EMCI EMC Insurance Group Inc

NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS

[ · ], 2019

To the Shareholders of EMC Insurance Group Inc.:

              Notice is hereby given that a special meeting of shareholders of EMC Insurance Group Inc., an Iowa corporation (the "Company"), will be held on [ · ], 2019, commencing at [ · ] Central Time at the offices of Employers Mutual Casualty Company, 219 Eighth Street, Des Moines, Iowa 50309, to:

              Each issued and outstanding share of the Company's common stock, par value $1.00 per share ("common stock") as of the close of business on the record date of [ · ], 2019 (the "record date") will be entitled to notice of and one vote upon all matters described above at the special meeting of shareholders (the "special meeting").

              All shareholders of record as of the record date are invited to attend the special meeting in person. Your vote is important, regardless of the number of shares of common stock you own. The merger cannot be completed without the affirmative vote of (i) the holders of at least a majority of all shares of common stock entitled to vote on adopting the merger agreement as of the close of business on the record date and (ii) the holders of at least a majority of the outstanding common stock owned by the Company's shareholders, other than EMCC, Merger Sub, the Company or any subsidiary of EMCC or the Company and the executive officers and directors of the Company, EMCC and its respective subsidiaries (such shareholders, which include unaffiliated security holders (as defined under Rule 13e-3(a)(4) of the Securities Exchange Act of 1934, as amended, the "public shareholders"), as of the close of business on the record date (the shareholders referred to in clauses (i) and (ii) are collectively referred to herein as the "required shareholder voting groups") and entitled to vote on adopting the merger agreement. Under the merger agreement, EMCC, which currently owns approximately 54% of the outstanding shares of common stock, agreed to vote all such shares that it owns " FOR " the merger agreement proposal and the presence of EMCC's shares at the special meeting assures a quorum will be present at the special meeting. Your failure to vote your shares or your abstention from voting on the merger agreement proposal will have the same effect as a vote " AGAINST " the merger agreement proposal.

              The adjournment proposal requires the affirmative vote of a majority of the shares present in person or by proxy at the special meeting and entitled to vote at the meeting and is only necessary if

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there are insufficient votes at the time of the special meeting to approve the merger agreement proposal. Under the merger agreement, EMCC agreed to vote all of its shares of common stock " FOR " the adjournment proposal, thus assuring that the adjournment proposal will pass. As a result, your vote (or failure to vote) on the adjournment proposal will not have an effect on the outcome of the vote.

              Even if you plan to attend the special meeting in person, it is requested that you complete, sign, date and return the enclosed proxy and thus ensure that your shares will be represented at the special meeting if you are unable to attend. You also may submit your proxy by using a toll-free telephone number or the Internet. Instructions have been provided in the enclosed proxy statement and on the proxy and voting instruction card for using these convenient services.

              If you sign, date and return your proxy and voting instruction card(s) without indicating how you wish to vote, your proxy will be voted " FOR " the merger agreement proposal and " FOR " the adjournment proposal. If you fail to attend the special meeting or submit your proxy, the effect will be that your shares will not be counted for purposes of determining whether a quorum is present at the special meeting and will have the same effect as a vote " AGAINST " the merger agreement proposal.

              You may revoke your proxy at any time before the vote at the special meeting by following the procedures outlined in the enclosed proxy statement. If you are a shareholder of record, attend the special meeting and wish to vote in person, you may revoke your proxy and vote in person.

              If you are a shareholder who holds your shares of common stock in "street name" through a broker, bank or other nominee, please be aware that you will need to follow the directions provided by such broker, bank or nominee regarding how to instruct it to vote your shares of common stock at the special meeting.

              The approximate mailing date of this notice, accompanying proxy statement and proxy card is [ · ], 2019.

		By the order of the Board of Directors,
		Todd A. Strother Senior Vice President, Chief Legal Officer and Secretary
Des Moines, Iowa [ · ], 2019

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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER AGREEMENT PROPOSAL

The following answers address briefly some questions you may have regarding the special meeting and the merger agreement proposal. These questions and answers may not address all questions that may be important to you as a shareholder of the Company. Please refer to the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to or incorporated by reference in this proxy statement for further information.

Q:

What is the proposed transaction?

A:

The proposed transaction is the merger of Merger Sub with and into the Company pursuant to the terms and conditions included in the merger agreement, with the Company surviving the merger as a privately held, wholly owned subsidiary of EMCC. The merger agreement, which governs the terms and conditions of the merger, is attached to this proxy statement as Annex A .

Q:

What will I receive in the merger?

A:

If the merger is completed and you hold your shares through the effective time of the merger (and you do not exercise your appraisal rights under Iowa law as explained in the " Dissenters' Rights to Appraisal " section of this proxy statement beginning on page [ · ]), you will be entitled to receive the merger consideration of $36.00 per share in cash, without interest and less any applicable withholding taxes, for each share of common stock that you own as of the record date. You will not be entitled to retain or receive shares in the surviving corporation.

Q:

Is the merger consideration a premium to the market price and book value of the Company's common stock?

A:

Yes. The merger consideration of $36.00 per share price represents an approximate 50% premium to the $23.99 closing market price of the common stock on the Nasdaq Global Select Market as of November 15, 2018, the last trading day prior to the public announcement of EMCC's original proposal to acquire 100% ownership of the Company, a 27% premium to the $28.44 book value per share of the Company as of March 31, 2019 and an increase of 20% over EMCC's original proposed price of $30.00 per share.

Q:

Will shareholders receive regular quarterly dividends before the merger is completed or if the merger agreement is terminated?

A:

Yes. Shareholders will be entitled to continue to receive regular quarterly dividends as declared by the Company's Board. Pursuant to the terms of the merger agreement, until the merger is either completed or the merger agreement is terminated, the Company's Board may not increase the payment of its quarterly dividend above $0.23 per share (the per share amount of the last quarterly dividend declared and paid on the common stock).

Q:

When and where is the special meeting?

A:

The special meeting will take place on [ · ], 2019, commencing at [ · ] Central Time, at the offices of Employers Mutual Casualty Company, 219 Eighth Street, Des Moines, Iowa 50309.

Q:

What matters will be voted on at the special meeting?

A:

You will be asked to vote to:

•

approve the merger agreement proposal; and

•

approve the adjournment proposal.

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Q:

How does the Company's Board of Directors recommend that I vote?

A:

Based on the unanimous recommendation of the Special Committee, the Company's Board recommends that the public shareholders vote:

•

" FOR " the merger agreement proposal; and

•

" FOR " the adjournment proposal.

In order to avoid any potential conflict of interest, Bruce G. Kelley recused himself from all of the Company's Board's and EMCC's Board of Directors' respective discussions, considerations, recommendations and votes with respect to the proposed transaction. You should read " Special Factors — Background of the Merger" beginning on page [ · ], " Special Factors — Reasons for the Merger; The Special Committee's Position as to the Fairness of the Merger to Public Shareholders; Recommendations of the Special Committee" beginning on page [ · ] and Special Factors — Recommendation of the Company's Board" beginning on page [ · ] for a discussion of the factors and alternatives that the Special Committee and the Company's Board considered in deciding to recommend and/or approve, as applicable, the merger agreement. See also " Special Factors — Interests of Certain Persons in the Merger " beginning on page [ · ].

Q:

What vote of shareholders is required to approve the merger agreement proposal?

A:

The consummation of the merger is conditioned upon the approval of the merger agreement proposal by the affirmative vote of (i) the holders of at least a majority of all shares of common stock entitled to vote on adopting the merger agreement as of the close of business on the record date and (ii) the holders of at least a majority of the outstanding common stock owned by the public shareholders entitled to vote on adopting the merger agreement as of the close of business on the record date. The shareholder vote described in clause (ii) above is also known as a "majority of the minority vote." EMCC and the Company are requiring a "majority of the minority vote" because the vote under clause (i) above is already determined as EMCC has agreed to vote in favor of the merger agreement proposal, thus assuring that the merger agreement proposal under clause (i) will pass. Pursuant to the Company's by-laws, issued and outstanding shares of common stock as of the close of business on the record date are entitled to one vote per share. The approval of the merger agreement proposal is a condition to the parties' obligations to consummate the merger.

Your failure to vote your shares of common stock or your abstention from voting on the merger agreement proposal will have the same effect as a vote " AGAINST " the merger agreement proposal. Each of the directors and executive officers of the Company has informed the Company that, as of the date of this proxy statement, he or she intends to vote " FOR " the merger agreement proposal.

Q:

What vote of shareholders is required to approve other matters to be presented at the special meeting?

A:

Approval of the adjournment proposal requires the affirmative vote of a majority of the shares present in person or by proxy at the special meeting and entitled to vote at the meeting and is only necessary if there are insufficient votes at the time of the special meeting to approve the merger agreement proposal. Pursuant to the Company's by-laws, issued and outstanding shares of common stock as of the close of business on the record date are entitled to one vote per share on the adjournment proposal.

Under the merger agreement, EMCC agreed to vote all of its shares of common stock " FOR " the adjournment proposal, thus assuring that the adjournment proposal will pass. As a result,

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your vote (or failure to vote) on the adjournment proposal will not have an effect on the outcome of the vote.

Q:

What constitutes a quorum for the special meeting?

