IN THE COMMONWEALTH COURT OF PENNSYLVANIA. Ancillary Matter Cover Sheet

Transcription

1 IN THE COMMONWEALTH COURT OF PENNSYLVANIA Caption of underlying insurance insolvency case: : : IN Re: Reliance Insurance : : Company in Liquidation : No. 1 REL 2001 Chief Clerk Use Only: Ancillary Matter Docket No. Time Stamp Ancillary Matter Cover Sheet The information collected on this form is used solely for court administration purposes. This form does not supplement or replace the filing and service of pleadings or other papers as required by law or rules of court. Commencement of Ancillary Matter: Complaint X Application Objection Other Lead Plaintiff/Petitioner/Objector Name: Carlson Holdings, Inc. and NAFCO Insurance Co., Ltd. Lead Defendant/Respondent Name: Reliance Insurance Company in Liquidation Plaintiff/Petitioner/Objector Attorney s Name: Douglas Y. Christian, Esquire Benjamin M. Schmidt, Esquire Richard B. Allyn, Esquire Check here if you have no attorney (are a Self-Represented [Pro Se] Litigant) Nature of the Ancillary Matter: Objection to Notice of Determination to Proof of Claim Nos(s). (List all proof of claim numbers included in this Objection. Attach a separate sheet if necessary.) Action by Liquidator X* Action by third party, as approved by the Court on (date) *Unopposed Application to Intervene to File Complaint for Declaratory Judgment RE: Cut- Through Request Related Matters: Are there any related or ancillary matters, including unresolved proofs of claim pending before the Liquidator, in this court or any other federal or state court or agency? Yes X No If yes, attach a list indicating the court or agency, caption, and docket or proof of claim number(s). DMEAST # v3

2 IN THE COMMONWEALTH COURT OF PENNSYLVANIA Carlson Holdings, Inc. and NAFCO : Insurance Company, Ltd., : Plaintiff/Applicants : : v. : : No. Reliance Insurance Company : In Liquidation, : Defendant/Respondent : : (Ancillary matter to IN RE: Reliance : Insurance Company In Liquidation, : No. 1 REL 2001) : ORDER AND NOW, this day of, 2012, upon consideration of the Unopposed Application to Intervene to File Complaint for Declaratory Judgment of Applicants Carlson Holdings, Inc. and NAFCO Insurance Company, Ltd., it is hereby ORDERED that: 1. The Application is granted and Applicants are permitted to intervene on the discrete controversy presented by their Complaint for Declaratory Judgment. 2. The Complaint for Declaratory Judgment attached as Exhibit A to the Application is deemed filed as of September 7, 2012, and the Chief Clerk is directed to docket it and assign it an ancillary matter number in the REL docket. BY THE COURT: Bonnie Brigance Leadbetter, Judge DMEAST # v3

3 IN THE COMMONWEALTH COURT OF PENNSYLVANIA Carlson Holdings, Inc. and NAFCO : Unopposed Application to Intervene Insurance Company, Ltd., : to File Complaint for Declaratory Plaintiff/Applicants : Judgment of Carlson Holdings, Inc. : and NAFCO Insurance Co., Ltd. v. : Re: Cut-Through Request : Reliance Insurance Company : In Liquidation, : No. Defendant/Respondent : : (Ancillary matter to IN RE: Reliance : Insurance Company In Liquidation, : No. 1 REL 2001) : UNOPPOSED APPLICATION TO INTERVENE TO FILE COMPLAINT FOR DECLARATORY JUDGMENT OF CARLSON HOLDINGS, INC. AND NAFCO INSURANCE CO., LTD. Pursuant to Pennsylvania Rules of Appellate Procedure 123 and 3775, Applicants Carlson Holdings, Inc. ("Carlson") and NAFCO Insurance Company, Ltd. ("NAFCO") (collectively "Applicants") respectfully request leave of Court to file the attached Complaint for Declaratory Judgment ("Complaint"), and to be granted limited intervention in this proceeding on the discrete controversy presented by their proposed Complaint relating to the Liquidator's denial of their cut-through request. In support of this Unopposed Application to Intervene to File Complaint For Declaratory Judgment ("Application"), Applicants state as follows: 1. Carlson is a Minnesota company engaged in the business of hospitality with its principal place of business located at 701 Carlson Parkway, Minnetonka, MN NAFCO is Carlson's wholly-owned captive insurer and is a Bermuda company engaged in the business of insurance with its principal place of business located at Victoria Hall, 11 Victoria Street, Hamilton HM 11, Bermuda. DMEAST # v3

4 3. Reliance Insurance Company in Liquidation ("Reliance") is a Pennsylvania domestic stock property and casualty insurance company in liquidation with its principal place of business located at 1601 Cherry Street, Philadelphia, PA On October 2, 2012, counsel for Michael F. Consedine, Insurance Commissioner of the Commonwealth of Pennsylvania in his capacity as Reliance's statutory Liquidator (the "Liquidator") confirmed that the Liquidator does not to oppose the Application Permitting Applicants to intervene is consistent with the long-standing procedure in In Re: Reliance Insurance Company In Liquidation authorizing the filing of objections as-ofright in response to a decision by the Liquidator denying a cut-through request for direct payment of reinsurance proceeds. See Order of this Court entitled "In Re: Liquidator's Petition to Approve Guidelines Regarding the Direct Payment of Reinsurance Proceeds Pursuant to 40 P.S " entered on April 26, 2002 (the "Guidelines"). 6. The Complaint that Applicants will file if permitted to intervene is attached hereto as Exhibit A, and is incorporated herein as if set forth at length. 7. As explained in greater detail below and in the Complaint, Applicants seek limited intervention in order to pursue a declaratory judgment that: (a) Carlson and NAFCO are entitled to directly pay reinsurance proceeds with respect to incurred loss workers compensation insurance policies issued by Reliance to Carlson during policy years 7/1/92-7/1/93 through 7/1/98-7/1/99; and (b) approval of Carlson's and NAFCO's cut-through request cannot be 1 On September 7, 2012, Applicants filed with this Court Applicants' objections to the Liquidator s denial of their direct payment request. The Chief Clerk requested that Applicants resubmit their objections in the form of an application for limited intervention to file a complaint for declaratory judgment under Pa. R.A.P. 3775(c)(2), and stated that the original filing date would be preserved if the application to intervene was filed within 30 days of September 21, DMEAST # v3 2

5 conditioned on NAFCO's assumption of Reliance's unreinsured exposure for incurred losses over NAFCO's $500,000 limit. 8. As explained in more detail in the Complaint, if permitted to intervene, Applicants will assert that they are entitled to approval of their cut-through request because, inter alia: (i) the Reinsurance Agreement between NAFCO and Reliance ("Reinsurance Agreement") contains a clear authorization for NAFCO to directly cut-through and pay Carlson's incurred loss workers compensation insurance claims; (ii) Carlson's Informed Consent to Substitution of Reliance ("Consent") and NAFCO's Assumption and Substitution by Reinsurer ("Assumption") explicitly confirm NAFCO's agreement to assume the direct coverage obligation it reinsured; (iii) applicable Pennsylvania precedent and the Guidelines are satisfied by Carlson's Consent and NAFCO's Assumption of direct coverage of its reinsured obligations; (iv) NAFCO is Carlson's wholly-owned captive insurer, and given the arrangement of the reinsured incurred loss program, equity requires that direct access be permitted; and (v) it is improper for the Liquidator to condition approval of Applicants' cut-through request on NAFCO's assumption of Reliance's non-reinsured obligations. 9. On May 28, 2010, over eight-and-a-half years after Reliance entered liquidation, the Liquidator sent Carlson an demanding that Carlson have NAFCO pay the Liquidator the equivalent of all of the Carlson's claims that NAFCO covered post-liquidation. The May 28, states in pertinent part: The captive has funded through the tpa approx. $316,294 in losses post liquidation as further discussed Nafco Insurance Company will need to seek and secure a Cut Through otherwise Reliance would bill the $316k to Nafco as reinsurance losses due the estate Once the Cut Through is approved by the Court we can reduce the captive collateral by the $316,446. DMEAST # v3 3

6 10. On July 12, 2011, the Liquidator sent Carlson and NAFCO an attaching a "bill for expenses incurred by the estate of [Reliance] in the administration of the Carlson deductible collateral." The further states that "[a]ll collateral reductions or draws subsequent to liquidation (10/31/01) are subject to ACT 46. Under ACT 46 [], which was signed into Pennsylvania law on June 21, 2004, Reliance is authorized to charge as reimbursement to the estate for expenses or administration up to 3% of the amount of collateral returned or drawn for deductible reimbursements." 11. The July 12, also states that "[t]he Reliance Collateral Review Committee approved a reduction of $201,335 from $1,775,647 to $1,574,312 for direct collateral and $140,242 from $1,195,782 to $1,055,540 for the captive contingent on payment of the attached ACT 46 expense billing of $5,235." 12. The July 12, also states that "the $1,055,540 remaining in the captive collateral includes $381,088 for captive losses paid post liquidation. The remaining $381,088 can be released in the event you secure a Cut Through." 13. On October 7, 2011, counsel for Carlson and NAFCO sent a letter to counsel for Reliance explaining that the Liquidator's demand that NAFCO pay $381,088 in collateral representing "captive losses paid post liquidation" should be withdrawn because NAFCO had fully satisfied its reinsurance obligations by paying all amounts requested into the Loss Fund Account of Reliance's third-party administrator, Crawford & Company and its successor (collectively, "Crawford"). The October 7, 2011 letter further explained that pursuant to the Reinsurance Agreement, the Guidelines, and applicable Pennsylvania precedent, in order for NAFCO to obtain cut-through status, NAFCO is only required to assume Reliance's liability to Carlson for claims covered by NAFCO's direct coverage obligation. DMEAST # v3 4

7 14. On April 6, 2012, counsel for Carlson and NAFCO delivered a letter to counsel for Reliance formally requesting cut-through status. In support of the cut-through request, Carlson and NAFCO resubmitted their October 7, 2011 letter request. 15. Carlson and NAFCO's April 6, 2012 letter to Reliance enclosed: (i) signed copies of Carlson's Consent with copies of the relevant incurred loss workers compensation insurance policies issued by Reliance to Carlson; and (ii) NAFCO's Assumption with an exemplar copy of the initial Reinsurance Agreement. 16. On August 8, 2012, counsel for Reliance on behalf of the Liquidator delivered a letter to counsel for Carlson and NAFCO stating that: [Reliance] wishes to advise you that your request for direct payment of insurance proceeds for those certain contracts as requested in accordance with your letter of May 18, 2012 (enclosing executed copies of the Informed Consent to Substitution of Reliance and Assumption and Substitution by Reinsurer) pursuant to 40 P.S and the Guidelines established by Order of the Commonwealth Court of Pennsylvania entered April 26, 2002 has been denied for the following reason(s): The proposed payments would not satisfy the reinsurer's direct coverage obligation. The reinsurer has not submitted documentary proof of its unequivocal assumption of Reliance's coverage obligations to the insured. 17. Accordingly, Carlson and NAFCO seek leave to intervene to pursue a declaratory judgment regarding the rights of the parties with respect to Carlson's and NAFCO's cut-through request. If permitted to intervene, Applicants will file the proposed Complaint as set forth in Exhibit A. Applicants will also brief the legal issues involved at the appropriate time and fully participate in any hearing on the discrete controversy presented by the Complaint. DMEAST # v3 5

8 18. Applicants are permitted to intervene under Pa. R.A.P. 3775(c)(2) because they have a sufficient interest in the proceedings of obtaining review of the Liquidator's denial of their cut-through request, Applicants are not adequately represented by any other party, and the grant of limited intervention will not unduly delay or prejudice the rights of the parties. WHEREFORE, for the reasons stated herein, Carlson Holdings, Inc. and NAFCO Insurance Company, Ltd. respectfully request the Court to enter the attached Order: (1) granting this Unopposed Application to Intervene and permitting them to intervene on the discrete controversy presented by their proposed Complaint for Declaratory Judgment; and (2) deeming the Complaint for Declaratory Judgment attached hereto as Exhibit A to be filed as of September 7, Respectfully submitted, /s/ Benjamin M. Schmidt Douglas Y. Christian (ID. No ) Benjamin M. Schmidt (ID. No ) BALLARD SPAHR LLP 1735 Market Street, 51 st Floor Philadelphia, PA Telephone: (215) /8136 Facsimile: (215) /8999 christiand@ballardspahr.com schmidtb@ballardspahr.com Of Counsel: Richard B. Allyn ROBINS, KAPLAN, MILLER & CIRESI L.L.P LaSalle Plaza 800 LaSalle Avenue Minneapolis, MN Telephone: (612) Facsimile: (612) RBAllyn@rkmc.com October 19, 2012 Attorneys for Carlson Holdings, Inc. and NAFCO Insurance Company, Ltd. DMEAST # v3 6

9

10 EXHIBIT A

11 IN THE COMMONWEALTH COURT OF PENNSYLVANIA Carlson Holdings, Inc. and NAFCO : Complaint Action for Declaratory Insurance Company, Ltd., : Judgment Re: Cut-Through Request Plaintiff/Applicants : : v. : No. : Reliance Insurance Company : In Liquidation, : Defendant/Respondent : : (Ancillary matter to IN RE: Reliance : Insurance Company In Liquidation, : No. 1 REL 2001) : COMPLAINT ACTION FOR DECLARATORY JUDGMENT Plaintiffs Carlson Holdings, Inc., ("Carlson") and NAFCO Insurance Company, Ltd., ("NAFCO") bring this action for declaratory judgment because the Liquidator and Reliance Insurance Company (in Liquidation) ("Reliance") have wrongfully denied Carlson's and NAFCO's cut-through request. Carlson and NAFCO seek a declaration that they are entitled to directly pay reinsurance proceeds under certain incurred loss workers compensation insurance policies. In support of this Complaint, Carlson and NAFCO aver as follows: INTRODUCTION 1. This action is filed pursuant to the Declaratory Judgment Act, 42 Pa.C.S. 7531, et seq., as there is an actual case and controversy between the parties that requires adjudication by the Court. 2. Carlson and NAFCO seek a declaratory judgment that: (a) they are entitled to directly pay reinsurance proceeds with respect to incurred loss workers compensation insurance policies issued by Reliance to Carlson during policy years 7/1/92-7/1/93 through 7/1/98-7/1/99; and (b) approval of Carlson's and NAFCO's cut-through request cannot be conditioned on DMEAST # v3

12 NAFCO's assumption of Reliance's unreinsured exposure for incurred losses over NAFCO's $500,000 limit. 3. Carlson and NAFCO are entitled to a cut-through pursuant to the Reinsurance Agreement between NAFCO and Reliance ("Reinsurance Agreement"), applicable Pennsylvania precedent, and this Court's Order entitled "In Re: Liquidator's Petition to Approve Guidelines Regarding the Direct Payment of Reinsurance Proceeds Pursuant to 40 P.S " entered in In Re: Reliance Insurance Company In Liquidation, No. 1 REL 2001, on April 26, 2002 (the "Guidelines"). True and correct copies of the Reinsurance Agreement and the Guidelines are attached hereto as Exhibit 1 and Exhibit 2, respectively. PARTIES AND VENUE 4. Carlson is a Minnesota company engaged in the business of hospitality with its principal place of business located at 701 Carlson Parkway, Minnetonka, MN NAFCO is Carlson's wholly-owned captive insurer and is a Bermuda company engaged in the business of insurance with its principal place of business located at Victoria Hall, 11 Victoria Street, Hamilton HM 11, Bermuda. 6. Reliance is a Pennsylvania domestic stock property and casualty insurance company in liquidation with its principal place of business located at 1601 Cherry Street, Philadelphia, PA Original jurisdiction and venue exists in this Court pursuant to the Guidelines, and because this is an ancillary matter related to In Re: Reliance Insurance Company In Liquidation, No. 1 REL BACKGROUND 8. From July 1, 1992 through July 1, 1999, Carlson insured its workers compensation obligations with Reliance. DMEAST # v3 2

13 9. The workers compensation obligations at issue here are solely incurred loss workers compensation insurance policies. 10. On July 1, 1992, Reliance (formerly Planet Insurance Company) entered into a "Claim Service Agreement" with Reliance's third-party administrator, Crawford & Company (with its successor, collectively, "Crawford"). The Claim Service Agreement is attached hereto as Exhibit Upon information and belief, a new Claim Service Agreement was executed for each policy year of Carlson's incurred loss workers compensation insurance policies, and continued in force for so long as claims expenses had to be paid in the years subsequent to the occurrence. No Claim Service Agreements were executed after Carlson ceased purchasing workers compensation insurance from Reliance in Under Section III.A. of the Claim Service Agreement and Section D.1. of Exhibit D to the Claim Service Agreement, Reliance had Crawford establish a "Loss Fund Account" out of which all expenses and administrative costs were to be paid. Although Carlson and NAFCO were not direct parties to the Claim Service Agreement, Reliance required Crawford to obtain funding for the Loss Fund Account from Carlson and NAFCO. This funding was maintained at a level sufficient to meet all claims obligations. As Crawford paid claims and expenses it was reimbursed and compensated from the Loss Fund Account, the details of which were provided to Reliance in monthly "Loss Run" and "Loss Fund Activity Reports." 13. The Liquidator continued the Claim Service Agreement after Reliance entered into liquidation in 2001, and Crawford as Reliance's agent, continued to handle and pay claims reinsured by NAFCO by withdrawing money from NAFCO's bank account and depositing the sums in the Loss Fund Account. In addition, Reliance and the Liquidator have their own user ID DMEAST # v3 3

14 for direct electronic access to Carlson's data to obtain NAFCO loss information, and they used this access through at least July Effective July 1, 1994, Reliance and NAFCO entered into the Reinsurance Agreement with Reliance as the cedant and the Carlson-owned NAFCO as the reinsurer. This Reinsurance Agreement was in effect for each of Carlson's subsequent incurred loss workers compensation insurance policies with Reliance. Under Article II of the Reinsurance Agreement, NAFCO's reinsurance coverage was limited to the first $500,000 of Incurred Losses/Allocated Loss Adjustment Expense ("ALAE"). 15. Under Article IV the Reinsurance Agreement, Reliance required that NAFCO maintain a "Paid Loss Deposit Fund," which was intended to secure "payment of the Reinsurer's liabilities under Article II of this Agreement." The liabilities under Article II of the Reinsurance Agreement are the first $500,000 of Incurred Losses/ALAE. 16. Under Article VI of the Reinsurance Agreement, NAFCO was required to provide Reliance with cash or a letter of credit to secure its obligations under the Reinsurance Agreement, as provided by Article VI.B.1. through VI.B.7, including maintaining the level of the Paid Loss Deposit Fund specified in Article IV. 17. Article VI.F.1. further provided that Reliance and any of its successors may draw the full amount of the Collateral for reimbursement of NAFCO's obligations paid by Reliance or its designated third-party claims administrator but not recovered from NAFCO, as follows: Article VI. COLLATERAL *** F. The Company, any successor by operation of law including any liquidator, rehabilitator, receiver or conservator may, notwithstanding any other provisions in this Agreement, draw the full amount of Collateral at any time. DMEAST # v3 4

15 1. for reimbursement of Reinsurer's obligations paid by the Company or its designated third-party claims administrator but not recovered from the Reinsurer 18. Article XII.A. of the Reinsurance Agreement contains an Insolvency clause that states that NAFCO as the Reinsurer is required to pay the Liquidator the same amount it would have been required to pay the cedant (Reliance) if it had not gone into liquidation. More specifically, the "Insolvency Clause" reads as follows: ARTICLE XII. INSOLVENCY A. The Reinsurer hereby agrees that, as to all reinsurance made, ceded, renewed or otherwise becoming effective hereunder, all amounts payable under this Agreement shall be paid by the Reinsurer on the basis of the Liability of the Company under the Policies, without diminution because of insolvency of the Company, directly to the Company or to its liquidator, receiver or other statutory successor. 19. Article XII.C. of the Reinsurance Agreement also contains a "cut-through" provision, which names the party to whom the reinsurance proceeds are to be paid in the event of insolvency. The cut-through provision does not require prior approval from a Liquidator. The cut-through provision states: ARTICLE XII. INSOLVENCY *** C. It is further agreed and understood that as to all reinsurance made, ceded, renewed or otherwise becoming effective hereunder, in the event of insolvency of the Company [Reliance] all amounts payable under this Agreement shall be paid by the Reinsurer [NAFCO] to the Named Insured [Carlson] under the Policies when the Reinsurer with the consent of the Named Insureds under the Policies has assumed the obligations of the Company under any of the Policies as direct obligations of the Reinsurer to the payees under such Policy and in substitution for the obligations of the Company to such payees. DMEAST # v3 5

16 20. Under the Reinsurance Agreement, the proceeds of NAFCO's reinsurance were used exclusively and entirely for the payment of Carlson's claims and for the benefit of Carlson. 21. On October 3, 2001, Reliance was placed into liquidation by Order of this Court. The Insurance Commissioner of the Commonwealth of Pennsylvania was appointed to be Reliance's statutory Liquidator. the Liquidator. 22. By Order dated April 26, 2002, this Court approved the Guidelines developed by P.S Reinsurer's Liability reads as follows: The amount recoverable by the liquidator from reinsurers shall not be reduced as a result of delinquency proceedings, regardless of any provision in the reinsurance contract or other agreement. Payment made directly to an insured or other creditor shall not diminish the reinsurer's obligation to the insurer's estate except when the reinsurance contract provided for direct coverage of an individual named insured and the payment was made in discharge of that obligation. 24. The Guidelines set forth the procedures by which a reinsurer and/or an insured can apply to the Liquidator to have a reinsurer cut-through or make direct payment of reinsurance proceeds to the underlying insured. Relevant portions of the Guidelines require as follows: 2. All reinsurers of Reliance shall be obligated to remit all reinsurance proceeds to the Liquidator, without diminution, regardless of any provision in the reinsurance contract between Reliance and the reinsurer or otherwise, except as specifically provided below. 3. Where a binding written contract document creating the reinsurance relationship between Reliance and a reinsurer contains a provision relating to the direct payment of the claims of an insured by the reinsurer, the reinsurer or insured desire that such direct payments be made by the insurer, the reinsurer or insured must first submit a written request to the Liquidator seeking approval of direct payment by the reinsurer. DMEAST # v3 6

17 *** 4. In reviewing the written request, the Liquidator, or her designee, shall determine whether the following requirements are satisfied before approving the request: *** b. The reinsurance contract must provide for a direct coverage obligation by the reinsurer to the insured and the payment must be made in satisfaction of that coverage obligation. The term "direct coverage" in refers to the creation of rights in the insured to look to the reinsurer directly to satisfy coverage obligations in place of and in substitution for any obligations of Reliance to the insured and on such terms as are set forth in the policy of insurance between Reliance and the insured. The magnitude and scope of the reinsurer's direct coverage obligation to the insured shall be governed by the language of the reinsurance contract and determined by the Liquidator in considering the direct payment request, the statute and the language of the relevant reinsurance contract. c. The payment made in "discharge" of the reinsurer's direct coverage obligation must release the insolvent insurer's estate from all liability to the insured for claims covered by the reinsurer's direct coverage obligation to the insured. (emphasis added.) *** e.... the reinsurer must (1) obtain the named insured's informed consent to the direct coverage relationship, which is in substitution for the relationship between the insured and the insolvent insurer; (2) provide evidence, in a form substantially similar to the form approved by the Court, that the reinsurer has unequivocally assumed a direct coverage obligation to the insured,... and the fact that consent to direct payment from the reinsurer is a release of all claims of the insured against the estate of Reliance relating to coverage assumed by the reinsurer; and (3) provide evidence DMEAST # v3 7

18 of the insured's informed consent to the direct coverage relationship by furnishing a written consent of the named insured in a form substantially similar to the form approved by the Court. The insured or reinsurer may obtain the Court-approved forms satisfying these requirements upon request. 25. On May 28, 2010, over eight-and-a-half years after Reliance entered liquidation, the Liquidator sent Carlson an demanding that Carlson have NAFCO pay the Liquidator the equivalent of all of the Carlson's claims that NAFCO covered post-liquidation. A true and correct copy of the May 28, is attached hereto as Exhibit 4. The May 28, states in pertinent part: The captive has funded through the tpa approx. $316,294 in losses post liquidation as further discussed Nafco Insurance Company will need to seek and secure a Cut Through otherwise Reliance would bill the $316k to Nafco as reinsurance losses due the estate Once the Cut Through is approved by the Court we can reduce the captive collateral by the $316, On July 12, 2011, the Liquidator sent NAFCO and Carlson an attaching a "bill for expenses incurred by the estate of Reliance Insurance Company (In Liquidation) in the administration of the Carlson deductible collateral." A true and correct copy of the July 12, is attached hereto as Exhibit 5. The further states that "[a]ll collateral reductions or draws subsequent to liquidation (10/31/01) are subject to ACT 46. Under ACT 46 [], which was signed into Pennsylvania law on June 21, 2004, Reliance is authorized to charge as reimbursement to the estate for expenses or administration up to 3% of the amount of collateral returned or drawn for deductible reimbursements." 27. The July 12, also states that "[t]he Reliance Collateral Review Committee approved a reduction of $201,335 from $1,775,647 to $1,574,312 for direct collateral and $140,242 from $1,195,782 to $1,055,540 for the captive contingent on payment of the attached ACT 46 expense billing of $5,235." DMEAST # v3 8

19 28. The July 12, also states that "the $1,055,540 remaining in the captive collateral includes $381,088 for captive losses paid post liquidation. The remaining $381,088 can be released in the event you secure a Cut Through." 29. On October 7, 2011, counsel for Carlson and NAFCO sent a letter to counsel for Reliance explaining that the Liquidator's demand that NAFCO pay $381,088 in collateral representing "captive losses paid post liquidation" should be withdrawn because NAFCO had fully satisfied its reinsurance obligations by paying all amounts requested into Crawford's Loss Fund Account. Reliance and the Liquidator were aware of that this arrangement had continued after Reliance entered into liquidation and never directed Carlson and NAFCO to follow any other procedure. Therefore, Reliance and the Liquidator had no right to request additional collateral because the "but not recovered from the Reinsurer" condition in Article VI.F.1. of the Reinsurance Agreement had not been met. A true and correct copy of the October 7, 2011 letter is attached hereto as Exhibit Carlson and NAFCO also explained that pursuant to Article XII.C. of the Reinsurance Agreement, the Guidelines, and applicable Pennsylvania precedent, in order for NAFCO to obtain cut-through status, NAFCO is only required to assume Reliance's liability to Carlson for claims covered by NAFCO's direct coverage obligation. 31. On April 6, 2012, counsel for Carlson and NAFCO delivered a letter to counsel for Reliance formally requesting cut-through status. A true and correct copy of a letter from counsel for Carlson and NAFCO to counsel for Reliance is attached hereto as Exhibit Carlson and NAFCO's April 6, 2012 letter to Reliance in support of their cutthrough request enclosed: (i) signed copies of Carlson's Informed Consent to Substitution of Reliance ("Consent") with copies of the relevant incurred loss workers compensation insurance DMEAST # v3 9

20 policies issued by Reliance to Carlson; and (ii) NAFCO's Assumption and Substitution by Reinsurer ("Assumption") with an exemplar copy of the initial Reinsurance Agreement. Carlson and NAFCO also resubmitted their October 7, 2011 letter in support of their cut-through request. 33. On August 8, 2012, counsel for Reliance on behalf of the Liquidator delivered a letter to counsel for Carlson and NAFCO denying their cut-through request. A true and correct copy of the August 8, 2012 letter is attached hereto as Exhibit 8. The August 8, 2012 letter states in pertinent part: [Reliance] wishes to advise you that your request for direct payment of insurance proceeds for those certain contracts as requested in accordance with your letter of May 18, 2012 (enclosing executed copies of the Informed Consent to Substitution of Reliance and Assumption and Substitution by Reinsurer) pursuant to 40 P.S and the Guidelines established by Order of the Commonwealth Court of Pennsylvania entered April 26, 2002 has been denied for the following reason(s): The proposed payments would not satisfy the reinsurer's direct coverage obligation. The reinsurer has not submitted documentary proof of its unequivocal assumption of Reliance's coverage obligations to the insured. COUNT I Declaratory Relief Pursuant to the Declaratory Judgment Act, 42 Pa.C.S. 7531, et seq. 34. Carlson and NAFCO incorporate by reference the allegations in paragraphs 1 through 33 of their Complaint as if set forth herein at length. 35. Pursuant to 40 P.S , when a reinsurance agreement has a cut-through provision naming the insured party to whom the reinsurance proceeds are to be paid, direct payment should be permitted in the event of insolvency. 36. Article XII.C. of the Reinsurance Agreement contains a cut-through provision that does not require prior approval from the Liquidator. DMEAST # v3 10

21 37. NAFCO's cut-through request complied with the criteria established in the Guidelines and in Koken v. Legion Insurance Co., 813 A.2d 1196 (Pa. Cmwlth. 2003) ("Legion"), aff'd sub nom. Koken v. Villanova Insurance Co., 583 Pa. 400, 878 A.2d 51 (2005). 38. NAFCO submitted a written request to the Liquidator seeking approval of direct payments by NAFCO to Carlson pursuant to the criteria established by Legion. 39. NAFCO executed the Assumption on the form authorized by the Liquidator. 40. With respect to the reinsured policies, Carlson executed the Consent on a form authorized by the Liquidator. 41. NAFCO's application shows that the reinsurance arrangement between Carlson, as the Insured, and NAFCO, as the Reinsurer, is consistent with the factual findings in the Legion decision, to wit: a. the placement of the reinsurance by Carlson as evidenced by the fact that NAFCO is Carlson's wholly-owned captive insurer and not by Reliance; b. the existence of the cut-through provision in Article XII.C. of the Reinsurance Agreement; c. the absence of any contracted underwriting risk borne by Reliance; d. Carlson and NAFCO's funding of Crawford's Loss Fund Account; and e. the proceeds of NAFCO's reinsurance were used exclusively and entirely for the payment of Carlson's claims and for the benefit of Carlson. 42. A plain and unambiguous reading of 40 P.S and the Guidelines support NAFCO's position that in order to obtain cut-through status, it only has to assume the coverage it reinsured, not the balance of Reliance's insured liability. This is particularly supported by Guideline 4 at subsection (c.) providing that NAFCO need only release Reliance "from all liability to the insured for claims covered by the reinsurer's direct obligation to the insured." (Emphasis added). In this case, NAFCO's obligation is exclusively for incurred losses within the DMEAST # v3 11

22 first $500,000 of Incurred Losses/ALAE, and not for losses above that limit that Reliance did not reinsure. 43. There is a case or controversy between the parties regarding whether Carlson's and NAFCO's request for application of the cut-through provision in the Reinsurance Agreement should have been granted. Pursuant to the Reinsurance Agreement, applicable Pennsylvania precedent including, without limitation, Legion, and the Guidelines, Carlson and NAFCO are entitled to cut-through status. Reliance's denial is inappropriate because Reliance asks NAFCO to assume a condition that it did not contract for. The cut-through that was plainly contemplated by the parties is not conditioned on the assumption of additional liabilities outside the contract. 44. Accordingly, Carlson and NAFCO seek a declaration that the cut-through provision in Article XII.C. of the Reinsurance Agreement be honored and that Carlson and NAFCO be permitted to make direct payment under incurred loss workers compensation insurance policies issued by Reliance to Carlson during policy years 7/1/92-7/1/93 through 7/1/98-7/1/ Carlson and NAFCO also seek a declaration that approval of their cut-through request cannot be conditioned upon NAFCO's assumption of Reliance's liability above the $500,000 limit that NAFCO contracted to reinsure in the Reinsurance Agreement. WHEREFORE, Carlson and NAFCO respectfully request that this Court enter an Order declaring that: (a) they are entitled to directly pay reinsurance proceeds with respect to incurred loss workers compensation insurance policies issued by Reliance to Carlson during policy years 7/1/92-7/1/93 through 7/1/98-7/1/99; and (b) approval of Carlson's and NAFCO's cut-through request cannot be conditioned on NAFCO's assumption of Reliance's unreinsured exposure for Incurred Losses/ALAE over NAFCO's $500,000 limit. DMEAST # v3 12

23 /s/ Benjamin M. Schmidt Douglas Y. Christian (ID. No ) Benjamin M. Schmidt (ID. No ) BALLARD SPAHR LLP 1735 Market Street, 51 st Floor Philadelphia, PA Telephone: (215) /8136 Facsimile: (215) /8999 Of Counsel: Richard B. Allyn ROBINS, KAPLAN, MILLER & CIRESI L.L.P LaSalle Plaza 800 LaSalle Avenue Minneapolis, MN Telephone: (612) Facsimile: (612) October 19, 2012 Attorneys for Carlson Holdings, Inc. and NAFCO Insurance Company, Ltd. DMEAST # v3 13

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25 CERTIFICATE OF SERVICE I hereby certify that I am this day serving the foregoing Unopposed Application to Intervene to File Complaint for Declaratory Judgment of Carlson Holdings, Inc. and NAFCO Insurance Company, Ltd. upon the persons and in the manner indicated below, which service satisfies the requirements of Pa. R.A.P Service by first class mail and addressed as follows: Isla L. Long Pepper Hamilton LLP 3000 Two Logan Square Eighteenth and Arch Streets Philadelphia, PA longi@pepperlaw.com Preston M. Buckman, Esquire Department Counsel for Insurance Governor's Office of General Counsel Commonwealth of Pennsylvania Insurance Department Office of the Chief Counsel Capitol Associates Building 901 North 7th Street Harrisburg, PA pbuckman@pa.gov (Attorneys for the Pennsylvania Insurance Department) Marilyn K. Kincaid, Esquire Reliance Insurance Company (in Liquidation) Three Parkway, 5th Floor Philadelphia, PA marilyn.kincaid@relianceinsurance.com (Attorney for Reliance Insurance Company (in Liquidation)) Dated: October 19, 2012 /s/ Benjamin M. Schmidt Benjamin M. Schmidt DMEAST # v3

26 EXHIBIT 1

27 REINSURANCE AGREEMENT This Reinsurance Agreement effective July 1, 1994, between Reliance National Indemnity Company (formerly Planet Insurance Company), an insurance corporation with business offices at 77 Water Street, New York, New York (the "Company") and Nafco Insurance Co., Ltd, an insurance corporation with its principal business office at #11 Victoria Street, Hamilton, Bermuda HM11, (the "Reinsurer"). In consideration of the payment of the reinsurance premium, and subject to the terms, conditions and limits of liability set forth below, the Reinsurer does hereby reinsure the Company in respect of the Company's Policies. ARTICLE I. DEFINITIONS The following terms shall have these meanings: A. "Policy" or "Policies" - Policies of insurance and any extension or renewals including endorsements written through Johnson & Higgins under Producer Code Number 80301, and issued by the Company to Carlson Holdings, Inc. first named insured, and as described in Schedule I to this Agreement. B. "Incurred Losses" - All Paid Losses, plus reserves for unpaid Losses both reported and unreported attributable to Policies and as established by the Company. C. "Paid Losses" - Payments for claims under the Policies, including any Deductible Amounts made by the Company, and not reimbursed by the Insured; D. "Allocated Loss Adjustment Expenses" - Expenses that the Company, or any claims administrator, under the Company's accounting practices, directly allocates to a particular claim which shall include expenses paid by the Company in connection with the Policies, whether or not related to Paid Losses. These Allocated Loss Adjustment Expenses may include: attorney's fees, court costs and related costs such as filing fees; the costs of medical examinations, expert medical or other review or testimony, laboratory services, x-rays, autopsies; and the costs for stenographic services, witnesses, summonses and copies of documents. Allocated Loss Adjustment Expense shall also include expenses incurred in connection with determining questions of the construction of Policies, their validity, and proceedings to determine the rights, duties or obligations if any of any insureds or parties to the CRAA Page 1 of 11

28 Policies. Allocated Loss Adjustment Expenses do not include Unallocated Loss Adjustment Expense. E. "Unallocated Loss Adjustment Expenses" - Expenses which are not directly allocated to a particular claim and shall include the expenses of the Company's employees or of claims administrators, including their salaries and traveling expenses, and the Company's overhead. F. "Return Premiums" - Amounts payable to insureds under Policies as return of unearned premiums on canceled or amended policies, adjustments arising out of premium audits or as required by law or rating plans, or as dividends. G. Terms defined or given special meanings within Policies have the same meanings in this Agreement as those given to them in the Policies. H. Other terms or phrases may be given special meanings within this Agreement. ARTICLE II. COVERAGE The Reinsurer is liable to the Company under this Agreement for the following: A. Workers' Compensation 1. Up to and including the first $500,000 of Incurred Losses covered under Part One - Workers' Compensation Insurance of Policies described as Workers' Compensation in Schedule I arising out of any accident involving one or more employees of an Insured; plus all Allocated Loss Adjustment Expense attributable to such Losses on a pro-rata basis. 2. Up to and including the first $500,000 of Incurred Losses covered under Part One - Workers' Compensation Insurance of Policies described as Workers' Compensation in Schedule I arising out of occupational disease affecting any one employee of the Insured; plus all Allocated Loss Adjustment Expenses attributable to such Losses on a pro-rata basis. B. Workers' Compensation/Employers' Liability 1. Up to and including the first $500,000 of Incurred Losses covered under Part Two - Employers' Liability Insurance of Policies described as Workers' Compensation in Schedule I arising out of bodily injury by accident; plus all Allocated Loss Adjustment CRAA Page 2 of 11

29 Expenses attributable to such Losses on a pro-rata basis; and 2. Up to and including the first $500,000 of Incurred Losses covered under Part Two - Employers' Liability Insurance of Policies described as Workers' Compensation in Schedule I arising out of bodily injury by disease; plus all Allocated Loss Adjustment Expenses attributable to such Losses on a pro-rata basis. C. For all costs and expenses incurred by the Company in connection with seeking recovery as salvage or subrogation for Paid Losses subject to reinsurance under this Article. D. For 100% of Paid Losses in excess of Policy limits, but otherwise within the terms and conditions of the Policy arising as the result of an action against the Company to recover damages, which an insured under the Policy is legally obligated to pay to a third party, alleging negligence or bad faith in rejecting a settlement within the Policy limits, or in discharging its duty to defend an insured under the Policy including prosecuting any appeals; plus all Allocated Loss Adjustment Expenses attributable to such Losses. E. For 100% of any punitive, exemplary, compensatory or consequential damages, but not including amounts payable under II.D, II.E, payable by the Company as the result of an action against the Company alleging negligence or bad faith in the handling of any claim made under a Policy; plus Allocated Loss Adjustment Expenses attributable to such Losses. ARTICLE III. CLAIMS A. The Company or its authorized representatives shall adjust, settle or compromise any and all claims arising under the Policies and shall further commence, continue, defend, or withdraw from actions, suits or proceedings under the Policies, and generally do all things relating to claims thereunder that it deems necessary or expedient. Any authorized representative shall follow the Company's claims processing guidelines. While the Reinsurer is not required to investigate or defend claims or suits under the Policies, it may associate, at its own expense, with the Company and its authorized representatives in the defense of any claim, suit or proceeding involving this reinsurance. Except as otherwise specifically provided for in this Agreement, it is the intent of this Agreement that the Reinsurer's liability shall, in all respect, follow the fortunes of the Company under the Policies. All adjustments, settlements and CRAA Page 3 of 11

30 compromises by the Company and its authorized representatives of claims involving Policies, when made by the Company or its authorized representatives, shall be unconditionally binding on the Reinsurer. B. All records pertaining to this Agreement and claims arising under the Policies shall be owned by the Company. The Company will, at the request of the Reinsurer, furnish the Reinsurer a copy of any of the Policies and all endorsements and shall make available for inspection and place at the disposal of the Reinsurer at reasonable times any of its records or claims subject to reinsurance under this Agreement. C. The Company will pay or credit the Reinsurer up to the amount of the Reinsurer's interest for amounts attributable to salvage, reimbursement obtained or recovery made by the Company relating to any of the Policies, including recovery for any Deductible Amounts as set forth in the Policies which were paid by the Company, after deducting the direct cost (excluding Unallocated Loss Adjustment Expenses) of obtaining such salvage or reimbursement or making such recovery, and after the Company has been reimbursed up to the amount of any Paid Losses for which the Reinsurer is not liable under Article II. ARTICLE IV. PAID LOSS DEPOSIT FUND A. The Reinsurer will provide funds for the Company to establish and maintain in its own name a Paid Loss Deposit Fund, for payment of the Reinsureris liabilities under Article II of this Agreement. The Company may at its option adjust the level of the Paid Loss Deposit Fund. B. The Reinsurer shall, upon receipt of a written request by the Company or a designated claims administrator forward by wire transfer within three (3) business days funds to the Company sufficient to maintain the Paid Loss Deposit Fund balance at the minimum level required in Section A above. C. In the event the Company is required to make a payment for Paid Losses including Allocated Loss Adjustment Expense on any one claim in the amount of $25,000, or greater, the Reinsurer shall, notwithstanding the availability of funds in the Paid Loss Deposit Fund, immediately upon receipt of notice forward by wire transfer funds for the full amount of the payments. D. The Company may increase the required level of the Paid Loss Deposit Fund each time the Reinsurer fails to make any payment to the Company within the time required by this CRAA Page 4 of 11

31 Agreement. No one individual increase will increase the required level to more than twice that required before the increase. ARTICLE V. REINSURANCE PREMIUM A. The reinsurance premium shall be the monies actually received and recorded by the Company as premium for the Policies less Return Premiums: 1. For Workers' Compensation Policies: a. 3.32% of such premium for Company Expenses; b % of such premium for: (1) premium taxes; (2) fees for board and bureaus; and (3) liabilities for assessments and pools; B. Within twenty (20) days after the end of each calendar quarter, the Company will send the Reinsurer a Reconciliation Statement including: a. Premiums received by the Company under the Policies; b. Return Premiums; c. Premiums payable to the Reinsurer; d. Payments made by the Reinsurer; e. Paid Losses; f. Allocated Loss Adjustment Expense; g. Amounts required to fund the Paid Loss Deposit Fund; h. Federal Insurance Excise Tax or other tax on Reinsurance Premium paid by the Company. i. Any other amounts paid or recovered by the Company subject to this Agreement; j. Reconciliation Balance; k. Claims reported; and 1. Such other information and in such form and detail as shall be mutually agreed upon in writing by the Company and the Reinsurer,or that may be required by regulatory authorities with jurisdiction over either party. C. If the result of any such reconciliation is that the Reinsurer owes money to the Company, the Reinsurer will within thirty (30) days after receipt of the Reconciliation Statement pay the amount due. CRAA Page 5 of 11

