreement; provided, however, nothing contained in this Section 7.1 shall require PICA to provide PRA with any presentations, board books, work papers or other materials prepared in support of any appraisal or other valuation analysis of PICA; provided, further that the party sharing such filing or materials may redact from such filing and communications any confidential competitive information of such party and its Affiliates.

(f)           The parties hereto shall cooperate with each other and use their commercially reasonable efforts to promptly prepare and file all necessary documentation, to effect all applications, notices, petitions and filings, to obtain as promptly as practicable all permits, consents, approvals and authorizations of all third parties and Governmental Authorities which are necessary or advisable to consummate the transactions contemplated by this Agreement (including the Plan of Conversion), and to comply with the terms and conditions of all such permits, consents, approvals and authorizations of all such Governmental Authorities.  PRA and PICA shall have the right to review in advance, and, to the extent practicable, each will consult the other on, in each case subject to Applicable Laws relating to the exchange of information, all the information relating to PRA or PICA, as the case may be, and any of their respective Subsidiaries, which appear in any filing made with, or written materials submitted to, any third party or any Governmental Authority in connection with the transactions contemplated by this Agreement; provided, however, nothing contained in this Section 7.1 shall require PICA to provide PRA with any presentations, board books, work papers or other materials prepared in support of any appraisal or other valuation analysis of PICA; provided, further that the party sharing such filing or materials may redact from such filing and communications any confidential competitive information of such party and its Affiliates.  The cooperation and coordination of each party required under this Section 7.1 shall include giving timely public notice of any public hearings regarding the transactions contemplated by this Agreement, and having its representatives attend and testify at such public hearings.  In addition, each of the parties hereto shall act reasonably and as promptly as practicable. The parties hereto agree that they will consult with each other with respect to the obtaining of all permits, consents, approvals and authorizations of all third parties and Governmental Authorities necessary or advisable to consummate the transactions contemplated by this Agreement and each party will keep the other apprised of the status of matters relating to completion of the transactions contemplated by this Agreement.

(g)           PRA and PICA shall, upon request, furnish each other with all information concerning themselves, their Subsidiaries, directors, officers and shareholders or stockholders, as applicable, and such other matters as may be reasonably necessary or advisable in connection with any statement, filing, notice or application made by or on behalf of PRA, PICA or any of their respective Subsidiaries to any Governmental Authority in connection with the Plan of Conversion and the other transactions contemplated by this Agreement.  PICA and the PICA Subsidiaries understand and agree that PRA may be required to include in PRA SEC Reports to be filed prior to Closing some or all of the Consolidated Financial Statements, in which event PICA agrees to consent to the inclusion of such financial statements.  In such event, PICA shall also request the independent auditors of PICA to consent to the inclusion of said financial statements in any registration statement of PRA that incorporates the financial statements included in such PRA SEC Report by reference.

(h)           PRA and PICA shall promptly advise each other upon receiving any communication from any Governmental Authority relating to the consent or approval from such Governmental Authority that is required for consummation of the transactions contemplated by this Agreement.

(i)           PICA and PRA shall use their commercially reasonably efforts to obtain any other consents and approvals and make any other notifications that may be required in

connection with the transactions contemplated by this Agreement; provided, however, that none of PICA, the PICA Subsidiaries or PRA shall be required to compensate any third party, commence or participate in litigation or offer or grant any accommodation (financial or otherwise) to any third party to obtain any such consent or approval.

(j)           Notwithstanding anything contained herein to the contrary, neither party shall be required to disclose to the other any of its or its Affiliates, confidential competitive information and neither party shall be required to comply with any provision of this Section 7.1 to the extent that such compliance would be prohibited by Applicable Law.

7.2           Access to Information.

(a)           Upon reasonable prior notice and subject to Applicable Laws relating to the exchange of information and to the Confidentiality Agreement dated May 29, 2008, respectively (the “Confidentiality Agreement”) which is hereby incorporated into this Agreement by reference and shall continue in full force and effect until Closing, PICA shall, and shall cause each of the PICA Subsidiaries to, afford to the officers, employees, accountants, counsel and other representatives of PRA, access, during normal business hours during the period prior to the Closing Date, to all of its properties, books, contracts, commitments and records.  During such period, each of PRA and PICA shall, and shall cause their respective Subsidiaries to, make available to the other party a copy of each report, schedule, registration statement and other document filed or received by it during such period pursuant to the requirements of federal securities laws or Insurance Laws (other than reports or documents which PRA or PICA, as the case may be, is not permitted to disclose under Applicable Law or by agreement); provided, however, that all such access shall be on a basis and follow procedures that the parties shall mutually agree, and shall not unreasonably interfere with any of the businesses or operations of PICA or any PICA Subsidiary; provided, further, that the accountants of PICA will not be obligated to make any work papers available to PRA unless and until PRA has signed a customary confidentiality agreement relating to such access to work papers in form and substance reasonably acceptable to such accountants.  Neither PRA nor PICA nor any of their respective Subsidiaries shall be required to provide access to or to disclose information where such access or disclosure would violate or prejudice the rights of PRA’s, PICA’s, or any PICA Subsidiary's, as the case may be, customers, jeopardize the attorney-client and work product privileges of the entity in possession or control of such information or contravene any law, rule, regulation, order, judgment, decree, fiduciary duty or binding agreement entered into prior to the date of this Agreement.  The parties hereto will make appropriate substitute disclosure arrangements under circumstances in which the restrictions of the preceding sentence apply.

(b)           No investigation by either of the parties or their respective representatives shall affect the representations, warranties, covenants or conditions of the other set forth in this Agreement.

7.3           Recommendation of Eligible Members.  PICA will, through its Board of Directors, subject to its fiduciary obligations as determined by its Board of Directors, recommend that its Eligible Members vote in favor of the approval and adoption of the Plan of Conversion.

7.4           Compliance with Securities Laws.  PICA and PRA understand and agree that the Shares to be issued pursuant to the Plan of Conversion will not be registered under the Securities Act or applicable state securities laws in reliance on exemptions from such registration and the certificates representing such Shares shall bear appropriate legends to such effect.  PICA and PRA shall cooperate with each other and use commercially reasonable efforts to cause the Shares to be issued pursuant to available exemptions from registration under the Securities Act and state securities laws.

7.5           Employee Plans.

(a)           For the period commencing at the Effective Time and ending no earlier than December 31, 2009, PRA shall take any action necessary so that all individuals who are employed by PICA or a PICA Subsidiary (including employees who are not actively at work on account of illness, disability or leave of absence) (“PICA Employees”) at the Effective Time and who continue in employment with PICA, PRA or any of their respective Subsidiaries after the Effective Time shall continue to receive base wages and salaries at rates no less favorable to such employee than the rates of wages and salaries paid by PICA or a PICA Subsidiary to such employee at the Effective Time, so long as they are employed by PICA, PRA and their Subsidiaries; provided that such obligations of PRA shall be subject to and conditioned upon compliance with Section 6.2(h) by PICA and the PICA Subsidiaries with respect to such Continuing Employee.  PICA Employees who continue in employment with PRA or any of its Subsidiaries shall be referred to herein as “Continuing Employees.”  From and after the Effective Time, the PICA Employee Plans in effect as of the date of this Agreement and at the Effective Time shall remain in effect with respect to the current and former PICA Employees covered by such PICA Employee Plans at the Effective Time, until at least December 31, 2009.  PRA agrees that it will honor all PICA Employee Plans in accordance with their terms as in effect at the Effective Time, subject to any amendment or termination thereof that may be required by the plans or Applicable Law.  PRA will review all PICA Employee Plans to determine whether to maintain, terminate or continue such plans for periods on and after January 1, 2010.  In the event employee benefits as provided by PICA or any PICA Subsidiary at the Effective Time are changed or terminated by PRA, in whole or in part for periods on and after January 1, 2010, PRA shall provide Continuing Employees with benefits that are, in the aggregate, no less favorable to the benefits provided to employees of PRA or applicable PRA Subsidiary (as of the date any such benefit is provided).

(b)           Employees of PICA or any PICA Subsidiary who become participants in a PRA Employee Plan shall, for purposes of determining eligibility, benefits (excluding accruals under a defined benefit plan) and vesting under any such PRA Employee Plan be given credit for service as an employee of PICA or any PICA Subsidiary or any predecessor thereto prior to the Effective Time as if such service were with PRA or applicable PRA Subsidiary.  PRA shall provide and recognize, or cause to be provided and recognized, all accrued but unused vacation of Continuing Employees as of the Effective Time.  In the event of any termination or consolidation of any PICA health plan with any PRA health plan, PRA shall make available to Continuing Employees and their dependents employer-provided health coverage on substantially the same basis as it provides such coverage to PRA employees and shall waive all pre-existing condition exclusions under such PRA plans with respect to Continuing Employees and their dependents.  In the event of a termination or consolidation of any PICA health plan, terminated

PICA Employees and qualified beneficiaries will have the right to continued coverage under group health plans of PRA in accordance with Code Section 4980B(f).  All PICA Employees who cease participating in a PICA health plan and become participants in a comparable PRA health plan during any plan year shall receive credit toward the applicable deductible and out-of-pocket maximums under the PRA health plan for any amounts paid by the employee under PICA’s health plan during the applicable plan year, upon substantiation, in a form satisfactory to PRA, that such payments have been made.