A:

The Company will have a quorum and will be able to conduct the business of the special meeting if the holders of a majority of the shares entitled to vote are present at the special meeting, either in person or by proxy. Shares registered in the names of brokers or other "street name" nominees for which proxies are voted on some but not all matters will be considered to be present at the meeting for quorum purposes, but will be considered to be voted only as to those matters actually voted, and will not be considered as voting for any purpose as to the matters with respect to which no vote is indicated (commonly referred to herein as "broker non-votes").

Under the merger agreement, EMCC, the holder of approximately 54% of the outstanding common stock, agreed to vote all of the shares of common stock that it owns " FOR " the merger agreement proposal, and the presence of these shares at the special meeting assures a quorum will be present at the special meeting.

Q:

What effects will the merger have on the Company if completed?

A:

The shares of common stock are currently registered under the Exchange Act, and such shares are quoted on the Nasdaq Global Select Market under the symbol "EMCI." As a result of the merger, all of the shares of common stock will cease to be publicly traded and will be owned by EMCC. Following the consummation of the merger, the registration of the shares of common stock and its reporting obligations with respect to such shares under the Exchange Act will be terminated upon application to the SEC. In addition, upon the consummation of the merger, such shares will no longer be listed on any stock exchange or quotation system, including on the Nasdaq Global Select Market.

Q:

What will happen if the merger is not consummated?

A:

If the merger is not consummated for any reason, the Company's shareholders will not receive any payment for their shares of common stock in connection with the merger. Instead, the Company will remain a public company and such shares of common stock will continue to be registered under the Exchange Act, and listed and traded on the Nasdaq Global Select Market.

Q:

What do I need to do now?

A:

You are urged to read this entire proxy statement carefully, including its annexes and the documents referred to or incorporated by reference in this proxy statement, as well as the related Schedule 13E-3, including the exhibits thereto, filed with the SEC, and to consider how the merger affects you.

If you are a shareholder of record, you can ensure that your shares are voted at the special meeting by submitting your proxy via:

•

telephone, using the toll-free number listed on your proxy card;

•

the Internet, at the address provided on your proxy card; or

•

mail, by completing, signing, dating and mailing your proxy card and returning it in the envelope provided.

If you hold your shares of common stock in "street name" through a broker, bank or other nominee, you should follow the directions provided by it regarding how to instruct it to vote your shares of common stock. Without those instructions, your shares of common stock will not

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be voted, which will have the same effect as voting " AGAINST " the merger agreement proposal.

Q:

Should I send in my stock certificates or other evidence of ownership now?

A:

No. After the merger is completed, you will be sent a letter of transmittal with detailed written instructions for exchanging your shares of common stock for the merger consideration. If your shares of common stock are held in "street name" by your broker, bank or other nominee, you will receive instructions from your broker, bank or other nominee as to what action, if any, you need to take to effect the surrender of your "street name" common stock in exchange for the $36.00 per share merger consideration. Please do not send in your certificates now.

Q:

Can I revoke my proxy and voting instructions?

A:

Yes. You can revoke your proxy and voting instructions at any time before your proxy is voted at the special meeting. If you are a shareholder of record, you may revoke your proxy by notifying the Company's Secretary in writing, by submitting a new proxy by telephone, the Internet or mail, in each case, dated after the date of the proxy being revoked, or by attending the special meeting and voting in person (but simply attending the special meeting will not cause your proxy to be revoked).

Please note that if you hold your shares of common stock in "street name" and you have instructed a broker, bank or other nominee to vote your shares of common stock, the above-described options for revoking your voting instructions do not apply, and instead you must follow the instructions received from your broker, bank or other nominee to revoke your voting instructions.

Q:

What does it mean if I get more than one proxy and voting instruction card?

A:

If your shares of common stock are registered differently or held in more than one account, you will receive more than one proxy card. Please complete and return all of the proxy cards you receive (or submit each of your proxies by telephone or the Internet, if available to you) to ensure that all of your shares of common stock are voted.

If your shares of common stock are held through a broker, bank or other nominee, you will receive either a voting form or a proxy card from the nominee with specific instructions about the voting methods available to you. As a beneficial owner, in order to ensure your shares of common stock are voted, you must provide voting instructions to the broker, bank or other nominee by the deadline provided in the materials you receive from them.

Q:

Who will count the votes?

A:

A representative of Broadridge Financial Solutions will tabulate the results and act as an inspector of election.

Q:

If I am not in favor of the merger agreement proposal, what are my appraisal rights under Iowa law?

A:

If you do not vote your shares in favor of the merger agreement proposal (including by not returning an unmarked proxy card, which will be voted in favor of the merger agreement proposal), properly demand appraisal of your shares, do not withdraw your demand for appraisal rights and otherwise comply with the requirements of Division XIII of the Iowa Business Corporation Act, you will be entitled to seek appraisal for, and obtain payment in cash for the fair value of, your shares of common stock, plus accrued interest, in lieu of receiving the merger consideration if the merger is completed. This appraised value could be more than, the same as or less than the merger consideration. To exercise your appraisal rights,

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you must comply with the requirements of Division XIII of the Iowa Business Corporation Act. For additional information regarding appraisal rights, see " Dissenters' Rights of Appraisal " beginning on page [ · ] of this proxy statement and the complete text of Division XIII of the Iowa Business Corporation Act attached to this proxy statement as Annex B .

Q:

Who can help answer my other questions?

A:

If you have more questions about the merger, or require assistance in submitting your proxy or voting your common stock or need additional copies of the proxy statement or the enclosed proxy card(s), please contact D.F. King & Co., Inc., which is acting as the proxy solicitation agent and information agent in connection with the merger.

D.F. King & Co., Inc.
Toll Free: (800) 714-3310
Email: emci@dfking.com

If your broker, bank or other nominee holds your common stock, you can also call your broker, bank or other nominee for additional information.

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SPECIAL FACTORS

Background of the Merger

              During the past several years, the independent members of the Company's Board periodically reviewed strategic alternatives for the Company to improve performance and maximize value for the public shareholders, and communicated various ideas and strategies to EMCC's Board of Directors for its consideration.

              Prior to October 23, 2018, EMCC's Board of Directors, the Finance Committee of EMCC's Board of Directors (for purposes of this section only, the "Finance Committee") and EMCC's management periodically reviewed various strategies to improve its performance in the property and casualty insurance industry, including reviewing ways in which to improve the performance and shareholder value of the Company. As part of these periodic strategy sessions, EMCC's Board of Directors, the Finance Committee and EMCC's management generally reviewed three strategic directions with respect to the Company: (i) whether the Company should continue to operate as is; (ii) whether changes could be made to improve the performance of, and attractiveness of investment in, the Company; or (iii) whether EMCC should purchase all of the outstanding stock of the Company that it did not own and take the Company "private."

              On October 23, 2018, the Finance Committee met to review possible strategic alternatives to improve the financial performance and value of the Company, including (i) increasing the pooling participation percentage between the Company and EMCC; (ii) increasing growth in the Company's assumed reinsurance segment; and (iii) actively pursuing strategic transactions. After such review, the Finance Committee believed that such potential strategic alternatives would be challenging to implement given the Company's and EMCC's structure (EMCC is required to maintain ownership of at least 50.1% of the Company for the pool members to qualify for a group rating from A.M. Best Company) and the different fiduciary duties to both EMCC's policyholders and to the public shareholders. Importantly, the Finance Committee determined that none of the potential alternatives considered would likely alter the Company's financial metrics enough to significantly increase the Company's total return to shareholders or address the structural differences between EMCC and the Company. Additionally, the Finance Committee believed that continuing the status quo of the Company was not a preferred option because (a) it would likely not provide additional value to the Company's shareholders; (b) the Company had a small amount of public float and limited trading volume and it was not performing up to the level of its publicly traded peers and was not expected to do so in the foreseeable future; and (c) the requirements and costs of remaining a public company were continually increasing. Moreover, the Finance Committee believed that the Company could no longer deliver the benefits originally contemplated by EMCC when EMCC formed the Company, namely to gain access to the public equity markets to support growth and significantly enhance the consolidated surplus. The Finance Committee also reviewed the potential strategic alternative of purchasing all of the Company's outstanding common stock that EMCC did not already own (for purposes of this section only, the "going-private transaction"). After extensive discussion, based on its belief that none of the potential alternatives considered were likely to substantially improve the Company's shareholder value and performance while remaining consistent with EMCC's primary focus as a mutual company on serving the best interests of its policyholders, the Finance Committee unanimously agreed that the going-private transaction was the most attractive strategic option to pursue, in the best interest of the public shareholders, and unanimously recommended the going-private transaction for consideration by EMCC's Board of Directors.

              On November 3, 2018, EMCC's Board of Directors (other than Mr. Kelley who voluntarily recused himself from the meeting and all future meetings of EMCC's Board of Directors, the Finance Committee and the Company's Board regarding the potential going-private transaction in order to avoid any potential conflict of interest) met to discuss potential strategic alternatives to improve the financial performance of the Company and to review the recommendation of the Finance Committee

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with respect to proposing the going-private transaction to the Company's Board. At the meeting, representatives from EMCC's management and the Finance Committee presented the potential strategic alternatives considered and the perceived advantages and disadvantages of the various strategic alternatives, including the proposed going-private transaction. At the conclusion of the meeting, the EMCC Board of Directors decided not to vote on a strategic option, decided to hold a special meeting in the next several weeks to give the directors additional time to consider the various strategic alternatives and authorized EMCC management to engage various legal and financial advisors to consider and evaluate the various strategic alternatives.