32 D. If the result of any such reconciliation is that the Company owes money to the Reinsurer, the Company will pay the amount due within thirty (30) days as set forth in the Reconciliation Statement. E. All amounts due the Reinsurer or the Company under this Agreement or any other agreement between the parties shall be subject to the right of offset. ARTICLE VI. COLLATERAL A. The Reinsurer shall deliver to the Company cash, a Letter of Credit or other security in an amount and form acceptable to the Company ("Collateral"), for the purpose of securing the Reinsurer's obligations under this Agreement. B. The Reinsurer's obligations being secured shall include: 1. Losses and Allocated Loss Adjustment Expenses, including any Deductible Amounts set forth in the Policies, which were paid by the Company but not recovered from the Reinsurer, for which the Reinsurer is liable under Article II; 2. Company's reserves for Losses reported and Allocated Loss Adjustment Expense on such Losses for which the Reinsurer is liable under Article II; 3. Company's reserves for Losses incurred but not reported and Allocated Loss Adjustment Expense on such Losses for which the Reinsurer is liable under Article II; 4. The Reinsurer's liabilities under Articles II.D and II.E. 5. Return premiums paid by the Company, but not recovered from the Reinsurer; 6. Company's reserves for unearned premiums; 7. Maintaining the level of the Paid Loss Deposit Fund in Article IV; All without diminution because of the insolvency of the Company or the Reinsurer. C. Any Letter of Credit shall be issued or confirmed by a Federal Reserve System member bank acceptable to the Company CRAA Page 6 of 11

33 with an office for presentment and payment in New York City, New York. D. Any Letter of Credit shall name Reliance National Indemnity Company as beneficiary. E. Any Letter of Credit shall be in accordance with its terms automatically renewable for successive annual periods unless the issuing bank gives the Company at least sixty (60) days advance notice of its intention not to renew. F. The Company, any successor by operation of law including any liquidator, rehabilitator, receiver or conservator may, notwithstanding any other provisions in this Agreement, draw the full amount of the Collateral at any time: 1. for reimbursement of Reinsurer's obligations paid by the Company or its designated third-party claims administrator but not recovered from the Reinsurer, or 2. to fund an account with the Company equal to the Reinsurer's obligations as determined by the Company. G. The Reinsurer's duty to provide Collateral is continuous and extends until the Company is satisfied that all of the Reinsurer's obligations under this Agreement have been or will be met. The Reinsurer's liabilities under this Agreement may extend beyond the time during which the Company will be receiving premiums under the Policies and beyond the termination of the Policies or this Agreement. H. The Reinsurer will, not less than thirty (30) days prior to any termination or expiration of any Letter of Credit, deliver to the Company, a replacement Letter of Credit or other Collateral in an amount and form acceptable to the Company which will become effective immediately upon the termination or expiration of the prio Collateral. I. The Company may require the Reinsurer to provide additional Collateral before the end of any calendar year by giving at least sixty (60) days notice to the Reinsurer of the amount of additional Collateral that will be required. Such Collateral shall comply with all the requirements of this Article. J. The Reinsurer shall deliver any Collateral to the Company at: CRAA Page 7 of 11

34 RELIANCE NATIONAL RISK SPECIALISTS 77 Water Street New York, New York (Attn: Financial Department) K. If the Reinsurer fails to provide the Company with any additional or substitute Collateral, the Company shall have the unconditional right to draw upon the full amount of any existing Letter of Credit or other Collateral and to hold and apply such funds in accordance with the provisions of Article VI.F. ARTICLE VII. TAXES A. The Company is responsible for the payment of all taxes on premiums received under the Policies. B. The Reinsurer is responsible for the payment of all taxes on reinsurance premiums hereunder, and shall reimburse the Company for any taxes it may pay on such premiums including any Foreign Insurance Excise Tax (FIET). ARTICLE VIII. TERMINATION A. This Agreement may be terminated in whole or in part by the Company by giving ninety (90) days prior written notice to the Reinsurer. The Reinsurer shall have the right to terminate this Agreement by giving prior written notice to the Company which shall be not less than sixty (60) days more than the longest period required for notice of cancellation under the Policies or the laws and regulations of any jurisdiction in which Policies are issued or delivered. B. The Reinsurer shall be entitled. to credit for a prorata portion of the reinsurance premium to which it would have been entitled had this Agreement not been terminated. ARTICLE IX. SURVIVAL OF OBLIGATIONS A. Reinsurer recognizes that the Company's obligations which accrue during the term of the Policies will survive the termination of those Policies, and that Reinsurer's obligations under this Agreement will survive the termination of those Policies and this Agreement. B. If this Agreement terminates, the Reinsurer's obligations and responsibilities under this Agreement will continue with respect to Losses on Policies issued or CRAA Page 8 of 11

35 renewed prior to the effective date of termination of this Agreement. C. Any Policy required to be renewed under any state law, or regulation or order shall be deemed renewed prior to the termination of this Agreement whether or not renewed prior to the date of termination. D. The Company and Reinsurer agree that they will cooperate in the handling of all such outstanding business existing on the effective date of termination until such business has expired either by cancellation or by the terms of the Policies, and all regulatory requirements are met. ARTICLE X. INTEREST AND COLLECTION COSTS A. Reinsurer will reimburse the Company for company's attorneys' fees and court costs incurred in attempting to collect amounts, including interest, which are due the Company under this Agreement but not paid within the time required by this Agreement. B. Either party will pay to the other interest at the monthly rate of one and one-half percent (1.5%) on any amount that is not paid within the time required by this Agreement. Interest shall accrue from the time any payment is payable under this Agreement. ARTICLE XI. ERRORS AND OMISSIONS Inadvertent delays (other then in payments due), errors or omissions made by the Company or the Reinsurer in connection with this Agreement or any transaction hereunder shall not relieve the other party from any liability which would have attached, had such delay, error or omission not occurred, provided that such error or omission is rectified as soon as possible after discovery. ARTICLE XII. INSOLVENCY A. The Reinsurer hereby agrees that, as to all reinsurance made, ceded, renewed or otherwise becoming effective hereunder, all amounts payable under this Agreement shall be paid by the Reinsurer on the basis of the liability of the Company under the Policies, without diminution because of the insolvency of the Company, directly to the Company or to its liquidator, receiver or other statutory successor. CRAA Page 9 of 11

36 B. It is further agreed and understood that in the event of insolvency of the Company, the liquidator or receiver or statutory successor of the Company shall give written notice to the Reinsurer of the pendency of any claim against the insolvent Company under any of the Policies within a reasonable time after such claim is filed in the insolvency proceeding; and that during the pendency of any such claim the Reinsurer may investigate such claim and interpose, at its own expense, in the proceeding where any such claim is to be adjudicated any defense or defenses which it may deem available to the Company or its liquidator or receiver or statutory successor. Any expense thus incurred by the Reinsurer shall be chargeable subject to court approval against the insolvent Company as part of the expense of liquidation to the extent of a proportionate share of the benefit which may accrue to the Company solely as a result of the defense undertaken by the Reinsurer as the assuming insurer. C. It is further agreed and understood that as to all reinsurance made, ceded, renewed or otherwise becoming effective hereunder, in the event of insolvency of the Company all amounts payable under this Agreement shall be paid by the Reinsurer to the Named Insured under the Policies when the Reinsurer with the consent of the Named Insureds under the Policies has assumed the obligations of the Company under any of the Policies as direct obligations of the Reinsurer to the payees under any such Policy and in substitution for the obligations of the Company to such payees. ARTICLE XIII. MISCELLANEOUS A. This Agreement shall be governed by and construed according to the laws of the State of New York. B. This Agreement may not be assigned by the Reinsurer unless the written approval of the Company is first obtained. C. Any notices, requests or other communications hereunder will be in writing and will be deemed to have been received when deposited in the United States mail with proper postage fees prepaid, addressed as follows: 1. If to the Reinsurer, then to: Nafco Insurance Co., Ltd. #11 Victoria Street Hamilton, Bermuda HM11 CRAA Page 10 of 11

37 2. If to Company, then to: RELIANCE NATIONAL RISK SPECIALISTS 77 Water Street New York, New York (Attn: Financial Department) D. Except for a termination in accordance with the provisions of Article VIII.A, this Agreement may not be released, discharged, changed or modified except by an instrument in writing signed by a duly authorized representative of both of the parties. IN WITNESS WHEREOF, the parties hereto, by their respective duly authorized persons, intending to be legally bound have signed this Agreement. Reinsurer: Nafco Insurance Co., Ltd Company: Reliance National Indemnity Company By: Tit Date: WITNESS: t///:471 CRAA Page 11 of 11

38 SCHEDULE I To the Reinsurance Agreement between Reliance National Indemnity Company (the "Company") and Nafco Insurance Co., Inc. (the "Reinsurer") Effective: July 1, 1994 POLICY NUMBER POLICY TYPE NWA Workers' Compensation/ Employers' Liability INSURED Carlson Holdings, Inc. LIMITS A: Statutory B: 1,000,000 Each Accident/ Bodily Injury CRAA Page 1 of 1

39 EXHIBIT 2

40 IN THE COMMONWEALTH COURT OF PENNSYLVANIA M. Diane Koken, Insurance Commissioner of the Commonwealth of Pennsylvania, Plaintiff V. Reliance Insurance Company, Defendant : No. 269 M.D IN RE: Liquidator's Petition to Approve Guidelines Regarding the Difect Payment of Reinsurance Proceeds Pursuant to 40 P.S ORDER AND NOW, this 26 th day of April 2002 consideration having been given to the Petition of M. Diane Koken in her capacity as Liquidator, Reliance Insurance Company, to approve guidelines regarding the direct payment of reinsurance proceeds pursuant to 40 P.S (hereinafter Guidelines) said Petition is GRANTED as set forth below; and, the Court directs that the Liquidator shall follow and abide by said Guidelines. FURTHER, The Guidelines attached hereto and marked as "Exhibit A", are APPROVED and are incorporated herein. Further, a reinsurer of Reliance Insurance Company ("Reliance") will not be relieved of its obligation to pay all reinsurance proceeds, without diminution, to the Liquidator unless (1) the relevant reinsurance contract contains a direct

41 payment provision in compliance with the requirements of 40 P.S , as set forth in the Guidelines; (2) the reinsurer or insured seeks in writing and obtains the written approval of the Court and the Liquidator before the reinsurer makes a direct payment to the insured; and (3) in considering any written request to pay reinsurance directly to an insured, the Liquidator shall apply the requirements of 40 P.S , as reflected in the Guidelines. TT IS further ORDERED that, as a necessary condition precedent to any direct payment by a reinsurer to any Reliance insured, the reinsurer shall provide to the Liquidator a signed document evidencing (1) that the reinsurer has unequivocally undertaken a direct coverage obligation to the insured; and (2) the insured's informed consent to the reinsurer's direct coverage of the insured. Such documents shall be in a form substantially similar to Exhibits B and C to this Order, which are made a part hereof. IT IS further ORDERED that, as a necessary condition precedent to any direct payment by a reinsurer to any Reliance insured, the Liquidator shall provide to the Court, for the Court's approval, a signed document evidencing (1) that the reinsurer has unequivocally undertaken a direct coverage obligation to the insured; and (2) the insured's informed consent to the reinsurer's direct coverage of the insured. Such documents shall be in a form substantially similar to Exhibits B and C to this Order, which are made a part hereof. IT IS further ORDERED, pursuant to 40 P.S and 221.5, that this Court shall retain sole and exclusive jurisdiction over, inter alia, the assets of the Reliance estate, including matters related to the direct

42 payment of reinsurance to Reliance insureds by Reliance's reinsurers given that said payments reduce the assets of Reliance available for distribution to all policyholders. Such sole and exclusive jurisdiction shall include any claim of injury as a result of the Liquidator's application of the Guidelines, and review of the Liquidator's. determination of any specific request for approval of direct payment of reinsurance proceeds under 40 P.S FURTHER, the Liquidator, through her counsel, is hereby directed to serve a copy of this order, forthwith, upon all parties listed on the master service list via U.S. mail and, where designated, fax and/or . The Liquidator, through her counsel, is directed to file with the court in the Office of the Prothonotary, 9 th Floor the Widener Building, 1339 Chestnut Street, Philadelphia, PA 19107, by 3:00 p.m. April 30, 2002 an affidavit, that service, as outlined above, has been effectuated. C:4 ES GARDNER COLINS, President Judge

43 Exhibit "A" GUIDELINES FOR ENFORCEMENT OF 40 P.S Pursuant to her authority under the Insurance Department Act of 1921, 40 P.S et seq. (the "Act"), M. Diane Koken, Insurance Commissioner of the Commonwealth of Pennsylvania, in her capacity as Liquidator ("Liquidator") of Reliance Insurance Company ("Reliance"), hereby promulgates the following Guidelines for the Enforcement of 40 P.S ("Guidelines"). 1. Section of the Act, 40 P.S , provides: The amount recoverable by the liquidator from reinsurers shall not be reduced as a result of delinquency proceedings, regardless of any provision in the reinsurance contract or other agreement. Payment made directly to an insured or other creditor shall not diminish the reinsurer's obligation to the insurer's estate except when the reinsurance contract provided for direct coverage of an individual named insured and the payment was made in discharge of that obligation. Section is applicable to all reinsurance contracts, treaties and certificates to which Reliance is presently a party. 2. All reinsurers of Reliance, which is an insurer subject to the Act, shall be obligated to remit all reinsurance proceeds to the Liquidator, without diminution, regardless of any provision in the reinsurance contract between Reliance and the reinsurer or otherwise, except as specifically provided below. 3. Where a binding written contract document creating the reinsurance relationship between Reliance and a reinsurer contains a provision relating to the direct payment of the claims of an insured by the reinsurer, and the reinsurer or insured desires that such direct payment be made by the reinsurer, the reinsurer or insured must first submit a written request to the Liquidator seeking approval of direct payment by the reinsurer. 4. In reviewing the written request, the Liquidator, or her designee, shall determine whether the following requirements are satisfied before approving the request:

44 a. The reinsurance contract must specifically provide for payment to an individual named insured and that insured must be identified with particularity either by name or policy number in the reinsurance contract; b. The reinsurance contract must provide for a direct coverage obligation by the reinsurer to the insured and the payment must be made in satisfaction of that coverage obligation. The term "direct coverage" in refers to the creation of rights in the insured to look to the reinsurer directly to satisfy coverage obligations in place of and in substitution for any obligations of Reliance to the insured and on such terms as are set forth in the policy of insurance between Reliance and the insured. The magnitude and scope of the reinsurer's direct coverage obligation to the insured shall be governed by the language of the reinsurance contract and determined by the Liquidator in considering the direct payment request, the statute and the language of the relevant reinsurance contract; c. The payment made in "discharge" of the rein.surer's direct coverage obligation must release the insolvent insurer's estate from all liability to the insured_ for claims covered by the reinsurer's direct coverage obligation to the insured; d. The reinsurer and insured seeking to utilize the direct paymen.t provision must further comply with all other relevant contractual provisions and obligations not in conflict with Pennsylvania law, and which affect the existence or creation of a direct coverage obligation or the release of the insolvent insurer for claims covered by the reinsurer's direct coverage obligations; and, e. Consistent with the Liquidator's obligation to protect the interests and maximize the assets of the insolvent insurer's estate, the reinsurer must (1) obtain the named insured's informed consent to the direct coverage relationship, which is in substitution for the relationship between the insured and the insolvent insurer; (2) provide evidence, in a form substantially similar to the form approved by the Court, that the reinsurer has unequivocally assumed a direct coverage obligation to the insured, that the reinsurer has complied with any other contractual provision regarding the direct payment or assumption and the reinsurer has disclosed to the insured certain. consequences of consenting to the direct coverage relationship with the reinsurer, including, if applicable, the lack of guaranty association coverage in the event the reinsurer becomes insolvent and the fact that consent to direct payment from the reinsurer is a release of all

45 claims of the insured against the estate of Reliance relating to coverage assumed by the reinsurer; and (3) provide evidence of the insured's informed consent to the direct coverage relationship by furnishing a written consent of the named insured in a form substantially similar to the form approved by the Court. The insured or reinsurer may obtain the Court-approved forms satisfying these requirements upon request. 5. Where the reinsurance contract complies with the requirements of , as reflected in these Guidelines, and the requirements of the reinsurance contract itself are also complied with, and the reinsurer commits in writing to undertake a direct coverage obligation to the insured, in a form substantially similar to the form approved by the Court, and the insured's informed consent has been obtained by the Liquidator, the Liquidator shall submit this documentation to the Court along with the Liquidator's recommendation for approval, and the Court will respond to the Liquidator's recommendation within twenty (20) days of the date of submission, thereafter,. the Liquidator will respond to the written request to approve direct payment by notifying the reinsurer and the named insured in writing that the direct payment provision is valid under Pennsylvania law and the reinsurer may, by complying with the terms of the reinsurance contract, make direct payment to the insured without incurring double liability to the Liquidator. 6. The Liquidator will further notify the reinsurer and the insured that the direct coverage relationship may be subject to regulation by the applicable state regulator in one or more states, e.g the state in which the insured resides or the state(s) in which the reinsurer seeks to pay claims directly, and that it is the reinsurer's obligation to comply with all such regulatory requirements. 7. Where the language of the reinsurance contract fails to satisfy the requirements of as set forth in these Guidelines or the reinsurer refuses to assume a direct coverage obligation to the insured or the reinsurer fails to obtain the insured's informed consent, the Liquidator will notify the reinsurer and the insured that the direct payment request has been denied and that direct payment of reinsurance proceeds to the insured by the reinsurer is not recognized by the Liquidator as discharging the reinsurer's obligation to pay all reinsurance proceeds to the Liquidator. The Liquidator will further notify the reinsurer and insured that any such payments are made at the reinsurer's peril and will not relieve the reinsurer of the Obligation to pay the full reinsurance to the Liquidator. An insurer or reinsurer may file objections to the Liquidator's denial of a direct payment request within thirty (30) days of receipt of the notice of denial of a direct payment request, said

46 filing shall be made with the (-curt, in the Office of the Chief Clerk, 9 th floor the Widener Building, 1339 Chestnut Street, Philadelphia, PA,

47 EXHIBIT 3

48 CLAIM SERVICE AGREEMENT AGREEMENT NO.6088 PREPARED SEPTEMBER 11, 1992 PROGRAM NO THIS AGREEMENT made as of the first day of July, 1992 by and between CRAWFORD & COMPANY, having a place of business at 5620 Glenridge Dr., Atlanta, Georgia ("Service Co."), and RELIANCE NATIONAL RISK SPECIALISTS, on behalf of PLANET INSURANCE COMPANY, having a place of business at 77 Water Street, New York, New York ("Insurer"). WITNESSETH: WHEREAS, Service Co. is engaged in the business of providing certain services with respect to the investigation and payment of insurance claims; WHEREAS, Insurer has issued those insurance policies as are set forth on Exhibit A hereto (the "Policies"), to its Insured, CARLSON COMPANIES, INC.; WHEREAS, Insurer desires to contract with Service Co. for the provision of its services for claims made under the Policies and Service Co. is willing to provide such services, on the terms and conditions set forth below. NOW, THEREFORE, in consideration of the mutual agreements, and representations set forth below, the parties do hereby agree as follows: I. Provision of Services. A. Service Co. agrees to provide those services as are set forth in paragraph B below (the "Basic Services") with respect to any claim referred to it that is made under any of the Policies which involves an actual or alleged loss occurring during the term of the underlying Policy. B. The Basic Services to be rendered by Service Co. with respect to any claims described in paragraph (A) above ("Claims") shall be the following: 1. To establish a file with respect to each Claim. 2. To investigate all Claims and to recommend the amount of loss reserve to be established with respect to each such Claim. 3. To provide each Claim file with a written chronology of all actions taken with respect to the underlying Claim. 4. To furnish all claim forms necessary for proper claims administration. 5. To adjust, settle or resist all Claims within the discretionary settlement authority limit of Service Co. as agreed -1- # /11/Q9

49 upon by Service Co. and Insurer, in writing, from time to time (Lhe "Authority Limit"). 6. To adjust, settle or resist all Claims in excess of the Authority Limit with the express prior approval of Insurer. 7. To supervise all litigation or other proceedings involving any Claim and, where permitted, to attend any judicial or administrative hearing involving any Claim. 8. To retain and then destroy files for each Claim in accordance with the File Retention and Destruction Policy set forth in Exhibit B hereto. 9. To monitor all treatment programs recommended to a Claimant by any care provider. 10. To provide Vocational Rehabilitation and Medical Case Management services for Workers' Compensation claims, when warranted, through the vendor approved by Insurer. 11. To provide Hospital Bill Audit Services for Workers' Compensation claims, when warranted, through the vendor approved by Insurer. 12. To provide PI:uvidel. Bill Audit, Utilization Review and Preferred Provider Services for Workers' Compensation claims, when warranted, through the vendor approved by Insurer. 13. To furnish to Insurer and/or its designees on a monthly basis, a "Loss Run" and a "Loss Fund Activity Report." The term "Loss Run" means a computer generated listing of claims that have been posted to Service Co.'s Statistical Insurance Support Data ("SISDAT") System. The term "Loss Fund Activity Report" means a computer generated listing of accounting activity in the Loss Fund Account during the preceding month that has posted to Service Co.'s SISDAT System. These computer generated listings will be provided to Insurer and/or its designees in hard copy or microfiche. A maximum of five (5) copies of any single listing, either hard copy, microfiche, or any combination thereof, will be provided by Service Co. for each period. Service Co. reserves the unilateral right to amend or alter the substance and form of the listings to be provided to Insurer and/or its designees hereunder if Service Co. hereafter amends or alters the substance or form of such listings for its customers generally. C. Subject to the provisions of Section IV. below, Service Co. agrees to provide the Basic Services with respect to all Claims for so long as and until each Claim shall have been paid or until, in the opinion of Service Co., Insurer shall have no further liability therefore. D. Notwithstanding the foregoing, Insurer reserves the right to assume the control and handling of any Claim at any time, and Service Co. agrees to deliver promptly any Claim file to Insurer which it -2- # /11/92

50 may request, but without any off-fet or deduction from any of the fees or charges paid or payable by Insurer to Service Co. under Section II below. The parties agree that at all times prior to and after the cancellation of this Agreement all Claim files are owned by and are the property of Insurer. Claim files are subject to review by insurer and its employees and authorized agents during Service Co.'s regular business hours, without prior notice. E. In the event any governmental agency, broker or agent should contact Service Co. for any reason with respect to any Claim, except for ordinary, customary, or usual contact not in the nature of a complaint, Service Co. agrees to promptly notify Insurer of the nature of such communication and, if the communication is in writing, Service Co. shall send Insurer a copy thereof. F. In the case of each Claim, Insurer reserves the right to require Service Co. to obtain its prior approval before retaining any attorney, physician or other professional or expert which Service Co. may seek to retain on behalf of or for the benefit of Insurer in connection with its provision of the Basic Services. G. All claims involving serious injuries of the following nature regardless of the reserve and whether or not Crawford believes there 2:-E; coverage or liability, must be promptly reported to Insurer. 1. Cord injury - paraplegia, quadriplegia 2. Amputations - requiring a prosthesia 3. Brain damage affecting mentality or central nervous system - such as Permanent disorientation, behavior disorder, personality change, seizures, motor deficit, aphasia, hemiplegia or comatose (unconsciousness) 4. Blindness 5. Burns - involving over 10% of the body with third degree or 30% of body with second degree 6. Multiple fractures - involving more than one member or non - union 7 _ Fractured bilateral ne raloic (fracture of both hpp1 bones) 8. Brachial plexus nerve damage (nerve damage causing paralysis and loss of sensation in arm and hand) 9. Massive internal injuries affecting body organs 10. Injury to nerves at base of spinal canal (Cauda Equina) or any other back injury resulting in incontinence of bowel and/or bladder. 11. Fatalities II. Fees and Charges. In consideration of Service Co. providing the Basic Services for all Claims as provided above, Insurer agrees to pay Service Co. those fees and other -, -.:harges as are set forth in Exhibit C, in accordance with the terms set forth therein.

51 III. Payment of Claims and Allocated Loss Expenses. A. Service Co. agrees to make all payments with respect to Claims and to pay all Allocated Loss Expenses (as defined in paragraph B below) from a regular demand deposit account established by Service Co., as custodian for Insurer, at its bank, Trust Company Bank, Atlanta, Georgia, (the "Loss Fund Account"), with funds to be made available by Insurer, at all times in accordance with this Agreement, for deposit into. the Loss Fund Account, and to deposit recovery amounts, including, without limitation, subrogation, salvage and adjustment reimbursements from Claim and Allocated Loss Expense amounts previously paid from such Loss Fund Account ("Recoveries") in accordance with the procedures set forth in Exhibit D hereto. B. The term "Allocated Loss Expenses" shall mean such of the following items of expense incurred or authorized by Service Co. as may be reasonable and necessary in connection with its provision of the Basic Services: 1. Medical examinations of claimants, including the reasonable and necessary transportation expenses of claimants. 2. Reports from attending or examining physicians. 3. Attorneys' fees and disbursements. 4. Court reporter services and transcripts. 5. Stenographic services and transcripts. 6. Witness attendance fees. 7. Court costs. 8. Appeal Bonds. 9. Printing costs related to trials and appeals. 10. Testimony, opinions, appraisals, reports, surveys and analyses of professionals and experts. 11. Automobile appraisals 12. Trial and hearing attendance fees 13. Reports from government agencies or branches. 14. Credit bureau reports. 15. Private, inupctigatorq- 16. Ph-t-graph Medical or vocational rehabilitation. 18. Medical cost containment services - i.e. utilization review, hospital bill audit, provider bill audit, medical case management and preferred provider services, incurred at the request of Insurer. 19. Extraordinary Claim investigation and/or travel expense incurred at the request of Insurer. 20. Any similar service related to the investigation and defense of a particular Claim, or the protection of and collection of the subrogation rights of the Insurer, for which Insurer shall have given prior approval. C. All charges for Allocated Loss Expenses shall not exceed the usual and customary local charges and no payments for any such expenses shall be made to Service Co. or any of its affiliates without the prior approval of Insurer, except automobile appraisals, provider bill audit, utilization review and preferred provider services. -4- # /11/92

52 IV. Cancellation of Agreement. A. At any time after the date hereof, this Agreement may be cancelled (a) by either party hereto, with or without cause, and for any reason whatsoever, upon giving the other party not less than thirty (30) days' prior written notice; or (b) by either party hereto, in the event of a breach of this Agreement by the other party, upon giving the other party not less that sixty (60) days' prior written notice, provided, however, that no cancellation of this Agreement by either party hereto shall become effective unless, prior to giving such sixty (60) days' notice, the cancelling party first shall give notice to the other party of the nature of the claimed breach and shall set forth in such notice a period of time of not less than ten (10) days within which the other party must cure such breach. B. Upon the expiration or cancellation of this Agreement, Insurer shall have the following options with respect to all Claims and Claim files then being handled by Service Co. By notice given to Service Co. not less than thirty (30) days prior to the effective date of expiration or cancellation of this Agreement, Insurer may require either (1) that all Claim files be returned to it or (2) that Service Co. continue to provide the Basic Services to all Claims for which Service Co. is responsible in accordance with Section I above. If no such notice is given, then Insurer shall be deemed to have selected the option in clause (1) above. In the event Insurer selects or is deemed to have selected the option in clause (1) above, Service Co. agrees to promptly return all Claim files to Insurer or its designee, at the sole expense of Insurer, and thereafter Service Co. shall have no further responsibility for any Claims. C. Except as provided above, no cancellation of this Agreement, however effected, shall relieve either party of its obligations hereunder with respect to any Claim outstanding as of the date of such cancellation or with respect to any amounts which then may be due or become Hue from one party to the other as provided hereunder. V. ReDresentations of Service Co. Service Co. represents, and as follows: (i) It shall comply with all applicable federal, state and local governmental laws, rules, regulations and orders in the performance of its duties under this Agreement; (ii) It is duly authorized and licensed to perform its duties hereunder in each jurisdiction in which it shall act and, in furtherance thereof, it shall contract only with such third parties as are also so duly authorized and licensed; and (iii) It shall not assert that any Claim is not a claim covered by one of the Policies nor decline to pay any such Claim without the express prior approval of Insurer, whether or not such Claim is below the Authority Limit /11/92

53 VI. Insurance. For as long as Service Co. shall be obligated to provide the Basic Services with respect to any Claim, Service Co. agrees to maintain general liability insurance, automobile liability insurance, workers compensation insurance, fidelity insurance, errors and omissions insurance, and such other insurance coverages as are set forth in Exhibit E hereto. Such coverages shall be written in amounts not less than those set forth in said exhibit and shall include coverage of Service Co.'s obligations under paragraph VII (B) below. Insurer acknowledges receipt of one or more certificates of insurance evidencing the fact that all such coverages are in effect as of the date hereof and that each of the foregoing policies contains a provision to the effect that it shall not be cancelled or allowed to expire without at least ten (10) days' prior notice being given to Insurer. VII. Indemnity. A. Insurer agrees to indemnify, defend and hold harmless Service Co., its subsidiaries and affiliates, and each of their respective employees, officers, directors and agents, from and against any and all causes of action, proceedings, penalties, fines, losses, damages, costs, expenses or other liabilities of whatever nature, including, without limitation, settlement costs and reasonable attorneys' fees, court costs and other expenses actually incurred by any such party, whether in investigating, prosecuting or defending any claim or action, or any threatened claim nr Action, which is based upon or arises out of or in connection with any of the following: (i) any action taken or omitted to be taken by Service Co. at the specific direction of Insurer and, as a result of such action or omission, Service Co. incurs any liability, to a third party; (ii) any litigation or proceedings naming Service Co. or any of its employees, officers or directors as a defendant wherein the plaintiff or petitioner in such litigation or proceeding does not allege any f" n the part of Service Co. or any of its. employees, officers or directors; (iii) any checks, overdrafts or other charges to, on, or related in any way, to the Loss Fund Account, provided, however, that no such check, overdraft or other charge was issued or incurred by Service Co. as a result of any dishonest or other tortious act or omission by Service Co. or any of its officers, directors, employees or agents; (iv) the breach of any agre.ment- Insurer in this Agreement. or representation made by B. Service Co. agrees to indemnify, defend and hold harmless Insurer, and each of its employees, officers, directors and agents, from and against any and all causes of action, proceedings, penalties, fines, losses, damages, costs, expenses or other liabilities of -6- An71q7 - (1Q/11/no

54 whatever nature, including, without limitation, settlement costs and reasonable attorneys fees, court costs and other expenses actually incurred by any such party, whether in investigating, prosecuting or defending any claim or action, or any threatened claim or action, which is based upon or arises out of or in connection with any of the following: (i) any tortious act or omission on the part of Service Co. or any of its directors, officers, employees, agents or independent contractors, or any other act taken by Service Co. that is outside the scope of its engagement as set forth in this Agreement, unless the complained of act or omission was taken at the express direction of Insurer; or (ii) the breach of any agreement or representation made by Service Co. in this Agreement. C. No cancellation of this Agreement shall relieve either party of its obligations of indemnity under this Section VII. The indemnity provisions set forth in paragraphs VII (A) and VII (B) respectively, are made for the joint benefit of the respective parties so indemnified and may be specifically enforced by any or all such parties as if each such party also was a party hereto. For purposes of this Section VII, the term "affiliate" shall mean any corporation that, by ownership of stock, controls or 4s in common control with gervir i Co. VIII. Guarantor. All obligations recited in this Agreement, including but not limited to Sections II and III above and Exhibits C and D hereto, wherein Insurer agrees to pay or to make funds available (including implementation of procedures to make funds available) to Service Co.'s Loss Fund Account to pay claims and/or losses and associated Allocated Loss Expenses, is intended to and hereby does make Insurer the guarantor thereof. At Insurer's request, Service Co. agrees to establish the Loss Fund Account and to seek such payments and availability of funds (including implementation of procedures to make funds available) directly from the Insurer's insured. In the event the Insurer's insured does not make payment or funds available (including implementalion of procedures Lo make funds available) to Service Co.'s Loss Fund Account, Insurer, as guarantor thereof, agrees to immediately pay to Service Co., upon request from Service Co., with supporting documentation, such funds not paid or such funds not made available to Service Co. by Insurer's insured. IX. Amendment and Waiver. No amendment or waiver of any provision of this Agreement, and no consent to any departure herefrom, shall be effective or binding unless and until set forth in a writing signed by each party, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it is given. No notice or any other communication given by one party hereto to the other party shall be construed to constitute approval or ratification by the other party of any matter contained or referred to in such notice, unless the same be consented to be the other party in writing. X. Entire Contract. This contract, together with the exhibits attached hereto, constitutes the entire agreement between the parties relating to the subject matter hereof, and there exist no other written or oral understandings, agreements or assurances with respect to such matters /11/99

55 :elating to the subject matter hereof, and there exist no other written or oral understandings, agreements or assurances with respect to such matters except as are set forth herein. Unless expressly stated, this Agreement confers no rights on any person or business entity that is not a party hereto. XI. Notices. All notices, requests and other communications from either party to the other shall be in writing and delivered either personally or by certified mail, return receipt requested. Any such notice, request or other communication shall be deemed to have been given on the date of personal delivery or, if mailed, on the date of mailing. All communications shall be addressed as follows: If to Service Co.: CRAWFORD & COMPANY 5620 Glenridge Dr., N.E. Atlanta, Georgia Attention: Mr. B. W. Crawley, Vice President If to Insurer: RELIANCE NATIONAL RISK SPECIALISTS 77 Water st*,=.ef New York, New York Attention: Mr. Arthur S. Barry, Vice President Insurer hereby authorizes and directs Reliance National Risk Specialists ("RNRS") to act as its general agent for all purposes under this Agreement. Without limiting the foregoing in any way, RNRS is hereby authorized to.make all such modifications, amendments and extensions of the Agreement, and to give all notices and instructions, which the Insurer could make or give hereunder, and when made or given, all such modifications, amendments, extensions, notices and instructions shall be _valid and binding upon the insurer as if made or given by itself. XII. Assignment. Neither party may assign its rights or obligations under this Agreement without the prior written consent of the other party. XIII. Binding Effect; Choice of Law. This Agreement shall be binding upon and inure to the benefit of each party hereto and their respective permitted successors and permitted assigns. This Agreement shall be governed by and its provisions construed in accordance with the laws of the State of New York applicable to contracts made and to be performed epi y within New York. XIV. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be considered an original, and all of which shall constitute one and the same instrument. -Q- ltr /la /11 /e-in

56 IN WITNESS WHEREOF, the parties by their authorized agents have caused this Agreement to be executed as of the date first written above. CRAWFORD & COMPANY 2 BY: TITLE: Vice President RELIANCE NATIONAL RISK SPECIALIST On Behalf of PLANET INSURMCE C MPANY ; / TITLE: / 14',/-1? DATE: /11/99

57 EXHIBIT A TO CLAIM SERVICE AGREEMENT #6088 For Program #07197 Insurer Insurance Coverage Provided To CARLSON COMPANIES, INC. Effective and Insurance Company Policy Number Coverage Expiration Dates Planet Insurance NWA WC (1) 07/01/92-06/30/93 Planet Insurnace NWA WC (2) 07/01/92-06/30/93 Planet Insurance NGA AL 07/01/92-06/30/93 Planet Insurance NKA GL 07/01/92-06/30/93 (1) States of Alabama, Colorado, Connecticut, Florida, Georgia, Illinois, Indiana, Louisiana, Maryland, Michigan, Minnesota, Pennsylvania, Rhode Island, South Carolina, Texas, Vermont and Washington DC (9) All Other States -in-./l1 1O7 - no In,

58 EXHIBIT B TO CLAIM SERVICE AGREEMENT #6088 For Program #07197 Insured: CARLSON COMPANIES, INC. FILE RETENTION AND DESTRUCTION POLICY LIABILITY FILES: Destroy two (2) years after applicable statute of limitations has expired. Exceptions: a. Suits - retain until expiration of appellate process. Then destroy. b. Mental Incompetents - retain indefinitely. c. Infant (Minor) Claims - retain until infant reaches majority plus applicable statute of limitations plus two (2) years. FIRST PARTY CLAIMS, SUBROGATION/ARBI1RATION, INCIDENT REPORTS, AND BOND LOSSES: Destroy one (1) year After file closing. Exceptions: a. Suits - retain until expiration of appellate process. Then destroy. b. Prevailing Statute Precludes Destruction in one (1) year..workers' COMPENSATION CLAIMS: Medical Only Claims Excluding Occupational Disease Claims: Destroy (6) months after applicable statute of limitations has expired. Exceptions: a. Prevailing Statute Precludes Destruction in six (6) months. Other Than Medical Only Claims Excluding Occupational Disease Claims: Destroy one (1) year after applicable statute of limitations has expired. Exceptions: a. Formal or Informal Hearing Level Claims - retain until expiration of appellate process. Then destroy. b. Prevailing Statute Precludes Destruction in one (1) year. Occupational Disease Claims: Destroy four (4) years after applicable statute of limitations has expired. Exceptions: a. Formal or Informal Hearing Level Claims - retain until expiration of appellate process. Then destroy. b. Prevailing Statute Precludes Destruction in four (4) years i /11/(49

59 EXHIBIT C TO CLAIM SERVICE AGREEMENT #6088 For Program #07197 Insured: CARLSON COMPANIES, INC. Schedule of Claims Service Fees and Expenses Section Cl. Basic Claims Services. C1.1 Flat Rate Loss Exposure Claims. Type of Loss Exposure Claim Workers' Compensation Medical Only Other Than Medical Only (AK, CA, FL & TX Only) Other Than Medical Only (AOS) Incident Reports Automobile Liability Private Passenger Non-Ownership, Automobile Liability & No-Fault Medical Payments Incident Reports General Liability Duu_Lly 4.11juiy Garage Liability, Owners', Landlord' and Tenants', Manufacturers' & Contractors and Commercial General Liability Property Damage Innkeepers', Garage, Garage Keepers', Owners', Landlords and Tenants', Manufacturers' & Contractors' and Commercial Products Liability Flat Rate Fee Per Anticipated Number Claimant Of Claimants $ $ $ $ $ $ Unknown $ Unknown $ $ $ Anticipated Fees $142, $106, $169, $ 18, $ 20, $114, $ 69, $ 57, # /11/92

60 Public Liability Medical Payments $ $ 44, Incident Reports $ Unknown Subtotal $745, Administrative Service Center Fee (7% of above) $ 52, TISDAT (For T&E Claims) $ $ Basic Claims Service Fee $798, C1.2 Payment of Basic Claims Service Fee. Insurer shall pay the Basic Claim Service Fee provided in Section C1.1 to Service Co. in eighteen (18) equal monthly installments of $44, At the first of each monthly period beginning with the effective date of this Agreement and continuing for eighteen (18) months thereafter, monthly billings in said amount will be submitted to Insurer by Service Co. and such billings will be paid by Insurer to Service Co. within thirty (30) days of such billing. C1.3 Adjustment of Basic Claim Service Fee. One year after the expiration of the policies under this Agreement, Service Co. shall provide to Insurer a statement setting forth the actual number of types of claims serviced by Service Co. under the Policies. If such statement shows that the Basic Claims Service Fee paid to Service Co. as set forth in Section C1.2 is in excess of the amount of such fees calculated on the basis of the actual number of claimants serviced, Service Co. shall immediately apply such amount as a credit to Insurer. If such statement shows that the Basic Claims Service Fee paid to Service Co. as set forth in Section C1.2 is less than the amount of such fee calculated on the basis of the actual number of claimants serviced, Insurer shall pay such additional amount to Service Co. within thirty (30) days after Insurer receives such statement and a billing for such additional amount. C1,4 SISDAT Fee. For any Claims handled on a time and expense basis, SISDAT shall be charged on the basis of $15.00 per claimant which shall be 1- erce P-. as to the actual number of time and e-pense claimants as stated in Section C1.3. C1.5 Administrative Service Center. For all Claims handled on a flat rate fee per claimant basis the Administrative Service Center fee in Section C1.1 shall be adjusted to the percentage of the actual flat rate fees, such adjustment to be included in the Adjustment of Basic Claim Service Fee as is referenced in Section C1.3. Section C2. Time and Expense Services. C2.1 Time and Expense Loss Exposure Claims. Workers' Compensation Occupational Disease claims, U.S. Longshoremen and Harborworkers' Act Occupational Disease claims, Employers Liability Occupational Disease claims, U.S. Longshoremen and Harborworkers Act Cumulative Trauma claims, Employers' Liability claims, U.S. Longshoremen and Harborworkers' Act claims, Liquor Liability claims, Elevator Liability claims, Owners' and Contractors' Liability claims, Contractual Liability claims, Professional Liability claims, Errors and Ommissions Liability claims, Personal Injury /11/Q0

61 Liability claims, Bailee Liability claims, and all subrogation investigation, second injury fund, third party contribution, social security or any other recovery or offset investigation or activity with respect to any claim, including arbitration, mediation, litigation and any other activity, except for a first notice letter to the adverse party or entity, shall be handled on a time and expense basis by Service Co. at Service Co.'s then prevailing hourly rate and expense method of billing. C2.2 Canadian Pricing. Claims occurring in Canada shall be handled on a time and expense basis by Service Co. at its then prevailing hourly rate and expense method of billing. All revenue paid to Service Co. for Canadian services shall be paid in U.S. funds. C2.3 Puerto Rican and Virgin Island Claims. Claims occurring in Puerto Rico and the Virgin Islands shall be handled by Service Co. on a time and expense basis at the prevailing hourly rate and expense method of billing. C2.3 Flat Rate Time Parameter. The flat rate fees per claimant and the percent of the total amount of flat rate fees per claimant reflected in Section C1.1 include the provision of Claim and Administrative Service Center services by Service Co. for Insurer for a period of two (2) years from the date of accident/occurrence for all accident/occurrence lines of exposure and two (2) years from the date Claim is made for all claims made lines of exposure. Any Claim(s) not concluded within such time parameters shall be handled to a conclusion by Service Co, for Insurer for an additional fee per claimant each two-year period or part of any two-year period thereafter that such Claim(s) have not been concluded through the fifth two year period. Thereafter, any such claims not concluded will be handled to a conclusion by Service Co. for Insurer on a time and expense basis at Service Co.'s then prevailing hourly rate and expense method of billing until all such Claim(s) have been concluded. Such billings shall be paid by Insurer to Service Co. within thirty (30) days of billing. The additional fees per claimant are as follows: EXPOSURE Second Two Years Third Two Years Fourth* Two Years Fifth* Two Years Subsequent Years WC-MO $ $ $ CPI UP + CPI T&E WC-OTMO, $ $ $ CPI UP + CPI T&E CT WC-OTMO, $ $ $ CPI UP + CPI T&E (AK, CA, FL & TX) OD AL-PP $ $ $ CPI UP + CPI T&E GL-BI $ $ $ CPI UP + CPI T&E PE - PD $ $ $ CPI UP + CPI T&E AMP-PP $ $ $ CPI UP + CPI T&E CPI = The average Consumer Price Index percentage figure as reflected in the U.S. Bureau of Labor Statistics Report published two months prior to the beginning of the new pricing period # /11/92