(c)           It is understood that PRA and its Subsidiaries are “at-will” employers.  Nothing in this Section 7.5 shall be interpreted as preventing PRA from terminating the employment of any individual or, except as otherwise provided in Section 7.5(a) with respect to PICA Employee Plans for periods before January 1, 2010, from amending, modifying or terminating any PRA Employee Plans, or any PICA Employee Plans, or any benefits under any PRA Employee Plans or any PICA Employee Plans, or any other contracts, arrangements, commitments or understandings, in accordance with their terms and Applicable Law.  In the event that any Continuing Employee is terminated from employment with PRA or its Subsidiaries as a result of a consolidation of operations of PICA with PRA, in whole or in part, after the Effective Time but prior to the second anniversary of the Effective Time, PRA shall provide, or cause to be provided, to such terminated Continuing Employee severance benefits equal to at least six, but not more than twelve, months of such Continuing Employee’s compensation based on such Continuing Employee’s position and service with PICA. To the extent not already paid by PICA and the PICA Subsidiaries, PRA shall pay, or cause to be paid, to Continuing Employees the bonuses such Continuing Employees have earned or accrued under the PICA and PICA Subsidiary bonus and incentive compensation programs in existence as of the Effective Time for the bonus determination period that includes the Effective Time.

(d)           PRA shall cause PICA or a Subsidiary (i) to offer to continue the employment of Jerry D. Brant, DPM after the Effective Time under an employment agreement that will supersede his current employment agreement and will include the terms that PRA has communicated to him, together with such other terms as are consistent with the terms of employment of other senior executives of PRA and (ii) to offer to continue the employment of Messrs. Adam Wilczek, T. Douglas Webb and Gary Dittman on such terms as PRA has communicated to them under the terms of the Release and Severance Compensation Agreements generally offered to other senior executives of PRA and the Release and Severance Compensation Agreements will supersede their current employment agreements.

(e)           PRA agrees that PICA shall satisfy any retirement payments or obligations due to Jerry D. Brant, DPM pursuant to the Employment Agreement dated July 20, 2000, as amended through the date hereof, between Dr. Brant and PICA prior to the Closing Date.  At the Effective Time, PICA shall credit current participants in the Executive Retention and Deferred Compensation Plan dated January 1, 2007 of PICA (the “Retention Plan”) with all amounts that would otherwise be credited to their accounts in 2009, 2010 and 2011 and accelerate the vesting of all benefits for the current participants under the Retention Plan.  PICA shall pay the total accrued benefits under the Retention Plan to each of the current participants promptly, but in any event no later than 60 days, after the Effective Time.

(f)           Notwithstanding anything herein to the contrary, PRA agrees that PRA will assume, maintain and honor, or cause to be assumed, maintained and honored, the Supplemental Deferred Compensation Plan in accordance with the terms of such plan as in effect at the Effective Time for a period ending no earlier than 48 months after the Effective Time; provided that PRA shall have the right to terminate employer matching contributions to former directors of PICA who have entered into a Consulting Agreement under such plan.  PRA further agrees that it shall not terminate such plan, nor take any other action to cause benefits to be distributed from such plan, prior to the date all benefits are payable to participants in the plan in accordance with the terms of the plan and participant elections as in effect on the date which is 48 months after the Effective Time.

(g)           Notwithstanding anything herein to the contrary, all payments made to PICA Employees under this Section 7.5 shall be subject to withholding required by applicable federal, state and local taxing authorities.

7.6           Directors’ and Officers’ Indemnification and Insurance.

(a)           PICA shall use its commercially reasonable efforts, prior to the Effective Time, to purchase a single payment, run-off or "tail" insurance policy or policies of directors’ and officers’ liability insurance covering current and former officers and directors of PICA and the PICA Subsidiaries on terms and conditions, including limits, no less favorable than their respective directors and officers liability insurance policy in effect on the date of this Agreement, such policy or policies to become effective at the Effective Time and remain in effect for a period of six (6) years after the Effective Time (the “Tail Policy”) with respect to directors’ and officers’ liability for claims arising from facts or events that occurred on or prior to the Effective Time.  If PICA is unable to obtain the Tail Policy prior to Closing, PRA shall use its best efforts to cause the individuals serving as officers and directors of PICA and the PICA Subsidiaries, immediately prior to the Effective Time to be covered for a period of six (6) years from the Effective Time (or the period of the applicable statute of limitations, if longer) by the directors’ and officers’ liability insurance policy maintained by PICA or the PICA Subsidiary (provided that PRA may substitute therefor policies of the same or substantially similar coverage and amounts containing terms and conditions which are not less advantageous in any material respect than such policy) with respect to acts or omissions occurring prior to the Effective Time which were committed by such officers and directors in their capacity as such; provided, however, that in no event shall the premium for any such insurance be more than 300% of the current amount expended by PICA or the PICA Subsidiary (the “Insurance Premium Amount”); and provided further, that if PRA is unable to maintain or obtain the insurance called for by this Section 7.6, PRA shall use its best efforts to obtain as much comparable insurance as available for the Insurance Premium Amount.

(b)           For a period of six years after the Effective Time (unless otherwise required by Applicable Law), the charter and bylaws of PICA and the PICA Subsidiaries shall contain provisions no less favorable with respect to the exculpation of, indemnification of and advancement of expenses to directors, officers, employees and agents than those set forth in the Amended and Restated Articles and Amended and Restated Bylaws (or equivalent organizational documents) of PICA (or the relevant Subsidiary) as in effect on the date hereof; provided, however, that if any claim or claims are asserted against any individual entitled to the protections

of such provisions within such six-year period, such provisions shall not be modified until the final disposition of any such claims.  In addition to the obligations set forth in Section 7.6(a), PRA shall, and shall cause PICA to, exculpate, indemnify, defend and hold harmless each person who is now, or who has been at any time before the date hereof or who becomes before the Effective Time, an officer, director, employee or agent of PICA or a PICA Subsidiary (the “Indemnified Parties”) against all losses, claims, damages, costs, expenses (including attorney’s fees), liabilities fines, obligations, or judgments or amounts (collectively "Losses") that are paid in settlement of or in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative, or investigative (formal or informal) (each a “Claim”), in which an Indemnified Party is, or is threatened to be made, a party or witness in whole or in part on or arising in whole or in part out of the fact that such person is or was a director, officer, employee or agent of PICA or a PICA Subsidiary if such Claim pertains to any matter of fact arising, existing or occurring at or before the Effective Time (including, without limitation, the Plan of Conversion and this Agreement and the transactions contemplated thereby), regardless of whether such Claim is asserted or claimed on, before, or after, the Effective Time (the “Indemnified Liabilities”), to the fullest extent provided under, the Amended and Restated Articles and Amended and Restated Bylaws or in the organizational documents of any PICA Subsidiary or PRA, as applicable, any indemnification agreement or under Applicable Law.  PRA shall pay expenses in advance of the final disposition of any such action or proceeding to each Indemnified Party to the full extent provided in the Amended and Restated Articles and Applicable Law.   The Indemnified Parties may retain counsel reasonably satisfactory to them after consultation with PRA; provided, however, that (A) PRA shall have the right to assume the defense thereof and upon such assumption PRA shall not be liable to any Indemnified Party for any legal expenses of other counsel or any other expenses subsequently incurred by any Indemnified Party in connection with the defense thereof, except that if PRA fails to promptly assume such defense the Indemnified Party may retain counsel reasonably satisfactory to him after consultation with PRA, and PRA shall pay the reasonable fees and expenses of such counsel for the Indemnified Party, (B) PRA shall be obligated pursuant to this paragraph to pay for only one firm of counsel for all Indemnified Parties except to the extent representation by a single firm or attorney is, in the absence of an informed consent by the Indemnified Party, prohibited by ethical rules relating to lawyers’ conflicts of interest, (C) PRA shall not be liable for any settlement effected without its prior written consent (which consent shall not be unreasonably withheld), (D) PRA shall have no obligation hereunder to any Indemnified Party when and if a court of competent jurisdiction shall ultimately determine, and such determination shall have become final and nonappealable, that indemnification of such Indemnified Party in the manner contemplated by this Agreement is prohibited by Applicable Law and (E) PRA shall have no obligation hereunder to any Indemnified Party for which and to the extent payment is actually and unqualifiedly made in the full amount of all such Losses for which indemnification has been sought to such Indemnified Party under any insurance policy, any other agreement for indemnification or otherwise.  Any Indemnified Party wishing to claim Indemnification under this Section 7.6, upon learning of any such Claim, shall notify PRA thereof, provided that the failure to so notify shall not affect the obligations of PRA under this Section 7.6 except to the extent such failure to notify prejudices PRA by depriving PRA of the reasonable opportunity to investigate and assume the defense of the claim. PRA’s obligations under this Section 7.6 continue in full force and effect for a period of six (6) years from the Effective Time (or the period of the applicable statute of limitations, if longer); provided, however, that all rights to indemnification in respect of any Claim asserted or made within such period shall continue until the final disposition of such Claim.