              During the week of November 5, 2018, pursuant to EMCC's Board of Directors' authorization, EMCC retained Boenning & Scattergood, Inc. ("Boenning") to provide initial financial analysis in connection with the EMCC Board of Directors' consideration of the going-private transaction and to assist in the EMCC Board of Directors' determination of the initial price per share to be offered to the public shareholders.

              On November 14, 2018, Steven Jacobs, a member of the EMCC Board of Directors and the Finance Committee, emailed Stephen Crane, the Chairman of the Board of the Company, and asked to speak to him about the work of the Finance Committee regarding strategic options for the Company, but without mentioning EMCC's potential proposal of the going-private transaction. In response to that email, and to facilitate the proposed discussion regarding the Company's strategic options, Mr. Crane forwarded to Mr. Jacobs several memoranda that had been previously prepared and discussed by the independent members of the Company's Board regarding possible strategies for enhancing the Company's value. The memoranda reflected that during the prior two meetings of the Company's Board, the Company's Board discussed that the current market valuation of the Company was unsatisfactory, that it had an obligation to explore possible strategies for enhancing the value of the Company and that the goal of maximizing shareholder return was not fully compatible with the mutual structure of its parent company, EMCC.

              On November 15, 2018, EMCC's Board of Directors met again to review the recommendation of the Finance Committee with respect to proposing a going-private transaction to the Company's Board. At the meeting, EMCC's Chief Legal Officer and representatives of Foley & Lardner LLP ("F&L"), legal counsel to EMCC's Board of Directors, advised EMCC's Board of Directors with respect to the procedural and legal considerations associated with the potential going-private transaction, various transaction structures typically used in effectuating a going-private transaction, the potential timeline for a going-private transaction and the fiduciary duties applicable to EMCC's Board of Directors in connection with considering such a transaction. EMCC's Board of Directors considered several potential alternative transaction structures to acquire all of the Company's outstanding common stock, including a long-form one-step upstream merger, a cash tender offer followed by a back-end short-form merger, and a reverse stock split. Given the relationship between EMCC and the Company, EMCC's Board of Directors focused on proposing a structure that it believed would afford the most procedural fairness to the public shareholders, including (i) requiring approval by a newly-formed, independent special committee of the Company's Board (to be advised by independent financial and legal advisors and fully authorized to consider the going-private transaction and alternatives thereto, including to turn down the going-private transaction proposal); (ii) requiring approval by a "majority of the minority" vote of the public shareholders; (iii) structuring the transaction as a long-form merger (as opposed to a tender offer followed by a short-form merger) since such a structure affords the most comprehensive disclosure to the public shareholders; (iv) providing the opportunity for the public shareholders to exercise dissenters' rights; and (v) not allowing any accelerated vesting of equity awards held by EMCC's and the Company's management (since EMCC's Board of Directors did not believe the proposed going-private transaction constituted a "change in control"). After a thorough discussion of various legal matters, representatives of Boenning discussed, among other things, illustrative financial analyses of the Company based on comparable public companies, precedent transactions, present value, book value, controlling interest premiums and historical trading performance. Boenning's analysis

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estimated a value range of $25.00 - $35.00 per share for the Company and Boenning suggested EMCC's Board of Directors initially offer $30.00 per share, with negotiation authorization to $33.50 per share. After careful and deliberate consideration and in agreement with the Finance Committee's conclusion that none of the other potential strategic alternatives with respect to the Company were likely to substantially improve the Company's shareholder value and performance while remaining consistent with EMCC's primary focus as a mutual company on serving the best interests of its policyholders, EMCC's Board of Directors unanimously approved the offer to acquire all of the Company's shares of common stock not currently held by EMCC for $30.00 per share, which price represented a 26% premium over the Company's closing stock price of $23.83 on November 14, 2018 but which did not represent a control premium since the EMCC Board of Directors believed the proposed going-private transaction did not constitute a "change in control" of the Company. This initial offer price also represented the mid-point of the estimated fair value range for the Company's shares suggested by Boenning's financial analysis. EMCC's Board of Directors authorized the Finance Committee to negotiate the going-private transaction on behalf of the EMCC Board of Directors, and authorized Mr. Jacobs to lead the Finance Committee's discussions with the Company's Board and any special committee thereof that the Company's Board may form to consider EMCC's offer in connection with the proposed going-private transaction.

              Later on November 15, 2018, following the close of trading on the Nasdaq Global Select Market, Mr. Proctor, the Chairman of EMCC's Board of Directors, Mr. Jacobs and EMCC's Chief Legal Officer called Stephen A. Crane, the Chairman of the Company's Board, to advise him of EMCC's offer. Subsequent to the call, Mr. Proctor sent the following non-binding proposal letter to the Company's Board:

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EMPLOYERS MUTUAL CASUALTY COMPANY

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              On November 16, 2018, EMCC filed a Schedule 13D and issued a press release announcing that it had submitted the going-private proposal to the Company's Board.

              On November 20, 2018, the Company's Board formed the Special Committee which consisted of the Company's four independent directors, Mr. Crane, Peter S. Christie, Jonathan R. Fletcher and Gretchen H. Tegeler. The Company's Board chose these four directors because each was determined by the Company's Board to be independent and not affiliated with EMCC. The Company's Board authorized the Special Committee to exercise all power and authority of the Company's Board that may be delegated with respect to the potential transaction, including the power and authority to:

•

review, evaluate and negotiate the terms and conditions of a possible transaction with EMCC;



•

provide a recommendation with respect to whether a possible transaction with EMCC is fair to, and in the best interests of, the public shareholders; and



•

select and retain, at the Company's expense, one or more independent investment banking firms and independent legal counsel and to retain such other advisors, consultants and agents as the Special Committee deemed appropriate.

              Later on November 20, 2018, Messrs. Crane, Christie, Fletcher and Ms. Tegeler met in their capacity as members of the Special Committee with Nyemaster Goode, P.C., legal counsel to the Company's Board ("Nyemaste r "), to discuss certain organizational matters. Pursuant to the Company's by-laws, the Special Committee unanimously elected Mr. Crane to serve as Chairman of the Special Committee. The Special Committee discussed the engagement of independent legal counsel and authorized Mr. Crane, in his capacity as Chairman of the Special Committee, to contact several law firms for the purpose of gauging their interest and expertise in acting as legal counsel to the Special Committee and scheduling meetings at which the Special Committee could interview the firms and individual attorneys.

              On November 21, 2018, the Company issued a press release announcing the receipt of the going-private transaction proposal from the EMCC Board of Directors and filed a copy of EMCC's November 15, 2018 offer letter on a Current Report on Form 8-K with the SEC.

              On December 11, 2018, the Special Committee interviewed several law firms, including Willkie Farr, to consider the retention of a legal advisor to the Special Committee. After discussion, the Special Committee determined to retain Willkie Farr to represent the Special Committee based on a variety of factors, including the reputation and experience of Willkie Farr in mergers and acquisitions transactions in the insurance industry, its experience in representing special committees considering going-private transactions, and the absence of relationships creating a potential conflict of interest.

              On December 17, 2018, the Special Committee met with Willkie Farr to discuss the role of the Special Committee and to interview representatives of several potential financial advisors to the Special Committee, including Sandler O'Neill.

              On December 19, 2018, the Special Committee met and discussed the potential financial advisors they had interviewed. Following a discussion, the Special Committee determined to engage Sandler O'Neill, based on, among other factors, Sandler O'Neill's special committee experience, knowledge of the insurance industry and the absence of potential conflicts of interest that would prevent Sandler O'Neill from acting as independent financial advisor to the Special Committee.

              On December 27, 2018, the Company's Board held a meeting at which it adopted resolutions confirming, among other things, that the power granted to the Special Committee included the power to negotiate with EMCC a definitive agreement with respect to the going-private transaction, and

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confirmed that the Company's Board would not approve the going-private transaction unless it was recommended by the Special Committee.

              On January 8, 2019, the Special Committee met with its legal and financial advisors to discuss the process of evaluating and responding to EMCC's non-binding proposal letter, including due diligence relating to the going-private transaction, Sandler O'Neill's approach to financial modeling, a review of past correspondence between the Company's Board and EMCC in which the independent members of the Company's Board had communicated various ideas for improving the Company's return on equity, and the Special Committee's negotiating strategy. During the meeting, Willkie Farr advised the Special Committee as to the duties and responsibilities of its members, the powers and authorities that were granted by the Company's Board to the Special Committee in connection with the going-private transaction, and an overview of process with respect to the going-private transaction. Willke Farr informed the Special Committee of the role special committees played in similar transactions and the legal standards applied by courts to going-private transactions involving a controlling shareholder. The Special Committee discussed whether they should solicit proposals to buy the Company from any other potential buyers. Representatives of Sandler O'Neill noted that because the Company was structured as a majority-owned subsidiary of a mutual insurance company, without its own employees and with the vast majority of its "business" consisting of its share of EMCC's business pursuant to a pooling agreement that was terminable by EMCC, it was unlikely that there would be any other parties interested in acquiring the Company. In addition, representatives of Sandler O'Neill noted that EMCC had publicly stated that it was not willing to sell its stake in the Company, which would make any solicitation of offers from potential buyers difficult. Following extensive discussion, and noting that since EMCC's going-private transaction proposal was in the public sphere and therefore any other potential buyer was on notice and could come forward, the Special Committee determined not to actively solicit bids for the Company, but rather to focus on how to achieve either the maximum value for shareholders through the going-private transaction or increase value for shareholders through an alternative structure for the Company. The Special Committee directed Sandler O'Neill to initiate a due diligence investigation of the Company, including requesting various business and financial information and setting up management meetings to discuss the Company's business and prospects.