62 * For the Fourth Two Years the flat rate amount shall be the Third Two Years amount plus the applicable CPI percentage increase. The Fifth Two Years amount shall be the Fourth Two Years amount (Unit Pricing) plus the applicable CPI percentage increase. The additional fees per claimant for Claims occurring in Canada shall be handled by Service Co. on a time and expense basis at its then prevailing hourly rate and expense method of billing. All revenue paid to Service Co. for Canadian services shall be paid in U.S. funds. Any Claims being supervised by Service Co.'s Administrative Service Center that have not been concluded within two (2) years from the date of accident/occurrence for all accident/occurrence lines of exposure and two (2) years from the date Claim is made for all claims made lines of exposure shall be supervised to a conclusion by the Administrative Service Center for Insurer from that date forward on a time and expense basis at the Administrative Service Center's then prevailing hourly rate and expense method of billing. C2.5 Catastrophe Claim. Any accident or occurrence resulting in ten (10) or more declared or potential claims or claimants shall be treated as "Catastrophe Claims.' Catastrophe Claims for loss exposure claims under Section C1.1 shall be handled on a time and expense basis by Service Co. at Service Co.'s then prevailing hourly rate and expense method of billing. C2.6 Claims Previously Serviced. Insurer shall pay Service Co. at Service Co.'s prevailing hourly rate and expense method of billing, for all services provided in connection with flat rate loss exposure claims in Section C1.1 when the servicing process was commenced by any entity other than Service Co. (including, without limitation, by Insurer or its Insured) before such Claim was assigned to Service Co. C2.7 Administrative Service Center. The Administrative Service Center supervisory fees for any claim handled on other than a flat rate per claimant basis shall be handled on a time and expense basis at the Administrative Service Center's then prevailing hourly rte and e-pnoe method of billing. C2.8 Payment of Time and Expense Claims. For those Claims set forth in Section C2 that will be billed on a time and expense basis, if any, Service Co. shall submit statements to Insurer on a monthly basis for Claims closed during such period and Insurer shall pay such invoices within thirty (30) days of the date of each such statement. If any such time and expense Claim is not concluded within three (3) months from the date such Claim is assigned to Service Co. hereunder, Service Co. may submit an interim time and expense billing to Insurer provided that a significant amount of time and expense activity has been recorded on such Claim. Subsequent interim bills will be submitted thereafter provided that a significant amount of time and expense activity has been recorded on such Claim. Any such Claim so interim billed shall continue to be handled by Service Company after such interim billing(s) on a time and expense basis at Service Co.'s then prevailing hourly rate and expense method of billing in effect at the time of such interim billing(s). All statements in respect to Claims handled on a time and expense basis are due and shall be -15- # /11/92

63 paid in full by Insurer within thi -zty (30) days of the date of such statement. Section C3. Services Included in Sections Cl and C2 C3.1 SISDAT Reports. Computer generated listings as set forth in Section I., Paragraph B.13. are included in the pricing set forth under aections Cl and C2. C3.2 Monthly Magnetic Claim Tapes. Claim data under this Agreement will be included with monthly magnetic claim tapes currently being provided to Insurer by Service Co. and the cost therefore is included in the pricing set forth under Sections Cl and C2. C3.3 IRS 1099 Reports reports will be sent by Service Co. in full compliance with IRS regulations. Section C4. Services Not Included in Sections Cl and C2. C4.1 Material Damage and Property Appraisals. Appraisals shall be handled by Service Co. at its then prevailing appraisal fee schedules. Billings for such appraisal services, if any, will be paid by Service Co. from the Loss Fund Account as Allocated Loss Expense Vocational Rehabilitation and Medical Case Management. Vocational Rehabilitation and Medical Case Management Services shall be provided by the vendor approved by Insurer for Workers' Compensation claims on a time and expense basis at such vendor's then prevailing hourly rate and expense method of billing. Billings for such services will be paid.from the Loss Fund Account as medical cost or as Allocated Loss Expense based on the state requirements in which such services are being provided. (A.3 Hospital Bill Audits. Hospital Bill Audit Services shall be handled by the vendor approved by Insurer for Workers' Compensation claims as follows: 1. Audit: Screen - screening of hospital bills for audit consideration will be billed at approved vendor's prevailing rates. 2. Full or partial audits conducted in the hospital where supporting patient medical records are available will be billed at approved vendor's prevailing rates. 3. Desk audits conducted in approved vendor's branch offices will be billed on a time and expense basis at approved vendor's then prevailing hourly rate and expense method of billing. 4. Medical record analyses will be billed on time and expense basis at approved vendor's then prevailing hourly rate and expense method of billing. 5. Negotiated discounts will be billed at approved vendor's prevailing rates # /11/92

64 sp Billings for Hospital Bill Audit Services will be paid from the Loss Fund Account as medical cost or as Allocated Loss Expense based on the state requirements in which such services are being provided. C4.4 Provider Bill Audit. Provider Bill Audit Services shall be provided by the vendor approved by Insurer for Workers' Compensation claims as follows: 1. Four phase audit fee schedule states will be billed at approved vendor's prevailing rates. 2. Physician peer review will be billed at approved vendor's prevailing rates. Billing for Provider Bill Audit Services will be paid from the Loss Fund Account as medical cost or as Allocated Loss Expense based on the state requirements in which such services are being provided. C4.5 Preferred Provider Services. Preferred Provider Services shall be provided by the vendor approved by Insurer for Workers' Compensation claims and shall be billed at approved vendor's prevailing rates. Billings for Preferred Provider Services will be paid from the Loss Fund Account as medical cost or as Allocated Loss Expense based on the state requirements in which such services are being provided. C4.6 Utilization Review. Utilization Review Services shall be provided by the vendor approved by Insurer for Workers' Compensation claims as follows: 1. Pre-certification of hospital admissions will be billed at approved vendor's prevailing 'rates. 2. Concurrent hospital reviews will be billed at approved vendor's prevailing rates. 3. Emergency hospital admission reviews will be billed at approved vendor's prevailing rates. 4. Psychological/chemical dependency hospital reviews will be billed at approved vendor's prevailing rates. Billings for Utilization Review Services will be paid from the Loss Fund unt as medical cost or as Allocated Loss Expense based on the state requirements in which such services are being provided. C4.7 Conflict of Interest Claim Assignment. In the event one of Service Co.'s branch office locations receives a claim assignment from Insurer pertaining to this Agreement after having already accepted a claim assignment for some other party involved in the same accident or occurrence, then Service Co. branch office location will notify Service Co.'s Administrative Service Center designated by Service Co. That center will contact Insurer to determine a mutually agreeable claim service organization to be assigned to provide claims adjustment services on behalf of Insurer in respect of the particular assigned claim. Service Co.'s -17- A /11/no

65 designated Administrative Service Center will then assign the claim to the agreed upon claim service organization on behalf of Insurer and will direct and control the claim service organization in the complete and total investigation, settlement or defense of the claim on behalf of Insurer, The claim service organization's bill will be audited, approved and paid by Service Co.'s designated Administrative Service Center. Such billings, if any, paid by Service Co.'s designated Administrative Service Center will be paid as an Allocated Loss Expense. C4.8 Prehearing Conferences and Informal Hearings. In those jurisdictions that permit adjusters to attend prehearing conferences and/or informal hearings on behalf of Insurer, Service Co. will appear at such conferences and/or hearings on Insurer's behalf. Billings for such appearances, if any, will be at time and expense based upon Service Co.'s then prevailing hourly rate and expense method of billing and will be included with Service Co. billing for time and expense services as set forth in Section C2.8. C4.9 Worker's Compensation Large Case Reports. In those jurisdictions that require Insurer to provide large case reports for rating and/or statistical information, based upon that jurisdiction's definition of, large cases, Service Co. will complete such reports upon request from Insurer. Billings for such reports, if any, will be on a time and expense basis at Service Co.'s then prevailing hourly rate and expense method of _g, and will be included with Qe-v 4 -e Co. h4114,g for time and expense services as set forth in Section C2.8. Section C5. Other Services. Only those services specifically set forth in this Agreement and in this Exhibit "C" are a part of this Agreement. Any other services that Insurer may need or desire with respect to this Agreement will be subject to separate negotiation between Insurer and Service Co. Section C6. Taxes. Any Canadian (Federal, provincial, territorial or local) or any domestic (Federal, state or local) sales taxes, which Service Co. may be required to pay or collect or which may be incurred by or assessed against Service Co., under any existing or future law, relating to the sale, delivery, rendering or provision of services to Insurer pursuant to this Agreement, shall be for the account of Insurer. Service Co. shall bill Insurer and Insurer shall promptly pay Service Co. such sales taxes in accordance with the provisions of the applicable law and regulations concerning the collection of such sales taxes and Service Co. shall remit such taxes to the appropriate taxing authority /11/49

66 EXHIBIT D TO CLAIM SERVICE AGREEMENT #6088 For Program #07197 Insured: CARLSON COMPANIES, INC. Loss Fund Account Procedures - Daily Budgeted Basis Section Dl. Loss Fund Account. 1. Service Co. shall establish a Loss Fund Account as agreed to in Article III, Paragraph A. at Trust Company Bank, Atlanta, Georgia, for the payment of Claims and Allocated Loss Expenses and for deposit of Recoveries. 2. Insurer shall establish an account with a bank of Insurer's choice for the purpose of replenishing the Loss Fund Account. 3. An appropriate letter, hereinafter referred to as the Letter of Authority, will be provided, within fifteen (15) days from the effective date of this contract, to Service Co.'s bank authorizing Service Co.'s bank to initiate the necessary daily direct debits against Insurer's designated bank account for deposit to the Loss Fund Account at Service Co.'s bank. In addition, the Service C3. will be furnished by Insurer with such account documentation with respect to the Loss Fund Account that may be required by Service Co.'s bank and Service Co. respectively. 4. On or before the effective date of this contract, Insurer will provide an initial imprest deposit to the Service Co. in an amount equivalent to five (5) banking days of average anticipated Claim and Allocated Loss Expense payments, net of Recoveries, or ten thousand dollars ($10,000), whichever is greater, to be maintained by Service Co. as a loss fund deposit, hereinafter referred to as the "Deposit," for payment of Claims and Allocated Loss Expenses from Service Co.'s Loss Fund Account. 5. Reimbursement to the Loss Fund Account will be made by a daily direct debit executed by Service Co.'s bank against Insurer's designated bank account for deposit into the Loss Fund Account at Service Co.'s bank. The amount of the daily direct debit will be limited to the amount computed by Service Co. who will instruct its bank as to the appropriate amount. The amount of the daily direct debit will be determined by Service Co. computing the average Claim and Allocated Loss Expense payments, net of Recoveries, made daily for Insurer. Each day the same average amount will be deposited into Service Co.'s Loss Fund Account via a direct debit drawn against Insurer's designated bank account. At the end of each month, beginning with the end of the first month from the effective date of this contract, Service Co. will compare the t6la1 deposits to the Loss Fund Account, including all direct debits resulting from the average daily budgeted amount, Recoveries and any amount as specified in Paragraph 7. below, made during the month to Service Co.'s Loss Fund Account to the actual claim payment account detailed in the SISDAT Monthly Loss Fund Activity and Loss Run Reports and an adjustment direct debit will be made, so the monthly deposits are equal to the totals shown on such SISDAT - q - 4( riqiil irn

67 -,- ports which reflect posted Claim and Allocated Loss Expense payments, net of Recoveries. Service Co. will conduct a quarterly analysis of the adequacy of the "Deposit" in Service Co.s Loss Fund Account based upon the most current three (3) months of Loss Fund Account activity. If the analysis determines that the current average Loss Fund Account activity exceeds the then Deposit, then Service Co. will authorize its bank to - initiate an adjustment direct debit in the amount necessary to bring the Deposit to the level stipulated in Paragraph 4., above. Service Co. will adjust the average daily direct debit to the revised average daily Loss Fund Account activity in accordance with Paragraph 5., above. 7. Service Co. will notify Insurer, via telephone, before making any single Claim and/or Allocated Loss Expense payment for twenty-five thousand dollars ($25,000) or more, and these amounts will be included in the direct debit along with the daily budgeted amount. Service Co. will not consider such amounts in arriving at the the daily budgeted direct debits and will not consider such amounts in computing the necessary Deposit required of Insurer as set forth in Paragraph 6., above. 8. Service Co. may draw and authorize checks, drafts, and other items on the Loss Fund Account only if Service Co. determines that it has sufficient funds in the Loss Fund Account to cover such checks, drafts, and other items. 9. Service Co. may terminate the Loss Fund Account at any time, in its sole discretion, for cause. For the purpose of this Exhibit D, the occurrence of any of the following shall constitute cause: Insurer shall fail to make when due. any payment or other amount due in respect to the Loss Fund Account; dissolutions or termination of the existence of Insurer; insolvency of the Insurer; appointment of a Receiver of any part of the property of Insurer; Insurer shall make an assignment for the benefit of creditors; or the commencement of any proceedings under any bankruptcy or insolvency laws by or against Insurer. 10. Unless otherwise agreed to by the parties hereto, the Loss Fund Account shall be maintained in accordance with the procedures set forth in this Exhibit D for so long as Service Co. shall be obligated to render the Basic Services with respect to any Claim. 11. At such time as Service Co. is no longer obligated to provide the Basic Services to any Claim under this Agreement, Service Co. agrees to make a final reconciliation of the Loss Fund Account and remit any closing balance to Insurer that Insurer may be entitled to receive in accordance with the Agreement /11/(39

68 EXHIBIT E TO CLAIM SERVICE AGREEMENT #6088 For Program #07197 Insured: CARLSON COMPANIES, INC. INSURANCE COVERAGE Crawford & Company maintains the insurance indicated below on its operations and believes that this insurance along with its financial stability adequately protects its clients. Workers' Compensation Coverage: Statutory General Liability, Including Personal Injury Coverage: $1,000,000 CSL Fidelity Coverage, Including Depositor's Forgery: $2,500,000 Each Occurrence Professional Liability (E&O): $3,000,000 Automobile Liability: $1,000,000 CSL Umbrella Liability: $5,000,000

69 EXHIBIT 4

70 From: Sent: Friday, May 28, :57 AM To: King, Sharon Risk Management Dept. Cc: Subject: Fw: Act 46 billing for Carlson Companies Dear Sharon, Attached please find the bill for expenses incurred by the estate of Reliance Insurance Company (In Liquidation) in the administration of the Carlson Companies deductible collateral. All collateral reductions or draws subsequent to liquidation (10/3/01) are subject to ACT 46. Under ACT 46 (copy attached), which was signed into Pennsylvania law on June 21, 2004, Reliance is authorized to charge as reimbursement to the estate for the expenses of administration up to 3% of the amount of collateral returned or drawn for deductible reimbursements. For the current billing cycle we have determined that our actual expenses are 2.49% of the collateral returned or drawn. The Reliance Collateral Review Committee approved a reduction to the direct collateral of $1,390,446 from $3,166,093 to $1,775,647 contingent on payment of the attached Act 46 expense billing of $34,622 and increasing the captive collateral by $927,740 from $268,042 to $1,195,782. Kindly advise if the Act 46 billing will be paid via check or wire transfer. After receipt of payment and increase to the captive collateral the reduction would occur within approx. 3 weeks. As Drew mentioned and per the claim list he sent the captive has funded through the tpa approx. $316,294 in losses post liquidation (after 10/3/01) and as further discussed Nafco Insurance Company will need to seek and secure a Cut Through otherwise Reliance would bill the $316k to Nafco as reinsurance losses due the estate. Further the captive is undersecured by $611,446 thus the need for an increase to the captive collateral of $927,740 to $1,195,782. The Cut Through process can take many months so we suggest you apply for the Cut Through and in the meantime to facilitate the direct reduction kindly pay the Act 46 billing and increase the captive collateral as noted above. Once the Cut Through is approved by the Court we can reduce the captive collateral by the $316,294. As a courtesy to insured's, we extend the option of paying the Act 46 billing directly rather than deducting the monies from collateral as permitted by the Act. Direct payment is, in fact, the preferred method for most insured's. Please be advised that the Act 46 billing is due 6/28/10 and if not paid, we will draw and deduct the billing from collateral. If you have any questions concerning the collateral review, kindly discuss with Drew Krzywicki at Also attached is the Reliance Insurance Company (In Liquidation) W 9 for your Finance Department. Thanks (See attached file: PA Statue Policyholder Collateral.doc)(See attached file: W 9.pdf)(See attached file: Carlson Companies 2.xls) Reese Roche Reliance Insurance Company (In Liquidation) 75 Broad Street, 10th floor New York, New York phone fax

71 EXHIBIT 5

72 Original Message From: Sent: Tuesday, July 12, :37 AM To: King, Sharon Risk Management Dept.; Bujarski, Steve Cc: > Subject: Act 46 billing for Carlson Companies Dear Sharon and Steve, Attached please find the bill for expenses incurred by the estate of Reliance Insurance Company (In Liquidation) in the administration of the Carlson Companies deductible collateral. All collateral reductions or draws subsequent to liquidation (10/3/01) are subject to ACT 46. Under ACT 46 (copy attached), which was signed into Pennsylvania law on June 21, 2004, Reliance is authorized to charge as reimbursement to the estate for the expenses of administration up to 3% of the amount of collateral returned or drawn for deductible reimbursements. For the current billing cycle we have determined that our actual expenses are 2.6% of the collateral returned or drawn. The Reliance Collateral Review Committee approved a reduction of $201,335 from $1,775,647 to $1,574,312 for the direct collateral and $140,242 from $1,195,782 to $1,055,540 for the captive collateral contingent on payment of the attached Act 46 expense billing of $5,235. Kindly advise if the Act 46 billing will be paid via check or wire transfer. After receipt of payment the reductions would occur within approx. 3 weeks. As a courtesy to insured's, we extend the option of paying the Act 46 billing directly rather than deducting the monies from the direct collateral as permitted by the Act. Direct payment is, in fact, the preferred method for most insured's. Please be advised that the Act 46 billing is due 8/12/11 and if not paid, we will draw and deduct the billing from collateral. Note the $1,055,540 remaining in captive collateral includes $381,088 for captive losses paid post liquidation. The $381,088 can be released in the event you secure a Cut Through. If you have any questions concerning the collateral review, kindly discuss with Drew Krzywicki at Also attached is the Reliance Insurance Company (In Liquidation) W-9 for your Finance Department. Thanks! (See attached file: PA Statue Policyholder Collateral.doc)(See attached file: W-9.pdf)(See attached file: Carlson Companies 3.xls) Reese Roche Reliance Insurance Company (In Liquidation) 75 Broad Street, 10th floor New York, New York phone fax

73 Westlaw. Page 1 40 P.S a C Purdon's Pennsylvania Statutes and Consolidated Statutes Annotated Currentness Purdon's Pennsylvania Statutes Annotated Title 40. Insurance (Refs & Annos) Chapter 1. Insurance Department Article V. Suspension of Business--Involuntary Dissolutions (Refs & Annos) (C) Formal Proceedings B. Liquidation 2. Powers and Duties of Liquidators and Others a. Policyholder collateral, deductible reimbursements and other policyholder obligations (a) Collateral shall not be considered an asset of the estate and shall be maintained and administered by the receiver as provided in this section, notwithstanding any other provision of law or contract to the contrary. (b) Subject to the provisions of this section, the collateral shall be used to secure the policyholder's obligation to fund or reimburse claims payment within the agreed deductible amount. (c) If a claim that is subject to a deductible agreement and secured by collateral is not covered by any guaranty association and the policyholder is unwilling or unable to take over the handling and payment of the non-covered claims, the receiver shall adjust and pay the non-covered claims utilizing the collateral but only to the extent the available collateral, after allocation under subsection (d), is sufficient to pay all outstanding and anticipated claims. A claim against the collateral by a third-party claimant is not a claim against the insolvent insurer's estate for the purposes of releasing the policyholder to the extent of applicable policy coverage. If the collateral is exhausted and the insured is not able to provide funds to pay the remaining claims within the deductible after all collection means against the insured have been exhausted, the receiver's obligation to pay such claims from the collateral terminates, and the remaining claims shall be claims against the insurer's estate subject to complying with other provisions of this article for the filing and allowance of claims. When the liquidator determines the collateral provided by the insured is insufficient to pay all additional and anticipated claims against the insured, the liquidator may file a plan for equitably allocating the collateral among claimants of the insured which provided the collateral, subject to court approval. (d) To the extent that the receiver is holding collateral that secures other obligations of the policyholder to pay the insurer directly or indirectly amounts that will become assets of the estate,such as reinsurance obligations under a captive reinsurance program or premium obligations under a retrospectively rated insurance policy where the premium due is subject to adjustment based upon actual loss experience, the receiver shall equitably allocate the collateral among such obligations and administer the collateral allocated to the deductible agreement pursuant to this section. With respect to the collateral allocated to obligations under the deductible agreement, if the collateralsecured reimbursement obligations are under more than one line of insurance, then the collateral shall be equitably allocated among the various lines based upon the estimated ultimate exposure within the deductible amount for each line. The receiver shall inform the guaranty associations of the method and details of all the foregoing allocations. (e) Regardless of whether there is collateral, if the insurer has contractually agreed to allow the policyholder to fund its own claims within the deductible amount pursuant to a deductible agreement either through the policyholder's own administration of its claims or through the policyholder providing funds directly to a third-party administrator who administers the claims, the receiver shall allow such funding arrangement to continue and, where applicable, will enforce such arrangements to the fullest extent possible. The funding of such claims by the policyholder within the deductible amount will act as a bar to a claim for such amount in the liquidation proceeding, including, but not 2005 Thomson/West. No Claim to Orig. U.S. Govt. Works.

74 Page 2 40 P.S a limited to, a claim by the policyholder or the third-party claimant. The funding will extinguish both the obligation, if any, of any guaranty association to pay such claims within the deductible amount, as well as the obligation, if any, of the policyholder or the third-party administrator to reimburse the guaranty association. No charge of any kind shall be made against a guaranty association on the basis of the policyholder funding of claims payment made pursuant to the mechanism set forth in this subsection. (f) (1) If the insurer has not contractually agreed to allow the policyholder to fund its own claims within the deductible amount, to the extent a guaranty association is required by applicable State law to pay any claims for which the insurer would have been entitled to reimbursement from the policyholder under the terms of the deductible agreement and to the extent the claims have not been paid by the policyholder or by a third party, the receiver shall promptly bill the policyholder for such reimbursement, and the policyholder will be obligated to pay such amount to the receiver for the benefit of the guaranty associations who paid such claims. Neither the insolvency of the insurer nor its inability to perform any of its obligations under the deductible agreement shall be a defense to the policyholder's reimbursements obligation under the deductible agreement. When the policyholder reimbursements are collected, the receiver shall promptly reimburse such guaranty association for claims paid that were subject to the deductible. If the policyholder fails to pay the amounts due within sixty days after such bill for such reimbursements is due, the receiver shall use the collateral to the extent necessary to reimburse the guaranty association and, at the same time, may pursue other collections efforts against the policyholder. If the policyholder reimbursements are not collected due to the reduction in such reimbursements as provided in paragraph (2), the receiver shall nonetheless reimburse such guaranty association as if such reimbursements had been collected. The receiver will obtain funds to reimburse a guaranty association claim affected by paragraph (2) by subtracting from funds collected by the receiver for other policyholder claim reimbursements under this paragraph amounts sufficient to reimburse the guaranty association affected by the application of paragraph (2). Subtraction of funds shall be made against all guaranty associations, including the guaranty association affected by paragraph (2) on the basis of the ratio stated in paragraph (3). If more than one guaranty association has a claim against the same collateral and the available collateral, after allocation under subsection (d), along with billing and collection efforts, are together insufficient to pay each guaranty association in full, then the receiver will prorate payments to each guaranty association based upon the proportion of the amount of claims each guaranty association has paid bears to the total of all claims paid by such guaranty associations. (2) The obligation of a policyholder arising solely from a deductible agreement to reimburse the receiver for the benefit of one or more guaranty associations under paragraph (1) for losses paid by one or more guaranty associations shall be reduced by the amount of premium paid by or on behalf of the policyholder for one or more policies issued by a wholly owned affiliate or subsidiary of the insurer, which affiliate or subsidiary was either licensed to do business in this Commonwealth or was an eligible surplus lines insurer under Article XVI of the act of May 17, 1921 (P.L. 682, No. 284), IFNI 1 known as "The Insurance Company Law of 1921," at the time of the issuance of such policies where such policies were purchased to fund the policyholder's obligation to reimburse the insurer for deductibles under the deductible agreement, but in no event shall the reduction in liability be less than ninety per centum of the total premiums paid to the insurer and such affiliate or subsidiary for such policies and coverage provided under the related deductible agreement, provided that the policyholder's reimbursement obligation shall be reduced only if: (i) the wholly owned affiliate or subsidiary was merged into the insurer that was a party to the deductible agreement before the entry of a liquidation order against the insurer; (ii) the merger was approved by the commissioner; and (iii) the merger took place before the enactment of this section. (3) The reduction as a result of paragraph (2) in the amount of deductible reimbursements that one or more guaranty associations would have been entitled to claim from a policyholder of the insurer under paragraph (1) shall be allocated by the receiver pursuant to this paragraph pro rata among all guaranty associations receiving deductible reimbursements under paragraph (1). The pro rata allocation among guaranty associations shall be based upon the ratio of: (i) claims paid and to be paid as estimated by each guaranty association that are referred to in paragraph (1) to (ii) the total amount of claims paid and to be paid estimated by all the guaranty associations that are referred to in paragraph (1). Amounts used for the pro rata allocation shall be determined after giving effect to the provisions referred to in subsection (k) relating to insured net worth Thomson/West. No Claim to Orig. U.S. Govt. Works.

75 Page 3 40 P.S a (4) Any claim of the policyholder under one or more policies issued by the affiliate or subsidiary as described in paragraph (2) is hereby waived except for those claims under policies that are not paid by a guaranty association as a covered claim or amounts the policyholder has reimbursed a guaranty association under Article XVIII [FN2.1. of "The Insurance Company Law of 1921" or similar laws in other states. (g) If the insurer has not contractually agreed to allow the policyholder to fund its own claims within the deductible amount and a deductible reimbursement policy is present, to the extent a guaranty association is required by applicable State law to pay any claims for which the insurer would have been entitled to reimbursement under the deductible reimbursement policy and to the extent the claims have not been paid by the policyholder or by a third party, the receiver shall first make a good faith attempt to recover reimbursements or collateral under the deductible reimbursement policy. Any resulting recoveries under the deductible reimbursement policy shall by payable to the guaranty associations to the extent of claims paid within the deductible. To the extent the receiver is unable in whole or in part to recover first under the deductible reimbursement policy for claims paid by the guaranty associations, the receiver shall promptly bill the policyholder for the reimbursement, and the policyholder will be obligated to pay the amount to the receiver for the benefit of the guaranty associations who paid the claims. The policyholder shall retain any and all defenses that may be asserted in connection with the receiver's efforts to collect reimbursements from the policyholder. (h) If the insurer has not contractually agreed to allow the policyholder to fund its own claims within the deductible amount and a deductible reimbursement policy is present and if a guaranty association is not paying claims for any reason for which the insurer would have been entitled to reimbursement under the deductible reimbursement policy, to the extent claims covered under a deductible reimbursement policy have been paid by the policyholder and sufficient information on the payments has been provided by the policyholder to the receiver for purposes of billing under the deductible reimbursement policy, the receiver shall make a good faith attempt to recover reimbursements or collateral under the deductible reimbursement policy from the insurer of the deductible reimbursement policy. Any resulting recoveries under the deductible reimbursement policy shall be payable to the policyholder. (i) Receiver's duties and powers: (I) The receiver is entitled to deduct from reimbursements owed to guaranty associations and/or policyholders under this section or collateral to be returned to a policyholder reasonable actual expenses incurred in fulfilling the responsibilities under this provision, not to exceed three per centum of the collateral or the total deductible reimbursements actually collected by the receiver. (2) With respect to claim payments made by any guaranty associations, the receiver shall promptly provide the guaranty associations with a complete accounting of the receiver's deductible billing and collection activities, including, but not limited to, copies of the policyholder billings when rendered, the reimbursements collected, the available amounts and use of collateral for each account and any proration of payments when it occurs. The receiver's costs of accounting shall be included with expenses referred to under this subsection and, together with other reasonable actual expenses, be subject to the overall limit called for by this subsection. If the receiver fails to make a good faith effort within one hundred twenty days of receipt of claims payment reports to collect reimbursements due from a policyholder under a deductible agreement based on claim payments made by one or more guaranty associations, then after such one-hundred-twenty-day-period such guaranty associations may pursue collection from the policyholders directly on the same basis as the receiver and with the same rights and remedies and will report any amounts so collected from each policyholder to the receiver. To the extent that guaranty associations pay claims within the deductible amount but are not reimbursed by either the receiver under this section or by policyholder payments from the guaranty association's own collection efforts, the guaranty association shall have a claim in the insolvent insurer's estate for such unreimbursed claims payments. (3) The receiver shall periodically adjust the collateral being held while the claims subject to the deductible agreement are run off, provided that adequate collateral is maintained to secure the entire estimated ultimate obligation of the policyholder plus a reasonable safety factor, and the receiver shall not be required to adjust the collateral more than once a year. The guaranty associations and the policyholder shall be informed of all such 2005 Thomson/West. No Claim to Orig. U.S. Govt. Works.

76 Page 4 40 P.S a collateral reviews, including, but not limited to, the basis for the adjustment. Once all claims covered by the collateral have been paid and the receiver is satisfied that no new claims can be presented, the receiver will release any remaining collateral to the policyholder. (j) The Commonwealth Court shall have jurisdiction to resolve disputes arising under this section. (k) Nothing in this section is intended to limit or adversely affect any right the guaranty associations may have under applicable State law to obtain reimbursement from certain classes of policyholders for claims payments made by such guaranty associations under policies of the insolvent insurer, or for related expenses the guaranty associations incur. (1) This section will apply to all delinquency proceedings which are open and pending as of the effective date of this section. (m) This section shall not apply to first party claims, or to claims funded by a guaranty association net of the deductible unless subsection (e) applies. (n) For purposes of this section, the following terms shall have the meanings given to them in this subsection: "Collateral" shall mean collateral held by, for the benefit of or assigned to the insurer or subsequently to the receiver in order to secure the obligations of a policyholder under a deductible agreement and also any collateral recovered or held by the receiver that secured the obligations of a policyholder under a deductible reimbursement policy. "Deductible agreement" shall include any combination of one or more policies, endorsements, contracts or security agreements which provide for the policyholder to bear the risk of loss within a specified amount per each claim or occurrence covered under a policy of insurance and may be subject to aggregate limit of policyholder reimbursement obligations as set forth in an endorsement to a policy or in a program agreement. "Deductible reimbursement policy" shall mean a policy other than one referred to in subsection (f)(2), purchased by the policyholder to secure the policyholder's obligation to reimburse the insurer for deductibles under the deductible agreement. "Non-covered claims" shall mean a claim that is subject to a deductible agreement, may be secured by collateral and is not covered by a guaranty association. CREDIT(S) 1921, May 17, P.L. 789, art. V, 523.1, added 2004, June 28, P.L. 443, No. 46, I, imd. effective. [FN1] 40 P.S et seq. IFN21 40 P.S et seq. RULES OF CIVIL PROCEDURE <This section is not suspended or affected by the Rules of Civil Procedure, Rules 1501 to 1550, governing equitable relief See Rule 1549.> 40 P.S a, PA ST 40 P.S a 2005 Thomson/West. No Claim to Orig. U.S. Govt. Works.

77 Page 5 40 P.S a Current through Act (End) Thomson/West. No Claim to Orig. U.S. Govt. Works.

78 Request for Taxpayer Identification Number and Certification IGive form to are requester. Do not 'send to es* IRS. :On Your inomo tot return).1#44./gx S WEOPX.CX Pal Ar94.) 4 /aft t5r.ea) dement from above..0 Exempt eoin books 0 Pains** 0 Other IA 4111'1" Fisersstses suns aid address isles* dwoods Ar-flt_A-ret-L/e3cit ) /9 iota :Enter yourilnth.theappropriata box. The TIN provided must match the name given on Line 1 to avoid baciar0 hholding. For indniduels, this Is your social security number (SSW ficrwever, for a -resident alien, solepropirator, or disregarded entity, ass the Part.' Instructions on page 3. For othw entities, it is 'yourempleryarldeneeeation number. (Ell*. If you do not have at number,.ow to get TW on page 3. Notradrafil:accountk in more than one name, see the chart on pea* 4 ft.:. rs;t4cit?ries on whose number to enter.-.. Patt I Sealed esourft numbs, I I Employer identilesdan rwatber 34-ol.$11O] 618 UndarPirarillise el poem, I cerelythat 1. Thlite:onbreahave on this form is My correct taxpayer identification. number (or I an waiting for a member to be issued to me), end i ent:not sub)ect to backup withholang because: (a) I an exempt from backup withholding, or (13) I have not been notified by the internal. flevene*service (IRS) thatlan subject to backup withholding as *result of a failure to.report all Merest or dvidendei or (c) this IRS Nos - nceltiorms that I wn no longer subject to backup withholding, end t. 3. teraar3411. pecan (including a U.S. resident ellen); CeellicelliW retructions. you must cross out item 2 atiove if you have been notified by the IRS that You we currently sublect to backup weletelifineescrwas you have failed to report all interest and dividends on your tax return. For-real estate transactions:item 2 doss not apply. Formerly& IMerest paid, acquisition or abandonment of secured Property, cancellation of debt, contributions to:an individual retirementasengement $R04, and generally, payments other than interest and dividends, you are not required to sign the Ceridloshon, but you must *Melds yew-zoned(see the instrucdone on page 4.) Ric C ida A. cp''(.., alenaluvis AM. J.0 0 C "nate wow ketitlio 1C;6LeA,L4O irtri Dots Itii.e/0 ; Purpose. of Form A -person who is required to file an information return with the. IRS, must obtain your correct taxpayer identification number (RN) to report, for example, income paid tcr you, real estate transactions, mortgage interest you paid, acquisition Or abandonment of secured property, cancellation of debt, or contfibns you roads to an IRA. U.S. person. Use form W-9 only if you are a U.S. person. (including a resident Wien), to provide your correct TIN to the person requesting it (the requester) arid, when applicable, to: 1. Certify lied the TIN you' are giving is correct (or you are waiting for a number to be issued), 2. Certify that you we not subjectto backup withholding, or 3. Claim exemption from backup withholding if you are a U.S. exempt payee. Note. If a requester gives you a form other than FORT! W-9 to request your 77N, you must use the requester's form if it is substantially similar to this Form W-9. For federal tax purposes you are considered a person if you are: An individual who is a citizen or resident of the United States, A partnership, corporation, company, or association =sated or agonized in the United States or under the laws of the United States, or Cat. I4o. -Any estate Other than a foreign.stata)cr trust. Sea Regulations sections (a) and 7(e) for additional 'information.. Foreign person. If you are a foreignperson, do not use Form W-9. Instead, use the appraxiate fonn W-Sises 'Publication -515, Withholding of Tax on Nonresident Aliens and Foreign Entities). Nonresident ellen who beconnes a resider* alien. - *Generally, only a nonresident alien individual may use the terms of a tax treaty to reduce or eliminate US. tax en. certain types of Income. However, most tax beetle* contain a: rovlslcn icnovm es a "saving clause." Exceptions spedeed In the saving clause May permit an exemption from tax to continue for certain types of income even after the recipient has otherwise become a U.S. resident alien for tax purposes. If. you are a U.S. resident alien who is relying on an :exception contained in the saving clause of alax treaty to claim an exemption from U.S. tax oh-certain types of income, you must attach a statement to Fort W-9 that specifies the.following *five itwns: 1.. The treaty country. Generally, this must be the same treaty under which you claimed exemption torn' tak as a.nonresident alien.., 2., The treaty article saddressing the income. 3. The article number:(or location) in the tax treaty that contains the saving clause and its exceptions. imam Earn W-9 /Rev )

79 Date: 07/12/11 Invoice Number: Carlson 3 Reliance Insurance Company (In Liquidation) 75 Broad Street, 10th floor New York, New York Bill To: Account: Carlson Companies Sharon King, Manager Business, Risk Management skinca,carlson.com cc: Steve Bujarski, sbujarski@carlson.com Manager of Risk Financing, Risk Management Carlson Companies Act 46 Collateral Administrative Expense Billing Approved reduction $201,335 Total $201,335 Collateral related Administrative Expense due (2.6%): $5,235 Please Remit: $5,235 Payment is due in 30 days and can be made via wire transfer or remittance check. Wire Instructions: Mellon Bank, Pittsburgh, PA - ABA/Transit it For Credit to: Reliance Insurance Company - Account it Mark Act 46 for: Carlson Companies OR Remittance Address: Reliance Insurance Company (In Liquidation) 75 Broad Street, 10th floor New York, New York Attn: Reese Roche Mark Act 46 for: Carlson Companies

80 EXHIBIT 6

81 800 LASALLE A 21;00 MircAPoLIS, T.A.: CAN: ATTORNEYS AT LAW October 7, 2011 RICHARD B. ALLYN rball)nra rkmc.com Ms. Claire Rocco Associate General Counsel Reliance Insurance Company In Liquidation Three Parkway, 5th Floor Philadelphia, PA Re: NAFCO Insurance Company, Ltd. ("NAFC0"); Reserves and cut-through Dear Ms. Rocco: Thank you for your 8/25/11 voice mail and . We have also reviewed the 2003 and 2009 R1L form letters apparently sent to Carlson Holdings, Inc. ("Carlson") concerning certain of their commercial liability insurance policies with deductibles. This letter is intended to focus in a hopefully clearer fashion on Reliance issued incurred loss workers compensation policies for the policy years 7/1/92-7/1193 through 7/1/98-7/1/99. 1 This limited category of workers compensation coverage required no deductible of Carlson. Reliance was (and its estate is) liable for all incurred losses arising from occurrences during the referenced policies. The upper limit was whatever amount a state law mandated. However, to mitigate its exposure, Reliance reinsured the first $500,000 of its incurred loss liability, including allocated loss adjustment expense, with NAFCO Insurance Co., Ltd, a Bermuda corporation. At the outset, a significant area of disagreement appears to lie in the factual history of how this reinsured incurred loss program worked. Reliance and NAFCO entered into a Reinsurance Agreement for each of the referenced policy years. (Exemplar is attached.) Pursuant to the Agreement, claims were to be adjusted, settled, and/or defended by Reliance or its "authorized representative." NAFCO was bound by the adjustment decisions ("follow the form"). Reliance required NAFCO to provide money to Reliance or its "designated claims administrator" to fund and maintain a Paid Loss Deposit Fund. The purpose of this fund was to cover payment of claims and expense that fell within NAFC0's share of the I Reliance also issued a policy for 7/1/99-7/1/2000 but it was novated by Lumberman's Mutual Cas. Co. ATLANTA BOSTON LOS ANGELES MINNEAPOLIS NAPLES NEW YORK

82 Ms. Claire Rocco October 7, 2011 Page 2 liabilities. In addition, NAFCO was required to provide Reliance with a letter of credit as collateral to secure NAFC0's contractual obligations. The LOC could only be drawn down by Reliance: for reimbursement of Reinsurer's obligations paid by the Company or its designated third-party claims administrator but not recovered from the Reinsurer, or 2. to fund an account with the Company equal to the Reinsurer's Obligations as determined by the Company. 2 NAFCO IS ENTITLED TO A RESERVE REDUCTION A key point here for you to consider is that Reliance delegated the entire claim handling and reporting to its "authorized representative" and "designated claims administrator," Crawford & Company (subsequently known as "Broadspire"). This delegation included Crawford collecting the Paid Loss Deposit Fund monies from NAFCO and using such monies to pay claims and related expenses. NAFCO did not pay claims; NAFCO did not pay money to Carlson. We are attaching a copy of the Claim Service Aareement between Reliance and Crawford covering the 7/1/92-7/1/93 policy year. It appears from Crawford records that there was a new Claim Service Agreement executed for each of the Carlson policy years. Such Agreement, on it face, continued in force for so long as claims expenses had to be paid in the years subsequent to the occurrence. Thus, no new Agreements were needed after Carlson no longer purchased work comp insurance from Reliance in While Carlson was not a direct party to the Claim Service Agreement, Reliance directed Carlson to submit its work comp claims to Reliance's agent, Crawford. The Paid Loss Fund Account was used by Crawford to pay NAFCO reinsured claims expense and administrative costs. Periodically, Crawford replenished the funding for this account from NAFCO. Thus, as Crawford, not NAFCO, paid claims and expenses, it was reimbursed and compensated from the Paid Loss Fund. Crawford was required to furnish Reliance with a monthly "Loss Run" and "Loss fund Activity Report" detailing each open claim. The next key point is that after the liquidation commenced in 2001, Crawford, now the Liquidator's agent, continued to apply and operate the various Claim Service As of this point in time, neither Reliance nor the Liquidator has paid any NAFCO obligations that N.kFC0 hasn't funded.

83 Ms. Claire Rocco October 7, 2011 Page 3 Agreements. As the "designated claim representative" Crawford handled and paid NAFCO reinsured claims continuously until replaced by Gallagher Bassett Services, Inc., with no change in Crawford continuously withdrew money from NAFC0's bank account and deposited the sums into the Paid Loss Deposit Fund (see attached Authorized Agreement for Direct Payments). In addition to Crawford's reporting to the Liquidator, the Liquidator had it own user ID for direct electronic access to Carlson's data consolidator to obtain NAFCO loss information. We can tell this access was used by the Liquidator at least through July Reliance (and the Liquidator) therefore has had knowledge of all Carlson and NAFCO work comp claim adjustment and payment activity by Crawford for an extended time after the Liquidation commenced in You provided us with two RIL form letters the Liquidator sent to policyholders with Large Deductible liability policies. These letters instructed the insured entities handling there own claims within their Large Deductible to proceed under certain limitations. However, note neither Carlson nor NAFCO were handling their own reinsured Incurred Loss claims. NAFCO and Carlson were required by Crawford to continue with the status quo. As far as our files reflect, the Liquidator took no steps to direct Carlson or NAFCO to deal any differently with Crawford or to handle claims other than the way they were before the Liquidation. Certainly, there is no dispute that Carlson and NAFCO consented to Crawford continuing to adjust claims from the Paid Loss Deposit Fund financed by NAFCO. And, that's the critical point: NAFCO has paid into the Fund all of the Incurred Loss money that the Liquidator's agent Crawford requested, without pause or fail, since the 2001 Liquidation commenced. Thus, because the Liquidator (1) permitted its agent to continue to seek the NAFCO claim deposits, (2) accepted the continued NAFCO payments, and (3) obtained the benefit of the payments (such claim amounts are not now a claim against the Liquidation estate), it is estopped from requiring NAFCO to pay the Liquidator collateral amounts (S381,088) representing "captive losses paid post liquidation." (See from RIL's Reese Roche dated 7/12/11.) Furthermore, the Reinsurance Contract condition that might permit the Liquidator to draw down a letter of credit or require more collateral has not been met: for reimbursement of Reinsurer's obligations paid by the Company or its designated third-party claims administrator but not recovered from the Reinsurer... (Reinsurance Agreement, 7/1/92-7/1/93, Article VI.F.) The Reinsurer NAFCO has fully satisfied all of its "obligations." Crawford recovered all monies to pay claims and expenses from the Paid Loss Fund financed by NAFCO.