 7.7           Advice of Changes.

(a)           Each party shall have the right, but not the obligation, to deliver to the other party a written disclosure schedule as to any matter of which it becomes aware following execution of this Agreement which would constitute a breach of any representation, warranty or covenant of this Agreement by such party, identifying on such disclosure schedule the representation, warranty or covenant which would be so breached.  If disclosure of a matter which would constitute a breach of any representation, warranty or covenant of this Agreement is made by either party, the nondisclosing party shall have the right, in its discretion, to terminate this Agreement to the extent such termination is permitted under Section 9.1 of this Agreement.

(b)           PICA shall update the PICA Disclosure Schedule (the “Closing Date PICA Disclosure Schedule”) to a date that is no earlier than ten (10) Business Days prior to the Closing Date and no later than seven (7) Business Days prior to the Closing Date and shall deliver the Closing Date PICA Disclosure Schedule to PRA not less than three (3) Business Days prior to the Closing Date.  The obligation of PICA to deliver to PRA the Closing Date PICA Disclosure Schedule shall be a material obligation for purposes of Section 8.2(a) hereof.

(c)           The provisions of this Section 7.7 and any notices by PRA on the one hand, and PICA on the other, shall not be deemed in any way to constitute a waiver by the counterparty of the conditions set forth in Article 8 hereof or any of its remedies under Article 9 hereof, nor shall any such notices cure any breach of any representation or warranty which is inaccurate.

7.8           Additional Agreements.

(a)           Prior to the Effective Time, PICA shall provide to PRA (i) within forty-five (45) days after the end of each calendar quarter, a copy of the quarterly unaudited statutory statements of PICA and each of the PICA Insurance Subsidiaries filed with the Insurance Regulator of the jurisdiction of domicile of PICA or the applicable PICA Insurance Subsidiary, as applicable, as of and for such quarter end and all exhibits, schedules and notes attached thereto or provided therewith and (ii) within sixty (60) days after the end of each fiscal year, a copy of the statutory annual statements of each of PICA and the PICA Insurance Companies filed with the Insurance Regulator of the jurisdiction of domicile of PICA or the applicable PICA Insurance Subsidiary, as applicable, as of and for such year end and all exhibits, schedules and notes attached thereto and provided therewith.

(b)           Prior to the Effective Time, PRA shall provide PICA promptly after filing with the SEC the periodic and current reports filed by PRA pursuant to Section 13(a) of the Exchange Act together with any financial statements and/or exhibits filed with such reports (other than those incorporated by reference).

(c)           PRA shall use commercially reasonable efforts to, as of the Closing, have the financial ability to consummate the transactions contemplated by this Agreement.

7.9           Negotiations with Other Parties.

(a)           Subject to Section 7.9(b), so long as this Agreement remains in effect and no notice of termination has been given under this Agreement, PICA shall not authorize or knowingly permit any of its representatives, directly or indirectly, to initiate, entertain, solicit, encourage, engage in, or participate in, negotiations with any Person or any group of Persons other than the other party to this Agreement or any of its Affiliates (a “Potential Acquiror”) concerning any Acquisition Proposal (as defined in this Section 7.9) other than as expressly provided in this Agreement.  PICA will promptly inform PRA of any bona fide inquiry it receives with respect to any Acquisition Proposal and shall furnish the information required in Section 7.9(b).

(b)           Nothing contained in this Agreement shall prohibit the Board of Directors of PICA from either furnishing information to, or entering into discussions or negotiations with, any Person or group of Persons regarding any Acquisition Proposal, or approving and recommending to the Eligible Members of PICA an Acquisition Proposal from any Person or group of Persons, if the Board of Directors of PICA determines in good faith that such action is appropriate in furtherance of the best interests of the Members.  In connection with any such determination, (i) PICA shall direct its representatives, officers and other appropriate personnel to cooperate with and be reasonably available to consult with any such Person, or group of Persons, (ii) PICA will disclose to PRA that it is furnishing information to, or entering into discussions or negotiations with, such Person or group of Persons, which disclosure shall describe the terms thereof (but need not identify the Person, or group of Persons making the offer), (iii) prior to furnishing such information to such Person or group of Persons, PICA shall enter into a written agreement with such Person or group of Persons which provides for, among other things, (A) the furnishing to PICA of information regarding such Person or group of Persons that is relevant to its ability to finance and otherwise perform its obligations under its Acquisition Proposal; (B) the confidentiality of all non-public information furnished to such Person or group of Persons by PICA; and (C) procedures reasonably satisfactory to PICA that are designed to restrict or limit the provision of information regarding PICA that could be used to the competitive disadvantage of PICA or PRA; (iv) PICA will not furnish any non-public information regarding PRA or the transactions contemplated hereby; and (v) PICA will keep PRA informed of the status of any such discussions or negotiations (provided that PICA shall not be required to disclose to PRA confidential information concerning the business or operations of such Person or group of Persons).

(c)           As used in this Agreement, “Acquisition Proposal” means (i) any proposal pursuant to which any Person or group of Persons, other than PRA or PICA, would acquire or participate in a merger, consolidation, or other business combination involving PICA or any of the PICA Subsidiaries, directly or indirectly; (ii) any proposal by which any Person or group of Persons, other than PRA or PICA, would acquire a substantial equity interest in PICA or any of the PICA Subsidiaries, including the right to vote 10% or more of the capital stock (following a reorganization or conversion) of PICA or any of the PICA Subsidiaries entitled to vote thereon for the election of directors; (iii) any acquisition of 10% or more of the assets of PICA or any of the PICA Subsidiaries, other than in the ordinary course of business; (iv) any acquisition in excess of 10% of the outstanding capital stock (following a reorganization or conversion) of PICA or any of the PICA Subsidiaries, other than as contemplated by this Agreement; (v) any acquisition of control (as defined under the Insurance Laws) of PICA or any PICA Subsidiary; or (vi) any transaction similar to the foregoing.

 7.10           Capital Contribution.  On the Closing Date, PRA hereby agrees to pay to PICA, via wire transfer of immediately available funds, a capital contribution in the amount of $15,000,000 (the “Capital Contribution”).

ARTICLE 8

CONDITIONS PRECEDENT

8.1           Conditions to Each Party’s Obligation.  The respective obligation of each party to consummate the transactions contemplated by the Plan of Conversion and this Agreement shall be subject to the satisfaction at or prior to the Effective Time of the following conditions:

(a)           The Plan of Conversion and this Agreement and the transactions contemplated by this Agreement shall have been approved and adopted by the requisite affirmative vote of the Eligible Members of PICA entitled to vote thereon; and

(b)           The Plan of Conversion and the Amended and Restated Articles shall have been approved by the Director of the Division prior to or on the Closing Date; and

(c)           All approvals of Governmental Authorities required to consummate the transactions contemplated by this Agreement shall have been obtained and shall remain in full force and effect and all statutory waiting periods in respect thereof shall have expired, (all such approvals and the expiration of all such waiting periods being referred to in this Agreement as the “Requisite Regulatory Approvals”).  Without limiting the generality of the foregoing:  (i) the HSR Act Report shall have been submitted to the Premerger Notification Agencies, and the waiting period under the HSR Act shall have expired or notice of early termination of the waiting period shall have been received; and (ii) the Plan of Conversion, the Amended and Restated Articles, the transfer of ownership of PICA and the PICA Subsidiaries to PRA and the Capital Contribution to be made to PICA shall have been approved by the Insurance Regulators, to the extent such approvals are required; and

(d)           No order, injunction or decree issued by any Governmental Authority of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Plan of Conversion or any of the transactions contemplated by this Agreement shall be in effect. No statute, rule, regulation, order, injunction or decree shall have been enacted, entered, promulgated or enforced by any Governmental Authority which prohibits, materially restricts or makes illegal consummation of the Plan of Conversion, including the transactions contemplated by this Agreement.

8.2           Conditions to Obligation of PRA.  The obligation of PRA to consummate the transactions contemplated by the Plan of Conversion and this Agreement is also subject to the satisfaction or waiver by PRA at or prior to the Effective Time of the following conditions:

(a)           PICA shall have performed in all material respects all material obligations required to be performed by it under this Agreement at or prior to the Closing Date, and PRA shall have received a certificate signed on behalf of PICA by the Chief Executive Officer and the Chief Financial Officer of PICA to such effect;

(b)           The representations and warranties of PICA contained in Article 4 of this Agreement shall be true and correct on and as of the Closing Date without giving effect to any limitation as to "materiality" or "Material Adverse Effect" set forth in such representation and warranties as if made on and as of such date (except to the extent that any such representation or warranty has by its terms been made as of a specific date in which case such representation and warranty shall have been true and correct as of such specific date); provided, however, that if the failure of any such representations and warranties to be true and correct on and as of the Closing Date, individually or in the aggregate, has not resulted in a Material Adverse Effect on PICA and the PICA Subsidiaries, taken as a whole, the foregoing condition shall be deemed to have been fulfilled, and PRA shall have received a certificate signed on behalf of PICA by the Chief Executive Officer and Chief Financial Officer of PICA to such effect;

(c)           PICA or the PICA Subsidiaries, taken as a whole, shall not have suffered a Material Adverse Effect and there shall have been no occurrence, circumstance or combination thereof (whether arising on, prior to, or after the date hereof), including litigation pending or threatened, which, as of the Closing Date, is reasonably likely to result in a Material Adverse Effect on PICA and the PICA Subsidiaries, taken as a whole, and PRA shall have received a certificate signed on behalf of PICA by the Chief Executive Officer and Chief Financial Officer of PICA to such effect; and

(d)           PICA shall have caused an opinion of counsel of Sidley Austin LLP as counsel for PICA, subject to the limitations and assumptions set forth therein, that neither PICA nor any of the PICA Subsidiaries will recognize any gain or loss for federal income tax purposes as a result of the transactions contemplated by the Plan of Conversion and this Agreement.