              On January 9, 2019, the Special Committee formally announced the retention of Willkie Farr as its independent legal counsel and Sandler O'Neill as its independent financial advisor in connection with its review, evaluation and response to the EMCC Board of Directors' non-binding proposal letter dated November 15, 2018.

              On January 10, 2019, the Special Committee distributed a preliminary information request list to the Company's management requesting detailed information regarding the Company's business, financial condition and actuarial and reserve matters.

              On January 17, 2019, the Company's management made the requested due diligence materials available to the Special Committee and Sandler O'Neill.

              On January 24, 2019, the Special Committee met with representatives of its legal and financial advisors to discuss a letter received by Mr. Crane, in his capacity as Chairman of the Special Committee, from Mr. Proctor, regarding an unsolicited proposal that EMCC had received in mid-December 2018, from a group of investors regarding a potential joint venture transaction with the Company. In the letter, Mr. Proctor informed Mr. Crane that EMCC's Board of Directors and Finance Committee had unanimously determined to reject the proposed joint venture. The Special Committee, Sandler O'Neill and Willkie Farr discussed the proposal and EMCC's rejection.

              On January 25, 2019, Gregory M. Shepard, a shareholder of the Company, sent a letter to the Company's Chief Legal Officer requesting that the Corporate Governance and Nominating Committee of the Company's Board nominate him as a candidate for election to the Company's Board and make him a member of the Special Committee.

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              On January 28, 2019, Mr. Shepard filed a Schedule 13D with the SEC reporting that he beneficially owned approximately 5.09% of the Company's common stock, and stating that he believed the Company's common stock was significantly undervalued.

              On January 31, 2019, Mr. Proctor and Mr. Jacobs spoke with Mr. Crane and informed him that, in response to inquiries and industry reports, EMCC was planning to issue a public statement clarifying that its non-binding proposal regarding the going-private transaction was not intended to suggest that EMCC would consider any transaction involving the merger of, or other similar transactions involving, EMCC with or into any third party. Mr. Proctor, on behalf of EMCC's Board of Directors, then sent the following letter to the Special Committee, which was subsequently filed by EMCC with a Schedule 13D/A with the SEC:

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EMPLOYERS MUTUAL CASUALTY COMPANY

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              Later on January 31, the Special Committee met with Willkie Farr and Sandler O'Neill to discuss the January 31, 2019 letter from EMCC, and determined that no response was necessary at that time.

              Between February 1, 2019 and March 5, 2019, representatives from Sandler O'Neill sent three emails to Mr. Shepard offering to meet with him so that the Special Committee could hear his views regarding the going-private transaction.

              On February 5, 2019, the Special Committee met with representatives of its legal and financial advisors and received a general status update, including a report on Sandler O'Neill's due diligence meetings with Company management. The Special Committee discussed strategies which could be used during negotiations with EMCC regarding the going-private transaction, including whether to propose an alternative structure for the Company which the Special Committee believed could enhance shareholder value.

              During the week of February 17, 2019, Mr. Crane and Mr. Jacobs discussed scheduling a meeting in the beginning of March, after the Special Committee completed its initial review of EMCC's non-binding proposal, to discuss the going-private transaction.

              On February 22, 2019, the Special Committee met with representatives of its legal and financial advisors to discuss initial views on the valuation of the Company and the Special Committee's response to EMCC's proposal regarding the going-private transaction. Representatives from Sandler O'Neill presented the specific metrics and calculations they used in evaluating the going-private transaction, and discussed their preliminary valuation analysis based on financial projections prepared by Company management. The Special Committee then discussed with Willkie Farr and Sandler O'Neill the viability of an alternative counter-proposal involving effecting structural changes to the Company's existing pooling arrangement with EMCC. The representatives from Sandler O'Neill discussed financial projections for the Company prepared by Sandler O'Neill in consultation with the Special Committee that it believed reflected the alternative structure and which could be used to negotiate a counter-proposal from the Special Committee. Those alternative projections were based on the projections prepared by Company management and reflected management's expectations regarding premium volume and losses, but reflected a lower expense ratio for the Company which could result from a ceding commission that would have to be negotiated with EMCC. The Special Committee also reviewed and discussed Mr. Shepard's request to join the Company's Board and the Special Committee. The Special Committee agreed to continue its discussion regarding Mr. Shepard's request, the Company's valuation and responding to EMCC's proposal at a subsequent meeting.

              On February 25, 2019, the Special Committee met with its legal and financial advisors to continue discussing Mr. Shepard's request to join the Company's Board and the Special Committee, Sandler O'Neill's materials on valuation, and the Special Committee's response to EMCC's proposal. Following a lengthy discussion, the Special Committee unanimously determined that they would not extend an offer to Mr. Shepard to join the Company's Board or the Special Committee at that time,

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but that it would invite him to share his views regarding the going-private transaction with the Special Committee, given his claim of expertise on valuation. The representatives from Sandler O'Neill reviewed the key points related to its materials on valuation and an alternative proposal to terminate the Company's existing pooling agreement with EMCC and replace it with a quota share reinsurance agreement (the "Alternative Proposal"). The Special Committee discussed that although the Alternative Proposal could not be implemented without EMCC's consent, presenting it to EMCC, along with a detailed explanation of how Sandler O'Neill and the Special Committee believed it could potentially increase value for all shareholders, including EMCC, would be beneficial. The Special Committee also considered that if EMCC rejected the Alternative Proposal, it could then consider other responses to the going-private transaction, having previously presented to EMCC the framework regarding its views on the potential value of the Company.

              Later on February 25, 2019, a representative from Willkie Farr called Mr. Shepard's legal counsel and informed him that the Special Committee had declined Mr. Shepard's request to join the Company's Board, but that the Special Committee would welcome the opportunity to meet with him to hear his views regarding the going-private transaction.

              On March 1, 2019, Mr. Shepard sent a letter to the Company's Chief Legal Officer indicating that he would like to meet with the Special Committee, Willkie Farr and Sandler O'Neill regarding the going-private transaction and indicating that he would consider making an offer to purchase EMCC and/or the Company, which he subsequently attached to an amendment to his Schedule 13D filed with the SEC.

              On March 5, 2019, a representative from Willkie Farr sent a letter to Mr. Shepard's legal counsel inviting Mr. Shepard to meet with the Special Committee in New York.

              Later on March 5, 2019, Mr. Crane and a representative from Sandler O'Neill met with Ronald Jean, a member of EMCC's Board of Directors designated to represent EMCC's Board of Directors and the Finance Committee in negotiations with the Special Committee, and Mr. Jacobs, with EMCC's and the Company's Chief Legal Officer attending the meeting as a neutral observer. Mr. Crane presented the Alternative Proposal and explained that if the Alternative Proposal were implemented, the Special Committee believed that the Company could achieve a return on equity more in-line with other companies in its publicly traded peer group. Mr. Crane and the representative from Sandler O'Neill also told Mr. Jean and Mr. Jacobs that they believed that, if the Alternative Proposal were put in place, it would result in a higher share price that would benefit the public shareholders, and would also benefit EMCC and its policyholders because the Company would have a correspondingly higher carrying value. In addition, Mr. Crane conveyed the Special Committee's view that the Alternative Proposal could continue to preserve EMCC's culture, distribution relationships and mix of business, as well as allowing the Company to remain a public company, which could create higher visibility for the EMC Insurance Companies and preserve access to public equity capital. The EMCC representatives asked questions regarding the Special Committee's Alternative Proposal, and told Mr. Crane they would consider the Alternative Proposal with EMCC's Board of Directors and provide a response to the Special Committee.

              On March 6 and 7, 2019, EMCC's Board of Directors met to review, on a preliminary basis, the Alternative Proposal presented to Messrs. Jean and Jacobs, directed the Finance Committee and EMCC's management to review the Alternative Proposal, including its likelihood of approval from the Iowa Insurance Division, and decided to hold a special meeting the following week to give the directors, the Finance Committee and EMCC's management additional time to consider the Alternative Proposal.

              On March 8, 2019, senior executives of EMCC met with the Deputy Commissioner – Supervision of the Iowa Insurance Division to discuss the Alternative Proposal and received an informal decision from the Deputy Commissioner – Supervision of the Iowa Insurance Division stating

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that, in his view, the Alternative Proposal was not fair and reasonable to EMCC's policyholders and would not likely receive regulatory approval. The Special Committee did not participate in this meeting.

              On March 13, 2019, EMCC's Board of Directors met with F&L to consider the Alternative Proposal. After review by the Finance Committee, EMCC's management advised the EMCC Board of Directors that the Alternative Proposal (i) would be difficult to implement, manage and execute; (ii) imposed risks, obligations and uncertainties on EMCC; (iii) would fail to solve the corporate organizational issues of managing the divergent financial and operational expectations of a publicly traded subsidiary company and those of its mutual parent company; and (iv) presented issues with obtaining Iowa Insurance Division regulatory approval. In addition, EMCC management advised the EMCC Board of Directors that they believed that the Alternative Proposal structure proposed by the Special Committee (a) was not in the best interest of EMCC's policyholders, (b) was based on financial projections which were premised upon revised expense allocations that were not in the best interests of EMCC's policyholders and would therefore not be agreed to by EMCC, and (c) did not address EMCC's limited ability to access the public equity markets (given the requirement that EMCC maintain ownership of at least 50.1% of the Company for the pool members to qualify for a group rating from A.M. Best Company), the small amount of public float and limited trading volume in the Company's common stock and the increasing costs associated with the Company remaining a public company. After a detailed discussion of the Alternative Proposal and EMCC's management's presentation on the Alternative Proposal, the EMCC Board of Directors decided that the Alternative Proposal would not be fair to, or in the best interests of, EMCC and its policyholders. As a result, EMCC's Board of Directors unanimously rejected the Alternative Proposal and directed Mr. Jacobs to convey such conclusions to the Special Committee, along with the EMCC Board of Directors' view that its $30.00 per share cash offer reflected a full and fair valuation of the Company and to reiterate the EMCC Board of Directors' willingness to proceed with the going-private transaction at $30.00 per share.