84 Ms. Claire Rocco October 7, 2011 Page 4 IL NAFCO QUALIFIES FOR THE CUT-THROUGH As you know, the Liquidator invited NAFCO and Carlson to apply for permission for the reinsurer to directly pay claims to Carlson. If accomplished, the Liquidator offered to credit the NAFCO collateral account in the amount of $381,088, the amount of captive losses paid post liquidation. When Carlson and NAFCO submitted such request, the Liquidator refused to approve unless NAFCO also assumed Reliance's unreinsured exposure over the $500,000 NAFCO limit. However, NAFCO has never had a chance to underwrite the excess exposure nor establish necessary reserves. This is not only unfair, but contrary to all principles of insurance. Just as importantly, the Liquidator's refusal is contrary to the Pennsylvania rules. Pursuant to the Liquidator's court-ordered GUIDELINES, the Pennsylvania Court claimed sole jurisdiction over matters related to the direct payment of reinsurance to Reliance insureds by reinsurers. It was based on the Pennsylvania statutory "insolvency clause": "The amount recoverable by the liquidator from reinsurers shall not be reduced as a result of delinquency proceedings, regardless of any provision in the reinsurance contract or other agreement. Payment made directly to an insured or other creditor shall not diminish the reinsurer's obligation to the insurer's estate except when the reinsurance contract provided for direct coverage of an individual named insured and the payment was made in discharge of that obligation. (Emphasis added.) 40 P.S The referenced exception applies when the reinsurance agreement has a "cut-through" clause naming the insured party to whom the reinsurance proceeds are to be paid (Carlson) in the event of insolvency. NAFC0's Reinsurance Agreements do, in fact, contain such a cut-through provision: C. It is further agreed and understood that as to all reinsurance made, ceded, renewed or otherwise becoming effective hereunder, in the event of insolvency of the Company (Reliance) all amounts payable under this Agreement shall be paid by the Reinsurer (NAFCO) to the Named Insured (Carlson) under the Policies when the Reinsurer with the consent of the Named Insureds under the Policies has the assumed the obligations of the Company under any of the Policies as direct obligations of the Reinsurer to the payees

85 Ms. Claire Rocco October 7, 2011 Page 5 under such Policy and in substitution for the obligations of the Company to such payees. (Reinsurance Agreement, ARTICLE XII, C.; Emphasis added.) Notice that this "cutthrough" clause does not require prior approval from a Liquidator. Carlson and NAFCO can have a direct relationship. Notwithstanding the contracted language of the Reliance-N.kFC0 Reinsurance Agreement, when a reinsurer and insured want to "cut-through" and not pay twice, the Liquidator's Guidelines require that the reinsurer and the insured must first meet certain requirements to obtain the Liquidator's and court's approval. Key conditions include the following: 2. All reinsurers of Reliance.., shall be obligated to remit all reinsurance proceeds to the Liquidator, without diminution, regardless of any provision in the reinsurance contract between Reliance and the reinsurer or otherwise, except as specifically provided below... the reinsurer or insured must first submit a written request to the Liquidator seeking approval of direct payment by the reinsurer. 4. b. The reinsurance contract must provide for a direct coverage obligation by the reinsurer to the insured and the payment must be made in satisfaction of that coverage obligation. The term "direct coverage" in refers to the creation of rights in the insured to look to the reinsurer directly to satisfy coverage obligations in place of and in substitution for any obligations of Reliance to the insured and on such terms as are set forth in the policy of insurance between Reliance and the insured. The magnitude and scope of the reinsurer's direct coverage obligation to the insured shall be governed by the language of the reinsurance contract and determined by the Liquidator in considering the direct payment request, the statute and the language of the relevant reinsurance contract. c. The payment made in "discharge" of the reinsurer's direct coverage obligation must release the insolvent insurer's estate from all liability to the insured for claims covered by the reinsurer's direct coverage obligation to the insured. (emphasis added.)

86 Ms. Claire Rocco October 7, 2011 Page 6 e.... the reinsurer must (1) obtain the named insured's informed consent to the direct coverage relationship, which is in substitution for the relationship between the insured and the insolvent insurer; (2) provide evidence, in a form substantially similar to the form approved by the Court, that the reinsurer has unequivocally assumed a direct coverage obligation to the insured,.. and the fact that consent to direct payment from the reinsurer is a release of all claims of the insured against the estate of Reliance relating to coverage assumed by the reinsurer; and (3) provide evidence of the insured's informed consent to the direct coverage relationship by furnishing a written consent of the named insured in a form substantially similar to the form approved by the Court. The insured or reinsurer may obtain the Court-approved forms satisfying these requirements upon request. Thus, a plain and unambiguous reading of both the statute and these GUIDELINES offer direct support for NAFCO to agree that it only has to assume the coverage it reinsured, not the balance of Reliance's insured liability. This is particularly supported by GUIDELINE at d. above; NAFCO need only release Reliance "from all liability to the insured for claims covered by the reinsurer's direct coverage obligation to the insured." This is also consistent with the Pennsylvania statute upon which the GUIDELINES were supposed to be based. As the Statute states, it is to be a "payment...in discharge of (NAFC0's) obligation." In this case, that obligation is exclusively for incurred losses within the first $500,000, not amounts in Reliance non reinsured exposure. Claire, to summarize our main points: (1) the Liquidator's proposed levy(s) should be withdrawn. NAFCO has continued to make "direct" payments to the Liquidator by virtue of its continuous funding of the Crawford Paid Loss Deposit Fund Account. Thus, the statutory "Insolvency Clause" has not been triggered, and (2) even if the "Insolvency Clause" has been triggered, the Liquidator has waived the right to demand duplicate collateral because for nearly 10 years it has knowingly and intentionally approved of NAFCO fimding Crawford's payment of Carlson claims through the Crawford Paid Loss Deposit Fund Account. NAFCO acted in reliance on both the Liquidator's and its agent Crawford's acceptance of NAFC0's money payments. The Liquidator having accepted the benefit of NAFC0's claim payments to its agent Crawford is clearly estopped from now requiring duplicate collateral.

87 Ms. Claire Rocco October 7, 2011 Page 7 (3 ) In any event, we would appreciate consideration for resubmitting NAFC0's cut-through request limited to NAFCO assuming the "direct coverage obligation" it reinsured. This position is supported by provisions found in the statute, the GUIDELINES and the Reliance/NAFCO Reinsurance Agreement. NAFCO need only "release the insolvent insurer's estate from all liability to the insured for claims covered by the reinsurer's direct coverage obligation." GUIDELINES at d. Thank you for consideration of these matters. Certainly, NAFCO and Carlson present even more equities than the hospitals in ARIO v. Reliance Insurance Company, 981 A2d. 950 (2009), a decision that permitted a cut-through. We renew our interest in conferring with you and your clients either in person or otherwise, at your convenience. Sincerely, ROBINS, KAPLAN, MILLER & CIRESI L.L.P. RBA/sjw Enclosures Richard B. Allyn cc: Steven Bujarski

88 REINSURANCE AGREEMENT This Reinsurance Agreement effective July 1, 1994, between Reliance National Indemnity Company (formerly Planet Insurance Company), an insurance corporation with business offices at 77 Water Street, New York, New York (the "Company") and Nafco Insurance Co., Ltd, an insurance corporation with its principal business office at #11 Victoria Street, Hamilton, Bermuda HM11, (the "Reinsurer"). In consideration of the payment of the reinsurance premium, and subject to the terms, conditions and limits of liability set forth below, the Reinsurer does hereby reinsure the Company in respect of the Company's Policies. ARTICLE I. DEFINITIONS The following terms shall have these meanings: A. "Policy" or "Policies" - Policies of insurance and any extension or renewals including endorsements written through Johnson & Higgins under Producer Code Number 80301, and issued by the Company to Carlson Holdings, Inc. first named insured, and as described in Schedule I to this Agreement. B. "Incurred Losses" - All Paid Losses, plus reserves for unpaid Losses both reported and unreported attributable to Policies and as established by the Company. C. "Paid Losses" - Payments for claims under the Policies, including any Deductible Amounts made by the Company, and not reimbursed by the Insured; D. "Allocated Loss Adjustment Expenses" - Expenses that the Company, or any claims administrator, under the Company's accounting practices, directly allocates to a particular claim which shall include expenses paid by the Company in connection with the Policies, whether or not related to Paid Losses. These Allocated Loss Adjustment Expenses may include: attorney's fees, court costs and related costs such as filing fees; the costs of medical examinations, expert medical or other review or testimony, laboratory services, x-rays, autopsies; and the costs for stenographic services, witnesses, summonses and copies of documents. Allocated Loss Adjustment Expense shall also include expenses incurred in connection with determining questions of the construction of Policies, their validity, and proceedings to determine the rights, duties or obligations if any of any insureds or parties to the CRAA Page 1 of 11

89 Policies. Allocated Loss Adjustment Expenses do not include Unallocated Loss Adjustment Expense. E. "Unallocated Loss Adjustment Expenses" - Expenses which are not directly allocated to a particular claim and shall include the expenses of the Company's employees or of claims administrators, including their salaries and traveling expenses, and the Company's overhead. F. "Return Premiums" - Amounts payable to insureds under Policies as return of unearned premiums on canceled or amended policies, adjustments arising out of premium audits or as required by law or rating plans, or as dividends. G. Terms defined or given special meanings within Policies have the same meanings in this Agreement as those given to them in the Policies. H. Other terms or phrases may be given special meanings within this Agreement. ARTICLE II. COVERAGE The Reinsurer is liable to the Company under this Agreement for the following: A. Workers' Compensation 1. Up to and including the first $500,000 of Incurred Losses covered under Part One - Workers' Compensation Insurance of Policies described as Workers' Compensation in Schedule I arising out of any accident involving one or more employees of an Insured; plus all Allocated Loss Adjustment Expense attributable to such Losses on a pro-rata basis. 2. Up to and including the first $500,000 of Incurred Losses covered under Part One - Workers' Compensation Insurance of Policies described as Workers' Compensation in Schedule I arising out of occupational disease affecting any one employee of the Insured; plus all Allocated Loss Adjustment Expenses attributable to such Losses on a pro-rata basis. B. Workers' Compensation/Employers' Liability 1. Up to and including the first $500,000 of Incurred Losses covered under Part Two - Employers' Liability Insurance of Policies described as Workers' Compensation in Schedule I arising out of bodily injury by accident; plus all Allocated Loss Adjustment CRAA Page 2 of 11

90 Expenses attributable to such Losses on a pro-rata basis; and 2. Up to and including the first $500,000 of Incurred Losses covered under Part Two - Employers' Liability Insurance of Policies described as Workers' Compensation in Schedule I arising out of bodily injury by disease; plus all Allocated Loss Adjustment Expenses attributable to such Losses on a pro-rata basis. C. For all costs and expenses incurred by the Company in connection with seeking recovery as salvage or subrogation for Paid Losses subject to reinsurance under this Article. D. For 100% of Paid Losses in excess of Policy limits, but otherwise within the terms and conditions of the Policy arising as the result of an action against the Company to recover damages, which an insured under the Policy is legally obligated to pay to a third party, alleging negligence or bad faith in rejecting a settlement within the Policy limits, or in discharging its duty to defend an insured under the Policy including prosecuting any appeals; plus all Allocated Loss Adjustment Expenses attributable to such Losses. E. For 100% of any punitive, exemplary, compensatory or consequential damages, but not including amounts payable under II.D, II.E, payable by the Company as the result of an action against the Company alleging negligence or bad faith in the handling of any claim made under a Policy; plus Allocated Loss Adjustment Expenses attributable to such Losses. ARTICLE III. CLAIMS A. The Company or its authorized representatives shall adjust, settle or compromise any and all claims arising under the Policies and shall further commence, continue, defend, or withdraw from actions, suits or proceedings under the Policies, and generally do all things relating to claims thereunder that it deems necessary or expedient. Any authorized representative shall follow the Company's claims processing guidelines. While the Reinsurer is not required to investigate or defend claims or suits under the Policies, it may associate, at its own expense, with the Company and its authorized representatives in the defense of any claim, suit or proceeding involving this reinsurance. Except as otherwise specifically provided for in this Agreement, it is the intent of this Agreement that the Reinsurer's liability shall, in all respect, follow the fortunes of the Company under the Policies. All adjustments, settlements and CRAA Page 3 of 11

91 compromises by the Company and its authorized representatives of claims involving Policies, when made by the Company or its authorized representatives, shall be unconditionally binding on the Reinsurer. B. All records pertaining to this Agreement and claims arising under the Policies shall be owned by the Company. The Company will, at the request of the Reinsurer, furnish the Reinsurer a copy of any of the Policies and all endorsements and shall make available for inspection and place at the disposal of the Reinsurer at reasonable times any of its records or claims subject to reinsurance under this Agreement. C. The Company will pay or credit the Reinsurer up to the amount of the Reinsurer's interest for amounts attributable to salvage, reimbursement obtained or recovery made by the Company relating to any of the Policies, including recovery for any Deductible Amounts as set forth in the Policies which were paid by the Company, after deducting the direct cost (excluding Unallocated Loss Adjustment Expenses) of obtaining such salvage or reimbursement or making such recovery, and after the Company has been reimbursed up to the amount of any Paid Losses for which the Reinsurer is not liable under Article II. ARTICLE IV. PAID LOSS DEPOSIT FUND A. The Reinsurer will provide funds for the Company to establish and maintain in its own name a Paid Loss Deposit Fund, for payment of the Reinsurer's liabilities under Article II of this Agreement. The Company may at its option adjust the level of the Paid Loss Deposit Fund. B. The Reinsurer shall, upon receipt of a written request by the Company or a designated claims administrator forward by wire transfer within three (3) business days funds to the Company sufficient to maintain the Paid Loss Deposit Fund balance at the minimum level required in Section A above. C. In the event the Company is required to make a payment for Paid Losses including Allocated Loss Adjustment Expense on any one claim in the amount of $25,000, or greater, the Reinsurer shall, notwithstanding the availability of funds in the Paid Loss Deposit Fund, immediately upon receipt of notice forward by wire transfer funds for the full amount of the payments. D. The Company may increase the required level of the Paid Loss Deposit Fund each time the Reinsurer fails to make any payment to the Company within the time required by this CRAA Page 4 of 11

92 Agreement. No one individual increase will increase the required level to more than twice that required before the increase. ARTICLE V. REINSURANCE PREMIUM A. The reinsurance premium shall be the monies actually received and recorded by the Company as premium for the Policies less Return Premiums: 1. For Workers' Compensation Policies: a. 3.32% of such premium for Company Expenses; b % of such premium for: (1) premium taxes; (2) fees for board and bureaus; and (3) liabilities for assessments and pools; B. Within twenty (20) days after the end of each calendar quarter, the Company will send the Reinsurer a Reconciliation Statement including: a. Premiums received by the Company under the Policies; b. Return Premiums; c. Premiums payable to the Reinsurer; d. Payments made by the Reinsurer; e. Paid Losses; f. Allocated Loss Adjustment Expense; g. Amounts required to fund the Paid Loss Deposit Fund; h. Federal Insurance Excise Tax or other tax on Reinsurance Premium paid by the Company. i. Any other amounts paid or recovered by the Company subject to this Agreement; j. Reconciliation Balance; k. Claims reported; and 1. Such other information and in such form and detail as shall be mutually agreed upon in writing by the Company and the Reinsurer,or that may be required by regulatory authorities with jurisdiction over either party. C. If the result of any such reconciliation is that the Reinsurer owes money to the Company, the Reinsurer will within thirty (30) days after receipt of the Reconciliation Statement pay the amount due. CRAA Page 5 of 11

93 D. If the result of any such reconciliation is that the Company owes money to the Reinsurer, the Company will pay the amount due within thirty (30) days as set forth in the Reconciliation Statement. E. All amounts due the Reinsurer or the Company under this Agreement or any other agreement between the parties shall be subject to the right of offset. ARTICLE VI. COLLATERAL A. The Reinsurer shall deliver to the Company cash, a Letter of Credit or other security in an amount and form acceptable to the Company ("Collateral"), for the purpose of securing the Reinsurer's obligations under this Agreement. B. The Reinsurer's obligations being secured shall include: 1. Losses and Allocated Loss Adjustment Expenses, including any Deductible Amounts set forth in the Policies, which were paid by the Company but not recovered from the Reinsurer, for which the Reinsurer is liable under Article II; 2. Company's reserves for Losses reported and Allocated Loss Adjustment Expense on such Losses for which the Reinsurer is liable under Article II; 3. Company's reserves for Losses incurred but not reported and Allocated Loss Adjustment Expense on such Losses for which the Reinsurer is liable under Article II; 4. The Reinsurer's liabilities under Articles II.D and II.E. 5. Return premiums paid by the Company, but not recovered from the Reinsurer; 6. Company's reserves for unearned premiums; 7. Maintaining the level of the Paid Loss Deposit Fund in Article IV; All without diminution because of the insolvency of the Company or the Reinsurer. C. Any Letter of Credit shall be issued or confirmed by a Federal Reserve System member bank acceptable to the Company CRAA Page 6 of 11

94 with an office for presentment and payment in New York City, New York. D. Any Letter of Credit shall name Reliance National Indemnity Company as beneficiary. E. Any Letter of Credit shall be in accordance with its terms automatically renewable for successive annual periods unless the issuing bank gives the Company at least sixty (60) days advance notice of its intention not to renew. F. The Company, any successor by operation of law including any liquidator, rehabilitator, receiver or conservator may, notwithstanding any other provisions in this Agreement, draw the full amount of the Collateral at any time: 1. for reimbursement of Reinsurer's obligations paid by the Company or its designated third-party claims administrator but not recovered from the Reinsurer, or 2. to fund an account with the Company equal to the Reinsurer's obligations as determined by the Company. G. The Reinsurer's duty to provide Collateral is continuous and extends until the Company is satisfied that all of the Reinsurer's obligations under this Agreement have been or will be met. The Reinsurer's liabilities under this Agreement may extend beyond the time during which the company will be receiving premiums under the Policies and beyond the termination of the Policies or this Agreement. H. The Reinsurer will, not less than thirty (30) days prior to any termination or expiration of any Letter of Credit, deliver to the Company, a replacement Letter of Credit or other Collateral in an amount and form acceptable to the Company which will become effective immediately upon the termination or expiration of the prior-'collateral. I. The Company may require the Reinsurer to provide additional Collateral before the end of any calendar year by giving at least sixty (60) days notice to the Reinsurer of the amount of additional Collateral that will be required. Such Collateral shall comply with all the requirements of this Article. J. The Reinsurer shall deliver any Collateral to the Company at: CRAA Page 7 of 11

95 RELIANCE NATIONAL RISK SPECIALISTS 77 Water Street New York, New York (Attn: Financial Department) K. If the Reinsurer fails to provide the Company with any additional or substitute Collateral, the Company shall have the unconditional right to draw upon the full amount of any existing Letter of Credit or other Collateral and to hold and apply such funds in accordance with the provisions of Article VI.F. ARTICLE VII. TAXES A. The Company is responsible for the payment of all taxes on premiums received under the Policies. B. The Reinsurer is responsible for the payment of all taxes on reinsurance premiums hereunder, and shall reimburse the Company for any taxes it may pay on such premiums including any Foreign Insurance Excise Tax (FIET). ARTICLE VIII. TERMINATION A. This Agreement may be terminated in whole or in part by the Company by giving ninety (90) days prior written notice to the Reinsurer. The Reinsurer shall have the right to terminate this Agreement by giving prior written notice to the Company which shall be not less than sixty (60) days more than the longest period required for notice of cancellation under the Policies or the laws and regulations of any jurisdiction in which Policies are issued or delivered. B. The Reinsurer shall be entitled. to credit for a prorata portion of the reinsurance premium to which it would have been entitled had this Agreement not been terminated. ARTICLE IX. SURVIVAL OF OBLIGATIONS A. Reinsurer recognizes that the Company's obligations which accrue during the term of the Policies will survive the termination of those Policies, and that Reinsurer's obligations under this Agreement will survive the termination of those Policies and this Agreement. B. If this Agreement terminates, the Reinsurerfs obligations and responsibilities under this Agreement will continue with respect to Losses on Policies issued or CRAA Page 8 of 11

96 renewed prior to the effective date of termination of this Agreement. C. Any Policy required to be renewed under any state law, or regulation or order shall be deemed renewed prior to the termination of this Agreement whether or not renewed prior to the date of termination. D. The Company and Reinsurer agree that they will cooperate in the handling of all such outstanding business existing on the effective date of termination until such business has expired either by cancellation or by the terms of the Policies, and all regulatory requirements are met. ARTICLE X. INTEREST AND COLLECTION COSTS A. Reinsurer will reimburse the Company for Company's attorneys' fees and court costs incurred in attempting to collect amounts, including interest, which are due the Company under this Agreement but not paid within the time required by this Agreement. Agreement. B. Either party will pay to the other interest at the monthly rate of one and one-half percent (1.5%) on any amount that is not paid within the time required by this Interest shall accrue from the time any payment is payable under this Agreement. ARTICLE XI. ERRORS AND OMISSIONS Inadvertent delays (other then in payments due), errors or omissions made by the Company or the Reinsurer in connection with this Agreement or any transaction hereunder shall not relieve the other party from any liability which would have attached, had such delay, error or omission not occurred, provided that such error or omission is rectified as soon as possible after discovery. ARTICLE XII. INSOLVENCY A. The Reinsurer hereby agrees that, as to all reinsurance made, ceded, renewed or otherwise becoming effective hereunder, all amounts payable under this Agreement shall be paid by the Reinsurer on the basis of the liability of the Company under the Policies, without diminution because of the insolvency of the Company, directly to the Company or to its liquidator, receiver or other statutory successor. CRAA Page 9 of 11

97 B. It is further agreed and understood that in the event of insolvency of the Company, the liquidator or receiver or statutory successor of the Company shall give written notice to the Reinsurer of the pendency of any claim against the insolvent Company under any of the Policies within a reasonable time after such claim is filed in the insolvency proceeding; and that during the pendency of any such claim the Reinsurer may investigate such claim and interpose, at its own expense, in the proceeding where any such claim is to be adjudicated any defense or defenses which it may deem available to the Company or its liquidator or receiver or statutory successor. Any expense thus incurred by the Reinsurer shall be chargeable subject to court approval against the insolvent Company as part of the expense of liquidation to the extent of a proportionate share of the benefit which may accrue to the Company solely as a result of the defense undertaken by the Reinsurer as the assuming insurer. C. It is further agreed and understood that as to all reinsurance made, ceded, renewed or otherwise becoming effective hereunder, in the event of insolvency of the Company all amounts payable under this Agreement shall be paid by the Reinsurer to the Named Insured under the Policies when the Reinsurer with the consent of the Named Insureds under the Policies has assumed the obligations of the Company under any of the Policies as direct obligations of the Reinsurer to the payees under any such Policy and in substitution for the obligations of the Company to such payees. ARTICLE XIII. MISCELLANEOUS A. This Agreement shall be governed by and construed according to the laws of the State of New York. B. This Agreement may not be assigned by the Reinsurer unless the written approval of the Company is first obtained. C. Any notices, requests or other communications hereunder will be in writing and will be deemed to have been received when deposited in the United States mail with proper postage fees prepaid, addressed as follows: 1. If to the Reinsurer, then to: Nafco Insurance Co., Ltd. #11 Victoria Street Hamilton, Bermuda HM11 CRAA Page 10 of 11

98 2. If to Company, then to: RELIANCE NATIONAL RISK SPECIALISTS 77 Water Street New York, New York (Attn: Financial Department) D. Except for a termination in accordance with the provisions of Article VIII.A, this Agreement may not be released, discharged, changed or modified except by an instrument in writing signed by a duly authorized representative of both of the parties. IN WITNESS WHEREOF, the parties hereto, by their respective duly authorized persons, intending to be legally bound have signed this Agreement. Reinsurer: Nafco Insurance Co., Ltd Company: Reliance National Indemnity Company By: Tit Date: WITNESS: PA7' ihd-e CRAA Page 11 of 11

99 SCHEDULE I To the Reinsurance Agreement between Reliance National Indemnity Company (the "Company") and Nafco Insurance Co., Inc. (the "Reinsurer") Effective: July 1, 1994 POLICY NUMBER POLICY TYPE INSURED LIMITS NWA Workers' Compensation/ Employers' Liability Carlson Holdings, Inc. A: Statutory B: 1,000,000 Each Accident/ Bodily Injury CRAA Page 1 of 1

100 CLAIM SERVICE AGREEMENT AGREEMENT NO PROGRAM NO THIS AGREEMENT made as of the first day of July, 1999 by and between CRAWFORD & COMPANY, having a place of business at 5620 Glenridge Dr., Atlanta, Georgia ("Service Co."), and RELIANCE NATIONAL RISK SPECIALISTS, on behalf of RELIANCE NATIONAL INDEMNITY COMPANY, having a place of business at 77 Water Street, New York, New York ("Insurer"). WITNESSETH: WHEREAS, Service Co. is engaged in the business of providing certain services with respect to the investigation and payment of insurance claims; WHEREAS, Insurer forth on Exhibit A hereto COMPANIES, INC.: has issued those Insurance policies as are set (the "Policies"), to its Insured, CARLSON WHEREAS, Insurer provision of its services Co. is willing to provide forth below. desires to contract with Service Co. for the for claims made under the Policies and Service such services, on the terms and conditions set NOW, THEREFORE, in consideration of the mutual agreements, and representations set forth below, the parties do hereby agree as follows: I. Provision of Services. A. Service Co. agrees to provide those services as are set forth in paragraph B below (the "Basic Services") with respect to any claim referred to it that is made under any of the Policies which Involves an actual or alleged loss occurring during the term of the underlying Policy. B. The Basic Services to be rendered by Service Co. with respect to any claims described in paragraph (A) above ("Claims") shall be the following: 1. To establish a file with respect to each Claim. 2. To investigate all Claims and to recommend the amount of loss reserve to be established with respect to each such Claim. 3. To provide each Claim file with a written chronology of all actions taken with respect to the underlying Claim.. 4. To furnish all claim forms necessary for proper claims administration. -1- # /03/99

101 5. To adjust, settle or resist all Claims within the discretionary settlement authority limit of Service Co. as agreed upon by Service Co. and Insurer, in writing, from time to time (the "Authority Limit"). 6. To adjust, settle or resist all Claims in excess of the Authority Limit with the express prior approval of Insurer. 7. To supervise all litigation or other proceedings involving any Claim and, where permitted, to attend any judicial or administrative hearing involving any Claim. 8. To retain and then destra iles for each Claim in accordance with the File Retention and Destruction Policy set forth in Exhibit B hereto. 9. To monitor all treatment programs recommended to a Claimant by any care provider. 10. To provide Vocational Rehabilitation and On-Site Case Management services for Workers' Compensation claims, when warranted, through the vendor approved by Insurer. 11. To provide Hospital Bill Audit Services for Workers' Compensation claims, when warranted, through the vendor approved by Insurer. 12. To provide Provider Bill Audit, Utilization Review and Preferred Provider Services for Workers' Compensation claims, when warranted, through the vendor approved by Insurer. 13. To furnish to Insurer and/or its designees on a monthly basis, a "Loss Run" and a "Loss Fund Activity Report." The term "Loss Run" means a computer generated listing of claims that have been posted to Service Co.'s Statistical Insurance Support Data ("SISDAT") System. The term "Loss Fund Activity Report" means a computer generated listing of accounting activity in the Loss Fund Account during the preceding month that has posted to Service Co.'s SISDAT System. These computer generated listings will be provided to Insurer and/or its designees in hard copy or microfiche. A maximum of five (5) copies of any single listing, either hard copy, microfiche, or any combination thereof, will be provided by Service Co. for each period. Service Co. -.reserves the unilateral right to amend or alter the substance and form of the listings to be provided to Insurer and/or its designees hereunder if Service Co. hereafter amends or alters the substance or form of such listings for its customers generally. C. Subject to the provisions of Section IV. below, Service Co. agrees to provide the Basic Services with respect to all Claims for so long as and until each Claim shall have been paid or until, in the opinion of Service Co., Insurer shall have no further liability therefore /03/99

102 D. Notwithstanding the foregoing, Insurer reserves the right to assume the control and handling of any Claim at any time, and Service Co. agrees to deliver promptly any Claim file to Insurer which it may request, but without any off-set or deduction from any of the fees or charges paid or payable by Insurer to Service Co, under Section II below. The parties agree that at all times prior to and after the cancellation of this Agreement all Claim files are owned by and are the property of Insurer. Claim files are subject to review by Insurer and its employees and authorized agents during Service Co.'s regular business hours, without prior notice. E. In the event any governmental agency, broker or agent should contact Service Co. for any reason with respect to any Claim, except for ordinary, customary, or usual contact not in the nature of a complaint, Service Co. agrees to promptly notify Insurer of the nature of such communication and, if the communication is in writing, Service Co. shall send Insurer a copy thereof. F. In the case of each Claim, Insurer reserves the right to require Service Co. to obtain its prior approval before retaining any attorney, physician or other professional or expert which Service Co. may seek to retain on behalf of or for the benefit of Insurer in connection with its provision of the Basic Services. G. All claims involving serious injuries of the following nature regardless of the reserve and whether or not Crawford believes there. is coverage at liability, must be promptly reported to Insurer. 1. Cord injury - paraplegia, quadriplegia 2. Amputations - requiring a prosthesis 3. Brain damage affecting mentality or central nervous system - such as permanent disorientation, behavior disorder, personality change, seizures, motor deficit, aphasia, hemiplegia or comatose (unconsciousness) 4. Blindness 5. Burns - involving over 10% of the body with third degree or 30% of body with second degree 6. Multiple fractures - involving more than one member or non-union 7. Fractured bilateral os calcis (fracture of both heel bones) 8. Brachial plexus nerve damage (nerve damage causing paralysis and loss of sensation in arm and-hand) 9. Massive internal injuries affecting body organs 10. Injury to nerves at base of spinal canal (Cauda Equine) or any other back injury resulting in incontinence of bowel and/or bladder. 11. Fatalities II. Fees and Charges. In consideration of Service Co. providing the Basic Services for all Claims as provided above, Insurer agrees to pay Service Co. those fees and other charges as are set forth in Exhibit C, in accordance with the terms set forth therein /03/99

103 III. Payment of Claims and Allocated Loss Expenses. A. Service Co. agrees to make all payments with respect to Claims and to pay all Allocated Loss Expenses (as defined in paragraph B below) from a regular demand deposit account established by Service Co., as custodian for Insurer, at its bank, SunTrust Bank, Atlanta, Georgia, (the "Loss Fund Account"), with funds to be made available by Insurer, at all times in accordance with this Agreement, for deposit into the Loss Fund Account, and to deposit recovery amounts, including, without limitation, subrogation, salvage and adjustment reimbursements from Claim and Allocated Loss Expense amounts previously paid from such Loss Fund Account ("Recoveries") in accordance with the procedures set forth in Exhibit D hereto. B. The term "Allocated Loss Expenses" shall mean such of the following items of expense incurred or authorized by Service Co. as may be reasonable and necessary in connection with its provision of the Basic Services: 1. Medical examinations of claimants, including the reasonable and necessary transportation expenses of claimants. 2. Reports from attending or examining physicians. 3. Attorneys' fees and disbursements. 4. Court reporter services and transcripts. 5. Stenographic services and transcripts. 6. Witness attendance fees. 7. Court costs. S. Appeal Bonds. 9. Printing costs related to trials and appeals. 10. Testimony, opinions, appraisals, reports, surveys and analyses of professionals and experts. 11. Automobile appraisals 12. Trial and hearing attendance fees 13. Reports from government agencies or branches. 14. Credit bureau reports. 15. Private investigators. 16. Photographs. 17. Medical or vocational rehabilitation. 18. Medical cost containment services - i.e. utilization review, hospital bill audit, provider bill audit, medical case management and preferred provider services, incurred at the request of Insurer. 19. Extraordinary Claim investigation and/or travel expense incurred at the request of Insurer. 20. Any similar service related to the investigation and defense of a particular Claim, or the protection of and collection of the subrogation rights of the Insurer, for which Insurer shall have given prior approval. C. All charges for Allocated Loss Expenses shall not exceed the usual and customary local charges and no payments for any such expenses shall be made to Service Co. or any of its affiliates without the prior approval of Insurer, except automobile appraisals, provider bill audit, utilization review and preferred provider services. -4- # /03/99

104 IV. Cancellation of Agreement. A. At any time after the date hereof, this Agreement may be cancelled (a) by either party hereto, with or without cause, and for any reason whatsoever, upon giving the other party not less than thirty (30) days' prior written notice; or (b) by either party hereto, in the event of a breach of this Agreement by the other party, upon giving the other party not less that sixty (60) days' prior written notice, provided, however, that no cancellation of this Agreement by either party hereto shall become effective unless, prior to giving such sixty (60) days' notice, the cancelling party first shall give notice to the other party of the nature of the claimed breach and shall set forth in such notice a period of time of not less than ten (10) days within which the other party must cure such breach. B. Upon the expiration or cancellation of this Agreement, Insurer shall have the following options with respect to all Claims and Claim files then being handled by Service Co. By notice given to Service Co: not less than thirty (30) days prior to the effective date of expiration or cancellation of this Agreement, Insurer may require either (1) that all Claim files be returned to it or (2) that Service Co. continue to provide the Basic Services to all Claims for which Service Co. is responsible in accordance with Section I above. If Insurer fails to give notice of the option it selects, then Insurer shall be deemed to have selected the option in clause (1) above. In the event Insurer selects or is deemed to have selected the option in clause (1) above, Service Co. agrees to promptly return all Claim files to Insurer or its designee, at the sole expense of Insurer, and thereafter Service Co. shall have no further responsibility for any Claims. C. Except as provided above, no cancellation of this Agreement, however effected, shall relieve either party of its obligations hereunder with respect to any Claim outstanding as of the date of such cancellation or with respect to any amounts which then may be due or become due from one party to the other as provided hereunder. V. Representations of Service Co. Service Co. represents, and agrees as follows: (i) It shall comply with all applicable federal, state and local governmental laws, rules, regulations and orders in the performance of its duties under this Agreement; (ii) It is duly authorized and licensed to perform its duties hereunder in each jurisdiction in which it shall act and, in furtherance thereof, it shall contract only with such third parties as are also so duly authorized and licensed; and (iii) It shall not assert that any Claim is not a claim covered by one of the Policies nor decline to pay any such Claim without the express prior approval of Insurer, whether or not such Claim is below the Authority Limit. -5- # /03/99

105 VI. Insurance. For as long as Service Co. shall be obligated to provide the Basic Services with respect to any Claim, Service Co. agrees to maintain general liability insurance, automobile liability insurance, workers compensation insurance, fidelity insurance, errors and omissions insurance, and such other insurance coverages as are set forth in Exhibit E hereto. Such coverages shall be written in amounts not less than those set forth in said exhibit and shall include coverage of Service Co.'s obligations under paragraph VII (B) below. Insurer acknowledges receipt of one or more certificates of insurance evidencing the fact that all such coverages are in effect as of the date hereof and that each of the foregoing policies contains a provision to the effect that it shall not be cancelled or allowed to expire without at least ten (10) days' prior notice being given to Insurer. VII. Indemnity. A. Insurer agrees to indemnify, defend and hold harmless Service Co., its subsidiaries and affiliates, and each of their respective employees, officers, directors and agents, from and against any and all causes of action, proceedings, penalties, fines, losses, damages, costs, expenses or other liabilities of whatever nature, including, without limitation, settlement costs and reasonable attorneys' fees, court costs and other expenses actually incurred by any such party, whether in investigating, prosecuting or defending any claim or action, or any threatened claim or action, which is based upon or arises out of or in connection with any of the following: (i) any action taken or omitted to be taken by Service Co. at the specific direction of Insurer and, as a result of such action or omission, Service Co. incurs any liability to a third party; (ii) any litigation or proceedings naming Service Co. or any of its employees, officers or directors as a defendant wherein the plaintiff or petitioner in such litigation or proceeding does not allege any fault on the part of Service Co. or any of its employees, officers or directors; (iii) any checks, overdrafts or other charges to, on, or related in any way, to the Loss Fund Account, provided, however, that no such check, overdraft or other charge was issued or incurred by Service Co. as a result of any dishonest or other tortious act or omission by Service Co. or any of its officers, directors, employees or agents; (iv) the breach of any agreement or representation made by Insurer in this Agreement. B. Service Co. agrees to indemnify, defend and hold harmless Insurer, and each of its employees, officers, directors and agents, from and against any and all causes of action, proceedings, penalties, fines, losses, damages, costs, expenses or other liabilities of -6- # /03/99

106 whatever nature, including, without limitation, settlement costs and reasonable attorneys' fees, court costs and other expenses actually incurred by any such party, whether in investigating, prosecuting or defending any claim or action, or any threatened claim or action, which is based upon or arises out of or in connection with any of the following: (i) any tortious act or omission on the part of Service Co. or any of its directors, officers, employees, agents or independent contractors, or any other act taken by Service Co. that is outside the scope of its engagement as set forth in this Agreement, unless the complained of act or omission was taken at the express direction of Insurer; or (ii) the breach of any agreement or representation made by Service Co. in this Agreement. C. No cancellation of this Agreement shall relieve either party of its obligations of indemnity under this Section VII. The indemnity provisions set forth in paragraphs VII (A) and VII (B) respectively, are made for the joint benefit of the respective parties so indemnified and may be specifically enforced by any or all such parties as if each such party also was a party hereto. For purposes of this Section VII, the term "affiliate" shall mean any corporation that, by ownership of stock, controls or is in common control with Service Co. VIII. Guarantor. All obligations recited in this Agreement, including, but not limited to, Sections II and III above and Exhibits C and D hereto, wherein Insurer agrees to pay claim service fees and expenses to Service Co., and to pay and make funds available to Service Co.'s Loss Fund Account (including implementation of procedures to make funds available) to enable Service Co. to pay claims and/or losses and associated Allocated Loss Expenses, are intended to and hereby do make Insurer the guarantor thereof. At Insurer's request, Service Co. agrees to seek payment of its claim service fees and expenses and payment and availability of funds to its Loss Fund Account (including implementation of procedures to make funds available) directly from the Insurer's Insured. In the event the Insurer's Insured does not make timely payment of Service Co.'s claim service fees and expenses and payment and availability of funds to its Loss Fund Account (including implementation of procedures to make funds available), Insurer, as guarantor thereof, agrees to immediately pay to Service Co., upon request from Service Co., with supporting documentation, such claim service fees and expenses and such funds not paid or such funds not made available to Service Co. by Insurer's Insured, IX. Amendment and Waiver. No amendment or waiver of any provision of this Agreement, and no consent to any departure herefrom, shall be effective or binding unless and until set forth in a writing signed by each party, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it is given. No notice or any other communication given by one party hereto to the other party shall be construed to constitute approval or ratification by the other party of any matter contained or referred to in such notice, unless the same be consented to be the other party in writing. -7- # /03199

107 X. Entire Contract. This contract, together with the exhibits attached hereto, constitutes the entire agreement between the parties relating to the subject matter hereof, and there exist no other written or oral understandings, agreements or assurances with respect to such matters except as are set forth herein. Unless expressly stated, this Agreement confers no rights on any person or business entity that is not a party hereto. XI. Notices. All notices, requests and other communications from either party to the other shall be in writing and delivered either personally or by certified mail, return receipt requested. Any such notice, request or other communication shall be deemed to have been given on the date of personal delivery or, if mailed, on the date of mailing. All communications shall be addressed as follows: If to Service Co.: CRAWFORD & COMPANY 560 Glenridge Dr., N.E. Atlanta, Georgia ':30342 Attention: Mr. 13.W..Crawley, Vice President If to Insurer: RELIANCE NATIONAL RISK SPECIALISTS 77 Water Street New York, New York Attention: Mr. Robert Haberle, Senior Vice President Insurer hereby authorizes and directs Reliance National Risk Specialists ("RNRS") to act as its general agent for all purposes under this Agreement. Without limiting the foregoing in any way, RNRS is hereby authorized to make all such modifications, amendments and extensions of the Agreement, and to give all notices and instructions, which the Insurer could make or give hereunder, and when made or given, all such modifications, amendments, extensions, notices and instructions shall be valid and binding upon the Insurer as if made or given by itself. XII. Assignment. Neither party may assign its rights or obligations under this Agreement without the prior written consent of the other party; provided, however, that Service Co. may subcontract part or all of the services required hereunder to any of its affiliates and subsidiaries without Insurer's written consent. XIII. Binding Effect; Choice of Law. This Agreement shall be binding upon and inure to the benefit of each party hereto and their respective permitted successors and permitted assigns. This Agreement shall be governed by and its provisions construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within New York. # /03/99

108 XIV. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be considered an original, and all of which shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties by their authorized agents have caused, this Agreement to be executed as of the date first written above. CRAWFORD & COMpY BY: TITLE: Vice President DATE: - RELIANCE NATIONAL RISK SPECIALISTS On Behalf of RELIANCE J TIONAL INDE TY OMPANY TITLE: DATE: 7/4-9- # /99

109 EXHIBIT A TO CLAIM SERVICE AGREEMENT #13489 For Program #07197 Insurer Insurance Coverage Provided To: CARLSON COMPANIES, INC. Insurance Company Policy Number Coverage Effective and Expiration Dates (from - through) Rel Nat'l Indemnity NWA WC (1) 07/01/ /30/2000 Rel Nat'l Indemnity NWA WC (2) 07/01/ /30/2000 Rel. Nat'l Indemnity NKA AL (3) 07/01/ /30/20q0 Rel Nat'l Indemnity NKA AL (4) 07/01/ /30/2000 Rel Nat'l Indemnity NKA AL (5) 07/01/ /30/2000 Rel Nat'l Indemnity NGA GL (6) 07/01/ /30./2000 Rel Nat'l Indemnity N8A AL (7) 07101/ /30/2000 Rd l Nat'l Indemnity NZE Property (8) 07/01/ /30/2000 Rd l Nat'l Indemnity NKA GL/Excess (9) 07/01/ /30/2000. (1) States of Oregon, Texas, and Wisconsin. (2) All states except Nevada, North Dakota, Ohio, Oregon, Texas, Washington, West Virginia, Wisconsin, and Wyoming. (3) State of Texas. (4) State of Virginia. (5) All other States. (6) All States. (7) International, $1mm per occurrence. (8) International, excess $100,000 for earthquakes/$50,000 all other perils. (9) Excess, $2mm per occurrence /03/99

110 EXHIBIT B TO CLAIM SERVICE AGREEMENT For Program :Insured: CARLSON COMPANIES, INC.. FILE RETENTION AND DESTRUCTION POLICY LIABILITY FILES: Destroy two (2) years after applicable statute of limitations has expired. Exceptions: a. Suits - retain until expiration of appellate process. Then destroy. b. Mental Incompetents - retain indefinitely. c. Infant (Minor) Claims - retain until infant reaches majority plus applicable statute of limitations plus two (2) years. FIRST PARTY CLAIMS SUBROGATION ARBITRATION INCIDENT REPORTS AND BOND LOSSES: Destroy one (1) year after file closing. Exceptions: a. Suits - retain until expiration of appellate process. Then destroy. b. Prevailing Statute Precludes Destruction in one (1) year. WORKERS' COMPENSATION CLAIMS: Medical Only Claims Excluding Occupational Disease Claims: Destroy six (6) months after applicable statute of limitations has expired. Exceptions: Prevailing Statute Precludes Destruction in six (6) months. Other Than Medical Only Claims Excluding Occupational Disease Claims: Destroy one (1) year after applicable statute of limitations has expired. Exceptions: a. Formal or Informal Hearing Level Claims - retain until expiration of appellate process. Then destroy. b. Prevailing Statute Precludes Destruction in one (1) year. Occupational Disease Claims: Destroy four (4) years after applicable statute of limitations has expired. Exceptions: a. Formal or Informal Hearing Level Claims - retain until expiration of appellate process. Then destroy. b. Prevailing Statute Precludes Destruction in four (4) years /03/99