8.3           Conditions to Obligation of PICA.  The obligation of PICA to consummate the transactions contemplated by the Plan of Conversion and this Agreement is also subject to the satisfaction or waiver by PICA at or prior to the Effective Time (other than Sections 8.3(c) and (d) which will occur on the date of the Effective Time) of the following conditions:

(a)           PRA shall have performed in all material respects all material obligations required to be performed by it under this Agreement at or prior to the Closing Date, and PICA shall have received a certificate signed on behalf of PRA by the Chief Executive Officer and the Chief Financial Officer of PRA to such effect;

(b)           PRA shall have deposited in trust with the Conversion Agent for the benefit of the Eligible Members (including the Qualified Policyholders) and the DR Former Members, cash in the amount of the Cash Consideration in accordance with Section 3.2(b) of this Agreement;

(c)           PRA shall have paid to PICA, via wire transfer of immediately available funds, a portion of the Purchase Price in the amount of $15,000,000 to fund the crediting of the Conversion Credits to Qualified Policyholders pursuant to the Plan of Conversion and Section 2.9(a) hereof on the date of the Effective Time;

(d)           PRA shall have paid to PICA, via wire transfer of immediately available funds, an amount equal to the Capital Contribution in accordance with Section 7.10; and

(e)           The representations and warranties of PRA contained in Article 5 of this Agreement shall be true and correct on and as of the Closing Date without giving effect to any limitation as to "materiality" or "Material Adverse Effect" set forth in such representations and warranties as if made on and as of such date (except to the extent that any such representation or warranty has by its terms been made as of a specific date in which case such representation and warranty shall have been true and correct as of such specific date) ; provided, however, that if the failure of any such representations and warranties to be true and correct on and as of the Closing Date, individually or in the aggregate, has not resulted in a Material Adverse Effect on PRA or its Subsidiaries, taken as a whole, the foregoing condition shall be deemed to have been fulfilled, and PICA shall have received a certificate signed on behalf of PRA by the Chief Executive Officer and Chief Financial Officer of PRA to such effect.

ARTICLE 9

TERMINATION AND AMENDMENT

9.1           Termination.  This Agreement may be terminated at any time prior to the Effective Time, whether before or after approval of the matters presented in connection with the Plan of Conversion by the Eligible Members of PICA:

(a)           by mutual consent of PRA and PICA in a written instrument, if the Board of Directors of PRA and the Board of Directors of PICA so determine to terminate this Agreement by an affirmative vote of a majority of the members of such party's entire Board of Directors;

(b)           by either PRA or PICA if (i) any Governmental Authority which must grant a Requisite Regulatory Approval has denied approval of the Plan of Conversion (including the transactions contemplated by this Agreement) or approval of the change of control of PICA or the PICA Insurance Subsidiaries as herein contemplated, and such denial has become final and nonappealable or any Governmental Authority of competent jurisdiction shall have issued a final nonappealable order permanently enjoining or otherwise prohibiting the consummation of the transactions contemplated by this Agreement, and (ii) the Board of Directors of PRA or the Board of Directors of PICA, as the case may be, determines to terminate this Agreement by an affirmative vote of a majority of the members of its entire Board of Directors;

(c)           by either PRA or PICA (provided that the terminating party is not then in material breach of any representation, warranty, covenant or other agreement contained in this Agreement) if (i) (x) there shall have been a breach of any of the representations and warranties set forth in this Agreement on the part of the other party (without giving effect to any limitation as to "materiality" or "Material Adverse Effect" set forth in such representations and warranties), which breach is not cured within forty-five (45) days following written notice to the party committing such breach, or which breach, by its nature or timing, cannot be cured prior to the Closing Date, and (y) such material breach or breaches of the representations and warranties, individually or in the aggregate, has resulted in a Material Adverse Effect on such party and its Subsidiaries taken as a whole and (ii) the Board of Directors of the party providing the notice determines to terminate this Agreement by an affirmative vote of a majority of the members of its entire Board of Directors.

(d)           by PRA upon written notice to PICA if (i) the Board of Directors of PICA shall indicate in writing to PRA that the Board of Directors of PICA is unwilling or unable to recommend to its Eligible Members that they approve and adopt the Plan of Conversion, (ii) in the Information Statement distributed by PICA to the Eligible Members in accordance with the Plan of Conversion the Board of Directors of PICA does not recommend to the Eligible Members that they approve and adopt the Plan of Conversion or (iii) after recommending that its Eligible Members approve and adopt the Plan of Conversion and this Agreement, the Board of Directors of PICA shall have withdrawn, modified or amended such recommendation in any respect materially adverse to PRA, without PRA's prior written consent (each a “PICA Recommendation Event”), provided that any such notice of termination must be provided to PICA not later than fifteen (15) Business Days after the later of the date PRA shall have been advised by PICA in writing of a PICA Recommendation Event, or such later date as may be agreed upon by PRA and PICA in writing;

(e)           by PRA upon written notice to PICA, if a PICA Acquisition Event (as defined in Section 9.5 hereof) has occurred.

(f)           by either PRA or PICA if (i) a meeting of the Eligible Members has been duly held for purposes of voting on the Plan of Conversion and the transactions contemplated by this Agreement, and (ii) approval of the Eligible Members of PICA required for the consummation of the Plan of Conversion shall not have been obtained by reason of the failure to obtain the required vote at such duly held meeting of Eligible Members or at any adjournment or postponement thereof;

(g)           by written notice from PICA to PRA, or from PRA to PICA, if the Closing does not occur on or before July 1, 2009, for any reason other than breach of this Agreement by the party giving such notice; or

(h)           by PICA upon the occurrence of a PICA Acquisition Event or PICA Recommendation Event.

9.2           Effect of Termination. In the event of termination of this Agreement by either PRA or PICA as provided in Section 9.1 of this Agreement, (i) this Agreement shall forthwith become void and have no effect, except that Sections 9.2, 9.5, 10.2, 10.3, 10.4, 10.6, 10.12, 10.13, 10.15 and 10.16 of this Agreement shall survive any termination of this Agreement, and (ii) neither PRA nor PICA, nor any of their respective Subsidiaries or any of the officers or directors of any of them shall have any liability of any nature whatsoever under this Agreement, or in connection with the transactions contemplated by this Agreement, except as otherwise provided in Section 9.5 of this Agreement; provided, however, that notwithstanding anything to the contrary contained in this Agreement, neither PRA nor PICA shall be relieved or released from any liabilities or damages arising out of its willful breach of any provision of this Agreement.

9.3           Amendment.  This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto.  Subject to the previous sentence and in compliance with Applicable Law, this Agreement may be amended by the parties hereto, by action taken or authorized by the Board of Directors of PRA and the Board of Directors of PICA,

at any time before or after approval of the matters presented in connection with the Plan of Conversion and this Agreement by the Eligible Members of PICA; provided, however, that after any approval of the Plan of Conversion and transactions contemplated by this Agreement by the Eligible Members of PICA, there may not be, without further approval of such Eligible Members, any amendment of this Agreement which changes or otherwise modifies or amends the (i) amount of the Purchase Price, (ii) the form of the consideration to be delivered to the Eligible Members and the DR Former Members of PICA under this Agreement, (iii) the Conversion Credits, or (iv) any other term contained in the Plan of Conversion.

9.4           Extension; Waiver.  At any time prior to the Effective Time, the parties to this Agreement may, to the extent permitted by Applicable Law, (a) extend the time for the performance of any of the obligations or other acts of the other parties to this Agreement, (b) waive any inaccuracies in the representations and warranties contained in this Agreement or in any document delivered pursuant hereto, or (c) waive compliance with any of the agreements or conditions contained in this Agreement; provided, however, that after any approval of the Plan of Conversion and the transactions contemplated by this Agreement by the Eligible Members of PICA, there may not be, without further approval of such Eligible Members, any extension or waiver of this Agreement or any portion thereof which changes or otherwise modifies or amends the (i) amount of the Purchase Price, (ii) the form of the consideration to be delivered to the Eligible Members and DR Former Members of PICA under this Agreement, (iii) the Conversion Credits, or (iv) any other term contained in the Plan of Conversion.  Any agreement on the part of a party to this Agreement to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party, but such extension or waiver or failure to insist on strict compliance with an obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.

9.5           Liquidated Damages; Termination Fee.    Notwithstanding anything to the contrary contained in this Agreement, in the event that any of the following events or circumstances shall occur, PICA shall, within ten (10) Business Days after notice of the occurrence thereof by PRA, pay to PRA the sum equal to $4,050,000 (which the parties agree and stipulate as reasonable and full liquidated damages and reasonable compensation for the involvement of PRA in the transactions contemplated in this Agreement and is not a penalty or forfeiture): (i) PRA shall terminate this Agreement pursuant to Section 9.1(d) or (e); (ii) PICA shall terminate this Agreement pursuant to Section 9.1(h); or (iii) if the Eligible Members of PICA fail to hold the meeting of the Eligible Members of PICA as required by Section 1.2 of this Agreement within 120 days after the Director issues his Decision and Order approving the Plan of Conversion and the Information Statement.  For purposes of this Agreement a “PICA Acquisition Event” shall mean that PICA shall have authorized, recommended, approved, or entered into an agreement with any Person (other than any of the parties to this Agreement) to effect an Acquisition Proposal.  Upon the making and receipt of such payment under this Section 9.5, PICA shall have no further obligation of any kind under this Agreement and PRA shall not have any further obligation of any kind under this Agreement, except in each case under Section 9.2 of this Agreement, and no party shall have any liability for any breach or alleged breach by such party of any provision of this Agreement.