              On March 15, 2019, Mr. Jacobs called Mr. Crane to convey the EMCC Board of Directors' rejection of the Alternative Proposal and the reasons therefor. Mr. Jacobs reiterated the EMCC Board of Directors' willingness to engage in the going-private transaction at $30.00 per share and requested that the Special Committee provide a response to the EMCC Board of Directors' original proposal no later than March 22, 2019. Mr. Crane subsequently provided the members of the Special Committee with an update of EMCC's rejection of the Special Committee's counter-proposal.

              On March 18, 2019, Mr. Crane called Mr. Jacobs and proposed an in-person meeting to discuss the Special Committee's counter-proposal to the EMCC Board of Directors' $30.00 per share going-private transaction proposal. Mr. Jacobs and Mr. Crane agreed to meet in person on March 22, 2019.

              On March 20, 2019, the Special Committee met with its legal and financial advisors to discuss how to respond to EMCC's proposal of $30.00 per share. Following extensive discussion on the valuation of the Company with representatives of Sandler O'Neill, based on the Company's current business model as well as under the Alternative Proposal that EMCC rejected, as well as a discussion of both the financial projections provided by Company management and the alternative financial projections prepared by Sandler O'Neill in consultation with the Special Committee, the Special Committee authorized Mr. Crane to meet with Mr. Jacobs and propose a counter-offer of $40.00 per share.

              On March 22, 2019, Mr. Crane and a representative of Sandler O'Neill met with Mr. Jacobs and Mr. Jean, in Chicago, Illinois. At the meeting, Mr. Crane presented the Special Committee's counter-proposal of $40.00 per share, reflecting certain elements of Sandler O'Neill's financial analysis and the alternative financial projections prepared by Sandler O'Neill in February 2019 incorporating the Alternative Proposal and the resulting return on equity. The representative from Sandler O'Neill presented publicly available financial statistics of a selected group of property and casualty companies who primarily offer standard commercial lines of insurance products through independent agency

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distribution channels and publicly-traded downstream subsidiaries of mutual companies. The representative from Sandler O'Neill also presented data showing that the Company's common stock had historically traded at a lower multiple to its book value than the other companies in the peer group. The Sandler O'Neill representative also presented metrics regarding four prior acquisitions of downstream public stock subsidiaries of mutual insurance companies, two of which involved acquisitions of the mutual insurance company and the public company subsidiary by a third party, in which the average price paid was approximately two times book value, to support the Special Committee's proposed price of $40.00 per share. Mr. Jacobs and Mr. Jean indicated that they would present the Special Committee's counter-proposal to the Finance Committee and EMCC's Board of Directors and respond to the Special Committee within seven to ten days.

              On March 25, 2019, Mr. Shepard sent a letter to the Special Committee which included an analysis of why he believed EMCC's initial offer price of $30.00 per share was inadequate and urged the Special Committee to consider alternatives to the going-private transaction, which he subsequently attached as an amendment to his Schedule 13D filed with the SEC.

              On March 29, 2019, EMCC's Board of Directors met with F&L to consider the Special Committee's counter-proposal of $40.00 per share. After review by the Finance Committee, EMCC's management presented its analysis of the Special Committee's counter-offer and its belief that certain of the assumptions that formed the basis for the Special Committee's counter-proposal price were incorrect, including the Special Committee's methodology of (i) calculating net present value based on "modified company projections" that EMCC's management believed incorrectly utilized a projected combined ratio of 95% for the property and casualty insurance segment rather than the Company's historical average or the projections that had been prepared by the Company's management; (ii) comparing the Company to a stand-alone public company and, more specifically, a stand-alone publicly traded property and casualty insurance company; and (iii) applying a control premium. Specifically, as the Company is a "virtual" company with no employees or operations of its own, EMCC's management believed that the Special Committee's counter-proposal that assumed the Company was a stand-alone company was based on a company structure that did not exist. At the conclusion of the meeting, EMCC's Board of Directors unanimously rejected the Special Committee's counter-offer because they believed that the Company's current and future prospects did not justify such a valuation. The EMCC Board of Directors directed Mr. Jacobs to inform the Special Committee that the EMCC Board of Directors would be willing to increase its offer to $33.00 per share based on the valuation range of $25.00 - $35.00 per share prepared by Boenning.

              On April 1, 2019, Mr. Jacobs called Mr. Crane to inform him that EMCC's Board of Directors had rejected the Special Committee's counter-proposal of $40.00 per share, but was willing to raise its original proposal from $30.00 per share to $33.00 per share. Mr. Jacobs requested that the Special Committee provide a response to the EMCC Board of Directors' counter-proposal of $33.00 per share no later than April 4, 2019. Mr. Crane indicated that this price was likely insufficient, but that he would discuss EMCC's counter-proposal with the Special Committee.

              On April 3, 2019, the Special Committee met with representatives of Willkie Farr and Sandler O'Neill to discuss EMCC's counter-proposal of $33.00 per share. While the Special Committee noted that the counter-proposal reflected a ten percent increase over the initially offered price per share, the members of the Special Committee discussed their belief that they could maximize public shareholder value and negotiate a higher price. The Special Committee discussed, with input from Sandler O'Neill and Willkie Farr, how best to negotiate a higher price per share. Following an extensive discussion, the Special Committee directed Mr. Crane to respond to EMCC that it still believed $40.00 per share was an appropriate and fair price and that the Special Committee was not willing to lower the price per share.

              On April 4, 2019, Mr. Crane called Mr. Jacobs to advise him that the Special Committee had rejected the EMCC Board of Directors' counter-proposal of $33.00 per share and re-affirmed its

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counter-proposal of $40.00 per share to EMCC. Mr. Jacobs stated that, although he would discuss the Special Committee's response with EMCC's Board of Directors, he believed EMCC's Board of Directors would not react favorably to the Special Committee's reaffirmation because of the EMCC Board of Directors' previous view that the Special Committee's first counter-proposal of $40.00 per share was based on projections which were premised upon revised expense allocations that EMCC's Board of Directors believed were not in the best interests of EMCC's policyholders and rejected at the March 29, 2019 EMCC Board of Directors meeting.

              On April 5, 2019, the Special Committee met with its legal and financial advisors to discuss EMCC's reaction to the Special Committee's counter-proposal remaining at $40.00 per share.

              On April 10, 2019, EMCC's Board of Directors met with F&L to consider the Special Committee's re-affirmed counter-proposal of $40.00 per share. After a discussion of the factors above, including the negative impact on EMCC's financial position and the limitation on future surplus growth, EMCC's Board of Directors rejected the Special Committee's counter-proposal based on its belief that the Special Committee's justification for its proposed $40.00 per share was not supported by the Company's actual financial projections, used unsupported and faulty comparisons to stand-alone property and casualty insurance companies, improperly applied a control premium to a transaction that does not constitute a "change in control" and did not take into consideration that the Company is a "virtual company" with no employees or operations of its own. As a result, EMCC's Board of Directors authorized Mr. Jacobs to inform the Special Committee that (i) to avoid potential risks should the going-private transaction not be completed, it would increase its offer to a "best and final" price of $36.00 per share even though that price was above the estimated value range of $25.00 - $35.00 per share initially recommended by Boenning; (ii) the EMCC Board of Directors would not be willing to pursue a transaction at more than $36.00 per share; and (iii) any further counter offers by the Special Committee would be rejected.

              Later on April 10, 2019, Mr. Jacobs called Mr. Crane to advise him that EMCC's Board of Directors had rejected the Special Committee's re-affirmed counter-proposal of $40.00 per share. Mr. Jacobs said that the EMCC Board of Directors was willing to increase its offer to $36.00 per share, which price represented the EMCC Board of Directors' best and final offer. Mr. Jacobs also communicated that, if the Special Committee did not accept the final proposal of $36.00 per share, then EMCC would publicly announce the withdrawal of its offer to conduct the going-private transaction. Mr. Jacobs also requested that the Special Committee provide a response to the EMCC Board of Directors' final proposal of $36.00 per share no later than April 17, 2019.

              On April 11, 2019, the Special Committee met with its legal and financial advisors to discuss EMCC's proposed best and final offer of $36.00 per share. The Special Committee discussed the $36.00 per share price, noting that it represented a significant premium over the initially proposed price of $30.00 per share, the revised proposed price of $33.00 per share, the market price of $23.99 per share immediately before announcement of the proposed going-private transaction and the then-current market price of $31.60 per share. Following a lengthy discussion with representatives of Sandler O'Neill and Willkie Farr, the Special Committee determined to continue to try to increase the price and authorized Mr. Crane to make a counter-proposal of $38.00 per share.