111 EXHIBIT C TO CLAIM SERVICE AGREEMENT #13489 For Program #07197 Insured: CARLSON COMPANIES, INC. Schedule of Claims Service Fees and Expenses Section Cl. Basic Claims Services Flat Rate Loss Exposure Claims. Flat Rate Type of Loss Exposure Fee Per Anticipated Number Anticipated Claim Claimant Of Claimants Fees Workers Compensation Medical Only $ ,528 $184, Other Than Medical Only (AK, CA, FL & TX Only) $ $92, (AOS) $ $191, Incident Reports $ $15, Carpal Tunnel and Cumulative Trauma Other Than Medical Only (AK, CA, FL & TX Only) $ $10, (AOS) $ $230, Occupational Disease Medical Only $ Unknown Other Than Medical Only $1, $9, Employer's Liability $ Unknown Employer's Liability Occupational Disease $ Unknown U.S. Longshoremen and Harborworkers' Act Medical Only $1, Unknown $---, Other Than Medical Only $1, Unknown $---, U.S. Longshoremen and Harborworkers' Act Occupational Disease Medical Only $1, Unknown Other Than Medical Only $1, Unknown Cumulative Trauma and Carpal Tunnel $1, Unknown Jones Act Occupational Disease $1, Unknown Jones Act Cumulative Trauma and Carpal Tunnel $ Unknown /03/99

112 Automobile liability Private Passenger Non-Owned/Owned Vehicles Bodily Injury Property4)amage No-Fault $ $8, Incident Reports $ $7, Products Liability Bodily Injury $ Unknown Property Damage $ Unknown Public Liability Medical Payments $ $15, Owners', Landlords' & Tenants' Liability Bodily Injury $ Unknown $--- Property Damage $ Unknown $--- Commercial General Liab. Bodily Injury $ Unknown Property Damage $ $26, Commercial Property $ $ Commercial Time Element $ Unknown Commercial Crime $ Unknown Boiler and Machinery $ Unknown Completed Operations Liability Bodily Injury $ Unknown Property Damage $ Unknown Innkeepers' Liability $ $12, Liquor Liability $1, $3, Elevator Liability $ Unknown Owners' and Contractors' Liability $ Unknown Garage Liability Bodily Injury $ Unknown Property Damage $ $92, Garage Keepers' Liability $ Unknown Contractual Liability $ $1, Professional Liability $ Unknown Errors and Omissions Liability $ Unknown Bailee Liability $ Unknown Manufacturers' and Contractors Liability Bodily Injury $ Unknown Property Damage $ Unknown Personal Injury Liab. $ $3, General Liability Incident Reports $ Unknown Subtotal $905, Administrative Service Center ("ASC") Fee (18% of above) $162, Basic Claims Service Fee $1,068, # /03/99

113 **Dedicated Unit Fee **Annual ASC Supervisory Fee $225, $15, Total Claims Service Fee $1,309, *See Section C4.8. **Service Co. will handle Insurer's claims occurring at its Insured's TOI Fridays locations from Service Co.'s Dallas, Texas branch office location ("Dedicated Unit"), and such claims will be supervised by Service Co.'s ASC for an annual fee. C1.2 Payment of Basic Claims Service Fee. Insurer shall pay the Basic Claim Service Fee, the Dedicated Unit Fee and the Annual ASC Supervisory Fee provided in Section C1.1 to Service Co. in eighteen (18) equal monthly installments of $72, At the first of each monthly period during the term of the Policies hereunder and for six additional months thereafter, monthly billings in said amount will be submitted to Insurer by Service Co. and such billings will be paid by Insurer to Service Co. within thirty (30) days of such billing. C1.3 Adjustment of Basic Claims Service Fee. One year after the expiration of the Policies hereunder, Service Co. shall provide to Insurer a statement setting forth the actual number of types of claims serviced by Service Co. under the Policies. If such statement shows that the Basic Claims Service Fee paid to Service Co. as set forth in Section C1.2 is in excess of the amount of such fees calculated on the basis of the actual number of claimants serviced, Service Co. shall immediately apply such amount as a credit to Insurer. If such statement shows that the Basic Claims Service Fee paid to Service Co. as set forth in Section C1.2 is less than the amount of such fee calculated on the basis of the actual number of claimants serviced, Insurer shall pay such additional amount to Service Co. within thirty (30) days after Insurer receives such statement and a billing for such additional amount. C1.4 Adjustment of Dedicated Unit Fee. Six (6) months after the expiration of the Policies hereunder, Service Co. shall provide to Insurer a statement setting forth the actual Dedicated Unit Fee. If such statement shows that the actual Dedicated Unit Fee paid to Service Co. is three percent (3%) or more less than the estimated Dedicated Unit Fee set forth in Section C1.1, Service Co. shall immediately apply such amount as a credit to Insurer. If such statement shows that the actual Dedicated Unit Fee is three percent (3%) or more greater than the estimated Dedicated Unit Fee set forth in Section C1.1, Insurer shall pay such additional amount to Service Co. within thirty (30) days after Insurer received a statement and a billing for such additional amount. If such statement shows that the actual Dedicated Unit Fee paid to Service Co. is three percent (3%) or less greater than or less than the estimated Dedicated Unit Fee set forth in Section C1.1, then such Dedicated Unit Fee shall not be adjusted. C1.5 SISDAT Fee. For any Claims handled on a time and expense basis, SISDAT shall be charged on the basis of $15.00 per claimant which shall be adjusted by Service Co. as to the actual number of time and expense claimants as stated in Section C # /03/99

114 C1.6 ASC. For all Claims handled on a flat rate fee per claimant basis, excluding subrogation investigation and Claims handled by the Dedicated Unit, the ASC fee in Section C1.1 shall be adjusted to the percentage of the actual flat rate fees (excluding subrogation investigation), such adjustment to be included in the Adjustment of Basic Claim Service Fee as Is referenced in Section C1.3. C1.7 Recovery Services ("Subrogation"). Branch Service Fees. As approved and authorized by Insurer, all subrogation investigation, third party contribution, second injury fund, social security and any other recovery or offset investigation or activity with respect to any Claim including arbitration, mediation, litigation and any other activity, except for a first notice letter to the adverse party or entity, shall be handled by Service Company's branch office locations and charged on the basis of a flat rate fee per claimant of $ Such Service includes outside investigation services for subrogation. The flat rate fee per claimant includes the provision of subrogation Claim services by Service Company's branch office locations for Insurer for a period of one (1) year from the date of Client's approval and authorization to Service Company's branch office locations to provide such services. Any. subrogation Claim(s) not concluded within such time period shall be handled to a conclusion by Service Company's branch office location(s) for Insurer for an additional fee of $ per claimant each one-year period or part of any one-year period thereafter. Supervisory Service Fees. Supervision of Service Company's branch office locations involved in Recovery Services shall be charged on the basis of $ per claimant per year. Such supervisory fees shall be in addition to supervisory fees described in Section C1.1 for supervision of flat rate loss exposure claims. Billing of Service Fees. Billings for Recovery Services will be included in Service Co.'s billings for time and expense services as set forth in Section C2.6. Section C2. Time and Expense Services. C2.1 Canadian Pricing. Claims occurring in Canada shall be handled on a time and expense basis by Service Co. at its then prevailing hourly rate and expense method of billing. All revenue paid to Service Co. for Canadian services shall be paid in U.S. funds. C2.2 Flat Rate Time Parameter. The flat rate fees per claimant and the percent of the total amount of flat rate fees per claimant reflected in Section C1.1 include the provision of Claim and ASC services by Service Co. for Insurer for a period of two (2) years from the date of accident/occurrence for all accident/occurrence lines of exposure and two (2) years from the date Claim is made for all claims made lines of exposure. Any Claim(s) not concluded within such time parameters shall be handled to a conclusion by Service Co. for Insurer for an additional fee per claimant each two-year period or part of any two-year period thereafter that such Claim(s) have not been concluded through the fifth two-year period. Thereafter, any such Claims not concluded will be handled to a /03/99

115 conclusion by Service Co. for Insurer on a time and expense basis at Service Co.'s then prevailing hourly rate and expense method of billing. Such billings shall be paid by Insurer to Service Co. within thirty (30) days of billing. The additional fees per claimant are as follows: EXPOSURE Second Two-Year Period Third Two-Year Period Tourth* Two-Year Period Fifth* Two-Year Period Subsequent Years WC-M0 $ WC-OTMO $ CPI UP -+ CPI T&E (AK, CA FL,TX) $ $ $ CPI UP + CPI T&E (AOS) $ $ $ CPI UP + CPI T&E CT- OTMO (AK, CA FL,TX) $ $ $ CPT UP + CPI T&E (AOS) $ $ $ CPI UP + CPI T&E OD-MO $ $ $ CPI UP + CPI T&E OTMO $1, $ 1, $1, CPI UP + DPI T&E EMP LIAB $ $ $ CPI UP + CPI T&E EMP LIAB OD $ $ $ CPI UP + CPI T&E USL&H OD-MO $1, $ 1, $1, CPI UP + CPI ' T&E OTMO $1, $ 1, $1, CPI UP + CPI T&E CT/CT $1, $ 1, $1, CPI UP + CPI T&E USL&H NO $1, $ 1, $1, CPI UP + CPI T&E OTMO $1, $ 1, $1, CPI UP + CPI T&E JA-OD $1, $ 1, $1, CPI UP + CPI T&E JA-CT/CT $ $ $ CPI UP + CPI T&E AL-PP $ $ $ CPI UP + CPI T&E PRODUCTS BI $ $ $ CPI UP + CPI T&E PD $ $ $ CPI UP + CPI T&E OLT LIAB BI $ $ CPI UP + CPI T&E PD $ $ CPI UP + CPI COM GL T&E BI $ $ CPI UP + CPI T&E PD $ $ CPI UP + CPT?&E COM OPER BI $ $ CPI UP + CPI T&E PD $ $ CPI UP + CPI T&E INNKEEP $ $ CPI UP + CPI T&E LIQUOR $1, , $1, CPI UP + CPI T&E ELEVATOR $ $ CPI UP + CPI T&E O&C LIAB $ $ CPI UP + CPI T&E GAR LIAB $ $ CPI UP + CPI T&E -16- # /03/99

116 EXPOSURE Second Two-Year Period Third Two-Year Period Fourth* Two-Year Period Fifth* Two-Year Period Subsequent Years GAR KEEP $ $ $ CPI UP + CPI T&E CONT LIA $ $ $ CPI UP + CPI T&E PROF LIA $ $ $ CPI UP + CPI T&E E&O LIAB $ $ $ CPI UP + CPI T&E BAILEE $ $ $ CPI UP + GPI T&E M&C LIAB BI $ $ $ CPI UP + CPI T&E PD $ $ $ CPI UP + CPI T&E PI LIAB $ $ $ CPI UP + CPI T&E CPI = The average Consumer Price Index percentage figure as reflected in the U.S. Bureau of Labor Statistics Report published two months.prior to the beginning of the new pricing period. * For the Fourth Two-Year Period, the flat rate amount shall be the Third Two-Year Period's amount plus the applicable CPI percentage increase. The Fifth Two-Year Period's amount shall be the Fourth Two-Year Period's amount (Unit Pricing or UP) plus the applicable CPI percentage increase. The additional fees per claimant for Claims occurring in Canada shall be handled by Service Co. at the additional fees per claimant pricing set forth above, and all revenue paid to Service Co. for Canadian services shall be paid in U.S. funds. C2.3 Catastrophe Claim. Any accident or occurrence resulting in ten (10) or more declared or potential claims or claimants shall be treated as "Catastrophe Claims." Catastrophe Claims for loss exposure claims under Section C1.1 shall be handled on a time and expense basis by Service Co. at Service Co.'s then prevailing hourly rate and expense method of billing. C2.4 Claims Previous11 Serviced. Insurer shall pay Service Co. at Service Co.'s prevailing hourly rate and expense method of billing, for all services provided in connection with flat rate loss exposure claims in Section Cl.! when the servicing process was commenced by any entity other than Service Co. (including, without limitation, by Insurer or its Insured) before such Claim was assigned to Service Co. C2.5 ASC. The ASC supervisory fees for any Claim handled on other than a flat rate per claimant basis or by the Dedicated Unit shall be handled on a time and expense basis at the ASC's then prevailing hourly rate and expense method of billing; provided, however, that the ASC shall not charge any additional per claimant supervisory fees on claims handled on a time and expense basis when such claims were originally handled on a flat rate basis. C2.6 Payment of Time and Expense Claims. For those Claims set forth in Section C2 that will be billed on a time and expense basis, if any, Service Co. shall submit statements to Insurer on a monthly basis for Claims closed during such period and Insurer shall pay such invoices within thirty (30) -17- # /03/99

117 days of the date of each such statement. If any such time and expense Claim is not concluded within three (3) months from the date such Claim is assigned to Service Co. hereunder, Service Co. may submit an interim time and expense billing to Insurer provided that a significant amount of time and expense activity has been recorded on such Claim. Subsequent interim bills will be submitted thereafter provided that a significant amount of time and expense activity has been recorded on such Claim. Any such Claim so interim billed shall continue to be handled by Service Company after such interim billing(s) on a time and expense basis at Service Co.'s then prevailing hourly rate and expense method of billing in effect at the time of such interim billing(s). All statements in respect to Claims handled on a time and expense basis are due and shall be paid in full by Insurer within thirty (30) days of the date of such statement. Section C3. Services Included in Sections Cl and C2 C3.I SISDAT Reports. Computer generated listings as set forth in Section I., Paragraph 3.I3. are included in the pricing set forth under Sections Cl and d2. C3,2 Monthly Magnetic Claim Tapes. Claim data under this Agreement will be included with monthly magnetic claim tapes currently being provided to Insurer by Service Co. and the cost therefore is included in the pricing set forth under Sections Cl and C2. C3.3 IRS 1099 Reports reports will be sent by Service Co. in full compliance with IRS regulations. Section C4. Services Not Included in Sections Cl and C2. C4.I Material Damage and Property Appraisals. Appraisals shall be handled by Service Co. at its then prevailing appraisal fee schedules. Billings for such appraisal services, if any, will be paid by Service Co. from the Loss Fund Account as Allocated Loss Expense. C4.2 XPressLink Claim Reporting ("XPressLink") Services. All Insurer Liability claims will be reported by Insured's locations to Service Co.'s centralized Early Assignment Reporting ("XPressLink") Services, via telephone, for XPressLink Services to complete a standard Insurance Service Office ("ISO") ACORD Form and to transmit such form, via fax transmittal, for assignment to Service Co.'s appropriate branch office locations. An acknowledgement copy of the ISO ACORD Form will be transmitted to Insured's location that reported the claim to XPressLink Services. All Insurer Workers' Compensation claims will be reported by Insured's locations to XPressLink Services, via telephone, for XPressLink Services to complete employer's first report of injury forms ("Claim Forms") and to transmit such completed Claim Forms, via fax transmittal, for assignment to Service Co.'s appropriate branch office locations. An acknowledgement copy of the completed Claim Form will be transmitted to Insured's location that reported the claim to XPressLink Services. An acknowledgement letter will be mailed by Service Co. to Insured's injured employee, confirming Claim assignment to Service Co. and identifying the Service Co. branch /99

118 office location (address and telephone number) to which the Claim assignment was made. In those jurisdictions that permit, XPressLink Services will file the original Claim Form directly with those jurisdictions' workers' compensation administrative authorities on behalf of Insurer. Copies of such original workers' compensation Claim Forms that are transmitted as set forth in this Section C4.2 will be noted to reflect that such original Claim Form filings have been made and the date that such filings were mailed. Service Co. shall not charge Insurer for XPressLink Services during the term of the Policies under Agreement. C4.3 Vocational Rehabilitation and On-site Case Management. Vocational Rehabilitation and On-site Case Management Services shall be provided by the vendor approved by Insurer for Workers' Compensation claims on a time and expense basis at such vendor's then prevailing hourly rate and expense method of billing. Billings for such services will be paid from the Loss Fund Account as medical cost or as Allocated Loss Expense based on the state requirements in which such services are being provided. C4.4 Hospital Bill Audits (Non-Fee Schedule States). Hospital Bill Audit Services shall be handled by the vendor approved by Insurer for Workers' Compensation claims as follows: 1. Audit Screen - screening of hospital bills for audit consideration will be billed at approved vendor's prevailing rates. 2. Full or partial audits conducted in the hospital where supporting patient medical records are available will be billed at approved 'vendor's prevailing rates. 3 Desk audits conducted in approved vendor's branch offices will be billed on a time and expense basis at approved vendor's then prevailing hourly rate and expense method of billing. 4 Medical record analyses will be billed on a time and expense basis at approved vendor's then prevailing hourly rate and expense method of billing. 5. Negotiated discounts will be billed at approved vendor's prevailing rates. Billings for Hospital Bill Audit Services will be paid from the Loss Fund Account as medical cost or as Allocated Loss Expense based on the state requirements in which such services are being provided. C4.5 Provider Bill Audit. Provider Bill Audit Services shall be provided by the vendor approved by Insurer for Workers'.Compensation claims as follows: -19- # /03/99

119 A. Medical Bill Review: 1. Four phase audit for fee schedule states and four phase audit for usual and customary fee states will be billed at approved vendor's prevailing rates. 2. Physician peer review willbe billed at apptoved vendor's prevailing rates. Note: Fee schedule states and usual and customary fee states require that provider bills be audited to ensure that provider bills are within the specific states' allowable fee schedules or usual and customary fee schedules, regardless of whether a physicians' preferred provider organization is being utilized. B. Hospital Bill Review (Fee Schedule States). Hospital Bill Review Services shall be handled by the vendor approved by Insurer for Workers' Compensation claims at approved vendor's then prevailing rates. Note: Fee schedule states require that hospital bills be audited to ensure that hospital bills are within the specific states' allowable fee schedules, regardless of whether a hospital preferred provider organization is being utilized. Billings for Provider Bill Audit Services will be paid from the Loss Fund Account as medical cost or as Allocated Loss Expense based on the state requirements in which such services are being provided. C4.6 Preferred Provider Services. Preferred Provider Services shall be provided by the vendor approved by Insurer for Workers' Compensation claims and shall be billed at approved vendor's prevailing rates. Billings for Preferred Provider Services will be paid from the Loss Fund Account as medical cost or as Allocated Loss Expense based on the state requirements in which such services are being provided. C4.7 Utilization Review. Utilization Review Services shall be provided by the vendor approved by Insurer for Workers' Compensation claims as follows: 1. Pre-certification of hospital admissions or outpatient services will be billed at approved vendor's prevailing rates. 2. Concurrent hospital reviews or continuing outpatient treatment reviews will be billed at approved vendor's prevailing rates. 3. Emergency hospital admission reviews will be billed at approved vendor's prevailing rates. 4. Psychological/chemical dependency hospital reviews will be billed at approved vendor's prevailing rates. Billings for Utilization Review Services will be paid from the Loss Fund Account as medical cost or as Allocated Loss Expense based on the state requirements in which such services are being provided ) /03/99

120 C4.8 Outside Field Investigation. Outside field investigation for all flat rate loss exposure claims noted in Section C1.1 will be handled on a time and expense basis at Service Co.'s then prevailing hourly rate and expense method of billing. Billings for such services will be included with Service Co.'s billings for time and expense services as set forth in Section C4.6. C4.9 Conflict of Interest Claim Assignment. In the event one of Service Co.'s branch office locations receives a Claim assignment from Insured pertaining to this Agreement after having already accepted a Claim assignment for some other party involved in the same accident or occurrence, then Service Co.'s branch office location will report the Claim to its XPressLink Center (located at Service Co.'s World Headquarters in Atlanta, Georgia). The XPressLink Center will assign the Claim to the General Adjustment Bureau.("GAB") office location closest to the accident or occurrence, to provide claim adjustment services on behalf of Insured. The XPressLink Center will report the Claim to Service Co.'s designated ASC location which will direct and control GAB in the complete and total investigation, settlement or defense of the Claim, provide authority to GAB, input the Claim into SISDAT, issue checks in payment of Claim and Allocated Loss Expenses, and notify Insured of the conflict Claim, identifying Service Co.'s ASC location that will supervise GAB. GAB's bill will be audited by Service Co.'s designated ASC and will be paid from the Loss Fund Account as Allocated Loss Expense. C4.10 Prehearing Conferences and Informal Hearings. In those jurisdictions that permit adjusters to attend prehearing conferences and/or informal hearings on behalf of Insurer, Service Co. will appear at such conferences and/or hearings on Insurer's behalf. Billings for such appearances, if any, will be at a flat rate of one hundred fifty nine dollars ($159.00) per appearance and will be included with Service Co. billing for time and expense services as set forth in Section C2.6. C4.11 Worker's Compensation Individual Case ("IC") and Detail Claim Information ("DCI") Reports. In those jurisdictions that require Insurer to provide IC and/or DCI reports for rating and/or statistical information, based upon that jurisdiction's definition of IC and/or DCI reports, Service Co. will complete such reports upon request from Insurer. Billings for such reports, if any, will be on a time and expense basis at Service Co.'s then prevailing hourly rate and expense method of billing, and will be included with S4rvice Co. billing for time and expense services as set forth in Section C2.6. Section C5. Other Services. Only those services specifically set forth in this Agreement and in this Exhibit "C" are a part of this Agreement. Any other services that Insurer may need or desire with respect to this Agreement will be subject to separate negotiation between Insurer and Service Co. Section C6. Taxes. Any Canadian (Federal, provincial, territorial or local) or any domestic (Federal, state or local) sales taxes, which Service Co. may be required to pay or collect or which may be incurred by or assessed against Service Co under any existing or future law, relating to the sale, delivery, rendering or provision of services to Insurer -21-1/ /03/99

121 pursuant to this Agreement, shall be for the account of Insurer. Service Co. shall bill Insurer and Insurer shall promptly pay Service Co. such sales taxes in accordance with the provisions of the applicable law and regulations concerning the collection of such sales taxes and Service Co. shall remit such taxes to the appropriate taxing authority /03/99

122 ATTACHMENT C-1 TO EXHIBIT C C:RAWFORD & COMPANY RISE MANAGEMENT SERVICES Page 1 of 2 LIMITED ASSIGNMENT MENU OF SERVICES Outside fee (Per Item Cost/In'Hours) Recorded Statements Insured Claimant Witness Signed Statements Insured Claimant Witness In-Person contact with Attorney to gather information In-Person negotiation with Attorney and/or Claimant 2.7* 2.7* 2.7* 3.0** 3.0** 3.0** 2.2 Second Negotiation with Attorney and/or Claimant Scene Investigation (Includes 2 photographs and diagram of accident scene) Canvass for Witnesses at Accident Scene Claimant Activity Checks (See services included in note 8 on page 2) Coordination of P.I. Surveillance Activities (See services included in note 9 on page 2) Owners Landlord/Tenant Check (See services included in note 10 on page 2) Workers' Compensation ("WC") Field contact (Complete WC Field Contact Request Form 4WC007). Review WC State Bureau Files Attend WC Hearings Obtain Final WC Benefits Receipts Public Records (See additional expenses in note 7 on page 2) Police Report Fire Report Theft Report Pleadings Birth Certificate Marriage Certificate Death Certificate Autopsy Report Lab Report Other Activities will be performed at time and expense. *Each additional statement at same location will be charged at 1 hour. **Each additional statement at same location will be charged at 2 hours. ***If statement obtained, additional charge would be 1.5 hours for a recorded statement and 2 hours for a signed statement. ****If statement obtained, additional charge would be 1 hour for a recorded statement and 2 hours for a signed statement # /03/99

123 Page 2 of 2 NOTES: 1) Service Company will not charge Client for case creation hour. 2) Fixed hour fee charged for a recorded statement includes a handwritten summary. Transcriptions are not included. 3) Fixed hour fee charged includes a handwritten transmittal report. Typed narrative reports are not included. 4) Fixed hour fees include limited assignment task services within forty (40) road miles. Beyond forty (40) road miles, driving time and mileage will be charged at Service Company's prevailing rates. 5) Service Company will consider a fixed hour fee earned after two (2) attempts have been made to complete a limited assignment task (broken appointments, etc.). 6) Service Company shall complete a limited assignment task and provide Client with a report regarding said task within fourteen (14) days of Client's request. A request for earlier completion of any limited assignment task will be charged on a time and expense basis at Service Company's then prevailing hourly rate and expense method of billing. 7) Fixed hour fee does not include out-of-pocket expenses or.professional expenses incurred by the handling adjuster or assigned office. These expenses include, but are not limited to, fees for personal photographs in excess of two, commercial photographs, independent engineering reports, independent medical exams, court reporters, accountants, architects or other professional services, medical records, police reports or other outside investigation reports, copies of official documents, subpoena services and/or trial and hearing appearances, or tolls or other incidental costs. 8) Claimant activity checks include two photographs of claimant's residence, contact with at least two neighbors, and a report setting forth the description of the claimant residence and its overall general condition and the results of contacts with the claimant's neighbors. 9) Private Investigator ("P.I.") surveillance coordination activities will be based upon Client's stated budget amount set forth in its written specifications to Service Company of the activities to be performed by the P.I. within said budget. P.I.'s report and invoice for services will be sent to Client with a copy to Service Company. 10) If circumstances warrant, Service Company will assess the relationship between the Client and the landlord of the building where the Client leases, and, if warranted, review the Client's lease to determine the obligations of the lessor and lessee and any other pertinent contracts between the landlord and vendors that would provide services relative to the upkeep of the property, including, but not limited to, maintenance and snow removal services. 11) If referral to another branch is required, originating branch will contact Client for authorization. 12) Service Company will submit an invoice to Client setting forth the limited assignment task services completed and the fixed hour fees charged plus any out-of-pocket expenses, allowable driving time and mileage. Such invoice will show the prevailing hourly rate that was used to calculate the fixed hour fees charged # /03/99

124 EXHIBIT D TO CLAIM SERVICE AGREEMENT For Program Insured:. CARLSON COMPANIES, INC. Loss Fund Account Procedures - Daily Budgeted Basis Section Dl. Loss Fund Account. 1. Service Co. shall establish a Loss Fund Account as agreed to in Article III, Paragraph A. at SunTrust Bank, Atlanta, Georgia, for the payment of Claims and Allocated Loss Expenses and for deposit of Recoveries, including, without limitation, both domestic (U.S.A.) Claims and Allocated Loss Expenses and foreign (non-u.s.a.) Claims and Allocated Loss Expenses. Such foreign Claims and Allocated Loss Expenses shall be paid in the foreign currency in the country/nation in which the Claim occurred, but will be reported in Service Co.'s SISDAT System in U.S. funds equivalent to said foreign currency amount. 2. Insurer shall establish an account with a bank of Insurer's choice for the purpose of replenishing the Loss Fund Account. 3. An appropriate letter, hereinafter referred to as the Letter of Authority, will be provided, within fifteen (15) days from the effective date of this contract, to Service Co.'s bank authorizing Service Co.'s bank to initiate the necessary daily direct debits against Insurer's designated bank account for deposit to the Loss Fund Account at Service Co.'s bank. In addition, the Service Co. will be furnished by Insurer with such account documentation with respect to the Loss Fund Account that may be required by Service Co.'s bank and Service Co. respectively. 4. On or before the effective date of this contract, Insurer will provide an initial imprest deposit to the Service Co. in an amount equivalent to five (5) banking days of average anticipated Claim and Allocated Loss Expense payments, net of Recoveries, or twelve thousand five hundred dollars ($12,500), whichever is greater, to be maintained by Service Co. as a loss fund deposit, hereinafter referred to as the "Deposit," for payment of Claims and Allocated Loss Expenses from Service Co.'s Loss Fund Account. 5. Reimbursement to the Loss Fund Account will be made by a daily direct debit executed by Service Co.'s bank against Insurer's designated bank account for deposit into the Loss Fund Account at Service Co.'s bank. The amount of the daily direct debit will be limited to the amount computed by Service Co. who will instruct its bank as to the appropriate amount. The -amount of the daily direct debit will be determined by Service Co. computing the average Claim and Allocated Loss Expense payments, net of Recoveries, made daily for Insurer. Each day the same average amount will be deposited into Service Co.'s Loss Fund Account via a direct debit drawn against Insurer's designated bank account. At the end of each month, beginning with the end of the first month from the effective date of this contract, Service Co. will compare the total deposits to the Loss Fund -25- # /03/99

125 Account, including all direct debits resulting from the average daily budgeted amount, Recoveries and any amount as specified in Paragraph 7. below, made during the month to Service Co.'s Loss Fund Account to the actual claim payment account detailed in the SISDAT Monthly Loss Fund Activity and Loss Run Reports and an adjustment direct debit will be made, so the monthly deposits are equal to the totals shown on such SISDAT reports which reflect posted Claim and Allocated Loss Expense payments, net of Recoveries. 6. Service Co. will conduct a quarterly analysis of the adequacy of the "Deposit" in Service Co.'s Loss Fund Account based upon the most current three (3) months of Loss Fund Account activity. If the analysis determines that the current average Loss Fund Account activity exceeds the then existing Deposit, then Service Co. will authorize its bank to initiate an adjustment direct debit in the amount necessary to bring the Deposit to the level stipulated in Paragraph 4., above. Service Co. will adjust the average daily direct debit to the revised average daily Loss Fund Account activity in accordance with Paragraph 5., above. 7. Service Co. will notify Insurer, via telephone, before making any single Claim and/or Allocated Loss Expense payment for twenty-five thousand dollars ($25,000) or more, and these amounts will be included in the direct debit along with the daily budgeted amount. Service Co. will not consider such amounts in arriving at the the daily budgeted direct debits and will not consider such amounts in computing the necessary Deposit required of Insurer as set forth in Paragraph 6., above. S. Service Co. may draw and authorize checks, drafts, and other items on the Loss Fund Account only if Service Co. determines that it has sufficient funds in the Loss Fund Account to cover such checks, drafts, and other items. 9. Service Co. may terminate the Loss Fund Account at any time, in its sole discretion, for cause. For the purpose of this Exhibit D, the occurrence of any of the following shall constitute cause: Insurer shall fail to make when due any payment or other amount due in respect to the Loss Fund Account; dissolutions or termination of the existence of Insurer; insolvency of the Insurer; appointment of a Receiver of any part of the property of Insurer; Insurer shall make an assignment for the benefit of creditors; or the commencement of any proceedings under any bankruptcy or insolvency laws by or against Insurer. 10. Unless otherwise agreed to by the parties hereto, the Loss Fund Account shall be maintained in accordance with the procedures set forth in this Exhibit D for so long as Service Co. shall be obligated to render the Basic Services with respect to any Claim. 11. At such time as Service Co. is no longer obligated to provide the Basic Services to any Claim under this Agreement, Service Co. agrees to make a final reconciliation of the Loss Fund Account and remit any closing balance to Insurer that Insurer may be entitled to receive in accordance with the Agreement /99

126 EXHIBIT E TO CLAIM SERVICE AGREEMENT For Program Insured: CARLSON COMPANIES, INC. INSURANCE COVERAGE Crawford & Company maintains the insurance indicated below on its operations and believes that this insurance along with its financial stability adequately protects its clients. Workers' Compensation Coverage: Professional Liability (E&O): Statutory $3,000,000 General Liability, Including Personal Injury Coverage: Automobile, Liability: $1,000,000 CSL $1,000,000 CSL Fidelity Coverage, Including Depositor's Forgery: Umbrella Liability: $2,500,000 Each Occurrence $5,000, /99

127 Authorization Agreement for Direct Payments Company Name: Carlson Companies, Inc. Company ID 5,g51/7'C7 I (we), hereby authorize Broadspire, hereinafter called COMPANY, to initiate debit entries to my (our) X Checking Account Savings Account (check one) indicated below et the depository financial institution named below, hereby called DEPOSITORY, and to debit the same to such account. I (we) acknowledge that the origination of ACH transactions to my (our) account must comply with the provisions of U.S. law. Depository Name /14/6-CO X1)6.. CO. BrariCh z2$ s/#,7,4' City State A-CA/ ZIP 66/ - Routing # 07/ Oa)Od Account#?6O 95 This authorization is to remain in full force and effect until COMPANY has received written notification from me (or either of us) of its termination, in such time and in such manner as to afford COMPANY and DEPOSITORY a reasonable opportunity to act on it. Name A A-G Please Print - Tax ID Number 39z Date Signature k,fronl5 055/sirv)7 -CAW Lcov\i e±a-ki 1ES

128 EXHIBIT 7

129 ROBINS, KAPLAN, MILLER & CIRES 2800 LASALLE PLAZA 800 LASALLE AVENUE MINNEAPOLIS. MN TEL FAX; April 6, 2012 RICHARD B. ALLYN B571 rba I ly a@rkm c.co m Ms. Claire Rocco Associate General Counsel Reliance Insurance Company In Liquidation Three Parkway, 5th Floor Philadelphia, PA Re: Carlson Holdings, Inc. and NAFCO Insurance Company, Ltd. Request for Cut-Through Approval Dear Ms. Rocco: As we have discussed in the past, reinsurer NAFCO Insurance Company, Ltd. ("NAFCO") and the underlying insured, Carlson Holdings, Inc., hereby formally requests approval for "cut-through" status. Enclosed for submission to your office and the Committee, please find: (1) Exhibit B Informed Consent to Substitution of Reliance, along with copies of the relevant Reliance/Carlson Incurred Loss Worker's Compensation policies, attached as Exhibits A-G; and (2) Exhibit C Assumption and Substitution by Reinsurer, with an exemplar copy of the initial Reliance/NAFCO Reinsurance Agreement, attached as Exhibit A. In support of this cut-through request, I am resubmitting our October 7, 2011 letter to you which outlines Carlson's and NAFC0's grounds for limiting the reinsurers "assumption and substitution" to the reinsurers' contracted policy limit (Appendix 1). NAFC0's past claim payments to Reliance's third party administrator for adjustment of the Carlson workers' compensation claims within the $500,000 limit are akin to Carlson paying its own claims within a $500,000 deductible; a practice the Liquidator has clearly permitted for largo deductible worker compensation policies. Given that NAFCO is a Carlson captive, this latter process should be given favorable consideration here. ATLANTA BOSTON LOS ANGELES MINNEAPOLIS NAPLES NEW YORK A ", P :I2 n T' 11 1,1 n mr.p1p p NINIP INCII p p NI It p 1 p p 1.1 p p., vn

130 Ms. Claire Rocco April 6, 2012 Page 2 Please let me know if there is additional documentation that would assist your office or the Committee. Lastly, thank you for your patience and cooperation in this matter. Sincerely, ROBINS, KAPLAN, MILLER & CIRESI L.L.P. RBA/sjw Enclosures Richard B. Allyn cc: Steven Bujarski

131 Exhibit "B" Informed Consent to Substitution of Reliance 1. Pursuant to Insurance Policies #NWA (7/1/ ), -01 (711/93-7/1/94, -02 ( /1/95), -03 (7/1/95-7/1196), -04 (7/1/96-7/1/97), -05 (7/1/97-7/1/98), and -06 (7/1198-7/1/99), including any and all endorsements, riders and addenda thereto (hereinafter "Policies") issued by Reliance Insurance Company (hereinafter "Reliance") to Carlson Holdings, Inc. (hereinafter "Policyholder"), Policyholder was insured by Reliance for the period July 1, 1992 to Jul; 1, 1999, Copies of the policies are attached hereto as Exhibits A G. For purposes of this consent, "Policyholder" shall refer collectively to the Policyholder and any and all insureds or persons who claim rights or benefits through or under the Policies. The term "Reliance" shall include Reliance Insurance Company and its former subsidiaries, which were previously merged into Reliance Insurance Company, including Reliance National Indemnity Company, Reliance National Insurance Company, United Pacific Insurance Company, Reliance Direct Insurance Company, Reliance Surety Company, Reliance Universal Insurance Company, United Pacific Insurance Company of New York, Reliance Insurance Company of Illinois, and Planet Insurance Company. 2. On October 3, 2001, an Order of Liquidation declaring Reliance insolvent was entered by the Commonwealth Court of Pennsylvania, Docket No. 269 MD 2001 (hereinafter the "Order of Liquidation"). Pursuant to this Order of Liquidation, M. Diane Koken, Insurance Commissioner of the Commonwealth of Pennsylvania, in her official capacity as Liquidator of Reliance (hereinafter "the Liquidator"), was vested with all powers, rights and duties authorized under Article V of the Insurance Department Act of 1921, 40 PS. Section 221.1, et seq. (hereinafter "the Act."). In accordance with that authority, the Liquidator has

132 directed that certain payments by Reliance in the ordinary course will be stayed, and payments for amounts due and owing under policies of insurance issued by Reliance (including the Policies) may only be made pursuant to a proof of claim submitted in the liquidation proceedings. 3. Policyholder may have the right to assert a claim for unpaid past and future claims under the Policies against Reliance, consistent with the Act, the Order of Liquidation and other orders, decisions and determinations of the Liquidator or the Commonwealth Court pertaining to the estate of Reliance. 4. The Policies issued by Reliance were reinsured by NAFCO Insurance Company, Ltd., (hereinafter referred to as "Reinsurer"), pursuant to reinsurance agreements effective July 1, 1992 (a copy is attached as Exhibit H), and for each referenced policy year thereafter, the "Reinsured Coverage" was for the first $500,000 of Incurred Loss, and attributable allocated loss adjustment expense, covered under each of the policies (collectively "the Reinsurance Contracts"). The Reinsurance Contracts between Reliance and Reinsurer contain a provision which permits, under certain circumstances, and if consistent with applicable law, the direct payment of the reinsurance proceeds directly to the Policyholder. 5. The Liquidator has informed the Reinsurer that this provision comports with the requirements of 40 P.S of the Act and the Guidelines For Enforcement of 40 P.S issued by the Liquidator. Accordingly, upon consent of the Policyholder (as evidenced by the execution of this "Informed Consent to Substitution of Reliance" and submission of this form i to the Liquidator), the Liquidator will permit direct payment of amounts due and owing under the Policies by the Reinsurer directly to the Policyholder, and will accept that the Reinsurer will assume the direct policy obligation to Policyholder. -2-

133 6. In consenting to this direct payment, Policyholder agrees and understands that the Reinsurer will substitute for Reliance under the Policies for the Reinsured Coverage, and the Reinsurer will be obligated for all payments and obligations under the Policies for the Reinsured Coverage. Policyholder hereby expressly agrees to waive, release and forego any and all rights, liabilities, claims and defenses against Reliance or the Liquidator in any matter relating to or arising from the Policies for the Reinsured Coverage or the agreement by the Reinsurer to assume the direct obligation of coverage to the Policyholder under the Policies for the Reinsured Coverage. It is expressly understood that Policyholder will have no further rights against Reliance or the Liquidator relating to the Policies for the Reinsured Coverage or the assumption as a result of this substitution. Upon execution of this Informed Consent to Substitution of Reliance, direct coverage will be assumed by Reinsurer and Reliance will be released in all respects from the Policies for all time for the Reinsured Coverage. A copy of the Reinsurer's executed Assumption and Substitution by Reinsurer is acknowledged by Policyholder and its terms and conditions are incorporated by reference into this agreement. 7. It is expressly understood by the Policyholder that Policyholder is waiving any and all rights it may or could have in the future to make a claim against Reliance in the liquidation proceedings under the Act arising from any obligation under the Policies for the Reinsured Coverage. 8. It is expressly understood by the Policyholder that Reliance makes no representations or guarantees concerning the Reinsurer's ability to pay on the direct coverage of the Policies upon substitution, nor does Reliance make any representations or guarantees about Reinsurer's financial condition or any other circumstances relating to its ability to comply with any obligations, including future obligations, under the Policies. -3-

134 9. It is expressly understood by the Policyholder that Reliance makes no representations or guarantees concerning the Reinsurer's legal status to make such payments (now or in the future) to Policyholder, or whether or not it is regulated, authorized or licensed to make payments to Policyholder. Policyholder confirms its understanding that it will not have any recourse to Reliance, under any circumstances, if there is non-payment by Reinsurer or defaults on Reinsurer's direct coverage obligations under the Policies upon substitution. 10. It is expressly understood by the Policyholder that it understands that if, at the time of this assumption from Reliance, the Reinsurer is not admitted to conduct insurance business in the state where an insured under the Policies is a resident, for the type of policies assumed, and should at any time the Reinsurer become insolvent, there may not be any guaranty association coverage of any losses. After the assumption by the Reinsurer, any future guaranty association coverage will be determined by applicable law to the Reinsurer and the direct coverage obligation of the Reinsurer, and not the circumstances of Reliance. 11. Upon execution of the Informed Consent to Substitution of Reliance, the Policies issued by Reliance to Policyholder, cancelled by operation of the Order of Liquidation or having expired by its own terms, shall further be null and void for all purposes as to the Reinsured Coverage and shall have no effect whatsoever with respect to Reliance or the Liquidator as to the Reinsured Coverage. 12. Policyholder confirms that it has consulted with legal counsel concerning the meaning, interpretation and effect of the Informed Consent to Substitution of Reliance, and that Policyholder is authorized to execute this document for itself, its officers, directors, representatives, and any and all insureds or persons who claim rights or benefits through or under the Policies. -4-

135 [intentionally left blank] 13. Any and all disputes or claims.arising from or related in any way to the meaning, enforcement or execution of this Informed Consent to Substitution of Reliance shall be governed by the law of the Commonwealth of Pennsylvania, without regard to its choice of law provisions, and the Policyholder agrees to submit to the sole and exclusive jurisdiction of the Commonwealth Court of Pennsylvania with respect to any such disputes or claims and any disputes on claims arising from or related to the Policies or the Agreement. SO AGREED: BY: Carlson Print Name M r K c d Title:

136 EXHIBIT A INSURANCE POLICY JULY 1, 1992 JULY 1, 1993

137 mcgftscpivjpe miktiort,g4ployers LuNkarry IN ura CE P0,1,19Y - FORMATION 'PAGE s -from i 1' át;thithsür.issuing Office NEW;YORK, NEW YORK - 1 The 1nsi1retrMailing kidreas Town Co.ny,-,.StEit0;.Z1 Agency Name and Address 80301, ,11% aostigq. so HIGGINS,. :#4, 3-9,5 LIN LN MINNEAPOLIS MN DtnerWorkplices rot shown Ye: 'INDIVIDU.. El PAFITN RSH1P ' CORPORATION 3. Coverage: A. Workers Compensation Insurance: Part One of the policy applies to the Workers Compensation Law of the states listed here: CA, ILL, IA, MA, NC, NE, NJ, NM, NY, OK, TN, VA, WI B. Employers Liability Insurance: Part Two of the policy applies to work in each state listed In Item 3.A. The limits of our liability under Part Two are: Bodily Injury by Accident $ 1,000,000 each accident Bodily Injury by Disease $ 1,000,000 each employee Bodily Injury by Disease $ 1,000,000 policy limit C. Other States Insurance: Part Three of the policy applies to the states, if any, listed here: All states except Nevada, North Dakota, Ohio, Washington, West Virginia, Wyoming, States designated in Item 3.A above and MAINE D. This policy includes these endorsements and schedules: SEE EtWORSEHENT A 4. Premlum: The premium for this policy will be determined by our Manuals of Rules, Classifications, Rates and Rating Plans. All Information required below Is subject to verification and change by audit. Classifications PLEASE SEE ATTACHED Code No. Premium Basis Rate Per Estimated Annual Total Estimated $100 of Premium Annual Remuneration Remuneration SURCHARGES CA: $ 2,823 IA: 39 MA: 4,500 NJ: 22,063 Total premium subject to the experience modification $ 3,955,534 Premium modified to reflect experience modification of 1_00 $ Other $ Total Estimated Standard Premium $ 3,955,534 Premium Discount, if applicable, IVA. % $ Loss and/or Expense Constant Charge $ 160 Minimum Premium $ Total Estimated Annual Premium $ 3,955,694 If indicated below, interim adjustments of premium shall be made 0 Semi-Annually 0 Quarterly 0 Monthly Deposit Premium $ Countersigned Date V-27-fo BY Authorized Representatl THIS INFORMATION PAGE WITH THE WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY rnd ENDORSEMENTS, IF ANY, ISSUED TO FORM A PART THEREOF, COMPLETES THE ABOVE NUMBERED POLICY. wiare3/1 / WO. INV AA Ai