ARTICLE 10

GENERAL PROVISIONS

10.1           Closing.   Subject to the terms and conditions of this Agreement, the closing of the Plan of Conversion and the transactions contemplated by this Agreement (the “Closing”) will take place at the offices of Burr & Forman LLP in Nashville, Tennessee, at 10:00 a.m. on a date to be mutually agreed upon by PRA and PICA, which shall be no later than five (5) Business Days after the satisfaction or waiver (subject to Applicable Law) of the latest to occur of the conditions set forth in Article 8 of this Agreement, unless extended by mutual agreement of the parties, (such date the “Closing Date”).

10.2           Nonsurvival of Representations, Warranties and Agreements.  None of the representations, warranties, covenants and agreements of PICA and PRA in this Agreement or in any instrument delivered by PICA or PRA pursuant to this Agreement shall survive the Effective Time, except as otherwise provided in Section 9.2 of this Agreement and except for those covenants and agreements contained in this Agreement and in any such instrument which by their terms apply in whole or in part after the Effective Time.

10.3           Expenses.  Except as otherwise expressly provided in this Agreement, all costs and expenses incurred in connection with this Agreement and the transactions contemplated by this Agreement shall be paid by the party incurring such expense; provided, however, that (a) PRA and PICA will share  the cost  of the HSR Act filing fee in proportion to their relative assets as of December 31, 2007, (b) PICA shall pay all expenses relating to the approval of the Plan of Conversion by the Director of the Division, and (c) PRA shall pay all expenses in connection with the approval of the change of control of PICA contemplated by this Agreement by the Director of the Division, and any other required filings with any Insurance Regulator.

10.4           Notices.  All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, by facsimile (with confirmation) followed by delivery of an original via overnight courier service, mailed by registered or certified mail (return receipt requested) or delivered by an express courier (with confirmation) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):

(a)           if to PRA to:

ProAssurance Corporation

100 Brookwood Place

Birmingham, Alabama 35209

Attention:  Chief Executive Officer, copy to Corporate Secretary

Fax: (205) 877-4405

with copies to:

Burr & Forman LLP

420 N. 20th Street, Suite 3100

Birmingham, Alabama 35203

Attention:  Jack P. Stephenson, Esq.

Fax: (205) 458-5100

(b)           if to PICA, to:

Podiatry Insurance Company of America

110 Westwood Place

Brentwood, TN  37027

Attention:  Chief Executive Officer

Fax: (615) 371-1857

with copies to:

Sidley Austin LLP

One South Dearborn

Chicago, IL  60603

Attention: Brian J. Fahrney, Esq.; Sean M. Carney, Esq.

Fax: (312) 853-7036

and

Wyatt, Tarrant and Combs

2525 West End Avenue, Suite 1500

Nashville, TN  37203

Fax: (615) 256-1726

Attention:  Parker Duncan, Esq,

10.5           Further Assurances.  Prior to the Closing, at the reasonable request of any party to this Agreement, the other parties shall execute, acknowledge and deliver such other documents and/or instruments as may be reasonably required by the requesting party to carry out the purposes of this Agreement.  In the event any party to this Agreement shall be involved in litigation, threatened litigation or governmental inquiries with respect to a matter covered by this Agreement, every other party to this Agreement shall also make available to such party, at reasonable times and subject to the reasonable requirements of its own businesses, such of its personnel as may have information relevant to such matters, provided that such party shall reimburse the providing party for its reasonable costs for employee time incurred in connection therewith if more than one business day is required.

10.6           Specific Performance; Remedies Cumulative.  Each party acknowledges and agrees that the breach of this Agreement would cause irreparable damage to the other party hereto and that neither party will have an adequate remedy at law.  Therefore, the obligations of PICA and PRA under this Agreement shall be enforceable by a decree of specific performance issued by any court of competent jurisdiction, and appropriate injunctive relief may be applied for and granted in connection therewith.  Such remedies shall, however, be cumulative and not exclusive and shall be in addition to any other remedies which any party may have under this Agreement or otherwise.

10.7           Presumptions.  It is expressly acknowledged and agreed that all parties have been represented by counsel and have participated in the negotiation and drafting of this Agreement, and that there shall be no presumption against any party on the ground that such party was responsible for preparing this Agreement or any part of it.

10.8           Exhibits and Schedules.  Each of the Exhibits and Schedules referred to in, and/or attached to, this Agreement is an integral part of this Agreement and is incorporated in this Agreement by this reference.

10.9           Interpretation; Conflict.  When a reference is made in this Agreement to Sections, Exhibits or Schedules, such reference shall be to a Section of or Exhibit or Schedule to this Agreement unless otherwise indicated.  The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”.  No provision of this Agreement shall be construed to require PRA, PICA or any of their respective Subsidiaries or Affiliates to take any action which would violate any Applicable Law, rule or regulation.  In the event of any conflict between the terms of this Agreement and the Plan of Conversion, the terms of the Plan of Conversion shall control.

10.10 Counterparts.  This Agreement may be executed in counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart.

10.11 Entire Agreement.  This Agreement (including the documents and the instruments referred to in this Agreement) and the Confidentiality Agreement constitute the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter of this Agreement.

10.12 Governing Law.  This Agreement shall be governed and construed in accordance with the laws of the State of Delaware, without regard to any applicable conflicts of law principles, except that the Plan of Conversion shall be effected in accordance with and governed by the laws of the State of Illinois, and the insurance laws of the State of Illinois as they relate to PICA shall govern to the extent the application of such laws would be inconsistent with or in contravention of the laws of the State of Delaware.

10.13 Severability.  Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction.  If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable.

10.14  Publicity.  PRA and PICA shall develop a joint communications plan and each party shall (i) ensure that all press releases and other public statements and communications with

respect to this Agreement and the transactions contemplated hereby shall be consistent with such joint communications plan and (ii) unless otherwise required by Applicable Law or by obligations pursuant to any listing agreement with or rules of the NYSE, consult with each other for a reasonable time before issuing any press release or otherwise making any public statement or communication (including any communications that would require a filing with the SEC), and mutually agree upon any such press release or any such public statement or communication, with respect to this Agreement or the transactions contemplated hereby. In addition to the foregoing, unless otherwise required by Applicable Law or by obligations pursuant to any listing agreement with or rules of the NYSE, neither PRA nor PICA shall issue any press release or otherwise make any public statement or disclosure concerning the other party or the other party’s business, financial conditions or results of operations without the consent of the other party.

10.15                      Assignment; Third Party Beneficiaries.  Neither this Agreement nor any of the rights, interests or obligations shall be assigned by any of the parties to this Agreement (whether by operation of law or otherwise) without the prior written consent of the other parties to this Agreement.  Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns.  Except as otherwise specifically provided in Sections 2.9, 3.2(b), 3.2(d) and 7.6, this Agreement (including the documents and instruments referred to in this Agreement) is not intended to confer upon any person other than the parties to this Agreement any rights or remedies under this Agreement.

10.16                      Definitions.

(a)           The following terms, as used in this Agreement, have the meanings that follow:

“Affiliate” means with respect to any specified Person, any other Person that at the time of determination directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such specified Person.

“Amended and Restated Articles” means the articles of incorporation of PICA amended and restated at the Effective Time and in substantially the form attached as Exhibit D to this Agreement.

“Amended and Restated Bylaws” means the bylaws of PICA as amended and restated at the Effective Time and in substantially the form attached as Exhibit E to this Agreement.

“Applicable Law” means all laws, published rules, statutes, regulations, policies and codes and judgments, injunctions, orders, decrees, licenses, permits and all other requirements of Governmental Authorities applicable to the Person, place and situation in question.

“Board of Directors” means the board of directors (or similar governing body) of PICA or PRA, as applicable.

“Business Day” means any day that is not a Saturday, or Sunday or other day on which commercial banks in the States of Illinois, Tennessee or Alabama are required or authorized to be closed.

“Code” means the United States Internal Revenue Code of 1986, as amended.

“Control” means, as to any Person, the power to direct or cause the direction of the management and polices of such Person, whether through the ownership of voting securities, by contract or otherwise.  The terms “Controlled by”, “under common Control with” and “Controlling” shall have correlative meanings.

“Decision and Order” has the meaning specified in the Plan of Conversion.

“DR Former Members” means any former Member of PICA that, according to the books and records of PICA, has, within the two years immediately preceding the date the Plan of Conversion is adopted by PICA’s Board of Directors, (a) terminated its policy due to such Member’s retirement or disability and (b) purchased or earned an extended reporting endorsement (tail coverage).

“Effective Date Filing” has the meaning specified in the Plan of Conversion.