              On April 16, 2019, Mr. Crane called Mr. Jacobs and made a counter-proposal of $38.00 per share based primarily on the Company's positive growth in book value per share in the first quarter of 2019. Based on the prior specific direction of the EMCC Board of Directors, Mr. Jacobs declined to increase the EMCC Board of Directors' offer based on the Company's first quarter results because EMCC's management believed the Company's full year 2019 financial performance guidance would be unchanged. In accordance with his prior directive from EMCC's Board of Directors, Mr. Jacobs called Mr. Crane and explained that EMCC would not pay more than $36.00 per share under any circumstances. Mr. Crane then requested that in lieu of $38 per share, a $1.00 per share special dividend should be paid in addition to the $36.00 per share the EMCC Board of Directors offered.

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              Later on April 16, 2019, Mr. Jacobs notified Mr. Crane that EMCC would not be willing to entertain paying a $1.00 special dividend as it believed that doing so was the equivalent to making an offer at $37.00 per share. Mr. Jacobs reiterated the EMCC Board of Directors' position that $36.00 per share was fair to the public shareholders and remained unchanged. Mr. Jacobs requested the Special Committee's acceptance or rejection of the EMCC Board of Directors' final offer by the end of the day on April 17, 2019.

              Late on April 16, 2019, Mr. Crane sent an email to Mr. Jacobs indicating that the Special Committee needed additional time to consider EMCC's best and final offer of $36.00 per share.

              On April 17, 2019, Mr. Jacobs called Mr. Crane to discuss timing. Mr. Crane stated that additional due diligence materials relating to the Company's first quarter results were required in connection with the Special Committee's evaluation of EMCC's final proposal of $36.00 per share, and conveyed that the Special Committee would not be able to respond until the week of April 22nd. In order to provide the Special Committee with an opportunity to review all available information, Mr. Jacobs agreed that a response on April 22, 2019 would be acceptable to EMCC.

              On April 18, 2019, the Company's management sent the requested due diligence materials relating to the Company's first quarter financial results to the Special Committee and Sandler O'Neill.

              On April 19, 2019, the Special Committee met with its legal and financial advisors to discuss various negotiation strategies. The Special Committee determined to continue to negotiate for a higher price, either directly or indirectly through the declaration and payment of a special dividend to the Company's shareholders prior to closing. The Special Committee authorized Mr. Crane to continue to negotiate with Mr. Jacobs to try to increase the price above $36.00 per share.

              Later on April 19, 2019, Mr. Crane and a representative from Sandler O'Neill called Mr. Jacobs and stated that the Special Committee was making a counter offer of $37.00 per share based upon the increase in the Company's book value per share as of March 31, 2019. Mr. Jacobs stated that while he was not authorized to agree to any price above $36.00 per share, he would discuss the Special Committee's request with the Finance Committee. Mr. Jacobs further stated that while he would discuss the request with the Finance Committee, EMCC's offer would be withdrawn if the Special Committee did not accept it by 5:00 pm on Monday, April 22.

              Late on April 19, 2019, the Finance Committee met with F&L to discuss the Special Committee's counter-proposal of $37.00 per share. After careful deliberation, the Finance Committee was unwilling to increase EMCC's proposed price above its best and final offer of $36.00 per share. The Finance Committee unanimously agreed to re-affirm the EMCC Board of Directors' best and final offer of $36.00 per share and requested that EMCC's management consider various strategic alternatives should the Special Committee fail to accept the EMCC Board of Directors' best and final offer.

              On April 20, 2019, a representative from Sandler O'Neill called Mr. Jacobs during which Mr. Jacobs re-affirmed the EMCC Board of Directors' best and final offer of $36.00 per share. Mr. Jacobs followed his call with the representative from Sandler O'Neill with an email to the representative from Sandler O'Neill and Mr. Crane detailing the Finance Committee's rejection of the Special Committee's counter-proposal of $37.00 per share.

              Later on April 20, 2019, the Special Committee met with its legal and financial advisors and discussed EMCC's unwillingness to increase its price above $36.00 per share. The Special Committee discussed the risks and consequences of not accepting the going-private transaction and the benefits afforded to the public shareholders by the "majority of the minority" shareholder approval condition to be included in the merger agreement. Following extensive discussion, including Sandler O'Neill's preliminary views on valuation, the Special Committee determined to accept $36.00 per share, subject

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to negotiation of a definitive merger agreement, if EMCC did not increase its price prior to the deadline.

              On April 22, 2019, Mr. Crane informed Mr. Jacobs that the Special Committee would accept EMCC's final proposal of $36.00 per share, subject to negotiation of an acceptable definitive merger agreement.

              On April 23, 2019, representatives of F&L and Willkie Farr held a telephonic meeting to discuss the draft merger agreement to be delivered by F&L, including certain provisions for the benefit of the public shareholders that Willkie Farr required to be included.

              Later on April 23, 2019, representatives of F&L distributed an initial draft merger agreement to Willkie Farr, which included a non-waivable "majority of the minority" shareholder approval condition and did not include a termination fee for termination of the merger agreement by the Company or EMCC or a financing condition.

              On April 30, 2019, the Special Committee met with representatives of its legal and financial advisors to review and evaluate the initial draft of the merger agreement. Willkie Farr indicated that the initial draft was constructive and included several seller-friendly provisions, including:

•

the absence of a financing condition and the inclusion of a specific performance provision requiring EMCC to close in the event that all of the closing conditions had been satisfied;



•

the fact that no termination fee or expense reimbursement was payable in the event that the Special Committee changed its recommendation to the public shareholders to vote in favor of the merger and EMCC subsequently terminated the merger agreement, or in any other circumstance;



•

the absence of a closing condition related to a certain percentage of shareholders exercising appraisal rights; and



•

the limited representations and warranties being requested from the Company.

Willkie Farr also noted that the initial draft of the merger agreement provided for a "no shop" provision after signing which would prohibit the Company or the Special Committee from soliciting bids from other potential acquirers. The Special Committee and representatives of Willkie Farr and Sandler O'Neill also discussed the non-waivable "majority of the minority" shareholder approval condition in the initial draft of the merger agreement which, by requiring a majority of the voting power of the Company not affiliated with EMCC to vote in favor of the going-private transaction, would allow the public shareholders the ability to review, evaluate and, if unattractive to them, effectively veto the going-private transaction. Willkie Farr noted to the Special Committee that the Company would not be required to pay any termination fee or expense reimbursement in the event of the failure of the "majority of the minority" condition.

              Later on April 30, 2019, representatives of F&L and Willkie Farr held a telephonic meeting to discuss the draft of the merger agreement, EMCC's financing plans and immediate sources of capital and the timing of the anticipated announcement of the Company's first quarter financial results.

              On May 1, 2019, Willkie Farr distributed a revised draft of the merger agreement to F&L. Willkie Farr's revised draft limited the scope of the Company's representations and warranties, and included a provision requiring EMCC to vote in favor of a competing proposal if the price offered were at least 110% of the merger consideration.

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              On May 3, 2019, F&L sent to Willkie Farr a revised draft of the merger agreement which, among other things, rejected the proposal that would require EMCC to support a competing proposal, but accepted the Company's limited representations and warranties.

              On May 6, 2019, the Special Committee met with Willkie Farr and Sandler O'Neill to discuss the revised draft of the merger agreement.

              On May 7, 2019, Willkie Farr sent a revised draft of the merger agreement to F&L, and negotiated the remaining terms, including the scope of alternative transaction proposals from third parties that could constitute a "superior proposal."

              Later on May 7, 2019, F&L sent a revised draft of the merger agreement back to Willkie Farr.

              On May 8, 2019, the Special Committee met with representatives of Willkie Farr and Sandler O'Neill to discuss the remaining open issues on the merger agreement. Following the meeting, Willkie Farr and F&L negotiated the remaining terms of the merger agreement, including the definition of a "superior proposal" that would allow the Special Committee to change its recommendation to the public shareholders that they vote in favor of the merger.

              Later on May 8, 2019, the Special Committee met again with Willkie Farr and Sandler O'Neill to consider the going-private transaction, including the merger agreement. Willkie Farr provided a summary of the process that the Special Committee had undertaken since it was formed and reviewed the fiduciary duties and responsibilities of the Special Committee. The Special Committee again discussed the terms of the going-private transaction, the risks and consequences of rejecting it, and the fact that the public shareholders would be able to accept or reject the going-private transaction pursuant to the "majority of the minority" shareholder approval condition in the merger agreement. After further discussion, at the request of the Special Committee, Sandler O'Neill issued an oral opinion, which was subsequently confirmed by delivery of a written opinion dated May 8, 2019, to the effect that, as of such date, and based upon and subject to the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Sandler O'Neill in preparing its opinion, the merger consideration was fair, from a financial point of view, to the public shareholders. After further discussion, the Special Committee unanimously determined that the merger agreement, the merger and the other transactions contemplated by the merger agreement were fair, advisable and in the best interests of the Company and the public shareholders and recommended that the Company's Board approve the merger, the merger agreement and the transactions contemplated thereby.

              Later on May 8, 2019, following the Special Committee meeting, the Company's Board (with Mr. Kelley recusing himself) met with Nyemaster and considered the going-private transaction and the recommendation of the Special Committee and resolved that the merger agreement, the merger and the other transactions contemplated by the merger agreement were fair, advisable and in the best interests of the Company and the public shareholders and that the merger agreement, the merger and the other transactions contemplated thereby be recommended to the Company's shareholders for adoption. Thereafter, and following a further review of the fiduciary duties of the directors, the Company's Board approved the merger, the merger agreement and the transactions contemplated thereby.