138 Company Numbers I =Reliance Insurance Company 2=P/snot Insurance Company 1 6= Untied Pacific Insurance. Company ilance Insurance Ca al Illinois AMENDING ENDORSEMENT IF this endorsement Is issued concurrently with the policy, the Attaching Clause need not be completed Emit. No. A Issued by Go. No. Insured Policy No. 2 CARLSON HOLDINGS, INC. NW A Effective Date Policy Perirxi Addri Premium Return Premium Premium subject 711/92 7/1/92 TO 7/1/93 0 to audit Unearned Premium factor Alt terms and conditions of the policy remain unchanged Countecslgned except as amended by this endorsement. FORMS AND ENDORSEMENTS ADV WC WC WC DO 00 00A GEN 470 GEM 47C GEN 470 GEM 470 GEM 47C GEM 47C GEM 47C 'GEM 470 GEM 470 GEM 470 GEM 470 GEM 470 HOW TO CONTROL THE COST OF SERIOUS EMPLOYEE INJURIES WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY INFORMATION PAGE WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY ENDT # A FORMS AND ENDORSEMENT ENDT # 1 "BORROWED SERVANT" ENDORSEMENT ENDT # 2 STOP GAP ENDORSEMENT ENDT # 3 NON CUMULATIVE LIMITS ENDORSEMENT ENDT # 4 REPATRIATION AND ENDEMIC DISEASE ENDORSEMENT ENDT # 5 NAMED INSURED ENDORSEMENT ENDT # 6 /N REM ENDORSEMENT ENDT # 7 UNINTENTIONAL ERRORS AND OMISSIONS ENDT # 8 DUTIES IN THE EVENT OF AN OCCURRENCE, ACCIDENT, INJURY, CLAIM, SUIT OR LOSS ENDT # 9 NEWLY ACQUIRED ENTITIES ENDT 410 NOTICE OF CANCELLATION ENDT #Il FOREIGN VOLUNTARY COMPENSATION AND EMPLOYERS LIABILITY COVERAGE ENDORSEMENT GEM 47C ENDT #12 THE PREMIUM FOR THIS ENDORSEMENT IF ON INSTALLMENTS IS PAYABLE AS FOLLOWS: ADDITIONAL RETURN SiEvIsED ANNIVERSARY PREMIUM Al' DATE OF ENDORSEMENT $ ' S. INDT APPLICABLE) ---_ _, P.InsT ANNIVERSARY $ 5 5 SECoNID ANNIVERSARY 5 S S GEN-ve Ed. 03/87

139 AMENDING ENDORSEMENT Company Numbers 1=Reflartce Insurance Oinymy 2=Plamtitmanceampany 6= United Pacific Insumwe CornPatlY 8.7.Fteliance Instance Co Of 1110tois it this endorsement Is issued concurrentl y with the policy, the Attaching Clause need not be omploted Emit. No. A cow r y) Issued by Co. No. Insured Polic y No. 2 CARLSON HOLDINGS. nye. WA 01 (13R07 pn, Effective Date Policy Period. Actrifl Premium Return Premium Premium subject 7/1/92 7/1/92 TO 7/1/93 0 to audit ij earned premium Factor terms and conditions of the polic y remain unchan ged Countersi gned except as amended by this endorsement. WC 1.74 WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY EXTENSION OF INFORMATION PAGE WC WC WC A WC A WC OIA EMPLOYERS LIABILITY INSURANCE LONGSHOREMEN'S AND HARBOR WORKERS COMPENSATION ACT COVERAGE ENDORSEMENT LONGSHORE AND HARBOR WORKERS COMPENSATION ACT COVERAGE ENDORSEMENT OUTER CONTINENTAL SHELF LAND ACT COVERAGE ENDORSEMENT MARITIME COVERAGE ENDORSEMENT WC VOLUNTARY COMPENSATION MARITIME COVERAGE ENDORSEMENT WC A VOLUNTARY COMPENSATION AND EMPLOYERS LIABILITY CONVERGE ENDORSEMENT WC RETROSPECTIVE PREMIUM ENDORSEMENT RATING OPTION V- ONE YEAR PLAN WC LONGSHOREMEN'S AND HARBOR WORKERS COMPENSATION ACT COVERAGE ENDORSEMENT CALIFORNIA WC EMPLOYERS LIABILITY COVERAGE AMENDATORY ENDORSEMENT... CALIFORNIA WC WC WC CALIFORNIA WORKERS COMPENSATION RETROSPECTIVE PREMIUM ENDORSEMENT HAWAII VOLUNTARY WORKERS ENDORSEMENT MASSACHUSETTS-ASSESSMENT CHARGE WC MASSACHUSETTS NOTICE TO POLICYHOLDER ENDORSEMENT WC A NEBRASKA CANCELLATION ENDORSEMENT TRE PREMIUM FOR THIS ENDORSEMENT IF ON INSTALLMENTS IS PAYABLE AS FOLLOWS: AODrrIONAt. RETURN REVISED ANNIVERSARY PREMIUM AT DATE OF ENDORSEMENT CNOT A P Foi-- 1 c An. 3 FIRST ANNIVERSARY S 5 SECOND ANNIVERSARY GEN47c Ed. 03/87

140 AMENDING ENDORSEMENT Company Numbers 1 Reliance Insurance Com pany 2 - = Planet Insurance Company, 6=United &Gift lama= Company tlx:rellance 'nuance Co. of Illinois lithls coda is ementis issued concurrently with the policy, the Attaching Clause need not be completed End!. No, A CONT'D Issued by Co. No. insured Policy No. 2 ounson HOLDINGS, INC. NWA Effective Date Policy Period Addt1 Premium Return Premium Premium subject 0 to audit 7/1/92 Unearned Premium Factor TO 7/1/93 Ati terms and conditions of the policy remain unchanged except as amended by this endorsement. Countersigned WC NEW JERSEY PART TWO LIMIT OF LIABILITY ENDORSEMENT WC 106 NOTICE WC NEW MEXICO CANCELLATION AND NONRENEWAL ENDORSEMENT WC WC OKLAHOMA EMPLOYERS LIABILITY AMENDED COVERAGE ENDORSEMENT WISCONSIN LAW ENDORSEMENT THE PREMIUM FOR THIS ENOORSEMENT IF ON INSTALLMENTS IS PAYASLE AS FOLLOWS: ADDITIONAL RETURN REVISED ANRIVERSAP`e PREMIUM AT DATE OF ENODR5EMENt S, FIRST ANNIVERSARY S SECOND ANNIVERSARY $ GEN-470 Ed, tnot ARAL:C.03LE?

141 WC 175 (Ed. 4434) WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY PLEASE READ,THE POLICY CAREFULLY. Qui% REFERENCE ZaNg" E INFORMATION PAGE GENERAL SECTION A. The Policy B. Who leinstriee'd C. Workers Compensation Law D. State. Locations, PART ONE-400S COMPENSATION INSURANCE A.. How This - Insurance Applies B. We Wilt Pay C. We Will Defend D. We Will Also Pay E. Other Insurance F Payments You Must Make G. Recdvery 'Frani Others ' Statutory -ProVisions.PART TWO EMPLOYERS LIABILITY INSURANCE A. How This Insurance-Applies B. We-Will Pay C. Exclusion's _ D. We Will Defend E. We Will Also Pay E Other Insurance G. Limits Of Liability BEGINNING ON PAGE BEGINNING, 014 PAGE PART TWO EMPLOYERS.LIABILITY INSURANCE. 2 (Coned) 1 H. Recovery From Others 3 1 I. Actions Against Lis 1 PART THREE OTHER STATES INSURANCE 1 FlowiThis Insurance Applies 4 1 B.. Notice 4 1 PART FOUR YOUR DUTIES IF INJURY OCCURS PART FIVE PREMIUM 4 1 = V Our Manuals. 4 1 B. Classifications 4 2 C. Remuneration 4 2 D. Premium Payment 4 2 E. Final Premium... 4 F Records 5 G. Audit PART S X CONDITIONS 5 A Inspection, 5 B. Long Term :Policy 5 C Transfer Of Your Rights And Duties 5 D Cancelation 5 E Sole Representative 5 IMPORTANT: This Quick Reference is not part of the Workers Compensation and Employers Liability Insurance Policy and does not providecoyerake. Refer to'the Workers Compensation and Employers Liability Insurance Policy itself for actijal contractual - provisions,. Copyright 1982, 1983 National Council on Compensation insurance. WC

142 WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY 4, In return for the payment of the premi dm and subject to all terms of this policy, e agree with you as follows. GENERieSECTIOil" A'. The Policy This policy includes at its effective date the Information Page and all endorsements and schedules listed there. It is a contract of insurance between you (the employeiviamed in item 1 of the Information Page) and us (the insurer named on the Information Page). The only. agreements relating to this insuranceare stated in this policy. The terms of this policy may not be changed or waived except by endorsement issued by us to be part of this policy. B. Who Is Insured You are insured if you are an employer named in item 1 of the Information Page. If that employer is a partnership, and if, you are one of its partners, you are insured, but only in your capacity as an employer of the partnership's employees. C. Workers Compensation LaW -.Wafkers Compensation Law means the workers or workmen's compensation law and occupational disease law of each sta'te or territory named in item 3.A. 011ie Information Page. It includes any amendments dthat law which are in effect during the policy period. It does not include the provision'of any law that provide nonoccupational disability benefits. D. State State means any state of the United States of America, and the District of Columbia. E. Locations This policy covers all of yourworkplaces listed in items 1 or 4 of the Informatiop Page; and,it covers all other workplaoes in item 3.A. states Unless you have other insurance or are self-insured for such workplaces. PART ONE WORKERS COMPENSATION INSURANCE A. How This Insurance Applies D. This workers compensation insurance applies to bodily injury by accident or bodily injury by disease. Bodily injury includes resulting death. 1. Bodily injury by accident must occur during the policy period. 2. Bodily injury by disease must be caused or aggravated by the conditions of your employment. The employee's last day of last exposure tio the conditions causing or aggravating Such bodily injury by disease must occur during the policy period. B. We Will Pay We will pay promptly when due the benefits required of you by the workers compensation law. C. We Will Defend We have the right and duty to defend at ourexpense any claim, proceeding or suit against you for benefits payable by this insurance. We have the right to investigate and settle these clairds, praceedings or sub. We have no duty to defend a claim, proceeding or suit that is not covered by this insurance. Page 1 E. We Will Also Pay We will also pay these costs, in.addition to other amounts payable under this,insura,pce, as part of any claim, proceeding or suit we defend: 1. reasonableexpenses -incurred at Our request, but not loss of earnings; 2. premiums for bonds to release attachments and for appeal bonds in bond amounts up to the amount payable under this insurance ; 3. litigation costs taxed against you; 4. interest on a judgment as required by law until we offer the amount due under this insurance; and 5. expenses we incur. Other Insurance We will not pay more ten our share of benefits and costs covered by this insurance.and other insurance or self-insurance. Subject to any limits of liability that may..apply, alf'shares will be equal until the loss is paid. If any insurance or self-insurance is exhausted, the shares of all remaining insurance will be equal until the loss is paid.

143 E Payments You Must Make You are responsible for any payments in excess of the benefits regularly provided- by the workers compensation law including those required because: 1. of your serious and willful misconduct; - 2. you iknowingly- employ an employee in violation of law; 3. you fail to comply with a health or safety law or regulation; or 4. you discharge, coerce or otherwise discrirninate - against any employae. in violation of the workers compensation la.. If we make anylciaythents in excess of the benefits regularly provided by, the workers compensation law on youribehalk youmil I: reimburse us. promptly: Recovery From Othths We have your rightsi-and-the rights of persons entitled to.,the,_beriefitkof :this insurance, to..recover our pay-.mentt.,frorri,anane, f.!e le for the injtiry you will do everything necessary 'to protect those rights for us and to help us enforce thern: H. Statutory Provisions These 'statements 'apply where - they are required by 1. As between an injured worker and us, we have notice of the injury when you have notice. 2. Your default or the bankruptcy or insolvency of you or your estate will not relieve us of our duties under this insurance after an injury occurs. 3. We are directly and primarily liable to any person entitled to the benefits payable by this insurance. Those persons may enforce our duties; so may an agency authorized by law. Enforcement may be against us or against you and us. 4. Jurisdiction over you is jurisdiction over us for purposespf the workers compensation law. We are bound by decisions against you under that law, subjedttothe provisions of this policy that are not in Conflict with that law. 5. This insurance conforms to the parts of the workers compensation., law that apply to: a. benefits payable by this insurance; b. -special taxes, payments into security or other special funds-arid-assessments payable by us under that_ law. 6. Terms of this insurance that conflict with the, workers compensation law are changed by this statement to conform to that law. Nothing in these paragraphs relieves you of your duties under this policy. A. How This Insurance Applies This employers;liability insurance applies to bodily injury by accident dr bodily injury by 'disease. Bodily injury includes resulting death. 1. The bodily injury must arise out of and in the course of the injured employee's employment by y(4_, 2. The employment must be necessary or incidental to your work in a state or territory listed in item 3.A. of the Information Page. 3. Bodily injury by accident must occur during the policy period. 4. Bodily injury by disease must be caused or aggra- Vated by the cdnditiont of your employment. The employee's last day of last exposure to the conditions causing &aggravating such bodily injury by disease must occur during the policy period. 5. If you - are suedythe original suit and any related legal 'actions fort-damages for bodily injury by accident or by disease must be brought,in, the United States Of America, its territories or possessions, or Canada. PART TWO EMPLOYERS LIABILITY INSURANCE Page 2 B. We WI 1,pay We will pay all sums you legally must pay as damages because of bodily injury to you r,employees, provided the bodily injury is covered by this Employers Liability InOra FiCe. The damages we will pay, where recovery is permitted by law, include damages: 1. for which you are liable to a third party by reason of a claim or suit against you by that third party to' recover the damages claimed against such third party as a result of injury to your employee; 2. for care and loss of services; and 3. for consequential bodily injury to a spouse, child, parent, brother or sister of the injured employee; provided that these damages are the direct consequence of bodily injury that arises out of and in the course of the injured employee's employment by you; and 4. because of bodily injury to your employee that 'arises out of and in the course of employment, cialmed against you in a Capacity other than as employer.

144 C. Exclusions This insurance does not cover: 1. I lability assumed under a contract. This exclusion does not apply to a warranty that your work will be done in a workmanlike manner; 2. punitive or exemplary damages because of bodily injury to an employee employed in violation of law; 3. bodily injury to an employee while employed in violation flaw with your actual knowledge or the aetual knowledge of an of your executive officers; 4, any obligation imposed,by a workers compensation, occupational disease, unemployment compensation, or disability benefits law, or any similar law; 5. bodily injury intentionally caused or aggravated by you; 6. bodily injury occurring outside the United States of America, its territories or possessions, arid Canada. This exclusion does not apply to bodily injury to a citizen or resident of the United States of America or Canada who is temporarily outside these countries; 7. damages arising out of the discharge of, coercion of, or discrimination against any employee in violation of law. D. We Will Defend We have the right and duty to defend, ateur expense, any claim, proceeding or suit against you for damages payable by this insurance. We have the right gate and settle these claims, - proceedings and suits. We have,no duty to defend a claim, proceeding or suit that it not covered by this insurance. We have no duty to defend or continue defending after we have bald our pplicable lithit of liability under this insurance. E. We Will Also Pay We will also pay these costs, in addition to other amounts payable under this insurance, as part of any claim, proceeding or suit we defend: I., reasonable expenses incurred at our request, but not loss of earnings; 2. premiums for bonds to release attachments and for appeal bonds in bond amounts up to the limit of our liability under this insurance; 3. litigation costs taxed against you; 4. interest on a judgment as required by law until we offer. the amount due under this insurance; and 5. expenses we incur, Page 3 E G. Other Insurance We will not pay more than our share of damages and costs covered by this insurance and other insurance or self-insurance. Subject to any limits of liability that apply, all shares will be equal until the loss is paid. If any insurance or self-insurance s,exhausted, the shares of all remaining insurance and self-insurance will be equal until the loss is paid. Limits Ofliability Our liability to pay fordamakes islirnited: Our limits of liability are shown in iterrf -3.B. of :the Information Page. They apply asexplained.below, 1. Bodily Injury by Accident. The limit shown for "bodily injury by accident each accident" is the most we will pay for all dwaget covered by this insurance because of bodily injury to One or more employees In any one.acciderit: A disease IS not bodilyinjuiybiceident unless it results direetly fiorii bbdily 'in)dry. byaccident. 2. Bodily Injury by Disease. The limit shown for "bodily injury by disease policy limit" is the most we will pay for all dame& covered by this insurance and arising out of,bodily injury by disease, regardless of the number of employees who sustain bodily injury by disease. The limit shown for "bodily injury bydisease each erniiloyee" is the most we will pay for all damages because of bodily injury by disease to any one employee. Bodily injury by disease does not include disease that results directly from a bodily injury by accident. 3. We will not, pay any clorls for damages after we have paid the applicabielimitof our liability under this insurance.. Recovery From Others We have your rights to recover our payment from anyone liable for an injury covered by this insurance. You will do everything necessary to protect those rights for us and to help us enforce them. 1, Actions Against Us There,wif I, be no right of action against us under this insurance unless: 1. you have complied with all the terms of this policy; and 2. the amount you owe has been:determined with our consent or by actual.trial and final:judgment. This insurance doeinot jive anyone the right to add us as a defendant in an action against you to determine your liability.

145 A. How This Insurance Applies 1. This other states insurance applies only if one or more states are shown in item 3.C. of the Information Page. 2: If:you begin work in anyone of thrlsastates nd are not insured or are not self-insured for such work, the policy will apply as though that 'state Were listed in item of the Information Page. PART THREE. OTHER STATES INSURACE 3. We will reimburse you for the benefits required by the workers compensation law of that state if we are not permitted to pay the benefits directly to persons entitled to them. B. Notice Tell us at once if you begin work in any state listed in item 3.C. of the Information Page. PART FOUR YOUR DUTIES IF INJURY OCCURS Tell us at once if injury occurs that may be covered 13sithis policy. Your other duties are listed here. 1. Provide for immediate medical and other services required by the workers compensation law. 2. Give us or our agent the names and addresses of the injured persons,and of witnesses, and other information we may need: 3. Promptly give us all notices, demands and legal pa- pers related to the injury, claim, proceeding or suit. 4. Cooperate with us /and assist us, as we may request, in the investigation, settlement or defense of any claim, proceeding or suit. 5. Do nothing after an. injury occurs that would interfere with our right to recover from others, 6, Do y not voluntarily make payments, assume obligations or incur expenses, except at your own cost. A. Our Manuals Al! premium for this policy will be determined by our manuals of rules, rates, rating plans and classifications,, We may change our m,anuals and apply the changes to this policy if,authorized by law or a governmental agency regulating this insurance. B. Classifications Item 4 of the Information Page shows the rate and premium basis for certain businessor work classifications. These classifications were -assignedbased on an estimate of the exposures you would have, during the policy period. If your actual exposures are not properly described by those classifications, we will assign proper classifications, rates and premium basis by endorsement to this policy. C. Remuneration Premium for each work classification is determined by multiplying a rate times a premium basis. Remuneration is the most common premium basis. This premium basis includes payroll and all other remuneration paid or payable during the policy period for the services of 1. all your officers and employees engaged in work covered by this policy; and 2. all other persons engaged in work that could make us liable under Part One (Workers Compensation Insurance) of this policy. If you do not have payroll records for these persons, the contract price for PART FIVE PREMIUM Page 4 their services and materials may be used as the premium basis. This paragraph 2 will not apply if you give us proof that the employers of these persons lawfully secured their workers compensation obligations. D. Premium Payments ibu Will pay all premium when due, You will pay the prerniurn even if part or all of a workers compensation law is not valid. E. Final Premium The premium shown on the InfOrMation Page, schedules, and endorsements is an estimate. The final premium. will be determined after, this policy ends by using the actual, not the estimated, premium basis and the proper classifications and rates that lawfully apply to the business and work covered by this policy. If the final premium is more than the premium you paid to us, you must pay us the balance. If it is less, we will refund the balance to you. The final premium will not be lessthan the highest minimum premium forthe classifications covered by this policy, If this policy is canceled, final premium will be determined in the followingway unless our manuals provide otherwise. 1. If we cancel, final premium will be calculated pro rata based on the time this policy was in force. Final premium will not be less than the pro rata share of the minimum premium.

146 F 2. If you cancel, final prem be More than* rata; it will be based on the time this poticy was in force, and increased by our short,ratecan'celation table and proce -doie: Final preitiiini IA not be less than the MininiuM premium.: Records You will keep records of information rieeded to Compute premium. You will provide us with copies of those records when we ask for them. G. AUdit You will let us examine and-audit all your records that relate to-this, policy. These: records include ledgers, journals, registers, vouchers, contracts, tax reports, payroll and disbursement records, and programs for storing and retrieyi ng data. We may conduct the audits diking :1'0,40r pcitinets hours.duringthe 'policy period and: Within, three years after the policy period ends. Information developed 'by audit will be used to determine -final' Pliemium. Insurance rate service organizations have the same rights we have under this provision,. PART six cononms A...Inspection We have the right, but are not obliged to inspect your workplaces at any time. Our inspections are nor safety IntpectiotiS, TheY relate oily to the insurability of-the workplaces arid the 'premiunit to be Charged. we may give you reports on the conditions we find. We nay also recommendicha nges.-whilethey may help reduce losses, we do not undertake to perform the duty of any person to provide for the health or safety of your, ernployees or the public. We do not warrant thatlobr workplaces are :safe or healthful or that they.comply with laws, regulations, : codes or standards,. Insurance rate service organizations have the same rights we have under this provision. B. Long Term Policy If the policy period is longer than orieyear and sixteen days, all provisions ofthis:poiicywill, apply as though a new policy were issued On each annual anniversary that this Policy is in force. C. Transfer Of Your Rights And Duties Your rights or,duties under this policy may not be transferred without our Written COnserit. If you die and we ṟeceive notice within thirty-daysafter your death, we will cover your legal representative as insured. D. Cancelation 1. You may cancel this policy. You must mail or deliver advance written notice to us stating when the cancelation is to take effect. 2. We may cancel this policy. We must mail or deliver to you not less than ten days advance Written notice stating when the cancelation is to take effect. Mailing that notice to you at your mailing address shownin item 1 of the Information Page will be sufficient to prove notice s, 3. The policy-perial will end on the day and hour stated in the dancelation notice. 4. Any of these provisions that conflicts with a law that controls the cancelation of the insurance in this policy is changed by this statement to comply With that jaw. E. Sole Rraseifltiv e. The insurecrfirst named -in item 1 of the Information Page will act oh behalf of-all insureds to change this policy, receive return premium, and give or receive notice of cancelatidn. Page 5

147 WORKERS cpm,ftn,siartp,n..,apip. EMPLOYERS LIA,Bwry,:,(N4pRANCE POLICY. PLEASE;READ'' THE POLICTCAREFULLY:-. ti : t,.; "QUICK REFERENCE -,.-_:1;F ;7.. '4 teaintiin'5-. BEGINNING :, ;,. (64- OWISAGE- : INFORMATION -PAGE PART TWO EMPLOYERS LIABILITY INstmiqs, 41 (contd.) GENERAL SECTION 1., A. The Policy - RecOveryi Frorn -Others, :' ' 1 ; -4 ' - ' " 611 " "' is :Insured, 1 kf" ' 4' :I.H; :Workers :Compensation -- Law' ' 4 1 '.-- State ;` - ' 1 ' I. 1 PART THREE OTHER STATES' INSURANCE' `. 4 E.' LOCitiOnS 1 A. How This irritiafieg'ais)siferi' " ; ", NbtiCe - PART ONE WORKERS COMPENSATION INSURANCE 1 A. How This Insurance Applies 1 PART FOUR YOUR DUTIES IF INJURY OCCURS... 4 B. We Will Pay 1 C. We Will Defend 1 PART FIVE PREMIUM 4 D. We Will Also Pay.,-- A. Our Manuals E. Other Insurance 1 B. Classification's 4 F.,,P,pyolnts.-You.,M Ist Make ReMUnere'tion 4 G.. Recovery From..0th.ers - 2 D. Prethium Payments ; :, H. Statutory PrvsJoj,. 2 Finay?,rernIum,, F. Records?ART Tylip-,gmpj.gyps,441,?tit...fryiNuRAtAgg 2 q? Agclitz: 5. r! ;,, ' A., -How:-This InsuranceiAppties ; 2 B,-- We Will Pay PART SIZ4ONDITIOHS T 5 C. :.,..Exclusions,. - 3 A. -Inspectlein - 5 D. We Will Defend 3 B Long Term Poky, E. We : Will :AN Pay.- ; - 3 C. Transfer Of Your Rights Anckluties 5, ve F. Other Insurance 3 D. Cappelation , fl- G. Limits Of Liability 3 E. Sole Representative 5 IMPORTANT:,... - This.Quick Referencetis not part of the Workers Compensation' a rfd'empioyers Liability Ihsurerfce;PoIrcy" and,does not provide coverage Refer' to the Workers Compensation and 'ErFIPIOYeri ilibilifil iriairl - aride Policy itself for actual ' contractual provisions ,[4,ti Copyright 1991 National Codncrontompensation Insurance. INC A (Ed. 4-92)

148 WPRKERS COMPEN* TION AND EMPLOYERS LIABIUI Y INSURANCE POLICY In return for the payment of the 'premium an subject to all terms of thlt 'policy, we agree with you as follows: A. The Policy This policy includes at its effective date iffelriforrnaton Page and all endorsements and schedules listed there. It is a contractaf insurance between you I.- (theerriployer nen:legit:olen l_of the Information -13ā/e) and us (the insurer named on the InforTaition?, Page). The only agreements relating to this irisurea amstaitedii9 this policy. The terms of this policy may nonged or waived except by endorsement, issued by us to be part of this policy. %iw!5.1:: ;;Ve.: B Who Is insti red! You are insured if you are an employer named in Item ' 1 of the information-rageathatornpjqyar iso partnership, and if you are ;one, of.,ifs,partners, you are insured, but only in your capacify -as 66 employer of the partnership s employees. C. Workers C.Ornpensation! Workers Compensation Law means thworkers or, g "GENERAL SECTION -, ; workmen's compensation law and occupational diseasejawaeachltate or territory named in Item 3.A. of the Information Page. It includes anyamendments to that law which are in effect during the policy perk o-d I tdo-es"n u de -an's/le-dual -Workers -Or work; rrieri's compe-nstiorilaw7-atiyiedetal Ott UpatiOnal, d1s8se law or the provisions of any law that provibe nonoccupational disability benefits.,a1;tilj.w)fie Di g4t9 State means any state of the tkiifed Sttes of Ameri-` ca, and the District of Columbia. ; E. Locations. This policy covers all Of your Warkplaces listed in Items.1; orizi-ofithe.1 nforrhation Page; and it covers all oxher.workplapes in ltem.3.a. states unless you! have other insurance or are self-insured for such workplaces., trow This Insurance Applies '!This workers compensation insurance, applies to bodily injury by accident or blodilylinjury by disease. Bodily Injury includes'resufting'deattr. ' IL:- Bodily injury by accidenttriu4 &Cur during the policy. period.. Bodily injuryby disease must be caused or aggravated by the conditions of your employment. ' The employee`s fast day otlostleppsurejoithe conditions causing or aggravating such bodily injury by disease must occur during the policy period: - ;; IW e" iav 7= We will pay promotlywhenaethe':benefits required of.you by;the; worker-s 'Comp'enSatibri law. d. We Will Defend, 'We have the right and duty to defend at our expense i a ny-cialm,proceeding or suit against you.for benefits Ipayable10Y ittlis insurance. We have the, right.to yestiiate 'and Settle these claims, proceedings or su its. W_e_hav.e_no Juty,to defend a claim,,,poopeeding or suit that is not covered by this insurance. PART ONE WORKERS COMPENSATION. INSURANCE. D. We Will Also Pay We will also pay these'costs, In' addition to ottler I amounts'payable' Under this risu ranee, as part of ahy claim, proceedirig-orsuit we defend: ' 1. reasonable ri& inet:ired at our request, 6ut not loss of earnings; 2. premiuths forbonds to release attaohments ahd forap -peartotids 'in bond arriounts up to the amount payable under this insurance; 3. litigation costs taxed against you; 4. intereston a judgrient as required by law until we,offer the arnount due ander this insurance; and expenses we 'incur. E. Other Insurance We will not pay more than our share of benefits and. costs 'covered i by:this i nsura noe and other insurance or se If7i,nsurance. Sqbjectto any limits of liability that mayapply,, all shares will be equal until -the loss is joaid_ltanyinsuranc_e or,selfrinsurance.isoxhautt-,.ed,,the_sharesof_altremaininginsurancewill beequal; until the loss is paid. - Pagel

149 ' F. Payments You Must Make H. You are responsible for an,payments In 'excess of the ben efits'regularly provided by the workers compensation law including those required because: 1. of your serious and willfyl misconduct; 2. you knowingly employ an employee in violation of law; 3;.yoU fairto-o6m plywith a health orsafety' law or regulationor e r 4- You discharge, coerce or otherwise discriminate aga filst any ernployee in vidation of the orkers compensation law. ;r1f-:we rifake any` payrnents in excessiatthe benefits ' ' regdially0ovidedbythewarkers COmpensition law 'oiryetirtbehalf, you Will reiriiblitte US PrOmptly. G. Reed-veil/ From Others We have your rights, and the rights of pers,ons entitled to the benefits of this insdianalito'acdver our payments from,anyone liable for the injury. You will do everything nedessairy to protect thoserights for arid `tolhelfi.:"lis' enforce them - Statutory Provisions These statements applywhere they are required by law. 1. As betweeiran injured worker and tis;, we have notice injury when you have notice. 2. Your default or the bankruptcy or insolvency of you or your estate will not relieve us of our duties under this insurance after an injury occurs. 3. We are directly and primarilyliabletp any person entitled to the benefits Payable by this insurance. Those persons may enforceour duties; so mayan agencyauthorized by raw: Enforcement may be against us or against you and us. 4. Jurisdiction over you is jurisdiction over us for PgrPoss of theworkers cornopn ation law. We aie'bound by decisions against you under that law, subject to the previsions of this policy that are not in conflict with that law. This insurance cdnforrns to the parts of the work ers compensation law that apply to a. benefits payable by this insurance; b. special taxes, payments into secyrity or other special funds, and assessments payable by us under that law. Terms of this insurance that Conflict' wifh the workers compensation law are changed by this *ferrieht to 'conform to that law Nothingcin 'these,paragraphs relieves you of your duties under this policy. PART TWO EMPLOYERS LIABILITY INSURANCE A.;. How This:Insurance-Applies ' This employers liability insurance applies to bodily injury by accident or bodily injury by disease. Bodily injury includes resulting death. 1. The bodily injury must arise out of and in the 'course of theinjured employee's employment by you. 2 The ernployment must be necessary or incidental to yoorwork in a State or territory listed in Item 3.A. Of the Information Page. 3. Bodily injury by acciderintust Occu rduring the policy period. 4. Bodily injury by disease must be caused or aggravated 'eniployrrient. The employee's last'day'of last e0oslire to the conditions'catising or'aggravating such bddily injury by disease. myst occur gyring the policy period you are sued; the original suit and any related legal actions for de mages,for bodily injury by accident or by disease must be brought in the United States of America, its territories or possesion, orcaiadä. B. We Will Pay We will pay all sums you legally must pay as damages because of bodily injury to your emplayees, provided the bodily injury is covered by this Employers Lia-, bility nsu fince. The darriageswe Will,pay, Where recovery is permit-., ted by law, include damages: for which yob arellable to a third:party by reason of a claim or suit against you by that third party to 'mower, the damages 'claimed against such third partyas a result ofinjury to your employee; for care and loss of services; and 3. for consequential bodi ly inj ury to espouse, child, Parent, brother or sister of the injured employee; provided that these damages are the direct consequence of bodily injury that arises Out of and in the catiselof the injured employee's employment by you; and 4. because of bodily injury to your employee that arises out of and in the course of employment, claimed against you in a capacity other than as employer. Page 2

150 ' C. Exclusions This insurance does not c : : as,sumed under a bontract, This exclusion does not apply to a warranty that your work will 'be done in a workenanlike manner; - 2.-Ipunitive or exemplarydamages because of bodily injiiry to an employee employed - in violation of law; 3. bodily ihj ith-arrëhiployee While eniployed in "Vicilatibri'of law with your actual knowledge or the - actual :knowledge of any of l-litoue "executive bffcér : 4. a ny obligation tpp9d,by3workers compensaliqn, occupqtional 11 SiaSe,,rurti,riplOyment comperisatioh, disability t benefit -s law, or any -similar: law;.bodil injury intentienailycaused or aggravated by YOU; 6. Oodily injury occurring outs! qe the :United States of America ; its territories or pos:sess'ione, and "Canada Tfli4Le)ccil00 dosjrfl. pt apply to bodily injurlei ya 'cifizen or resident IDT )the United States ; of America oreanada who -is tetporarify otitside these countries; ;.; ' 7. damages arising out of coercion, criticism, demotion, evaluation, reassignment, discipline, defamation, harassment,l -pmiliatiop, discri,mi-j nation against or termination of any empf&yee, or any personnel practices, policies ; acts or omissions; a., bodily injuryto any person in work subject to the,longsbore,and Harbor Workersompensation Act (33 USC Sections $))-the : Nonappropriated Fgpci instru Tenth lities, Apt _(5 USC - Sectiene'g1J1:431.73),thleoUtei:Ctintirielitai,Shelf Lands Act (43'.USC SeCtiqns''isr-1356irie Def ense :,Base Act (42 USC 'Sections ), the federal Coal Mine1-fealth and Safety Act of 1969(30 USC Section s' ), any other federal,w6rkersibr workmen's-scrim pensation law or other federal occupational disease: law, or any amendments. to these laws; a. bodily injury,to any person in work subject to the Federai.Employers' Liability Act(45USCSections 5160), a nyother fed,eural.laws obligatingn ernployer..fo pay damages to an"e'mployeel"due to poo0 injury arising out of oei,httie $_ours e rof ern- * PloYM'eni, or ail Y a ndthëhtsio those 'laws ; 10. bodily ipjury to a_master or member of thecrew - of any vessel; fines Or Penalties i MPoSed for violation of federal or state law; and Page damage pable under the Migrantand Seasonal AgricW al Worker Protection Act (29 USC Sections, ) and under any other federal law awarding da -mages for Violation Of those /- laws or regulations issued thereunder, and any 'amendments to those laws. D: We Will Oefenci V,Vetaye therightand duty to defend ) at ourexpense, any claim, proceeding or suit againstyou.for damages payable by this insurance.,we have the right,to in- VeStigate -and'settlethese'clairris, proceedings and suits: We have no duty to, defend a.,_clairn, proceeding or si jtthat is not covered by this i n s fp, nog., ;We have rig, du ty tq ciefc. 114:9f.IPPntillu,e.OPfP,.r1011.1g, after we have paid our applicable limit of liability under this insurance. E' We Will 144o.P-ay -, We %;Vift a101oay these :CoSts :;. in -addition to 'other iindunis Cayable'ande'r'.0iiihStirance, as part of any claim, proceeding, siiit -d6fendi 1. reasonable expenses incurred at our request, but ṉ011idss ' 2. premiligns jo0onds to release attachments and for:appeal bonds in bond amounts up to the lim-, it of our liability under this insurance; 3. litigation costs taxed against you; 4. interest on a judgment as required by law until we offer the amountdue'linderithisinsurance; and 5. expenses we incur. F. Other Insurance WeAvilinot pay more than ou rshare of damages and costs covered by this insurance and other:insurance or self-insurance. Subject to any limits of liability that afisli:ares will be equal i OntillheloSs is paid If any ineitranceself-insurance -is exhausted, the shares of all rernaining inaura rice and seignsurance will. be:equal until:the loss is paid: G. Limits of Liability Our liability to pay for damages is limited Our limits of liabilityare shown in Itern 3.B..opelpformation Page. They, apply as exolainec( below, I. tioalini ihjurjr by Acbideht -The 'Milt' Shown for "bodily injury by accident each accident" is the,mostwe willipay for all damages covered by this - insurancebecause ofbodily injury to.ope or more employees-in any; one accident.', A disease is not bodily inligylay.accident unless it results directly from bodilyinjury by accident.