“Eligible Member” means each Member eligible under the Plan of Conversion to receive consideration in exchange for such Member’s Membership Interests.

“Employee Plan” means any “employee benefit plan,” as defined in Section 3(3) of ERISA; any employment, severance or similar service agreement, plan, arrangement or policy; any other plan or arrangement providing for compensation, bonuses, profit-sharing, stock option or other equity-related rights or other forms of incentive or deferred compensation, vacation benefits, insurance (including any self-insured arrangements), medical, dental or vision benefits, disability or sick leave benefits, life insurance, employee assistance program, workers’ compensation, supplemental unemployment benefits, severance benefits and post-employment or retirement benefits (including compensation, pension, insurance or medical benefits); or any loan; in each case including plans or arrangements, both written and oral, covering or extended to any current or former director, employee or independent contractor.

“Environmental Laws” means any federal, state, local or foreign law (including common law) treaty, judicial decision, regulation, rule, judgment, order, decree, injunction, permit or governmental restriction or requirement in effect on the date hereof relating to protection of the environment or to pollutants, contaminants, wastes or chemicals or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous substances, wastes or materials.

“Environmental Permits” means, with respect to any Person, all permits, licenses, franchises, certificates, approvals and other similar authorizations of Governmental Authorities required by Environmental Laws and affecting, or relating in any way to, the business of such Person or any of such Person’s Subsidiaries, as currently conducted.

“Governmental Authority” means any United States federal, state or local or any supra-national or non-U.S. governmental, political subdivision, governmental, regulatory or

administrative authority, instrumentality, agency, body or commission, self-regulatory organization or any court, tribunal, or judicial or arbitral body.

“Insurance Laws” means all Applicable Laws applicable to the business of insurance and the regulation of insurance holding companies, whether domestic or foreign, and all applicable orders and directives of Governmental Authorities and market conduct recommendations resulting from market conduct examinations of Insurance Regulators.

“Insurance Regulators” means all Governmental Authorities regulating the business of insurance under the Insurance Laws.

“Knowledge of PICA” means the actual knowledge of any person listed on Exhibit F.

“Lien” means, with respect to any property or asset (real or personal, tangible or intangible), any mortgage, lien, pledge, charge, security interest, encumbrance or other adverse claim of any kind in respect of such property or asset.  For purposes of this Agreement, a Person shall be deemed to own subject to a Lien any property or asset that it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such property or asset.

“Material Adverse Effect” means, with respect to PICA and PRA, as the case may be, a material adverse effect on the business, assets, properties, operations, or condition (financial or otherwise) of such party and its Subsidiaries taken as a whole; provided that any adverse change or effect arising out of or resulting from or attributable to the following shall be excluded in any determination of Material Adverse Effect: (i) any circumstance, change or effect (including international events such as acts of terrorism or war) affecting generally companies operating in the medical malpractice insurance business; (ii) any circumstance, change or effect affecting generally the United States or world economy or capital markets generally, including changes in interest or exchange rates; (iii) changes or prospective changes in laws, rules or regulations or accounting or actuarial practices (iv) the execution or announcement of or the consummation of the transactions contemplated by this Agreement or the Plan of Conversion (including the adverse effect of any loss or threatened loss of, or disruption or threatened disruption in, any customer, reinsurer, policyholder, supplier, professional association and/or vendor relationships or loss of personnel resulting from such execution, announcement or consummation), (v) actions taken or omitted by such party at the direction of, or with the prior written consent of, the other party, or (vi) the effect of any action taken by the other party or its Affiliates with respect to the transactions contemplated by this Agreement.  For the purposes of the foregoing, without limiting the exceptions set forth in clauses (i) through (vi) above, a Material Adverse Effect shall (a) be conclusively presumed to have occurred with respect to PICA and any adverse change or effect that results, or reasonably could be expected to result, in a reduction of more than $10 million in the equity of PICA calculated in accordance with GAAP at and as of June 30, 2008, (b) be conclusively presumed not to have occurred with respect to PICA and any adverse change or effect that does not result, or reasonably could not be expected to result, in a reduction of more than $10 million in the equity of PICA calculated in accordance with GAAP at and as of June 30, 2008.

“Member” means, as of any date of determination, a Person who, in accordance with the records of PICA, PICA’s articles of incorporation and bylaws, and Applicable law, is a member of PICA as of such date.

“Membership Interest” means all policyholders’ rights as members arising prior to the Conversion under the bylaws of PICA or otherwise under Applicable Law.  These include the right to vote and to participate in any distribution of surplus in the event that PICA is liquidated.  The term “Membership Interest” does not include rights expressly conferred upon the policyholders by their policies or contract (other than any right to vote), such as the right to any declared policy dividends.

“Permitted Lien” means any Liens included in the PICA Disclosure Schedules.

“Person” means an individual, corporation, partnership (general or limited), limited liability company, association, trust or other entity or organization, including any Governmental Authority.

“Qualified Policyholders” has the meaning set forth in the Plan of Conversion.

“Subsidiary” of any Person means any corporation, general or limited partnership, joint venture, limited liability company, limited liability partnership or other Person that is a legal entity, trust or estate (i) where such Person has the right to elect a majority of the board of directors (or a majority of another body performing similar functions) of such corporation or other Person, whether through ownership of voting securities or interests, by exercising of contractual rights or otherwise, or (ii) of which (or in which ) more than 50% of the (a) voting capital stock of such corporation or other Person, (b) interest in the capital or profits of such partnership, joint venture or limited liability company or (c) the beneficial interest in such trust or estate, is at the time of determination directly or indirectly owned or controlled by such Person.

(b)           Set forth below is an index to the definitions set forth in this Agreement.

Term	Section
215 ILCS 5/59.1	1.1
Acquisition Proposal	7.9(c)
Affiliate	10.16(a)
Agreement	Recitals
Amended and Restated Articles	10.16(a)
Amended and Restated Bylaws	10.16(a)
Applicable Law	10.16(a)
Board of Directors	10.16(a)
Burdensome Condition	7.1(a)
Business Day	10.16(a)
Capital Contribution	7.10
Cash Consideration	2.2
Claim	7.6(b)
Closing	10.1
Closing Date	10.1
Closing Date PICA Disclosure Schedule	7.7(b)
COBRA	4.13(k)
Code	10.16(a)
Common Stock	Recitals
Confidentiality Agreement	7.2(a)
Consideration Notices	3.2(d)
Consolidated Financial Statements	4.7(a)
Consulting Agreement	2.6
Continuing Employees	7.5(a)
Control	10.16(a)
Conversion	Recitals
Conversion Agent	3.1
Conversion Credits	2.9(a)
Conversion Fund	3.2(b)
Credit Account	2.9(c)
Decision and Order	10.16(a)
Director	1.1
Distribution List	3.2(c)
Division	1.1
DR Former Members	10.16(a)
Effective Date Filing	10.16(a)
Effective Time	1.5
Eligible Member	10.16(a)
Employee Plan	10.16(a)
Environmental Laws	10.16(a)
Environmental Permits	10.16(a)
ERISA	4.13(a)
Exchange Act	2.7
GAAP	4.7(b)
Governmental Authority	10.16(a)
HIPAA	4.13(k)
HSR Act	4.5(c)
HSR Act Report	4.5(c)
Indemnified Parties	7.6(b)
Indemnified Liabilities	7.6(b)
Information Statement	1.3
Insurance Laws	10.16(a)
Insurance Premium Amount	7.6(a)
Insurance Regulators	10.16(a)
Intellectual Property	4.18(a)
IRS	4.12(a)
June 30, 2008 Statements	4.21(d)
Knowledge of PICA	10.16(a)
Lien	10.16(a)
Losses	7.6(b)
Material Adverse Effect	10.16(a)
Member	10.16(a)
Membership Interest	10.16(a)
PACO Permits	4.2(b)
Permits	4.2(b)
Permitted Lien	10.16(a)
Person	10.16(a)
PICA	Recitals
PICA Acquisition Event	9.5
PICA Actuarial Analyses	4.21(e)
PICA Actuaries	4.21(e)
PICA Contract	4.16(a)
PICA Disclosure Schedule	4
PICA Employees	7.5(a)
PICA Employee Plans	4.13(a)
PICA Holding Company Act Report	4.6(c)
PICA Insurance Policies	4.11(a)
PICA Insurance Subsidiaries	4.2(b)
PICA Permits	4.1(b)
PICA Personal Property Leases	4.20(b)
PICA Real Property	4.19(a)
PICA Real Property Leases	4.19(a)
PICA Recommendation Event	9.1(d)
PICA Regulatory Agreement	4.15(a)
PICA Reinsurance Treaties	4.21(c)
PICA Reserves	4.21(d)
PICA SAP Statements	4.6(a)
PICA Subsidiaries	4.2(a)
Plan of Conversion	Recitals
Potential Acquiror	7.9(a)
PRA	Recitals
PRA SEC Reports	5.3(a)
Premerger Notification Agencies	4.5(c)
Proposal	1.2
Purchase Price	2.2
Qualified Policyholders	10.16(a)
Requisite Regulatory Approvals	8.1(c)
Retention Plan	7.5(e)
Sale	Recitals
SAP	4.6(b)
SEC	2.7
Securities Act	5.3(b)
Shares	2.1
SOX	4.7(f)
Subsidiary	10.16(a)
Tail Policy	7.6(a)
Tax or Taxes	4.12(a)
Tax Return or Tax Returns	4.12(a)
WARN Act	4.14(e)

IN WITNESS WHEREOF, PRA and PICA have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the date first above written.