              Later on May 8, 2019, the EMCC Board of Directors met to receive an update regarding the developments on the negotiation of the merger agreement. Representatives of F&L reviewed the terms of the merger agreement and the negotiation process with representatives of Willkie Farr. Following a discussion of the financial and other terms of the proposed transaction, the EMCC Board of Directors determined that the merger agreement and the transactions contemplated thereby, including the merger, were in the best interests of EMCC and its policyholders and approved, authorized and adopted the merger agreement and the transactions contemplated thereby, including the merger.

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              Late on May 8, 2019, after the close of trading on the Nasdaq Global Select Market, EMCC, the Company and Merger Sub, executed the merger agreement.

              On the morning of May 9, 2019, EMCC and the Company issued a joint press release announcing the execution of the merger agreement.

Reasons for the Merger; The Special Committee's Position as to the Fairness of the Merger to Public Shareholders; Recommendations of the Special Committee

              The Company's Board formed the Special Committee consisting of all of its directors other than Mr. Kelley, each of whom was determined by the Company's Board to be independent and not affiliated with EMCC, consisting of Stephen A. Crane (Chairman), Peter S. Christie, Jonathan R. Fletcher and Gretchen H. Tegeler. The Special Committee was granted by the Company's Board the authority to review, evaluate and negotiate the merger, as well as potential alternatives thereto, and make a recommendation to the Company's Board with respect to the merger. In order to avoid any potential conflict of interest, Mr. Kelley recused himself from all of the Company's Board's and EMCC's Board of Directors' respective discussions, considerations, recommendations and votes with respect to the proposed transaction. The Special Committee retained its own independent financial and legal advisors who have extensive experience with transactions similar to the merger and who assisted the Special Committee in evaluating the merger and in negotiating with EMCC, Merger Sub and their advisors.

              The Special Committee, acting with the advice and assistance of its independent legal and financial advisors, evaluated and negotiated the merger, including the terms and conditions of the merger agreement, and determined that the merger agreement, the merger and the other transactions contemplated by the merger agreement are fair to, advisable and in the best interests of the public shareholders. The Special Committee unanimously recommended to the Company's Board that it declare and determine that the merger agreement, the merger and the other transactions contemplated by the merger agreement are fair, advisable and in the best interests of the public shareholders, approve the terms of the merger agreement, the merger and the other transactions contemplated by the merger agreement, and direct that the merger agreement be submitted to holders of the common stock for adoption as contemplated by the merger agreement.

              Over the course of approximately six months, the Special Committee held 23 meetings to discuss, among other things, the transaction proposed by EMCC, other strategic alternatives, and the merger agreement and the transactions contemplated thereby, including the merger. On a number of occasions, the Special Committee discussed the price that was proposed and other substantive issues raised by the merger agreement.

              In evaluating the fairness and advisability of the merger agreement, the Special Committee considered information with respect to the Company's financial condition, results of operations, businesses, competitive position and business strategy, on a historical and a prospective basis, as well as current industry, economic and market conditions and trends. In reaching their determinations and making their recommendations, both the Special Committee and the Company's Board relied on the Company's and EMCC's management to provide factual financial information, projections and assumptions, based on the best information available to management at that time, as the starting point for their analyses. The Special Committee considered the financial analyses and fairness opinion of Sandler O'Neill, which the Special Committee adopted as its own, in reaching its determination as to the advisability and fairness of the merger agreement (including the merger consideration) and the merger.

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              The Special Committee also considered the following factors as being generally supportive of its determination and recommendations:

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the current and historical market prices of the common stock, including the facts that the per share merger consideration of $36.00 represents a premium of approximately 50% over the closing price of the Company's common stock of $23.99 on November 15, 2018 (the unaffected share price prior to the public announcement of EMCC's initial proposal), and approximately 16% over the 52-week closing high price of the Company's common stock prior to the public announcement of EMCC's initial proposal;



•

the fact that the per share merger consideration of $36.00 represents a 27% premium to the $28.44 book value per share of the Company as of March 31, 2019 and an increase of 20% over EMCC's originally proposed purchase price of $30.00 per share;



•

the business, operations, financial condition, earnings and prospects of the Company, in light of the fact that EMCC owns a majority of the Company's common stock and therefore controls the Company and was unwilling to implement the Special Committee's proposed alternative structure for the Company;



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the Special Committee's consideration of the risks of continuing as an independent public company controlled by EMCC, including the risk that EMCC would not approve strategic alternatives to the merger or agree to implement structural changes to the Company designed to enhance value for the public shareholders and the risk that EMCC could take other actions, including amending the pooling agreement or purchasing shares in the open market, that could result in a lower value for the public shareholders;



•

the belief by the Special Committee that the merger consideration of $36.00 per share was the highest price that could be obtained from EMCC, that the terms of the merger agreement were the most favorable terms EMCC would be willing to agree to and that further negotiations would run the risk of causing EMCC to abandon the transaction altogether in which event the public shareholders would likely lose the opportunity to accept the premium being offered;



•

the risk that the market price of the common stock would significantly decrease if there was no transaction with EMCC;



•

the fact that since the public announcement of the initial proposal from EMCC, none of the Company, the Special Committee or any of the Special Committee's independent legal and financial advisors received any inbound inquiries from third parties related to potential alternative acquisition proposals, other than certain statements made by Mr. Shepard which did not result in an offer;



•

that the Special Committee was able to negotiate an effective increase in the merger consideration of $6.00 per share from the $30.00 per share consideration offered in the initial proposal from EMCC, representing an increase of 20%;



•

the Special Committee's belief that it was unlikely that any other transaction with a third party could be consummated at this time in light of the fact that the Company's business consists primarily of a pooling agreement with EMCC and the position of EMCC that they would not agree to any other transaction involving a sale or merger of EMCC;

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•

the fact that the public shareholders will receive cash for their shares and will therefore have immediate liquidity and receive certain value for their shares at $36.00 per share;



•

the oral opinion delivered by Sandler O'Neill to the Special Committee, which was subsequently confirmed by a written opinion dated May 8, 2019, that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Sandler O'Neill in preparing its opinion, the merger consideration of $36.00 per share of common stock of the Company was fair, from a financial point of view, to the public shareholders, as more fully described in the section entitled "— Opinion of the Financial Advisor to the Special Committee ";



•

the terms of the merger agreement, including:



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there is no termination fee or expense reimbursement payable to EMCC under any circumstances in connection with the termination of the merger agreement;



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the inclusion of provisions that permit (i) the Special Committee, under specified circumstances, to change or withdraw its recommendation with respect to the merger agreement and the merger and (ii) the Special Committee, under specified circumstances, to respond to unsolicited proposals to acquire the Company to the extent the Special Committee determines in good faith, after consultation with its outside financial advisors and outside legal counsel, that failure to do so would be inconsistent with its fiduciary duties;



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the likelihood that no governmental authority would prevent or materially delay the merger under any insurance law;



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the fact that none of the obligations of any of the parties to complete the merger are conditioned upon receipt of financing;



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the rights of public shareholders to exercise their statutory appraisal rights and the absence of any condition regarding the percentage of public shareholders that exercise such rights; and



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other terms and conditions of the merger agreement, as discussed in the section entitled " The Merger Agreement ", which the Special Committee, after consulting with Willkie Farr, considered to be reasonable and consistent with relevant precedent transactions.

              The Special Committee also considered a number of factors discussed below, relating to the procedural safeguards that it believes were and are present to ensure the fairness of the merger. The Special Committee believes these factors support its determinations and recommendations and provide assurance of the procedural fairness of the merger to the public shareholders:

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the non-waivable requirement that the merger agreement be approved by the affirmative vote of the holders of at least a majority of the outstanding Company common stock owned by the public shareholders;



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the authority granted to the Special Committee by the Company's Board to negotiate the terms of a definitive merger agreement with respect to EMCC's initial proposal, or to determine not to pursue any transaction involving EMCC, and the fact that the resolutions establishing the Special Committee provided that the Company's Board

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would not approve any transaction involving EMCC that was not approved and recommended by the Special Committee;

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the fact that the Special Committee consists solely of independent and disinterested directors;



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the fact that the members of the Special Committee were adequately compensated for their services and that their compensation was in no way contingent on their approving the merger agreement and taking the other actions described in this proxy statement;



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the fact that the Special Committee (i) held 23 meetings and met regularly to discuss and evaluate the various proposals from EMCC and (ii) that each member of the Special Committee was actively engaged in the negotiation process on a regular basis;



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the fact that the Special Committee retained and received the advice of (i) Sandler O'Neill as its independent financial advisor and (ii) Willkie Farr as its independent legal advisor;



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the fact that the merger agreement cannot be amended without the approval of the Special Committee; and



•

the fact that the merger consideration was the product of extensive negotiations between the Special Committee and its advisors, on the one hand, and EMCC, on the other hand.

              In light of the procedural safeguards to the public shareholders described above, the Special Committee did not consider it necessary to retain an unaffiliated representative to act solely on behalf of the public shareholders for purposes of negotiating the terms of the merger agreement or preparing a report concerning the fairness of the merger agreement and the merger.