151 2. Bodlly.31njury by Diseae:7 The limit ; shown for. bodily injury by dise policy Jimir is the most we will pay for all damages covered by this nsu rance and arising out of bodily injury by disease, reigarcliess ;,o-fdthe ; nymber ot employees who stistain 'bodily injury by disease The limit shown,for injury, by disease each ern-,, pior,e: is the Mast we will pay for all damages becabse oftioci ily, injury by disease to an one employee.,,090n injury*01sp.50*11,909c4.10, disease,that 1rers,y,4,04:01Y frp,r1,4;bodily.injury by ac- Cident. 3. We,vvi If not pay any claims for darn ages atter We _hae Alethe, pplicble liriiii:ot,obro5iiity under thiihsuràncé.' ' H. Recovery From Other's We have your rights to recover our payment fromany- '.. 1!;-, j;, PARTIIIREEOTHER K.' 'HOw This Irfiniarice Applies,,. This other statestrisura npp ;applies only if one #19v;/ ic3...otthe In-. I, If Youibegia Work fria"ny one of those states after - ' the'effettive dated this; Pollayanda'rethot in- SU red. re' are' ncit :'Self=itiStrred`ftif-S6ah'Wo'f'k ;., all provisions of the policy will apply as though:that state were listed in Item 3.A. of the Information Page. 3. We will reimburse you for the benefitstecjuired 1. Provide for immediate thedibal and.other,se&ices recjufred by the WOrketscompenation 'law.., - 3,11-13 or,syr,aget ithelnath e,s1h,51 51re_sses of the irijo red persons a hd,of witnesses, and other informa-.lion we,rnay. need. 3 ', Promptly. give'us -all notitesc;dertfands a-ha lege I pa- one liable for - '"'jury covered by this insurance. You will do every: protect those rights for: us and to help us enforce them. Actions Against Us There will, be no right of action against us under this insurance unless: - 1. Yo4 have,,complied with all the terms otthis poll-.. 9.Y; and The arnatirit you Owe has been determined with our consent or by actual trial.anefinal ijudgthent. ' This insurance does not give anyone the right to add Us as a defendant in an action against you to determine your liability. Thebankr.bi3tcyoriri'S'Olvency of you or your estate Will not relieve.:us: of bur oblige tions under this Part. STATES INSURANCE by the workers compensation law of state 'ifye ate not permitted to paythe benefits directly to persons entitled to the*. _ 4. ff you have work-on the effective date of this'poli- 1 cyiry any, State not listedlin item 3.A: of the InfOrmatiori Page,icoveragewill-nOt be afforded for Yii:-33that 'state uriless'we are:notified within! thirty 'days:. ' ' B. Notice Tell, us at once if you begin work in any state listed in Item 3.C. of the Information Page. ' PART'ObuR.LOOR, DUTI ES IF INJURY OCCURS Tell us at once if injury occurs that may4ef9yered pers related to theinjury, claim, proceeding or Suit. this policy. Your other duties are listed ' 4.' Cooperate with us.and assist us, aswe may request, f..fin-3the,investigation,:'settlement or 3 defense. -of any clair i-oroceeding orsult Do nothing gter an injury 6P -curs that would inter- ' fere With our right recover froth Others..Do.notvolu ntarily 'make payments, assume:obligations or 'indur expensesrexcept at 'your own dost. A. Our Manuals '1 All Premiurtiter th'rspolicywill'bedetefrnithad *Our 3' manuals Oftrules'Vratesitating.plariS -aricitlassifications:ve, may. thth-)geourirrignuals'.8nct apply the changes to this policy if authorized bpaw or a governmental agency regulating ithjscipsyran,qe. :,,2 8. Classificatious., Item 4-of.the.InformatiOn Page:showslhe. rateand premium.basisfor3certain.;busin,ess or work classifications. These classifications were assigned.based on an estimate of the exposures you would have dur-.part. FIVE PREMIUM ing the policy period. If your actual-6(posuresareinot: properly described byjhose classifications, wewill assigh,'properclosifidatiohs, rates and Prerriluni'basls by endorsethant to this polipy. - C. Remuneration - Premium for-each Work classificatioh is determined. by,multiplying a. rate times a premium basis. Remuneration is the Most c6rherion premium basis This premium basis - includes payroll and all other remuneratiohpaid orpayable during.the policy 'Period for the services of Page; 4'

152 L all your-officers and ern ees engaged in work covered by this policy; 2. all other person g engaged in -Work that could make us liable under Part One (Workers Oorri- E pensation Insurance) of this poliey. If you do not ;have payroll records for these persons, the contract price for their services and materials, may be used as the premium basis. This paragraph.2. : iil notaj5bbr if ydij "gilie'lls`proof that the employers of these persons lawfully -Sedired their workers compensation obligations. D. Premium Payments You will pay allpremium when.due. You will pay the premium even if part or all of a workers, compensation law:is nor,valid..,, Final.PrerniumH' The premium shown on the Page, schedules, and endorsements is aneestirnateitthe final premium will be determined after this policy ends by using the actual, not the estimated, premium basis and the proper classifications and rates that lawfully apply to the bus Mei and WON< oa Vered.bYthis poflcy. If-the final -premium is-nore than the premium you paid to us, you must pay us:the balance. If it is :les:siime- will refund the-balance: tbyout-,the final premium wiwnot be-less-than the highest minimum premium for the classifications covered by:this policy. If this policy -Inceled, final premium Will be determined in ti.:owingwayunless our manuals provide otherwise: I.: If we da-ncel,firial Premiuffiwill be calculated pro 1: -rata' based on the timethis polity wasan force. Final Premium will not be tess tharthe pro rata share of the minimum premium. gc.: If you cancel, final premium Will be more than pro'rata; it will be based'on the fiftle this policy was in force, and increased b'our short rate caritelatibn tabl āndjgrooki'ire'nrial premium leillrriot be.les thànthemihiñiiirh premium. F. Records You will keep recbrds ofjrifarrriatio.q,00ded to Corn- - P[Itel 'bremium. You will proyide OSvxitn.aopies of those records when we ask for G. Audit /o iiiiii examirie and audit all your r'edortis that -(releteitb-thispolity. These records include ledgers, journals, registers, yopctiera,sorqacts,i tax reports, payroll and disburs{ete'nt recordg; atid eprograins for storing and retrieving-data. We May ebriduct the' auditsduring regilitar butihest KotirSdulirig the policy period and within three years' aft -6r the'lialley period ends. :-Thformati,on deve.loped,by, au3:litwill, be, used to determine final,premium. Insurancejrate service organizations, hayejhe)same rights-we have under this provision., - A. Inspection We have the right, but are not obliged to. inspect your ' WOrkPiaCeSst any time. Our1RsPeCtiOniare'not ialety inspections. They relate only to-the insurability of the workplaces ancl. the premiums to,be charged: We may give you reports on the conditions -we find. We may also recommend changes. While they may help reduce losses, we do not undertake to perform the duty of a hy persan to provide for the health Or safety of youremployees or the public: We do.notwarrant that your workplaces are safe or healthful or that they comply with laws, regulations, codes or standards. Insurance rate service organizations have the same rights we have under this provision. B.,Lang Term Policy. if the'poiloy period is longerthan gneyear'and sixteen days, all provisions of thispolic will apply as though a new polioy were issued On each annual anniversary that this policy is in forcel C. Transfer Of Your Rights And Duties Your,rights or duties U'ricler this policy may not be transferred without our written consent If you die and we receive notice within thirty days after. PART SIX CONDITIONS _, your death, ;.-we,wilt,cover your legal representative as insured': D. CanOelaiipti 1. You may cancel this poelicy. must mail or de-, lwee ,6 written notice to us stating when the' bariceiation'is to take a4eaf. We may cancel this policy. We Must Mail or de-:' liver to you hatless than ten pays advance writ ten notice stating when the can ceiatiohls to take effect.:mailing,that notice to you.* yourmailing;.. address shown in Item 1 of the Information Page will be sufficient to prove notice. The policy period will end on the day and hour stated in the cancelation notice,.! 4. -Any. of :these provisions that conflict,with a law that-controls the cancelation of the:insurance in this policy is changed:by-this statementto com-, ply with:the - E. Sole Representative, The insured first named in Item 1 of the' Criforrhation Page will act-on-behalf of all insureds to change this policy, receive returr'prernium; and:give or receive notice of cancelation. Page

153 EXHIBIT B INSURANCE POLICY JULY 1, JULY 1,1994

154 P,04- A111 tigpl,ovrsv tn FORMATPONPAGE ' Nie T ISSERANCE COMPANY (Nam of Insurff) 491ail1ntA4dre8s:. (No, Street, Town County, State, Lp) Age-11'0 Code, Nani6 and Address R SON S, INC., CARLSON PARKWAY JOHNSON. & _,IIIGGINS, = _ 16:6-6 : 14kCP-LN"0*. _, _,..I*E,,, mtkl 5545SL-82Q2 ta.l.nnea.u91.:is, MN ,..., - ' her WOrkplac's not shtivin above: aindividual LI PARTNERSHIP &CORPORATION OR I.D. No FEIN # _,.. 2. Policy Plkirxl: The policy period isirom 4143, to 1.41/ WStindakITime fittlitauft4, g' 1411TAtii,, 3. Coverage: A. Workers Compensation Insurance; Part One of the policy applies to the Workers Compensation Law of the states listed here: AZ, AR, CA., HI, KS, KY, NA, NO, NE, N.I, OK, OR, RI, VA, WI. B. Employers Liability Insurance: Part Two of the policy applies to work in each state listed in item 3.A. The limits of our liability under Part Two are: Bodily Injury by Accident $ 1,000,000 each accident Bodily Injury by Disease $ 1,000,000 each employee Bodily injury by Disease $ 1,000,000 policy limit C. Other States Insurance: Part Three of the policy applies to the states, if any, listed here: All states except Nevada, North Dakota, Ohio, Washington, West Virginia, Wyoming, States designated in Item 3.A above and MAINE D. This policy includes these endorsements and schedules: SEE ENDORSEMENT #2 4. Premium: The premium for this policy will be determined by our Manuals of Rules, Classifications, Rates and Rating Plans. All information required below is subject to verification and change by audit. Classifications Code No. Premium Basis Rate Per Estimated Annual Total Estimated $100 of Premium Annual Remuneration Remuneration SEE WC 174 SITRCEARGES: CA-$9,064 N.T-$25,288 KY-$283 OR-$309 MA--$3,760 MO-$364 Total premium subject to the experience modification $ 5,144,062 Premium modified to reflect experience modification of $ 5,385,877 Other Total Estimated Standard -Premium $ 5,385,877 Premium Discount, if applicable, % $ Loss and/or Expense Constant Charge $ 1.60 Minimum Premium $ Total Estimated Annual Premium $ 5,386,037 If indicated below, interim adjustments of premium shall be made 0 Semi-Annually Cl Quarterly 10 Monthly Depss' - remium $ Countersigned Date CI \a Lk-C15 BY Aar-.4111rAW. geffiff p esentat mtm 9/23/93 THIS INFORMATION PAGE WITH THE WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY AND ENDORSEMENTS, IF ANY, ISSUED TO FORM A PART THEREOF, COMPLETES THE ABOVE NUMBERED POLICY, 11411t nes iset ft

155 AMENDING ENDORSEMENT Company Nu mbers 1 Reliance frrsurarice Company 2 Planet Insurance Company 6z-- Unite Paatfic Insurance Company 8 R 11 8 flisufamce Co. of Illinois if this endorsement is issued concurrently with the policy, the A aching Clause need not be co leted Endt. No. Issued by Co. No, Maur 2 Effective Date Policy Period. 7/1/93 Unearned Premium Factor Policy No. CARLSON HOLDINGS INC. _ 7/1/93 TO 7/1/94 All terms and conditions of the policy remain unchanged except as amended by this endorsement. NWA Addri Premium Return Premium Premium subject 0 to audit Countersigned FORMS AND ENDORSEMENTS WC 174 WC GEN 47C WC /84 04/84 03/87 WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY EXTENSION OF INFORMATION PAGE WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY ENDORSEMENT #1 NAMED INSURED ENDORSEMENT ENDORSEMENT #2 FORMS AND ENDORSEMENTS ENDORSEMENT #3 LOCATIONS ENDORSEMENT ENDORSEMENT #4 "BORROWED SERVANT" ENDORSEMENT ENDORSEMENT #5 STOP GAP ENDORSEMENT ENDORSEMENT #6 NON-CUMULATIVE LIMITS ENDORSEMENT ENDORSEMENT #7 REPATRIATION AND ENDEMIC DISEASE ENDORSEMENT ENDORSEMENT #8 IN REM ENDORSEMENT ENDORSEMENT #9 UNINTENTIONAL ERRORS AND OMISSIONS ENDORSEMENT #10 DUTIES IN THE EVENT OF AN OCCURRENCE, ACCIDENT, INJURY, CLAIM, SUIT OR LOSS ENDORSEMENT #11 NEWLY ACQUIRED ENTITIES ENDORSEMENT #12 NOTICE OF CANCELLATION ENDORSEMENT #13 AMENDATORY ENDORSEMENT ENDORSEMENT #14 WAIVER OF SUBROGATION FOREIGN VOLUNTARY COMPENSATION AND EMPLOYERS' LIABILITY COVERAGE ENDORSEMENT WC /84 DEFENSE BASE ACT COVERAGE ENDORSEMENT WC /84 LONGSHOREMEN'S AND HARBOR WORKERS' COMPENSATION ACT COVERAGE ENDORSEMENT WC /84 MARITIME COVERAGE ENDORSEMENT WC A 08/91.VOLUNTARY COMPENSATION AND EMPLOYERS LIABILITY COVERAGE ENDORSEMENT...._. _...._. _ 4.. L..- ADDITIONAL. RETURN REVISED ANNIVERSARY PREMIUM A 1" DATE OF ENDORSEMENT S S (NOT APPLICABLE) FIRST ANNIVERSARY 5 $ SECOND ANNIVERSARY _ $ $ 5

156 AMENDING ENDORSEMENT I Company Numbers 11:Reliance Insurance Company 2.1. Planet Insurance Company 6,7. United Peak Insurance Company 8:-. Reliance Insurance Co. of /1/hiois If this endorsement is issued concurrently with the policy, the Attaching CI use not be completed Emt. N0 2 CONTtD. issued by Co. No. Insured PolicyNo. 2 Effective Date 7/1/93 Unearned Premium Pao or Policy Period CARLSON HOLDINGS, INC. 7/1/93 TO 7/1/94 MI terms and conditions of the policy remain unchanged except as amended by this endorsement. NWA Addt'l Premium Return Premium Premium subject to aucii t Countersigned 0 WC /88 WC /92 WC A 12/91 WC /86 WC A 04/92 WC /91 WC /86 WC /91 WC /84 WC /84 WC A 01/87 EMPLOYERS LIABILITY INSURANCE ENDORSEMENT AMENDATORY ENDORSEMENT RETROSPECTIVE PREMIUM ENDORSEMENT ONE YEAR PLAN ARIZONA CANCELLATION ENDORSEMENT LONGSHORE AND HARBOR WORKERS' COMPENSATION ACT COVERAGE ENDORSEMENT CALIFORNIA POLICY AMENDATORY ENDORSEMENT CALIFORNIA EMPLOYERS' LIABILITY COVERAGE AMENDATORY ENDORSEMENT CALIFORNIA CALIFORNIA WORKERS' COMPENSATION RETROSPECTIVE PREMIUM ENDORSEMENT HAWAII VOLUNTEER WORKERS ENDORSEMENT KANSAS FINAL PREMIUM ENDORSEMENT KANSAS CANCELLATION AND NONRENEWAL ENDORSEMENT WC /84 NOTICE TO INSUREDS TAX AND ASSESSMENT CHARGE KENTUCKY WC /86 WC /90 WC /84 WC A 04/91 WC A 07/92 WC /84 MASSACHUSETTS ASSESSMENT CHARGE MASSACHUSETTS NOTICE TO POLICYHOLDER ENDORSEMENT MISSOURI LIMIT OF LIABILITY ENDORSEMENT MISSOURI CANCELLATION AND NONRENEWAL ENDORSEMENT NEBRASKA CANCELLATION ENDORSEMENT NEW JERSEY PART TWO LIMIT OF LIABILITY ENDORSEMENT PREMIUM FOR T ADDITIONAL RETURN REVISED ANNIVERSARY PREMIUM AT DATE OF ENDORSEMENT 5 NOT APPLICARLE1 FIRST ANNIVERSARY S S SECOND ANNIVERSARY $ $ $

157 AMENDING ENDORSEMENT company Numbers r.= ROliariCe Insunrnce Company 2 = Plefist Insursace Company 6 z.-1in itad Pacific insurance Company 8= Reliance Insurance Co. of Illinois It this endorsemen is Issued concurrently with the policy, the Attaching Clause need not be Completed End!. No. 2 dimr r 1). Issued bye. No. Insured Policy No. 2 CARLSON HOLDINGS INC. NWA Effective Date Policy Period Acidt'l Premium Return Premium Premium subject I 93 TO io audit unearned., Premium Factor All terms and conditions of the policy remain unchanged.countersigned except as amended by this endorsement. WC /89 NOTICE WC A 10/90 WC A 01/89 WC /84 OKLAHOMA CANCELLATION, NONRENEWAL AND CHANGE ENDORSEMENT OREGON CANCELLATION ENDORSEMENT RHODE ISLAND DIRECT LIABILITY STATUTE ENDORSEMENT WC /89 NOTICE TO VIRGINIA POLICYHOLDERS WC /90 WISCONSIN LAW ENDORSEMENT...4 ADDITION+ L RETURN REVISED ARMY ERSAR Y PREMIUM A T DA TE or ENDORSEMENT FIRST ANN IVERSAR Y SECONO ANNIVERSA R Y $ $ 5

158 WC 175 (Ed. 4-84) WORKERS COMPENSAVON AND EMPLOYERS LIABILITY INSURANCE KILICY PLEASE READ THE Ppypy. carerjlly., t: -' 1",1 1 77, pp( REFERENCE BEGINNING!.. ON -PAGE ANFORMATIONYAGE ; t GENERAL SECTION A. The Policy Who Insured C. Workers Compensation Law 1 D. State ' E. Locations 1 1"! PART ONE WORKERS COMPENSATION INSURANCE 1 A,.. How This Insurance Applies,... 1 B. We Will Pay C. We Will Defend D. We Will Also Pay... E. Other Insurance 1, F. Payments You Must Make 2 Recovery From Others' j :PART' TWO EMPLOYERS,LIABILITY: INSURANCE. 2 A. How This Insurance'Applies B. We Will Pay `.; C. Exclusions D. We Will Defend E. We Will'Alio' Pay 'F. - Other Irtirance ' " G.'Limits Of IMPORTANT: BEGINNING ON PAGE PART 7WOEMPLOYERS11ABILITY.INSURANCE.. 2 (Corirch)f H. Recovery From Others 3 I. Actions Against Us 3 PART THREE OTHER STATES INSURANCE 4 HoW-Ttli,s Insurance Applies,Nptice PART FOUR YOUR DUTIES IF INJURY OCCURS ; 4 PART FIVE PREMIUM MahualS B. Classifications C. Remuneration Prerniutn Payment's E "' Final Prethiiir E Records,. 'G. I Audit' PART:SIX CONDITIONS1;.---!`, 5 3 A Ir,446ticiiri ' - " 5 p. 3 B Lc ng'tethipolicy 5. 3 C. Transfer Of Your Rights And Duties 5 A 3 0 Cancelation 5 3 E Sole Representative 5 This Quick Reference int part of the Workers compensation and Employers Liability Insurance Policy and dokiiiiijiipiagecoli6rai'i.' RefertotheWorkersCompensation and Employers Liability Insurance itself 'fo:ractiral contactual - provisions. ' tr.1.41: d:11 Copyright 1982, 1988 National Council on Compensation Insurance. WC

159 WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY : In return for the payment of the premitim and stibject to all ternis Of this policy, We agree with you as follows. 4i A GENERAL SECTION- The Policy This policy includes at its effective date the Inforinacd'- tion Page and all endorsements and schedules listed there. it is a contract of insurance between you (the effiployerthamed in item 1 of the Information Page) aridlis,(the insurer named on the Information Page). The onfyzagreements`frelatingtb this: iiisuraridetaie stated in this policy. The terms of this policy may, not be changed or waived except by endorsement issued by us to be part of this policy. Who Is Insured You are insured if you are an employer named in item 1 of the Information Page, If IfiateMPIPYer,IS' a OAnership, and if you are one of its partners,' -you are insured, but only in your capacity as an employer of the partnership's'employees:. - onipensatiori w - "-Wgkers Compensation Law means the workers or workmen's compensation law and occupational disease law of each stite or territory named in item 3.A. dffh Information Page. It includes any amendments to-that law which are in effect during the policy period. It does not include the provisi5r1vbflb`ny provide nonoccupational disability benefits. D: State State means any state of the Wpit,q,d,ptats of America, and the District pf Columbia. E.: Locations This policy covers all of your workplaces listed in items 1 ()cll. of the Information Page; and it covers all other ;: workplaces rn item 3.A'. states'unless you have other ( insurance or areselfinsuredcforistlefi workplaces., How This Insurance Applies This workers cqmpensatiori rinsorance rappliesc,to bodily injury by accident or bodily injury by disease. Oodily injury includes resulting dedth, 1. Bodily injury by accident must occur during the policy period. 2. Bodily injury by disease must be.caused okaggra: -: vated by the conditions of your employment. The eniployeet last day of last exposure t6the coalitions causing or aggravating SLidh-l3OciilY injury:_by diseasentist dtd'ur dartittlie j B. We Will Pay " We will pay promptly when due the benefits required of you by the workers compensation law. C. We Will Defend t,-,. We have theright and duty:tcp defend at our:expense -. any claim, proceeding or suit against you for benefits paya ble, by th is jnsurapce We.haye.therigbt to investilati:gd `Settle these-ala intsaroceedings suits... We have no duty to defend a claim, proceeding or suit that is not covered by this insurance. PARTUNE,-WORKERS COMPENSATION INSURANCE D Page 1 We Will Also Pay, We will also pay these,cqstsiriaddition to,pther amounts payable under.this,ihsyr,apc,e as, part of any claim, pioceeding or suit We 'defend: 1. reaso n a Wel 6:kpeite -s;iriclitiredi at 'Our- request; but not loss of eain iiril,gs;:. :.. Jr"; 2. premiums for bonds to release attachments.and for appeal bonds in bond amounts up to the amount payable under tflisinsurance;. _ 3. litigation costs taxed against youi. 4. interest on a judgment as,req uired,by, law until we offer the amount due under this insurance. and 5. expenses we incur. E. Other Insurance WèviIl riot`pa'y',616reittin bur share of benefits and cosis covered by this insurance and oter. insurance or self-insurance. Subjëct. to aii.y I irriits of liability' that may apply, alt shares will be equal until the' - foss is paid, If any insurance or self-insurance is exhausted, the shares of all remaining insurance will be equal until the loss is paid.

160 _ Payments You Must Make You.are:responsible,for any payments in excess of the benefits.reguiarly -provided by the workers compensa - tion. law including those required, because:::, of ybtir -SeIkuS 'and:willfuhtisconduct; ;- 2 you aneritlbyee -invioldfi6n of 3. you fail to caniply with a health or safe ty law or regulation; or 4. you discharge, coerce or otliarwiie ' disdritninate against, any,ern pj9y,pe,, in..vjolation,of,thelworkers compensation. l.,, If we make a*i3ayfrientis"in '-excess of he be nefits regularly. provided byithemorkers.compensation law on younbehalt, youmilliteimbursa us_promptlyi,:, J, : G :'' ' r0iiiPaiiVs We have your rightsi-and,the. :rights of persons entitled to the.benefits of this - insurance, to,..recavenour pay - ments 'from anyone l iable, for,the,.i.njuf:),.. You will do -, everyth in k ; necessary to protect those rights for us and to help us enforcethien'. `" "-,,:t : ' A 7 n statootypipyivoi ;..,,! 4,_, :,,. Thes ard 'rettun ired by,i.. As betweeri an injured worker and US, We have : :; '.- notice of the injury when you have notice:. 2. Your default or the.bankruptcy or insolvency of you or your,estate will not relieve us of our duties under this insurance after an injury occurs. 3. We are directly and primarily liable,to any person. entitled to the ben,efits payablabythis insurance. Those. persons., may enforce our duties, 80 may an agency 'authorized ' by law, Enforcerriani may be against us or against you and us, 4., Jurisdiction over you is jurisdiction over us for purposes of the workerscompensoon law. We are bound by decisions against you under that law, subjecyfd the bfovlsio shsref this 'klidy that are not Tri (COnflibt With'iliklekv '''" 5. This insurance conforms to the parts of the work - ers compens,ation law that apply to: ', a. benefits payable by this insurance; ispecial,taxes -; payments into security or other specia lu ndsl i and assassments payable by us underthatlaw Terrp8 Of, ' this insurance that conflict with the,i. Workers Confpensatian tai are, Changed by this statement to conform to that law, ' NOthirieirf..thase - paragraphi ' relleifes You of your duties under this policy. tc` ' ''PART TWOL-EMPLOYERS LIABILIYlNSURANCE A. How This Insurance Applies This erripleyer.(.11abilitonstiranca -applies i td bedily injory : by 'accidentik2blidily;injikry lby ' disease. Bodily injury includes resulting dee-my" 1. The bodily injury must arise out of and in the course of the injured employee lsi erriployrnen't by you. 2..,,tpe:mpioyrneratrnust be. necessary br!incidental,to..your wails; state,onterritoryilistecf,in -t. item '3.A. of the Inforrnatjon2P.age., 3. Bodily injury by accident must occur during the policy period.?,;,,:;. ]; A 4. Bodily injury by disease must be caused oraggra - '''' lated. bythe'boriditiori`i Of 'yciue01016shifdtif..ithe employee 's last day of fast exppgtirefethe'c'ondi- --. causingkinaggravating -suchtodily:injuey by disease must occur during the policy period. I fru iare'sbed2the.originafsult:and'any related - legal ; 4ctidris ;for6darnages ' for ' bbdily.;injury by -accident: or.,byc -ciis,ease:,must!* brought, ihr the.,llnited,states,otarrierice, itsterritariesor posses - sions, or Canada. Page2 WeVill Pay' - '.; v Welwill pay all:sums you legalimust payas damages because pf bodily injury to, your,ern oyees, provjd ed thebbdily, injdry' is' ovei-44 by this Employers Liability Insurance: Thadaryiages we where recover.), is permitted by law, include damages: 1. for which you are liable to a third party by reason of a claim or suit against you by that third,party recover the damages claimed against,such,third!wfy as a result of injury to your employee, 2. foi care and-lo$s:of services;,and for conseq uentialjpod ity - injury to a spouse, child, parent, brother or sister, of, the injured employee; provided that these,damages are the direct conse - quence pi, boy injury that arjses out of and in the course of the injured employee 's employment by you; and 4. because a bodily injury to your employee that arises out of and in the course of employment, Yeti in a'capacity Other than as employer.

161 C. Exclusions This insurance does not:cover: 1. liability assumed under a contract. This occlusion does not apply to a warranty that your work will be done in avorktnanlike manner; 2. punitive or exemplary damages because of bodily injury to an employee employed in violation of law; 3. bodily injury to an employee while employed in violation Of faik with ydikactual knowledge or the actual knowledge Of an'of yourexedutive officers; 4. any obligation imposed by a workers compensation, occupational disease 1 unemployment compensation, or disability benefits law, or any similar law; ; 5. bodily-injury intentional IY caused raggravated by 6. bodily injury occurring outside the United States of.america, its territories. or, possessions, and Canada. This exclusion does, not apply to bodily injury to a citizen or residerlt of the United States of America Or Canada who is temporarily outside these' countries;- ' 7. damages arising out of the discharge of, coercion of or discrimination againstany employee; in violation of law. -.) D. We Will Defend We have the right and duty to defend; atour'experiae, any claim, proceeding or suit against youjoyamages payable by this insurance. We have the iiihlto irivesti- 1 gate and settlethese claims, tproceedings and.suits. We have no duty to defend a claim, proceeding,or suit that is not covered by this insurance.' we have no duty to defend or continue defending after we hi e paid our applicable lirhitat liability Under this insiirinte': E. We Will Also Pay -' We will also pay these costs:, in addition to other amotinti Payable under this ins Orarice, is part of any claim, proceeding or suit we defend: reasonablee:xpihses iricuried at cue request; but not los's of earnings; 2. PreMiums for bonds to release attachments and for appeal bonds in bond, amounts up to the limit óv cur liability under this insurance; 3. litigation costs taxed against you; 4. interest on.a judgment as required by law until we offer-the,amount due,undser this insurance; and 5. expenses we incur. Page 3 F G. Other Insurance We:will not PAY more than our Share -of damages and costs covered by this.i nsueanceand-other insurance or self-insurance: Subject V:, any limits of liability that apply, all,shares,will:be.equal untirthe :loss is paid. If any insurance, or. self-insurance s, exhausted, the ires of all remaining MS-urine -Cenci Salt...insurance will be equal until the loss is paid,..=,4 100 Pf,144ility Our liability to 1:sajfor darriaket is Iiinited;Our limits of liability are shown in iteni.i.b: 6f1fiel Infarmation Page.3hey.apply. asexplainedael,9#, 1-. :Bodily Injury- by Accident: ' The limit shown for "bodilyinjury by actident-each accideht" is the most we will pay for all clajnam :c9ver5c1,,bypthis insurance because of bodily"injurylb one ar more employees in'anyone:aocidenti AdiSeaSe not bodinjuly13,y, 2accident Unless it regults'drectly v ; 2. Bodily Injury by Disease,.. Th,e,Iimt shown for "bodily injury by disease policy _limit" is the most we will pay for all darrage's 2COVeied. BY this in yrartce and,arisingjout of,bodily injury by disease, regardless of the number of employees who sustain bodily injury bydisease. -rt),,.litnit shown for "bodilyinji36, by'aieak.,---eaph -enfployee" is the most we will pay for all damages because of bodily injury by disease to any one employee. Bodily injury by disease does not include disease that results directly from a bodily injury by accident. rleirta : We will not, pay,any,claims,for,darnages after we have.paidtheapplicabte,lirnitof our liability under this insurance. :., Recovery From Others., - We have your rights to recover our payment from anyone'liable for an injury COVere'd by this ih's &eke: You iilldoeverythirignecessary to protect thoserights for us and to help us ehforcettrern: ' I. Actions Against Us There will be no right of action against us Linder this inauranoe Unless: - 1:: you have complied with,al the terms of this policy; and, the amountyou-owe has:been,determi ned with our,consentor by actual :trialfand final:judgment. Thieihsurance cibes not iiellyonitlie light to add us as a 'defendant in an 'action againkyou to determine your liability.

162 A. How This Insurance Applies :This other States' ihsurance applieonly if one or mote Statesare stiewri in itern of the Information Page. " " If you bekin work in ok one Of thosestates and are not insured or are not self-insuredfibr,such'work, -the policy will applias though that state were listed in item 3.A. of the Information Page. PART THREE OTHER STATES INSURANCE '3.We Will reimburse you for the benefits required by w;orkers compensation law of that state if we are not Permitted to pay the benefits directly to persons entitled to them. B. Notice Tell us at once if you begin work in any state listed in item 3.C. of the Information Page. PART FOUR YOUR DUTIES IF INJURY OCCURS Tell us at once if injury occurs that may be covered`i*ihis policy. Your other duties are listed here. 1. Provide for immediate medical and other services required by the workers compensation law Give us or our agent the names and addresses of the injured personsahd of Witnesses a ndiother inforrnation'we ' may.need 3. Promptly give us 'all 'notices, demans andlegal pa- Pert -related to the injury, claim, proceeding or suit. 4. Cooperate with usand assist us, aswe may:request, in the investigation, settlement or defense of any claim, PrOC'ee-ding. OrSoit. IElp:o nothing after an injury occurs that would interfere, with our right to srecolier, from qttwa,. 6. Do-riotvOluntarily! make payments ; assume oblige-, tionsor incur experises, except at, your own' cost: A. Our Manuals, All premium for this policy will be determined by our manuals of rules, rates, ratiniplans ano Ciassifica-,,tionsF, We Tay,change our, man_ukis and apply, the changes to thispolicy,it a uthorizeo : by lavii,o6a governmental agency regulating this insurance. nfi, B. qlpisificatioris, Item 4 of the Information Page 'shoi&thé rate and premium basis for certain business or work classifica-_, tions. These classifications wereassigligase7pon an estimate pfloe expo,sures;you wouldhaye,gluring the policy, perlocklfyour actual exposures:grenot properly decried by those classifications, -wa will, assign proper classifications, rates and premium ;basis by endorsement to this policy. C. Remuneration Premium for each work classification is determined by multiplying a rate times a premium basis. Remuneration is the most common premium basis. This premium basis includes payroll and all other remuneration paid or payable during the policy period for the services of: 1. all your officers and employees engaged in work covered by this policy; and 2. all other persons engaged in work that could make us liable under Part One (Workers Compensation Insurance) of this policy. If you do not have payroll records for these persons, the contract price for PART FIVE PREMIUM,:, I's theiri Services'aria!materials-may Page usecl as tne prerni urn basislothis'paragraph'2 will not apply if you--,give ut'!proof that the employers of these persons lawfully secured their Workers compensation obligations. D. Premium Payments You will Ph'y all premium When:.'cfue. YOU will pay the! ñithj even`if Part ()rail -of a workers compensation law is not valid. E. Final Premium The premium shown on'ine infor ';Mat*n Page,,schedu le s, and eridarserheritils'ari esti Mate. The final prerni.will be determined afterithis :policy ends1 by using the actual, not the estimated, premium basis and the proper classifications and rates that lawfully apply to the business and work covered by this policy. If the final premium is more than the premium you paid to us, you must pay us the balance. If it is less, we will refund the balance to you. The final premium will not be less than the highest minimum premium for the classifications covered by this policy, If this policy is canceled, final premium will be determined in the fol lowing way unless our manuals provide otherwise. 1. If we cancel, final premium will be calculated pro rata based on the time this policy was in force. Final premium will not be less than the pro rata share of the minimum premium.,

163 2. If you cancel, final premium willibe,ifibrethi6pro HopVp, PW:..1:,19ctrit n force, and table an less than the rninimuni premium :p2criperition not be You will keep reciirds rbfliifohatiisri l tigecii f8.:adbmpute Premium. You will provide us with copies of those 'records when we ask for them. Y1,13:. 1-1';.a GAiidit TMA9 You will let us examine aridi66ditall yourfecords that ( Telat.eitojhisqciolicy. Thesei Toorcis,,inplude ledgers, reparts, payroll and disbursement records, andrprograms for _ storipgendfetriay,ingdeta, rwe nlaycp,riduckthe audits till rig iegui#,t; bysin,ss'h,oursdqingthei`ppl Priod and ithithrdê eat ifief Peiidd ends. I I nforrnat on devel cted,pyoaqd it wi Used lo determ i rie'-final pwmitirri. - IcifsuranCe retgservici `organizations have the same rights we have under this provi- 3 ; ; ;.:2, i c;,-.. ;,,o h.ia.:;,-, :, ; c:-.,,i.;;;:1-,-1,..:1;f1! PARTSIX--CONDM ONS, ;. ':-:,: r,- -- fi,',y'lic.:,;':, 4, i:a i...:, Ff.' ''.': C,-;',1 _ =:-. =-:= =;",:=11';, 1, =. `,...,- AQ- Inspection n your. death, we Will c'ovet y6i:ir 'legal representative ai '-.-,V.4:,, r--0 "F". `;'-';''''.tr, :1)`i'4'.11:.ilit'1!'",:ii= ::;iii ':'.itistireck,9, iic' :-';:. ;,,,.11'', ','',-; =-,., :i; :!..,i -. We haiithe' right, hilt are not:-db,liged,t6,1tisn_ectipur workplaces at any time Our inspi6tionare' ribisifety D, Cancelatioe litijiedtialig, trieirelate Phlyto`thgr i-41.1rabli0 Pflhe:' 2 rf, :.- :.)-: ;, 1 * :.--.4 :1, f.i, a: - = -=.i,",c-it. 1-q,') :r.,. ',, 1 workplaces and ille)pfeliiiiiffs :to'be-chergerf.' We' May,.;;I:YouimaK cancel:this policy.,iouf mum st:ail or de d-.,;. give yqu jreports,- on the conditionsweit nd -.-7,Weirnay.' liver advance written notice tpus statingshen the alsorecornmend.chahges. While tfieymay help reduce i:.1:. cn ancelatio 1st,00...i.,-, take,effect.,, losses, we do not undertake to perform the duty of any 2. We may cancel this policy. We must mail or deliver person to provide for the health or safety of Your em-, _,,,,,,, to you not less than ten days advance Written ployees-or the public: We do not warrant thaociiir.' '''' ''." ' notice stating when the cancelation is to take -,-,...ii*o.rapippes 1.!fsafP.P.r.,M#P it hf.4 1 :---P0hg:thPY -icomp l Y effect. Mailing that notice to you at Īda/Mailing' -, AIM ig'.#y.si.r,41.44,tr9n,,..93*:0 Aalicl?r,c1inul'ailce?a,ddr.'ess rospd.w.n i i.a,itern 4, pf,theo(riformation Page Tate tservi:cei.erganiz.atipris have7the sarnet,tights we will be sufficient to prove notice " - ::-;,1 -,.,,., i i. i j ' F :. t : 7 I i 08 -,.. ;. :1; ; i,; :::: ld 'n :dr, 'the 1!;!.; 'd4 and flour B. Long Tenn Policy If the policy period is longer tharforie9eara -hdfsixteen --, -days all provisions otthi,spolicy,will. apply athoqgh a. new. policy viere :issued ion, eacifannpal :anniyer ry that this policy is in force..tosy C. Transfer Of Your Rights And Duties. 3 Your:, ciets ifaferria If you dje:and we receiveboticewithin thirtydays'after '.,',,i4statedf iroffe-carfeeletron'. hotiodirif VOM')'48 4. Any7af these provisidnt that conflicts with a law that -tontroisine cencelation of the insurance in this policy is changed by this statinie'ntici'earn ply' =,i= :=-= =0'i%i-n=v,;",=1: :==3 meir:14 :r.1 10,= E.,:toleltepresentative.. -. I 7 tfied haineti:riff Ofthe inforrhation tf:pege Wi I l'zactibilibefia I f: Oral I; ibredg tige'th is,', TOOlickvreCeive rrettirropretriiuni[ 3 ahd:tive'orreteive notice rof:catitelatich : '. ro!c :v.i (;t 3: rit ±1 n'w ;', te,s= ' ffii.alfc 7 Page5: -;;

164 EXHIBIT C INSURANCE POLICY JULY 1, JULY 1, 1995

165 WORKERS rn ""APENSATION AND EMPLOYERS UA INFORMATION PAGE V INSURANCE POLICY makoi,a3a 2 Renewal of M4A PRLTAWnR WATVIWAT. TWTIMITTV CO (Name of Insurer) 1. The Insured/Malting Address: (No. Street, Town, County, State, Zp) CARLSON HOLDINGS, INC. 701 CARLSON PARKWAY P.O. BOX MINNEAPOLIS,, MN Other Workplaces not shown above: 2. Policy Period: The policy period is from 07/01/94 at the Insured's Mailing Address. 110 CORPORATION OR 1.0. No n010 to 07/01/95 12:01 AM. Standard Time, 3. Coverage: A. Workers Compensation Insurance: Part One of the policy applies to the Workers Compensation Law of the states listed here: CA MA WI HI B. Employer's Liability insurance: Part Two of the policy applies to work in each state listed in Item 3.A. The limits of our liability under Part Two are: Bodily Injury by Accident $ 1,000,000. each accident Bodily Injury by Disease $ 1,000,000. each employee Bodily injury by Disease $ 1,000,000. policy limit C. Other States Insurance: Part Three of the policy applies to the states, if any, listed here: All states except Nevada, North Dakota, Ohio, Washington, West Virginia, Wyoming, States designated in item 3.A above and MAINE D. This policy includes these endorsements and schedules: SEE SCHEDULE OF FORMS AND ENDORSEMENTS ATTACHED 4. Premium: The premium for this policy will be determined by our Manuals of Rules, Classifications, Rates and Rating Plans. All information required below is subject to verification and change by audit. Classifications Code Premium Basis Rate Per Estimated No. Total Estimated $100 of annual Annual Remuneration Remuneration Premium SEE WC 174 Surcharge: CA MA 4, Premium modified Other Total premium subject to the experience modification $ 740, to reflect experience modification of qpv. $ 746, Total Estimated Standard Premium $ 746, Premium Discount, if applicable, NP % $ Loss and/or Expense Constant Charge $ 160. Minimum Premium $ 0 Total Estimated Annual Premium $ 746, if indicated below, interim adjustments of premium shall be made 0 Semi-Annually 0 Quarterly 0 Monthly Deposit Premium $ 0- Countersigned Date 06/11/94 By Authorized Representative lotr-t A. eiti,146. 9/1/94 RR THIS INFORMATION PAGE WITH THE WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY AND ENDORSEMENTS, IF ANY, ISSUED TO FORM A PART THEREOF, COMPLETES THE ABOVE NUMBERED POEJCY. CJDL-6400 Ed. 4/84

166 Workers Compensation and Employers Liability insurance - Change Endorsement * * EFFECTIVE 7/ 1/94 POLICY NUMBER POLICY PERIOD AGENCY NUMBER NWA FROM: 07/01/94 TO: 07/01/ NAME OF INSURED AND ADDRESS CARLSON HOLDINGS, INC. 701 CARLSON PARKWAY P.O. BOX MINNEAPOLIS,, MN AGENCY NAME AND ADDRESS JOHNSON & HIGGINS 1600 LINCOLN CENTER 333 SOUTH SEVENTH ST. MINNEAPOLIS, MN WORKER'S COMPENSATION AND EMPLOYERS' UABILITY INSURANCE POLICY CHANGE ENDORSEMENT CHANGE ENDORSEMENT NUMBER SCHEDULE OF FORMS AND ENDORSEMENTS WC174 04/84 WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY EXTENSION OF INFORMATION PAGE WC /84 WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLIC WC /84 DEFENSE BASE ACT COVERAGE ENDORSEMENT WC /84 LONGSHOREMENS AND HARBOR WORKERS COMPENSATION ACT COV END WC /84 OUTER CONTINENTAL SHELF LANDS ACT COVERAGE ENDORSEMENT WC /84 MARITIME COVERAGE ENDORSEMENT WC /84 VOLUNTARY COMPENSATION MARITIME COVERAGE ENDORSEMENT WC000311A 08/91 VOLUNTARY COMPENSATION AND EMPLOYERS LIABILITY COVERAGE END WC /84 PENDING RATE CHANGE ENDORSEMENT WC000503A 09/91 RETROSPECTIVE PREMIUM ENDORSEMENT ONE YEAR PLAN WCO4R /94 CALIFORNIA WC LOSS PREVENTION NOTICE TO POLICYHOLDER WC040101A 04/92 LONGSHORE AND HARBOR WORKERS COMPENSATION ACT COVERAGE ENDOR WC /91 CALIFORNIA POLICY AMENDATORY ENDORSEMENT WC /86 EMPLOYERS LIABILITY COVERAGE AMENDATORY ENDORSEMENT CAL IFORN THIS ENDORSEMENT CHANGES THE POLICY TO WHICH IT IS ATTACHED AND IS EFFECTIVE ON THE DATE ISSUED UNLESS OTHERWISE STATED. (THE INFORMATION BELOW IS REQUIRED ONLY WHEN THIS ENDORSEMENT IS ISSUED- SUBSEQUENT TO PREPARATION OF THE POLICY.) Premium $ Countersigned by Authorized Representative Date

167 Workers Compensation and Employers Liability insurance - arming() Endorsement * * EFFECT IVE 711 / 94 POLICY NU BER POLICY PERIOD AGENCY NUMBER - NWA FROM: 01/01/94 TO: 07/01/ NAME OF INSURED AND ADDRESS AGENCY NAME AND ADDRESS carlson HOLDINGS, INC. JOHNSON & HIGGINS 701 CARLSON PARKWAY 1600 LINCOLN CENTER P.O. BOX SOUTH SEVENTH ST. MINNEAPOLIS,, MN MINNEAPOLIS, MN WORKER'S COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE POLICY CHANGE ENDORSEMENT CHANGE ENDORSEMENT NUMBER SCHEDULE OF FORMS AND ENDORSEMENTS - CONT'D WC /86 MASSACHUSETTS ASSESSMENT CHARGE WC /90 MASSACHUSETTS NOTICE TO POLICYHOLDER ENDORSEMENT WC /94 WISCONSIN LAW ENDORSEMENT WC /84 HAWAII VOLUNTEER WORKERS ENDORSEMENT WC /92 ENDT# 1 NAMED INSURED WC /92 ENDT# 2 LOCATIONS ENDORSEMENT WC /92 ENDT# 3 "BORROWED SERVANT" ENDORSEMENT WC /92 ENDT# 4 STOP GAP ENDORSEMENT wc /92 ENDT# 5 NON-CUMULATIVE WC /92 ENDT# 6 REPATRIATION AND ENDEMIC DISEASE ENDORSEMENT WC /92 ENDT# 7 IN REM ENDORSEMENT WC /92 ENDT# 8 UNINTENTIONAL ERRORS AND OMISSIONS WC /92 ENDT# 9 DUTIES IN THE EVENT OF AN OCCURRENCE WC /92 ENDT# 10 AMENDATORY ENDORSEMENT wc /92 ENDT# 11 AMENDMENT OF EXPECTED OR INTENDED INJURY THIS ENDORSEMENT CHANGES THE POLICY TO WHICH IT IS ATTACHED AND IS EFFECTIVE ON THE DATE ISSUED UNLESS OTHERWISE STATED. THE INFORMATION BELOW IS REQUIRED ONLY WHEN THIS ENDORSEMENT IS ISSUED SUBSEQUENT TO PREPARATION OF THE POUCY.) Premium $ Countersigned by Authorized Representative Date %Ate' "e. "rs n artn.