PROASSURANCE CORPORATION,

a Delaware corporation

By:  ­                      /s/ Victor T. Adamo

Name:  Victor T. Adamo

Title:                       President

PODIATRY INSURANCE COMPANY OF AMERICA, A MUTUAL COMPANY,

an Illinois mutual insurance company

By:            /s/ Jerry D. Brant

Name:  Jerry D. Brant, DPM

Title:    Chief Executive Officer

Signature Page to Stock Purchase Agreement

EXHIBIT A

FORM OF PLAN OF CONVERSION

The Plan of Conversion, including exhibits, is filed as a separate Exhibit to this 8-K.

EXHIBIT B

DIRECTORS TO BE ELECTED

For PICA and the PICA Insurance Subsidiary:

W. Stancil Starnes, Chairman

Victor T. Adamo

Jerry D. Brant

Howard H. Friedman

Kirk Petersen

Edward L. Rand, Jr.

Zack Stamp

Darryl K. Thomas

Adam Wilczek

EXHIBIT C

FORM OF CONSULTING AGREEMENT

DRAFT

October 15, 2008

CONSULTING, CONFIDENTIALITY AND NONCOMPETITION AGREEMENT

THIS CONSULTING, CONFIDENTIALITY AND NONCOMPETITION AGREEMENT (“Agreement”) is made and entered into as of the [first day of month after Closing], by and between ProAssurance Corporation, a Delaware corporation (“ProAssurance”), and  _____________________(the “Consultant”).

W I T N E S S E T H:

WHEREAS, ProAssurance desires to retain Consultant for the period set forth in this Agreement to obtain services from the Consultant, and Consultant is willing to be retained by ProAssurance pursuant to this Agreement; and

WHEREAS, Consultant acknowledges (i) that Consultant’s expertise will contribute significantly to the financial success of the business of ProAssurance and (ii) that the compensation, covenants not to compete and confidentiality provisions in this Agreement are reasonable.

NOW, THEREFORE, in consideration of the premises, as well as for other good and valuable consideration (the receipt and sufficiency of which is hereby acknowledged), the parties hereby agree as follows:

1.           Definitions.  Capitalized terms not otherwise defined in this Agreement shall have the meanings given to them in the Stock Purchase Agreement dated as of  __________________, by and among ProAssurance, and  Podiatry Insurance Company of America (“PICA”).

2.           Consulting Relationship.  ProAssurance hereby retains Consultant to provide Consulting Services (as defined in Section 3 of this Agreement) for a term commencing on the date hereof (the “Effective Date”) and ending on that date that is the earlier of the date this Agreement is terminated and  ______________, 2013 [48 month after the Effective Date] (the “Expiration Date”).

3.           Consulting Services.  Consultant agrees to provide such services to ProAssurance as may be reasonably requested from time to time by the Chief Executive Officer of PICA or   ProAssurance, consistent with Consultant’s skills, background and experience.  Consultant shall not be required to devote a specific amount of time each year to the performance of his duties, but shall spend that amount of time reasonably necessary to accomplish the assigned tasks (including Board, advisory board and committee service) faithfully and completely.  The services of Consultant as described above are collectively defined as the “Consulting Services.”

4.           Compensation.

a.           In consideration of Consultant’s Consulting Services and Consultant’s covenants regarding confidentiality and noncompetition,  ProAssurance shall pay Consultant: (i)

a fee at closing of $ 50,000; and (ii)  a consulting fee payable in 47 consecutive monthly installments of $5,200 each and one final installment of  $5,600, with such installments commencing on the Effective Date and payable on the first day of each of the next consecutive 47 fiscal months thereafter (the “Consulting Fee”).

b.           ProAssurance shall reimburse Consultant, within 30 days after Consultant submits expense receipts to ProAssurance, for all reasonable out-of-pocket travel expenses that are paid by Consultant in performing the Consulting Services, in accordance with the reimbursement policies adopted from time to time by ProAssurance.

c.           It is understood and agreed that Consultant is responsible for all tax payments.  If ProAssurance, in its sole discretion, shall determine that ProAssurance or any of its subsidiaries has incurred or will incur any liability to withhold any federal, state or local income or other taxes by reason of any remuneration payable to Consultant, then ProAssurance may effect such withholding.

d.      With respect to any compensation paid pursuant to this Agreement, Consultant  shall be permitted to defer compensation pursuant to the terms of the PICA Deferred Compensation Plan; provided that neither PICA nor ProAssurance nor any of their respective subsidiaries shall make a matching contribution with respect to the compensation payable to Consultant under this Agreement.

5.           Right of Employment.  Neither this Agreement nor any action taken or not taken pursuant to this Agreement shall be construed as giving Consultant any right to be retained, as an employee or otherwise, by ProAssurance or any of its subsidiaries.

6.           Termination.  This Agreement may be terminated as follows:

a.           This Agreement shall terminate one day after Consultant’s death.

b.           ProAssurance may terminate this Agreement if, by reason of a disability, Consultant has been unable to perform Consulting Services for a period of 180 consecutive days. For purposes of this Agreement, "disability" means a serious injury or illness that requires Consultant to be under regular care of a licensed medical physician and renders the Consultant incapable of performing the essential function of this Agreement as determined by the Board of Directors of PICA 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.  Consultant will submit to such medical or psychiatric examinations and tests as such medical professional deems necessary to make any determination of Consultant’s disability and consent to such medical professional sharing the results of such examination with a representative of the Board.

c.           If Consultant is a Podiatric Physician, ProAssurance may terminate this Agreement if Consultant fails to be an insured of PICA or a ProAssurance subsidiary; provided that this section shall not apply if the Consultant  is no longer actively engaged in the private practice of Podiatric Medicine.

d.           ProAssurance may terminate this Agreement for Cause at any time.  For purposes of this Agreement “Cause” shall mean, and this Agreement shall be deemed to have been terminated for Cause if such termination results from, (i) willful gross misconduct on the part of Consultant that is materially and demonstrably injurious to ProAssurance or any of its subsidiaries as determined by the Board of Directors of ProAssurance; provided however, that no act, or failure to act, on the part of Consultant shall be considered willful gross misconduct unless Consultant acted, or failed to act, other than in good faith and with a reasonable belief that such action, or failure to act, was in the best interest of ProAssurance and its subsidiaries; or (ii) Consultant commits any act that constitutes a felony and that results, or is intended to result, directly or indirectly, in Consultant’s substantial personal gain or personal enrichment at the expense of ProAssurance or any of its subsidiaries.

e.           Consultant may terminate this Agreement with cause or without cause at any time.

Except for termination upon the death of the Consultant, any termination of this Agreement by ProAssurance, or by Consultant, shall be communicated by Notice of Termination to the other party given in accordance with Section 18 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.  The "Date of Termination" means (i) if this Agreement  is terminated by reason of death of the Consultant, the date of death shall be the Date of Termination; (ii) if  this Agreement is terminated by reason of Disability, the Date of Termination shall be the date of determination of Disability by the board of directors of ProAssurance; (iii) if this Agreement is terminated by ProAssurance other than for death or  Disability , the Date of Termination shall be the date of receipt of the Notice of Termination by Consultant; or (iv) if this Agreement is terminated by Consultant for any reason other than death, the Date of Termination shall be date of receipt of the Notice of Termination by ProAssurance.

7.           Compensation Upon Termination.  Upon termination of this Agreement in accordance with Section 6, ProAssurance shall have no further obligation under this Agreement to make any payments to Consultant or to bestow any benefits on Consultant after the  Termination Date, other than payments and benefits accrued and due and payable to Consultant prior to the Termination Date. Notwithstanding the foregoing, in the event of the death or Disability of the Consultant, ProAssurance will pay monthly installments that would otherwise be due to Consultant pursuant to Section 4 from the Date of Termination to the Expiration Date. Such payment will be made in a lump sum within thirty days after the Date of Termination; and, in the event of death, the payment will be made to the estate of Consultant.