              In the course of reaching its determinations and making its recommendations, the Special Committee also considered the following countervailing factors concerning the merger agreement and the merger:

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the fact that the Company and the Special Committee are prohibited from soliciting competing proposals from other bidders who may be willing to pay a higher price per share;



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the fact that the public shareholders will have no ongoing equity participation in the Company following the merger, and that such stockholders will cease to participate in the Company's future earnings or growth, if any, and will not participate in any potential future sale of the Company to a third party;



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the risk that, while the merger is expected to be completed, there can be no guarantee that all conditions to the parties' obligations to complete the merger will be satisfied, and as a result, it is possible that the merger may not be completed even if approved by the holders of a majority of the outstanding shares of common stock held by public shareholders; and



•

the risks and costs to the Company of the pendency of the merger or if the merger does not close, including the potential effect of the diversion of management and the substantial expenses which the Company will have incurred.

              The Special Committee also considered the financial analyses and the opinion of Sandler O'Neill, which the Special Committee adopted as its own, among other factors considered, in reaching its determination as to the fairness of the transactions contemplated by the merger agreement. As part of

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making its determination regarding the fairness of the merger, the Special Committee relied upon the Company's management's projections as described in the section entitled " — Financial Projections Prepared by the Company " and assumed that such plan had been reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of the Company of the financial performance of the Company for the periods indicated therein.

              This discussion of the information and factors considered by the Special Committee in reaching its conclusions and recommendation includes all of the material factors considered by the Special Committee, but is not intended to be exhaustive. In view of the wide variety of factors the Special Committee considered in evaluating the merger agreement and the transactions contemplated thereby, including the merger, and the complexity of these matters, the Special Committee did not find it practicable, and did not attempt, to quantify, rank or otherwise assign relative weight to the factors. In addition, different members of the Special Committee may have given different weight to different factors.

              In reaching its determination and making its recommendation, the Special Committee did not consider the liquidation value of the Company because it considered the Company to be a viable, going concern and therefore did not consider liquidation value to be a relevant valuation method. In addition, the Special Committee did not consider firm offers made by unaffiliated persons during the last two years, as no such offers were made during the last two years. While the Special Committee did not believe that there is a single method for determining "going concern value," the Special Committee believes that each of Sandler O'Neill's valuation methodologies represented a valuation of the Company as it continues to operate its business, and such analyses could be collectively characterized as forms of going concern valuations.

              Because all of the members of the Company's Board are also members of the Special Committee, other than Mr. Kelley, who, in order to avoid any potential conflict of interest, recused himself from all of the Company's Board's and EMCC's Board of Directors' respective discussions, considerations, recommendations and votes with respect to the proposed transaction, the Company's Board's determination that the merger agreement and the merger are advisable, fair to and in the best interests of the public shareholders, was based solely on the analysis of the Special Committee described above.

Recommendation of the Company's Board

              Acting on the recommendation of the Special Committee (which recommendation the Company's Board expressly adopted), the Company's Board has, by the unanimous vote of its members (other than Mr. Kelley, who recused himself in order to avoid any potential conflict of interest), adopted a resolution adopting the merger agreement and the merger. With Mr. Kelley's recusal from the Company's Board's consideration of the merger, the members of the Company's Board and the Special Committee are the same. The Company's Board, based on the recommendation of the Special Committee, recommends that the public shareholders vote "FOR" the merger agreement proposal.

              The Company's Board determined to limit its recommendation to approve the merger agreement proposal to the public shareholders and to not extend such recommendation to EMCC on the basis that the interests of EMCC, as a shareholder, materially differed from the public shareholders and the belief of the Company's Board that it would not be appropriate to recommend to EMCC that EMCC vote to approve the merger agreement proposal in which it effectively was the purchaser of the common stock to be converted in the merger.

              If the merger is consummated, members of the Company's Board, including members of the Special Committee, will be entitled to receive an aggregate of approximately $12.2 million, consisting of merger consideration, approximately $1.8 million of which would be received by members of the Special Committee. See " — Interests of Certain Persons in the Merger " beginning on page [ · ].

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Financial Projections Prepared by the Company

              The Company does not as a matter of course make public financial projections beyond its normal practice of releasing current fiscal year guidance regarding non-GAAP operating income because, among other reasons, the uncertainty, unpredictability and subjectivity of the underlying assumptions and estimates. However, five-year projections prepared in November 2018 were made available to EMCC, Merger Sub and Boenning in November 2018 in connection with their respective consideration and evaluation of the merger, and in the case of the Special Committee and Sandler O'Neill, promptly after request in January 2019. Due to the length of time since EMCC's initial November 2018 proposal to acquire the shares of common stock from the public shareholders, Sandler O'Neill requested updated projections through the fourth quarter of 2018 in February 2019 and through first quarter of 2019 in May 2019 (which neither set of projections Boenning reviewed in connection with its November 2018 financial analysis).

              The Company has included these financial projections in this proxy statement to give shareholders access to this information, but not to influence their decision whether to vote for or against the merger agreement proposal. The inclusion of this information should not be regarded as a reliable prediction of future results.

              The financial projections are subjective in many respects. Although presented with numerical specificity, the financial projections reflect and are based on numerous varying assumptions and estimates with respect to industry performance, general business, economic, political, market and financial conditions, competitive uncertainties, and other matters, all of which are difficult to predict and beyond the Company's control. As a result, there can be no assurance that the projections of the Company's future performance will be realized or that actual results will not be significantly higher or lower than projected. The financial projections are forward-looking statements and should be read with caution. See " Cautionary Statement Concerning Forward-Looking Information " on page [ · ] and the section entitled " Risk Factors " in the Company's Annual Report on Form 10-K for the year ended December 31, 2018, as amended, which is incorporated by reference in this proxy statement. The financial projections cover multiple years and such information by its nature becomes less reliable with each successive year. In addition, the financial projections will be affected by the Company's ability to achieve strategic goals, objectives and targets over the applicable periods.

              By including the financial projections in this proxy statement, neither the Company nor any other person (or their respective representatives) has made or is making any representation to any person regarding the information included in the projections or the ultimate performance of the Company compared to the information contained in the projections. Similarly, the Company has not made any representation to EMCC or Merger Sub, in the merger agreement or otherwise, concerning the projections.

              The financial projections were not prepared with a view toward public disclosure or toward complying with generally accepted accounting principles (GAAP), the published guidelines of the SEC regarding projections or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial projections. The Company's independent registered public accounting firm has not examined or compiled any of the financial projections, expressed any conclusion or provided any form of assurance with respect to the financial projections and, accordingly, assumes no responsibility for them. The financial projections should be evaluated, if at all, in conjunction with the historical financial statements and other information regarding the Company contained in the Company's public filings with the SEC.

              Readers of this proxy statement are cautioned not to place undue reliance on the specific portions of the financial projections set forth below. No one has made or makes any representation to any shareholder regarding the information included in these financial projections.

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              Except as noted in the following sentence, the financial projections do not take into account any circumstances or events occurring after the date they were prepared. The financial projections prepared in November 2018 and February 2019 do not include any expenses associated with the proposed merger, however, the financial projections prepared in May 2019 do include $4.6 million of pre-tax estimated transaction expenses. Further, the financial projections do not take into account the effect of any failure of the merger to occur and should not be viewed as accurate or continuing in that context. Except as may be required by applicable securities laws, the Company does not intend to update, or otherwise revise, the financial projections or the specific portions presented to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the assumptions are shown to be in error.

              For the foregoing reasons, as well as the bases and assumptions on which the financial projections were compiled, the inclusion of specific portions of the financial projections in this proxy statement should not be regarded as an indication that such projections are an accurate prediction of future events, and they should not be relied on as such.

Financial Projections Prepared in November 2018

              Set forth below are the five-year projections that EMCC, Merger Sub and Boenning considered in their respective consideration and evaluation of the merger that were prepared in November 2018. The financial projections set forth below do not reflect expenses anticipated to be incurred in connection with a digital transformation project commenced in 2018 that will replace the majority of EMCC's current legacy systems. While the total cost of the project had not yet been determined at the time these projections were prepared, the Company's management estimates that the Company's portion of the pre-tax expense will be approximately $28.0 million over the next five years.

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Financial Projections Prepared in February 2019

              The financial projections prepared in November 2018 were provided to the Special Committee and Sandler O'Neill on January 24, 2019. However, at a due diligence meeting on January 25, 2019, Company management advised Sandler O'Neill that the financial projections prepared in November 2018 were in the process of being updated to reflect the fourth quarter financial information and the underlying business trends and such revised financial projections would be made available to the Special Committee and Sandler O'Neill within a short period of time. The updated financial projections prepared in February 2019 (which Boenning did not review in connection with its November 2018 financial analysis), which were taken into account by the Special Committee and Sandler O'Neill in their respective consideration and evaluation of the merger, are set forth below. The financial projections set forth below do not reflect expenses anticipated to be incurred in connection with a digital transformation project commenced in 2018 that will replace the majority of EMCC's current legacy systems. While the cost of the project had not yet been determined at the time these projections were prepared, the Company's management estimates that the Company's portion of the pre-tax expense will be approximately $28.0 million over the next five years.

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Financial Projections Prepared in May 2019

              Due to the length of time since EMCC's initial November 2018 proposal, as well as the updated financial projections provided in February 2019, Sandler O'Neill requested updated projections through the first quarter of 2019 in May 2019 (which Boenning did not review in connection with its November 2018 financial analysis), which are also set forth below. The financial projections set forth below that were prepared in May 2019 include an estimated approximately $28.0 million of expenses over the next five years that will be incurred in connection with a digital transformation project commenced in 2018 that will replace the majority of EMCC's current legacy systems. While the total cost of the project had not yet been finalized at the time these projections were prepared, the Company's management estimated that the Company's portion of the pre-tax expense will be approximately $28.0 million over the next five years.