8.           Confidentiality.

a.           Consultant acknowledges (i) that as a result of Consultant’s prior service as a director of PICA  and Consultant’s engagement by ProAssurance, Consultant has and will become informed of, and has had and will have access to, valuable and confidential information of ProAssurance and its subsidiaries including, but not limited to, trade secrets, technical information, know-how, plans, specifications, marketing and sales information, claims handling

information, investment information, and the identity of policyholders and reinsurers (collectively, “Confidential Information”), (ii) that the Confidential Information is the exclusive property of ProAssurance and its subsidiaries, and (iii) that the Confidential Information is to be held by Consultant in trust and solely for the benefit of ProAssurance and its subsidiaries.  Accordingly, Consultant shall not at any time subsequent to the date of this Agreement, use, reveal, report, publish, transfer or otherwise disclose to any person or entity any of the Confidential Information without the prior consent of ProAssurance, except to officers and employees of ProAssurance and its subsidiaries, and other persons or entities whom ProAssurance agrees are in a contractual or fiduciary relationship with ProAssurance or any of its subsidiaries.  This provision does not prohibit Consultant from disclosing information which legally is or becomes of general public knowledge from authorized sources other than Consultant.

b.           If the Confidential Information known to Consultant or in Consultant’s possession is subpoenaed, is subject to a demand for production, or is subject to any other form of legal process, by any judicial, regulatory, administrative, legislative or governmental authority, or any other person or entity, Consultant agrees to notify ProAssurance promptly that such subpoena, demand or other legal process has been received.  Consultant agrees to use Consultant’s best efforts, consistent with the requirements of applicable law, to protect the Confidential Information from disclosure and to cooperate with ProAssurance and its subsidiaries in seeking protection from disclosure of the Confidential Information.  If Consultant is required to disclose the Confidential Information, Consultant agrees, at ProAssurance’s request and expense, to use Consultant’s best efforts to obtain assurances that the Confidential Information will be maintained on a confidential basis and not be disclosed to a greater degree than legally required.

c.           Upon the termination of this Agreement, Consultant shall promptly deliver to ProAssurance all originals and all copies that are in Consultant’s possession or control of the following: all customer lists, stockholder lists, lists of names of beneficial owners, policyholder lists, manuals, letters, notes, notebooks, reports and all other materials relating to the business of ProAssurance and its subsidiaries.  Consultant shall represent to ProAssurance that Consultant has complied with the provisions of this Section 8 at the time the Consultant ceases to be a consultant to ProAssurance.

9.           Noncompetition and Nonsolicitation.

a.           During the term of this Agreement and until the Expiration Date, Consultant agrees that Consultant shall not, directly or indirectly, engage, participate, or assist in any business organization by performing services related to the providing of malpractice insurance to podiatric physicians, chiropractors  and other persons or entities insured by PICA or any of its subsidiaries (the “Proscribed Activities”) in the states in which PICA  or any of its subsidiaries is then conducting the Proscribed Activities, whether as owner, part-owner, stockholder, partner, director, officer, trustee, employee, agent, consultant or in any other capacity, on Consultant’s own behalf or on behalf of any person or entity.  Consultant may make passive investments in a competitive enterprise of which the voting equity interests are publicly traded, provided that Consultant’s holdings in such enterprise, together with the holdings of any

of the Consultant’s affiliates (as that term is defined in Rule 405 of the Rules under the Securities Exchange Act of 1934, as amended) do not exceed 3% of the outstanding voting equity interests of such enterprise.

b.           During the term of this Agreement and until the Expiration Date, Consultant agrees that Consultant shall not (i) directly or indirectly solicit any person or entity in the states in which PICA   or any of its subsidiaries is then conducting the Proscribed Activities to purchase insurance products or services competitive with the Proscribed Activities, (ii) directly or indirectly solicit any person or entity to purchase or sell insurance products or services relating to the Proscribed Activities, or (iii) recruit or otherwise solicit or induce any person who is at the time an employee or consultant with ProAssurance or any of its subsidiaries to terminate such person’s employment or consulting relationship with ProAssurance or any of its subsidiaries.

10.           Restrictions Reasonable.  The restrictions against competition and solicitation set forth above are considered by the parties to be reasonable for the purposes of protecting the business of ProAssurance and its subsidiaries.  If any restriction is found by a court of competent jurisdiction to be unenforceable because it extends for too long a period of time, or over too broad a range of activities, or in too large a geographic area, then that restriction shall be interpreted to extend only over the maximum period of time, or range of activities, or geographic area, as to which it may be enforceable.

11.  Remedies.  Consultant and ProAssurance acknowledge that ProAssurance and its subsidiaries would not have an adequate remedy at law for money damages if the covenants contained in Sections 8 or 9 of this Agreement were not complied with in accordance with their terms.  Because the breach or threatened breach of any of the covenants in Sections 8 or 9 of this Agreement will result in immediate and irreparable injury to ProAssurance and its subsidiaries, Consultant agrees that ProAssurance and its subsidiaries shall be entitled to an injunction restraining Consultant from violating Sections 8 and 9 of this Agreement to the fullest extent allowed by law.  Nothing in this Agreement shall prohibit ProAssurance or any of its subsidiaries from pursuing all other legal or equitable remedies that may be available to it for a breach or threatened breach, including the recovery of damages.

12.           Resignation from PICA Board of Directors.  Consultant hereby resigns as director and officer, if applicable, of PICA and any of its direct or indirect subsidiaries, effective upon the Effective Time as defined and contemplated under the Stock Purchase Agreement.  This resignation shall not require acceptance by PICA or any of its direct or indirect subsidiaries, and shall take effect automatically upon the Effective Time without any further action on behalf of the Consultant or PICA or any of its direct or indirect subsidiaries.

13.           Survival.  The provisions of Sections 8, 9, 10, 11, 12 and 18(b) shall survive the termination of this Agreement and shall inure to the benefit of ProAssurance, its successors and assigns, and the provisions of  Section 7 shall survive the termination of this Agreement and inure to the benefit of the Consultant, and its heirs, representative, successors and assigns.

14.           Third-Party Agreements and Rights.  Consultant confirms that Consultant is not bound by any agreement with any other person or entity that would restrict engagement of Consultant in any business or Consultant’s use or disclosure of information.  Consultant represents that Consultant’s execution of this Agreement, engagement by ProAssurance and performance of duties pursuant to this Agreement will not violate any obligations Consultant may have to any other person or entity.  Consultant shall not disclose or make use of information in violation of any agreements with or rights of any other person or entity.

15.           Further Assurances.  Consultant and ProAssurance agree to execute, acknowledge, deliver and file, or cause to be executed, acknowledged, delivered and filed, all further instruments, agreements or documents as may be necessary to consummate the transactions provided for in this Agreement and to do all further acts necessary to carry out the purpose and intent of this Agreement.

16.           No Waiver.  No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with the waiver or estoppel.  No written waiver shall be deemed a continuing waiver unless specifically stated therein, and each waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of the term or condition for the future or as to any act other than that specifically waived.  The waiver by a party of any other party’s breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach, and the failure of any party to exercise any right or remedy shall not operate or be construed as a waiver or bar to the exercise of such right or remedy upon the occurrence of any subsequent breach.  No delay on the part of a party in exercising a right, power or privilege hereunder shall operate as a waiver thereof.  No waiver on the part of a party of a right, power or privilege, or a single or partial exercise of a right, power or privilege, shall preclude further exercise thereof or the exercise of any other right, power or privilege.  The rights and remedies of this Agreement are cumulative and are not exclusive of the rights or remedies that a party may otherwise have at law or in equity.

17.           Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without reference to its conflicts of law principles.

18.           Notices.  Notices required or permitted to be given under this Agreement shall be in writing and shall be deemed given if delivered personally, telecopied (with confirmation), mailed by registered or certified mail (return receipt requested), or delivered by an express courier (with confirmation), to the parties at the addresses below (or at such other address for a party as shall be specified by like notice):

a.           If to ProAssurance:

ProAssurance Corporation

100 Brookwood Place

Birmingham, Alabama 35209

Attention:  Chief Executive Officer

with copy to                                Corporate Secretary

Fax: (205) 877-4405

b.           If to Consultant:

19.           Assignment.

a.           This Agreement and all of Consultant’s rights, duties and obligations under this Agreement are personal in nature and shall not be assignable by the Consultant.  A purported assignment shall not be valid or binding on ProAssurance.

b.           This Agreement shall inure to the benefit of and be legally binding upon all successors and assigns of ProAssurance.  ProAssurance will require a successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of ProAssurance by agreement in form and substance satisfactory to the Consultant, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that ProAssurance would be required to perform it if no such succession had taken place.  For purposes of this Section 18, “ProAssurance” shall mean ProAssurance as defined above and all successors to its business or assets that execute and deliver the agreement provided for in this Section 18 or that otherwise become bound by the terms and provisions of this Agreement by operation of law.

20.           Attorneys’ Fees.  If litigation is brought concerning this Agreement, the prevailing party shall be entitled to receive from the non-prevailing party, and the non-prevailing party shall upon final judgment and the expiration of all appeals immediately pay upon demand all reasonable attorneys’ fees and expenses of the prevailing party.

21.           Entire Agreement.  This Agreement constitutes the entire understanding of the parties and supersedes all prior discussions, negotiations, agreements and understandings, whether oral or written, with respect to its subject matter.  This Agreement may be modified only by a written instrument properly executed by Consultant and ProAssurance.

22.           Severability.  If any one or more of the provisions of this Agreement is held invalid, illegal or unenforceable, the remaining provisions of this Agreement shall be unimpaired, and the invalid, illegal or unenforceable provision shall be replaced by a mutually acceptable valid, legal and enforceable provision which comes closest to the intent of the parties.

23.           Counterparts.  This Agreement may be executed by the parties in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument.

The parties have executed this Agreement effective as of the day and year first written above.

PROASSURANCE CORPORATION                                                                                                CONSULTANT

By: ___________________________                                                                                                ______________________________

Name:

______________________________

Taxpayer Identification Number

EXHIBIT D

AMENDED AND RESTATED ARTICLES

Attached as Exhibit B to the Plan of Conversion.

EXHIBIT E

AMENDED AND RESTATED BYLAWS

Attached as Exhibit C to the Plan of Conversion.

EXHIBIT F

KNOWLEDGE OF PICA

Dr. Jerry D. Brant

Adam P. Wilczek

T. Douglass Webb

Gary R. Dittman