168 Workers Compensation and Employers Liability Insurance - Change Endorsement * * EFFECTIVE 7/1/94 POLICY NUMBER POLICY PERIOD AGENCY NUMBER NWA FROM : 07/01/94 TO: 07/01/ NAME OF INSURED AND ADDRESS AGENCY NAME AND ADDRESS CARLSON HOLDINGS, INC. JOHNSON & HIGGINS 701 CARLSON PARKWAY 1600 LINCOLN CENTER P.O. BOX SOUTH SEVENTH ST. MINNEAPOLIS,, MN MINNEAPOLIS, MN WORKER'S COMPENSATION AND EMPLOYERS' UABIUTY INSURANCE POLICY CHANGE ENDORSEMENT CHANGE ENDORSEMENT NUMBER, SCHEDULE OF FORMS AND ENDORSEMENTS - CONT'D WC WC WC WC WC WC W IA WC W WC040601A WC WC WC /92 01/92 01/92 01/92 01/92 06/92 02/89 04/88 04/92 12/93 01/91 04/84 06/92 ENDT# 12 NEWLY ACQUIRED ENTITIES ENDT# 13 NOTICE OF CANCELLATION ENDT#.14 WAIVER OF SUBROGATION ENDT# 15 EXTENDED PROTECTION - INDEMNIFICATION IN MONOPOLISTIC STATES ENDT# 16 FOREIGN VOLUNTARY COMPENSATION& EMPLOYERS LIABILITY COVERAGE MASSACHUSETTS CANCELLATION ENDORSEMENTS ALTERNATE EMPLOYER ENDORSEMENT EMPLOYERS' LIABILITY INSURANCE ENDORSEMENT AMENDATORY ENDORSEMENT CALIFORNIA CANCELLATION ENDORSEMENT CALIFORNIA WORKERS' COMPENSATION RETROSPECTIVE PREMIUM ENDORSEMENT MASSACHUSETTS LIMITS OF LIABILITY ENDORSEMENT MASSACHUSETTS CANCELLATION ENDORSEMENT THIS ENDORSEMENT CHANGES THE POLICY TO WHICH IT IS ATTACHED AND IS EFFECTIVE ON THE DATE ISSUED UNLESS OTHERWISE STATED. THE INFORMATION BELOW IS REQUIRED ONLY WHEN THIS ENDORSEMENT IS ISSUED SUBSEQUENT TO - PREPARATION OF THE POUCY.) Premium $ Countersigned by Authorized Representative Wes el" no cu.% n.triot Date

169 WC WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE POLICY PLEASE READ THE POLICY CAREFULLY. WC 175 (4-84) QUICK REFERENCE BEGINNING ON PAGE BEGINNING ON PAGE INFORMATION PAGE G. Urrats Of Uabillty a H. Recovery From Others 3 GENERAL SECTION 1 I. Actions Against Us 3 A. The Polley 1 B. Who Is Insured 1 PART THREE OTHER STATES INSURANCE 3 C. Workers' Compensation Law 1 A. How This Insurance Applies a D. State 1 B. Notice a E. Locations 1 PART FOUR YOUR DUTIES IF INJURY OCCURS 3 PART ONE WORKERS COMPENSATION INSURANCE A, How This Insurance Applies 1 B. We Will Pay 1 PART FIVE PREMIUM 4 C. We Will Defend 1 A. Our Manuals 4 D. We Will Also Pay 1 B. Classifioatiorts 4 E. Other Insurance 1 C. Remuneration 4 F. Payments You Must Make I D. Premium Payments 4 G. Recovery From Others 2 E. Final Premium 4 H. Statutory Provisions 2 F. Record& 4 a Audit 4 PART TWO EMPLOYERS' LIABIUTY INSURANCE A. How Th Is insurance Applies 2 PART SIX CONDITIONS 4 B. We Will Pay 2 A. Inspection 4 C. Exclusion 2 B. Long Term Policy 5 0, We WIII Defend 3 C. Transfer Of Your Rights And Duties 5 E We W1I1Also Pay 3 D. CancelatIon 5 F. Other Insurance 3 E. Sole RepresentatIve.5 IMPORTANT: This Quick Reference Is not part of the Workers' Compensation and and Employers' Uability Insurance Policy and does not provide coverage. Refertothe Workers' Compensation and Employers' Uablifty Insurance Policy itseiffor actual contractual provisions. NWA

170 WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE POLICY In return for the payment of the premium and subject to all terms of this policy, we agree with you as follows. A. The Policy This policy includes at its effective date the Information Page and all endorsements and Schedules listed there. it is a contract of insurance between you (the employer named In item 1 of the information Page) and us (the insurer named on the information Page). The only agreements relating to this insurance are stated in this policy. The terms of this policy may not be changed or waived except by endorsement issued by us to be part of this policy. B. Who Is Insured You are insured if you are an employer named in item 1 of the Information Page. If that employer is a partnership, and if you are one of Its partners, you are insured, but only in your capacity as an employer of the partnership's employees. GENERAL SECTION C. Workers' Compensation Law Workers' Compensation Law means the workers' or workmen's compensation law and occupational disease law of each state or territory named In item 3.A of the information Page. It includes any amendments to that law which are in effect during the policy period. It does not include the provisions of any law that provide nonoccupational disability benefits. D. State State means any state of the United States of America, and the District of Columbia. E. Locations This policycovers all of your workplaces I isted in items 1 or 4 of the information Page; and it covers all other workplaces in item 3.A states unless you have other insurance or are self-insured for such workplaces. PART ONE WORKERS' COMPENSATION INSURANCE k. How This insurance Applies This workers' compensation insurance applies to bodily Injury by accident or bodily Injury by disease. Bodily injury Includes resulting death. 1. Bodily injury by accident must occur during the policy period. 2. Bodily injury by disease must be caused or aggravated by the conditions of your employment. The employee's last day of last exposure to the conditions causing or aggravating such bodily injury by disease must occur during the policy period. B. We Will Pay We will pay promptly when due the benefits required of you by the workers' compensation law. C. We Will Defend We have the right and duty to defend at our expense any claim, proceeding or suit against you for benefits payable by this insurance. We have the right to investigate and settle these claims, proceedings or suits. We have no duty to defend a claim, proceeding or suit that is not covered by this insurance. D. We Will Also Pay We will also pay these costs, In addition to other amounts payable under this Insurance, as part of any claim, proceeding or suit we defend: 1. reasonable expenses Incurred at our request, but not loss of earnings; 2. premiums for bonds to release attachments and for appeal bonds In bond amounts up to the amount payable under this insurance; 3. litigation costs taxed against you; 4. Interest on a judgment as required by law until we offer the amount due under this insurance; and 5, expenses we incur. E. Other Insurance We will not pay more than our share of benefits and costs covered by this insurance and other insurance or self-insurance. Subject to any limits of liability that may apply, all shares will be equal until the loss is paid. If any insurance or self-insurance is exhausted, the shares of all remaining insurance will be equal until the loss is paid. F. Payments You Must Make You are responsible for any payments in excess of the benefits regularly provided by the workers' compensation law Including those required because: 1. of your serious and wiftful misconduct; knowinglyemploy an employee in violation of 2. law; 3. you fall to comply with a health or safety law or regulation; or 4. you discharge, coerce or otherwise discriminate against any employee In violation of the workers' NIAIA Pans 1 elf WC 175 (4-84) wr ritl MI FA

171 compensation law. if we make any payments in excess of the benefits regularly provided by the workers' compensation law on your behalf, you will reimburse us promptly. G. Recovery From Others We have your rights, and the rights of persons entitled to the benefits of this insurance, to recover our payments from anyone liable for the injury. You will do everything necessary to protect those rights for us and to help us enforce them. H. Statutory Provisions These statements apply where they are required by law. 1. As between an injured worker and us, we have notice of the injury when you have notice. 2. Your default or the bankruptcy or insolvency of you or your estate will not relieve us of our duties under this Insurance after an Injury occurs. 3. We are directly and primarily liable to any person PART TWO EMPLOYERS' LIABILITY INSURANCE A. How This Insurance Applies This employers' liability insurance applies to bodily Injury by accident or bodily injury by disease. Bodily injury includes resulting death. 1. The bodily Injury must arise out of and in the course of the Injured employee's employment by you. 2. The employment must be necessary or incidental to your work In a state or territory listed In item 3.A of the information Page. 3. Bodily injury by accident must occur during the policy period. 4. Bodily injury by disease must be caused or aggravated by the conditions of your employment The employee's last day of last exposure to the conditions causing or aggravating such bodily Injury by disease must occur during the policy period. 5. If you are sued, the original suit and any related legal actions for damages for bodily injury by accident or by disease must be brought In the United States of America, its territories or possessions, or Canada. B. We Will Pay We will pay all sums you legally must pay as damages because of bodily injury to your employees, provided the bodily Injury is covered by this Employers' Liability insurance. The damages we will pay, where recovery is permitted by law, include damages: 1. for which you are liable to a third party by reason of a claim or suit against you by that third party to recover the damages claimed against such third entitled to tine benefits payable by this Insurance. Those persons may enforce our duties; so may an agency authorized by law. Enforcement may be against us or against you and us. 4. Jurisdiction over you is jurisdiction over us for ' purposes of the workers' compensation law. We are bound by decisions against you under that law, subject to the provisions of this policy that are not in conflict with that law. 5. This insurance conforms to the parts of the workers' compensation law that apply to: a. benefits payable by this insurance; b. special taxes, payments into security or other special funds and assessments payable by us under that law. 8. Terms of this insurance that conflict with the workers' compensation law are changed by this statement to conform to that law. Nothing in these paragraphs relieves you of your duties under this policy. party as a result of injury to your employee; 2. for care and loss of services; and 3. for consequential bodily injuryto a spouse, child, parent, brother or sister of the injured.employee; provided that these damages are the direct consequence of bodily injury that arises out of and in the ( course of the Injured employee's employment by you; and 4. because of bodily injury to your employee that arises out of and in the course of employment, claimed against you in a capacity other than as employer. C. Exclusions This insurance does not cover: 1. liability assumed under a contract. This exclusion does not apply to a warranty that your work will be done in a workmanlike manner. 2. punitive or exemplary damages because of bodily injury to an employee employed in violation of law; 3. bodily Injury to an employee while employed in violation of law with your actual knowledge or the actual knowledge of any of your executive officers; 4. any obligation imposed by a workers' compensation, occupational disease, unemployment compensation or disability benefits law or any similar law; 5. bodily Injury intentionally caused or aggravated by you; 6. bodily injury occurring outside the United States of America, its territories or possessions, and NWA WC 175(4-84) WC Page 2 of 5

172 Canada. This exclusion does not apply to bodily injury to a citizen or resident of the United States of America or Canada who is temporarily outside these countries; 7. damages arising out of the discharge of, coercion of or discrimination against any employee in violation of law. D. We Will Defend We have the right and duty to defend, at our expense, any claim, proceeding or suit against you for damages payable by this Insurance. We have the right to Investigate and settle these claims, proceedings and sults. We have no duty to defend a claim, proceeding or suit that is not covered by th Is insurance. We have no duty to defend or continue defending after we have paid our applicable limit of liability under this Insurance. E. We Will Also Pay We will also pay these costs, in addition to other amounts payable under this Insurance, as part of any claim, proceeding or suit we defend: 1. reasonable expenses Incurred at our request, but not loss of earnings; 2. premiums for bonds to release attachments and for appeal bonds in bond amounts up to the limit of our liability under this insurance; 3. litigation costs taxed against you; 4. interest on a judgment as required by law unfit we offer the amount due under thls insurance; and 5. expenses-we incur. F. Other Insurance We will not pay more than our share of damages and costs covered by this insurance and other insurance or self-insurance. Subject to any limits of liability that apply, all shares will be equal until the loss Is paid. if any Insurance or self-insurance Is exhausted, the shares of all remaining insurance and self-insurance will be equal until the loss Is paid. G. Limits Of Liability Ourilabil ity to psyfor damages is limited. 0 ur limfts of liability are shown in item 3.8 of the information Page. They apply as explained below. 1. Bodily injury by Accident. The limit shown for "bodily injury by accident each accident" Is the most we will pay for all damages covered by this Insurance because of bodily injury to one or more employees in any one accident. A disease Is not bodily injury by accident unless It results directlyfrom bodily Injury by accident. 2. Bodily 1 njury by Disease. The limitshownfor ubodily injury by disease policy limit" is the most we will pay for ail damages covered by this Insurance and arising out of bodily injury by disease, regardless of the number of employees who sustain bodily Injury by d isease. The limit shown for "bodily injury by disease each employee" lathe most we will pay for all damages because of bodily Injury by disease to any one employee. Bodily Injury by disease does not include disease that results directly from a bodily Injury by accident. 3. We will not pay any claims for damages after we have paid the applicable limit of our liability under this Insurance. H. Recovery From Others We have your rights to recover our payment from anyone liable for an Injury covered by this Insurance. You will do everything necessary to protect those rights for us and to help us enforce them. I. Actions Against Us There will be no right of action against us under this Insurance unless: 1. you have compiled with all the terms of this policy; and 2. the amount you OWO has been determined with our consent or by actual trial and final judgment. This insurance does not give anyone the right to add us as a defendant in an action against you to determine yourilabliity. PART THREE OTHER STATES INSURANCE A. How This Insurance Applies 1. This other states insurance applies only if one or more states are shown In item 3.0 of the information Page. 2. If you begin work In any one of those states and are not insured or are not self-insured for such work, the policy will apply as though that state were listed In item 3.A of the information Page. 3. We will reimburse you for the benefits required by the workers' compensation law of that state if we are not permitted to pay the benefits directly to persons entitled to them. B. Notice Tell us at once if you begin work In any state listed in item 3.0 of the Information Page. Tell us at once If injury occurs that may be covered by this policy. Your other duties are listed here. PART FOUR YOUR DUTIES IF INJURY OCCURS 1. Provide for Immediate medical and other services required by the workers' compensation law, 2. Give us or our agent the names and addresses of the Injured persons and of witnesses, and other informa- NWA Page 3 of 5 WC 175 (444) WO

173 tion we may need. 3. Promptly give us all notices, demands and legal papers related to the injury, claim, proceeding or suit. 4. Cooperate with us and assist us, as we may request, In the Investigation, settlement or defense of any A. Our Manuals All premium for this policy will be determined by our manuals of rules, rates, rating plans and classifications. We may change our manuals and apply the changes to this policy if authorized by law or a goy- - ernmental agency regulating this insurance. B. Classifications item 4 of the information Page shows the rate and premium basis for certain business or work classifications. These classifications were assigned based on an estimate of the exposures you would have during the policy period. If your actual exposures are not properly described by those classifications, we will assign proper classifications, rates and premium basis by endorsement to this policy. C. Remuneration Prem I umfor eachwork classification Is determined by multiplying a rate times a premium basis. Remuneration is the most common premium basis. This premium basis includes payroll and all other remuneration paid or payable d uring the policy period for the services of: 1. all your officers and employees engaged in work covered by this policy; and 2. all other persons engaged In work that could make us liable under Part One (Workers' Compensation Insurance) of this policy. if you do not have payroll records for these persons, the contract price fortheir services and materials may be used as the premium basis. This paragraph 2. will not apply if you give us proof that the employers of these persons lawfully secured their workers' compensation obligations. D. Premium Payments You will pay all premium when due. You will pay the premium even if part orall of a workers' compensation law Is not valid. E. Final Premium A. INSPECTION We have the right, but are not obliged to inspect your workplaces at anytime. Our Inspections are not safety Inspections. They relate only to the insurability of the workplaces and the premiums to be charged. We may give you reports on the conditions we find. We may also recommend changes. While they may help reduce losses, we do not undertake to perform the duty of any person to provide for the health or safety of your PART FIVE PREMIUM PART SIX CONDITIONS claim, proceeding or suit. 5. Do nothing after an injury occurs that would Interfere with our right to recover from others. e. Do not voluntarily make payments, assume oblige- ( tions or incur expenses, except at your own cost. The premium shown on the information Page, schedules and endorsements Is an estimate. The final premium will be determined after this policy ends by using the actual, not the estimated, premium basis and the proper classifications and rates that lawfully apply to the business and work covered bythis policy. lithe final premium is more than the premium you paid to us, you must pay us the balance. if it is less, we will refund the balance to you. The final premium will not be less than the highest minimum premium for the classifications covered by this policy. If this policy Is canceled, final premium will be determined in the following way unless our manuals provide otherwise. 1. if we cancel, final premium will be calculated pro rata based on the time this policy was in force. Final premium will not be less than the pro rata share of the minimum premium. 2. If you cancel, final premium will be more than pro rata; it will be based on the time this policy was in force, and increased by our short rate cancelation table and procedure. Final premium will not be r less than the minimum premium. F. Records You will keep records of information needed to compute premium. You will provide us with copies of those records when we ask for them. G. Audit You will let us examine and audit all your records that relate to this policy. These records include ledgers, journals, registers, vouchers, 'contracts, tax reports, payroll and disbursement records and programs for storing and retrieving data. We may conduct the audits during regular business hours during the policy period and within three years after the policy period ends. information developed by audit will be used to determine final premium. Insurance rate service organizations have the same rights we have under this provision. employees or the public. We do not warrant that your workplaces are safe or healthful or that they comply with laws, regulations, codes or standards. Insurance rate service organizations have the same rights we have under this provision. B. Long Term Policy if the policy period is longer than one year and sbcteen days, all provisions of this poky will apply as though ItV WC Page 4 of 5

174 .&9;7 a new policy were Issued on eacnennual anniversary that this policy Is In force. C. Transfer Of Your Rights And Duties Your rights or duties under this policy may not be transferred without our written consent. If youdle and we receive notice within thirty days after your death, we will cover your legal representative as Insured. D. Canoelotion 1. You may cancel this policy. You must mail or deliver advance written notice to us stating when the cancelatlo n is to take effect. 2. We may cancel this policy. We must mail or deliver to you not less than ten days advance written notice stating when the canceiation Is to take effect. Mailing that notice to you at your mailing address shown in item 1 of the Information Page will be sufficient to prove notice. 3. The policy period will end on the day and hour stated in the cancelation notice. 4. Any of these provisions that conflicts with a law that controls the cancelation of the Insurance in this policy Is changed bythis statement to comply with that law. E. Sole Representative The insured first named in item 1 of the information Page will act on behalf of all Insureds to change this policy, receive return premium and give or receive notice of cancelation. NWA WC 175 (4-84) Page 5 of 5 WC

175 EXHIBIT D INSURANCE POLICY JULY 1, JULY 1, 1996

176 WORKERS NWA010380,2 93 Renewal of NWA nmpensation AND EMPLOYERS UAW ITY INSURANCE POUCY INFORMATION PAGE RELIANCE NATIONAL INDEMNITY CO (Name of Insurer) Fein No Issuing Office NEW YORK, NY 1, The Insured/Malting Address: (No. Street, Town, County, State, Zp) Agency Code, Name and Address CARLSON HOLDINGS, INC. JOHNSON & HIGGINS 701 CARLSON PARKWAY 1600 LINCOLN CENTER P.O..80x SOUTH SEVENTH ST. MINNEAPOLIS, MN MINNEAPOLIS, MN INDIVIDUAL D PARTNERSHIP Other Workplaces not shown above: 120 CORPORATION OR 1.D. No, Policy' Period: The policy period is from 07/01/95 at the insured's Mailing Address. to 07/01/96 12:01 A.M. Standard Time, 3. Coverage: A. Workers Compensation insurance: Part One of the policy applies to the Workers Compensation Law of the states listed here: ID MT OK OR WI HI B. Employer's Liability Insurance: Part Two of the policy applies to work In each state listed In item 3.A. The limits of our liability under Part Two are: Bodily injury by Accident $ 1,000,000. each accident Bodily injury by Disease $ 1,000,000. each employee Bodily Injury by Disease $ 1,000,000. policy limit C. Other States Insurance: Part Three of the policy applies to the states, if any, listed here: All states except Nevada, North Dakota, Ohio, Washington, West Virginia, Wyoming, States designated in item 3.A above and MAINE D, This policy includes these endorsements and schedules: SEE SCHEDULE OF FORMS AND ENDORSEMENTS ATTACHE 4. Premium: The premium for this policy will be determined by our Manuals of Rules, Classifications, Rates and Rating Plans. All Information required below is subject to verification and change by audit. Classifications Code Premium Basis Rate Per Estimated No. Total Estimated $100 of annual Annual Remuneration Remuneration Premium SEE WC 174 Surcharge: OR 1, Total premium subject to the experience modification $ 114, Premium modified to reflect experience modification of SE SCHED. $ 101, Other $ 0.00 Total Estimated Standard Premium $ 101, Premium Discount, If applicable. N/A %$ Loss and/or Expense Constant Charge. $ 160. Minimum Premium $ _0 Total Estimated Annual Premium $ 101, If Indicated below, interim adjustments of premium shall be made 0 Semi-Annually 0 Quarterly 0 Monthly Deposit Premium $ 0. Countersigned Date 07/11/95 Issue Date 07/11/95 :Fitz 7/14/95 By Authorized Representative THIS INFORMATION PAGE WITH THE WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY AND ENDORSEMENTS, IF ANY, ISSUED TO FORM A PART THEREOF, COMPLETES THE ABOVE NUMBERED POLICY. GJDL-6400 Ed, 4/84 raw

177 WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE POLICY EXTENSION OF INFORMATION PAGE WC 174 (4-84) Policy Number: NWA /01/95 4. Premium Classifications Code No, Premium Basis Total Estimated Annual Remuneration Rate Per $100 of Remuneration Estimated Annual Premium CARLSON HOLDINGS, INC. IDAHO CLERICAL OFFICE EMPLOYEES HOC , ,369. 1,369. EL 1000/1000/1000 WITH WC % 45. 1,414. EXPERIENCE MODIFICATION ,244. Total Estimated Annual Premium $ WC 174 (4-84) Page 1 of 1

178 WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE POLICY EXTENSION OF INFORMATION PAGE WC 174 (4-84) Policy Number: NWA /01/95 4. Premium Classifications Code No. Premium Basis Total Estimated Annual Remuneration Rate Per $100 of Remuneration Estimated Annual Premium CARLSON HOLDINGS, INC. HAWAII CLERICAL OFFICE EMPLOYEES NOC , ,250. 2,250. EL 1000/1000/1000 WITH WC % 74. 2,324. EXPERIENCE MODIFICATION ,045. Total Estimated Annual Premium $ WC 174 (4-84) Page 1 of 1

179 WORKERS COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE POLICY EXTENSION OF INFORMATION PAGE WC 174 (4-84) Policy Number: NWA /01/95 4. Premium Classifications Code No. Premium Basis Total Estimated Annual Remuneration Rate Per $100 of Remuneration Estimated Annual Premium CARLSON HOLDINGS, INC. MONTANA CLERICAL OFFICE EMPLOYEES NOC , ,186. 2,186. EL 1000/1000/1000 WITH WC % 72. 2,258. EXPERIENCE MODIFICATION ,987. Total Estimated Annual Premium W0 174 (4-84) Page loll

180 WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE POLICY EXTENSION OF INFORMATION PAGE WC 174 (4-84) Policy Number: NWA /01/95 4. Premium Classifications Code No. Premium Basis Total Estimated Annual Remuneration Rate Per $100 of Remuneration Estimated Annual Premium CARLSON HOLDINGS, INC. OKLAHOMA CLERICAL OFFICE EMPLOYEES NOC ,308, ,722. 7,722. EL 1000/1000/1000 WITH WC % ,876. EXPERIENCE MODIFICATION ,931 Total Estimated Annual Premium $ WC 174 (4-84) Page 1 of 1

181 WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE POLICY EXTENSION OF INFORMATION PAGE WC 174 (4-84) Policy Number: NWA /01/95 4. Premium Classifications Code No. Premium Basis Total Estimated Annual Remuneration Rate Per $100 of Remuneration Estimated Annual Premium CARLSON HOLDINGS, INC. OREGON CLERICAL OFFICE EMPLOYEES HOC ,721, , ,441. EL 1000/1000/1000 WITH WC % ,314. EXPERIENCE MODIFICATION , ,036. Total Estimated Annual Premium WC174 (4-84) Page 1 of 1

182 WC 174 (4-84) WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE POLICY EXTENSION OF INFORMATION PAGE Policy Number: NWA /01/95 4. Premium Classifications Code No. Premium Basis Total Estimated Annual Remuneration Rate Per $100 of Remuneration Estimated Annual Premium, CARLSON HOLDINGS, INC. WISCONSIN CLERICAL OFFICE EMPLOYEES NOC ,167, ,502. HOTEL:ALL OTHER EMPLOYEES & ,647, ,869. SALESPERSONS, DRIVERS 71,371. EL 1000/1000/1000 WITH WC % 2, ,726. EXPERIENCE MODIFICATION , ,879. EXPENSE CONSTANT ,039. Total Estimated Annual Premium $ WC 174(4.84) Panel of 1

183 THIS ENDORSEMENTCHANGES THE POLICY, PLEASE READ IT CAREFULLY. CANCELLATION BY US This endorsement modifies Insurance provided underthe following: WORKERS'COMPENSATION & EMPLOYERS' LIABILITY INSURANCE POLICY Number of Days 90 The cancellation condition of the policy is replaced bythis condition: D. Cancellation 1. You may cancel this policy. You must mall or deliver adva nce written notice to us stating when the cancellation is to take effect. 2. We maycancel this policy. If we cancel because you fail to pay all premium when due or you fall to report payroll when due, we will mall or deliver to you not less than 10 days advance written notice stating when the cancellation Is to take effect. If we cancel for any other reason, we will mail or deliver to you not less than the number of days shown above advance written notice stating when the cancellation Is to take effect. Mailing notice to you at your mailing address shown in Item 1 of the Information Page will be sufficient to prove notice. 3. The policy period will end on the day and hour stated In the cancellation notice. 4. Any of these provisions that conflicts with a law that controls the cancellation of the insurance in this policy is changed by this statement to comply with the law. MAILING ADDRESS: MR. HOWARD HELBERG DIRECTOR OF RISK MANAGEMENT CARLSON COMPANIES, INC. P.O. BOX MINNEAPOLIS, MN POLICY: NWA /01195 WC 00 R

184 WC GO A (Ed. 4-92) WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE POLICY PLEASE READ THE POLICY CAREFULLY. WC 102 (4.92) QUICK REFERENCE BEGINNING ON PAGE BEGINNING ON PAGE INFORMATION PAGE G. limits Of Liability 3 H. Recovery From Others 3 GENERAL SECTION 1 I. Actions Against Us a A. The Policy B. Who Is insured 1 PART THREE OTHER STATES INSURANCE 4 C. Workers' Compensation Law 1 A. How This Insurance Applies 4 D. State 1 B. Notice 4 E. Locations 1 PART ONE WORKERS' COMPENSATION INSURANCE A. How This Insurance Applies, 1 PART FOUR YOUR DUTIES IF INJURY OCCURS 4 B. We Will Pay 1 PART FIVE PREMIUM 4 C. We Will Defend 1 A. Our Manuals 4 D. We Will Also Pay 1 8. Classifications 4 E. Other Insurance 1 C. Remuneration 4 F. Payments You Must Make Ii Premium Payments 4 G. Recovery From Others 2 E. Final Premium 4 H. Statutory Provisions 2 F. Records 4 G. Audit 5 PART TWO EMPLOYERS' LIABILITY INSURANCE A. How This Insurance Applies. 2 PART SIX CONDITIONS 5 B. We Will Pay 2 A. Inspection 5 C. Exclusions 2 B. Long 'term Polley 5 D. We Will Defend 3 C. Transfer Of Your Rights And Duties 5 E We Wil Also Pay 3 D. Cancelation 5 F. Other Insurance 3 E. Sole Representative 5 IMPORTANT: This Quick Reference Is not part of the Workers' Compensation and and Employers' liability insurance Policy and does not provide coverage. Referto the Workers' Compensation and Employers' Liability Insurance Policy Itself for actual contractual provisions. POLICY: NWA /01/95 Copyright 1991 National Council on Compensation Insurance,

185 WORKERS' COMPENSATI ig4 AND EMPLOYERS' LIABILITY INSURANCE POLICY In return for the payment of the premium and subject to all terms of this policy, we agree with you as follows. A. The Policy This policy Includes at its effective date the Information Page and all endorsements and Schedules listed there. it is a contract of Insurance between you (the employer named In item 1 of the Information Page) and us (the Insurer named on the Information Page). The only agreements relating to this insurance are stated In this policy. The terms of this policy may not be changed or waived except by endorsement issued by us to be part of this policy. B. Who is Insured You are insured If you are an employer named In item 1 of the Information Page. If that employer Is a partnership, and if you are one of Its partners, you are Insured, but only In your capacity as an employer of the partnership's employees. C. Workers' Compensation Law A. How This Insurance Applies This workers' compensation insurance applies to bodily injury by accident or bodily injury by disease. Bodily Injury Includes resulting death. GENERAL SECTION Workers' Compensation Law means the workers' or workmen's compensation law and occupational disease law of each state or territory named in Item 3.A of the information Page. it includes any amendments to that law which are in effect during the policy period. It does not Include any federal workers' or workmen's compensation law, any federal occupational disease law or the provisions of any law that provide noncecupatlonal disability benefits. D. State State means any state of the United States of America, and the District of Columbia. E. Locations PART ONE WORKERS' COMPENSATION INSURANCE 1. Bodily injury by accident must occur during the policy period. 2. Bodily injury by disease must be caused or aggravated by the conditions of your employment. The employee's last day of last exposure to the conditions causing or aggravating such bodily injury by disease must occur during the policy period. B. We Will Pay We will pay promptly when due the benefits required of you by the workers' compensation law. C. We Will Defend We have the right and duty to defend at our expense any claim, proceeding or suit against you for benefits payable by this insurance. We have the right to Investigate and settle these claims, proceedings or suits. We have no duty to defend a claim, proceeding or suit that Is not covered by this Insurance. D. We Will Also Pay We will also pay these costs, In addition to other amounts payable under this insurance, as part of any claim, proceeding or suit we defend: 1. reasonable expenses Incurred at our request, but This policy covers all of your workplaces listed in items 1 or 4 of the Information Page; and It covers all other workplaces In item 3.A states unless you have other Insurance or are self-insured for such workplaces. not loss of earnings; 2. premiums for bonds to release attachments and for appeal bonds In bond amounts up to the amount payable under this insurance; 3. litigation costs taxed against you; 4. Interest on a judgment as required bylaw until we offer the amount due under this insurance; and 5. expenses we incur. E. Other Insurance We will not pay more than our share of benefits and costs covered by this Insurance and other insurance or self-insurance. Subject to any limits of liability that may apply, all shares will be equal until the loss is paid. If any insurance or self-insurance Is exhausted, the shares of all remaining insurance will be equal until the loss is paid. F. Payments You Must Make You are responsible for any payments In excess of the benefits regularly provided by the workers' compensation law including those required because: 1. of your serious and willful misconduct; 2. you knowingly employ an employee in violation of law; 3. you fall to comply with a health or safety law or regulation; or 4. you discharge, coerce or otherwise discriminate against any employee in violation of the workers' POLICY: IsIWA /01195 WC 102(4-92) Paget of 5 Copyright 1991 National Council on Compensation Insurance. WC A (Ed. 4-92)

186 compensation law. If we make any payments in excess of the benefits regularly provided by the workers' compensation law on your behalf, you will reimburse us promptly. G. Recovery From Others We have your rights, and the rights of persons entitled to the benefits of this Insurance, to recover our payments from anyone liable for the injury. You will do everything necessary to protect those rights for us and to help us enforce them. H. Statutory Provisions These statements apply where they are required by law. 1. As between an injured worker and us, we have notice of the Injury when you have notice. 2. Your default or the bankruptcy or insolvency of you or your estate will not relieve us of our duties under this Insurance after an injury occurs. 3. We are directly and primarily liable to any person A. How This Insurance Applies This employers' liability insurance applies to bodily Injury by accident or bodily injury by disease. Bodily injury includes resulting death. 1. The bodily Injury must arise out of and in the course of the injured employee's employment by you. 2. The employment must be necessary or Incidental to your work In a state or territory listed in item 3.A of the Information Page. 3. Bodily Injury by accident must occur during the policy period. 4. Bodily Injury by disease must be caused or aggravated by the conditions of your employment. The employee's last day of last exposure to the conditions causing or aggravating such bodily Injury by disease must occur during the policy period. 5. if you are sued, the original suit and any related legal actions for damages for bodily Injury by accident or by disease must be brought in the United States of America, its territories or possessions, or Canada. B. We Will Pay We will pay all sums you legally must pay as damages because of bodily injury to your employees, provided the bodily injury is covered bythis Employers' Liability Insurance. The damages we will pay, where recovery is permitted by law, include damages: 1. for which you are liable to a third party by reason of a claim or suit against you by that third partyto recover the damages claimed against such third PART TWO EMPLOYERS' LIABILITY INSURANCE entitled tome benefits payable by this Insurance. Those persons may enforce our duties; so may an agency authorized by law. Enforcement may be against us or against you and us. 4. Jurisdiction over you Is jurisdiction over us f purposes of the workers' compensation law. We,. are bound by decisions against you under that law, subject to the provisions of this policy that are not in conflict with that law. 5. This insurance conforms to the parts of the workers' compensation law that apply to: a. benefits payable by this Insurance; b. special taxes, payments Into security or other special funds, and assessments payable by us under that law. 6. Terms of this insurance that conflict with the workers' compensation law are changed by this statement to conform to that law. Nothing in these paragraphs relieves you of your duties under this policy. party as a result of injury to your employes; 2. for care and loss of services; and 3. for consequential bodily injury to a spouse, child, parent, brother or sister of the injured employee; provided that these.damages are the direct consequence of bodily Injury that arises out of and In tz_ course of the Injured employee's employment by yo and 4. because of bodily injury to your employee that arises out of and in the course of employment, claimed against you in a capacity other than as employer. C. Exclusions This Insurance does not cover: 1. liability assumed under a contract. This exclusion does not apply to a warranty that your work will be done in a workmanlike manner; 2. punitive or exemplary damages because of bodily injury to an employee employed in violation of law; 3. bodily injury to an employee while employed In violation of law with your actual knowledge or the actual knowledge of any of your executive officers; 4. any obligation Imposed by a workers' compensation, occupational disease, unemployment compensation or disability benefits law or any similar law; 5. bodily injury intentionally caused or aggravated by you; 6. bodily injury occurring outside the United State( of America, its territories or possessions and Can- POLICY: NVVA /95 WC 102(4-92) W000 COCOA (Ed. 4-92) Copyright 1991 National Counoll on Compensation insuranos, Pegs 2 of 5

187 ada. This exclusion does no. dpplyto bodily injury to a citizen or resident of the United States of America or Canada who is temporarily outside these countries; 7. damages arising out of coercion, criticism, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation, discrimination against or termination of any employee, or any personnel practices, policies, acts or omissions; 8. bodily Injury to any person in work subject to the Longshore and Harbor Workers' Compensation Act (33 USC Sections ), the Non. appropriated Fund Instrumentalities Act (5 USC Sections ) 1 the Outer Continental Shelf Lands Act (43 USC Sections ), the Defense Base Act (42 USC Sections ), the Federal Coal Mine Health and Safety Act of 1969 (30 USC Sections ), any other federal workers' orworkmen's compensation lawor other federal occupational disease law, or any amendments to these laws; 9. bodily Injury to any person in work subject to the Federal Employers' LiabilltyAct (45 USC Sections 51-60), any other federal laws obligating an employer to pay damages to an employee due to bodily injury arising out of or In the course of employment, or any amendments to those laws; 10. bodily Injury to a master or member of the crew of any vessel; it. fines or penalties imposed for violation of federal or state law; and 12. damages payable under the Migrant and Seasonal Agricultural Worker Protection Act (29) USC Sections ) and under any other federal law awarding damages for violation of those laws or regulations issued thereunder, and any amendments to those laws. D. We Will Defend We have the right and duty to defend, at our expense, any claim, proceeding or suit against you for damages payable by this Insurance. We have the right to Investigate and settle these claims, proceedings and suits. We have no duty to defend a claim, proceeding or suit that is not covered bythis Insurance. We have no duty to defend or continue defending after we have paid our applicable limit of liability under this insurance. E. We Will Also Pay We will also pay these costs, in addition to other amounts payable under this insurance, as part of any claim, proceeding or suit we defend: 1. reasonable expenses Incurred at our request, but not loss of earnings; 2. premiums for bonds to release attachments and for appeal bonds In bond amounts up to the limit of our liability under this Insurance; 3. litigation Costs taxed against you; 4. Interest on a judgment as required by law until we offer the amount due under this insurance; and 5. expenses we incur. F. Other insurance We will not pay more than our share of damages and costs covered by this insurance and other insurance or self-insurance. Subject to any limits of liability that apply, all shares will be equal until the loss is paid. If any Insurance or self-insurance is exhausted, the shares of all remaining insurance and self-insurance will be equal until the loss is paid. G. LimitsOf Liability 0 ur liabilityto payfor damages is limited. 0 urilmits of liab Ility are shown in item 3.B of the information Page. They apply as explained below. 1. Bodily Injury by Accident. The limit shown for "bodily injury by accident each accident" is the most we will pay for all damages covered by this insurance because of bodily injury to one or more employees In any one accident. A disease is not bodily injury by accident unless it results directiyfrom bodily injury by accident. 2. Bodily i nj ury by D Isease. The limit shown for "bodily injury by disease policy limit" is the most we will payforall damages covered by thls Insurance and arising out of bodily injury by d isease, regardless of the number of employees who sustain bodily injury by disease. The limit shown for "bodily injury by disease each employee" is the most we will pay for all damages because of bodily Injury by disease to any one employee. Bodily Injury by disease does not include disease that results directly from a bodily injury by accident. 3. We will not pay any claims for damages after we have paid the applicable limit of our liability under this insurance. H. Recovery From Others We have your rights to recover our payment from anyone liable for an injury covered by this Insurance. You will do everything necessary to protect those rights for us and to help us enforce them. Actions Against Us There will be no right of action against us under this Insurance unless: 1. you have complied with all the terms of this policy; and 2. the amount you owe has been determined with our consent or by actual trial and final judgment. This Insurance does not give anyone the right to add us as a defendant In an action against you to determine your liability. The bankruptcy or Insolvency of you or your estate will not relieve us of our obligation under this Part. POLICY: NVVA /01/95 WC 102(4.92) Page 3 of 5 Copyright 1991 National Council on Compensation Insurance. WC A (Ed. 4-92)

188 PART THREE OTHER STATES INSURANCE A. How This Insurance Applies 1. This other states insurance applies only if one or more states are shown in item 3.0 of the Information Page. 2. If you begin work in any one of those states after the effective date of this policy and are not Insured or are not self-insured fo r such work, ail provisions of the policy will apply as though that state were listed in Item 3.A of the Information Page. 3. We will reimburse you forthe benefits required by the workers' compensation law of that state if we are not permitted to pay the benefits directly t persons entitled to them, 4. if you have work on the effective date of this policy In any state not 1 isted In item 3.A of the information Page, coverage will not be afforded for that state unless we are notified within thirty days. B. Notice Tell us at once If you begin work in any state listed In item 3.0 of the information Page. PART FOUR YOUR DUTIES IF INJURY OCCURS Tell us at once if injury occurs that may be covered by this policy. Your other duties are listed here. 1. Provide for immediate medical and other services required by the workers' compensation law. 2. Give us or our agent the names and addresses of the Injured persons and of witnesses, and other information we may need. 3. Promptly give us all notices, demands and legal pa- pars related to the Injury, claim, proceeding or suit. 4. Cooperate with us and assist us, as we may request, in the Investigation, settlement or defense of any claim, proceeding or suit. 5. Do nothing after an Injury occurs that would interfere with our right to recover from others. 6. Do not voluntarily make payments, assume obligations or incur expenses, except at your own cost. A. Our Manuals All premium for this policy will be determined by our manuals of rules, rates, rating plans and classifications. We may change our manuals and apply the changes to this policy if authorized by law or a governmental agency regulating this insurance. B. Classifications Item 4 of the information Page shows the rate and premium basis for certain business or work classifications. These classifications were assigned based on an estimate of the exposures you would have during the policy period. If your actual exposures are not properly described by those classifications, we wm assign proper classifications, rates and premium basis by endorsement to this policy. PART FIVE PREMIUM C. Remuneration Premium fo reach work classification is determined by muitiplying a rate times a premium basis, Remuneration Is the most common premium basis. This premium basis Includes payroll and all other rem u neration paid or payable during the policy period for the services of: 1. all your officers and employees engaged in work covered by this policy; and 2. all other persons engaged In work that could make us liable under Part One (Workers' Compensation insurance) of this policy. If you do not have payroll records for these persons, the contract price for their services and materials may be used as t he premium basis. This paragraph 2. will not apply if you give us proof that the employers F. of these persons lawfully secured their workers' compensation obligations. D. Premium Payments You will pay all premium when due. You will pay tl< premium even if part or all of a workers' compensation - law is not valid. E. Final Premium The premium shown on the Information Page, Schedules and endorsements is an estimate. The final premium will be determined after this policy ends by using the actual, not the estimated, premium basis and the proper classifications and rates that lawfully ap ply to the business and work covered by this policy. If the final premium Is more than the premium you paid to us, you must pay us the balance. If it is less, we will refund the balance to you. The final premium MI not be less than the highest minimum premium for the classifications covered by this policy. if this policy is canceled, final premium will be determined In the following way unless our manuals provide otherwise. 1. If we cancel, final premium will be calculated pro rata based on the time this policy was in force. Final premium will not be less than the pro rata share of the minimum premium. 2. If you cancel, final premium will be more than pro rata; it will be based on the time this policy was in force, and Increased by our short rate canoeist Ion table and procedure. Final premium will not be less than the minimum premium. Records POLICY: NWA /01/95 WC 102 (4-92) WC A (Ed. 4-92) Copyright 1991 National Council on Compensation insurance, Page 4of 5

189 07.1 You will keep records of Infort,,...ton needed to compute premium. You will provide us with copies of those records when we ask for them. G. Audit You will let us examine and audit all your records that relate to this policy. These records include ledgers, Journals, registers, vouchers, contracts, tax reports, payroll and olzoursemerit records and programs for storing and retrieving data. We may conduct the audits during regular business hours during the policy period and within three years after the policy period ends. information developed by audit will be used to determine final premium. insurance rate service organizations have the same rights we have underthls provision. A. Inspection We have the right, but are not obliged to Inspect your workplaces at anytime. Our Inspections are not safety Inspections. They relate only to the Insurability of the workplaces and the premlumsto be charged. We may give you reports on the conditions we find. We may also recommend changes. While they may help reduce losses, we do not undertake to perform the duty of any person to providefor the health or safety of your employees or the public. We do not warrant that your workplaces are safe or healthful or that they comply with laws, regulations, codes or standards. Insurance rate service organizations have the same rights we have under this provision. B. Long Term Policy if the policy is longer than one year and sbcteen days, all provisions of this policy will apply as though a new policy were Issued on each annual anniversary that this policy is In force, C. Transfer Of Your Rights And Duties Your rights or duties under this policy may not be transferred without our written consent. If you die and we receive notice within thirty days after PART SIX CONDITIONS your death, we will cover your legal representative as insured, D. CancelatIon 1. You may cancel this policy. You must mall or deliver advance written notice to us stating when the cancelatlon is to take effect. 2. We may cancel this policy. We must mail or deliver to you not less than ten days advance written notice stating when the cancelation is to take effect. Mailing that notice to you at your mailing address shown In Item 1 of the Information Page will be sufficient to prove notice. 3. The policy period will end on the day and hour stated In the cancelation notice. 4. Any of these provisions that conflicts with a law that controls the cancelation of the insurance in this policy Is changed by this statement to comply with that law. E. Sole Representative The Insured first named In Item 1 of the Information Page will act on behalf of all Insureds to change this policy, receive return premium and give or receive notice of cancelation. POLICY: NWA /01195 WC 102(4-92) Page 5 of Copyright 1991 National Council on Compensation Insurance, WC CO A (Ed. 4-92)

190 EXHIBIT E INSURANCE POLICY JULY 1, JULY 1, 1997

191 WORKERS COMPENSATION AND PLOVERS LIABILITY INSURANCE POLIrN INFORMATION PAGE (Minnesota) NWA S RELIANCE NATIONAL INDEMNITY CO *2:'. NEW YORK, NY Renewal of (Name of Insurer) Issuing Office NW A Reliance and affiliate companies are required by law to provide its policyholders with certain accident prevention services as required by Section of the Minnesota Worker:3 -i Compensation Statute. If you would like more Information please call our Loss Control Department at (312) The Insured/Mailing Address; CARLSON HOLDINGS, INC 701 CARLSON PARKWAY P.O. BOX MINNEAPOLIS, MN Other Workplaces not shown above: Fein No Policy Period: The policy period is from 07/01/96 at the Insureds Mailing Address. No. Street, Town, County, State, Zip) Agency Code, Name and Address JOHNSON & HIGGINS 1600 LINCOLN CENTER 333 SOUTH SEVENTH ST. MINNEAPOLIS, MN INDIVIDUAL 0 PARTNERSHIP 120 CORPORATION OR 1.0. No to 07/01/97 12:01 A.M. Standard Time, 3. boverage: A. Workers Compensation Insurance: Part One of the policy applies to the Workers Compensation Law of the states listed here: OR TX WI B. Employer's Liability insurance: Part Two of the policy applies to work in each state listed in item 3.A. The limits of our liability under Part Two are: Bodily Injury by Accident Bodily Injury by Disease Bodily Injury by Disease C. Other States Insurance: Part Three of the policy applies to All states except Nevada, North Dakota, Ohio, Washington, above and MAINE ' D. This policy includes these endorsements and schedules: SEE SCHEDULE OF FORMS AND ENDORSEMENTS ATTACHEE 4, Premium; The premium for this policy will be determined by our Manuals of Rules, Classifications, Rates and Rating Plans. All information required below is subject to verification and change by audit...j, Classifications Code Premium Basis Rate Per Estimated.; No. Total _Estimated $100 of annual; '.,.3. Annual Remuneration Remuneration Premium: :.. SEE WC 174 Surcharge: TX 10, OR 0.00 $ 1,000,000. each accident $ 1,000,000. each employee $ 1,000,000. policy limit the states, if any, listed here: West Virginia, Wyoming, States designated in item 8.A Total premium subject to the experience modification $ Premium modified to reflect experience modification of SEE SCHED. $ Other SEE SCHED. Total Estimated Standard Premium $ Premium Discount, if applicable, N/A %$ Loss and/or Expense Constant Charge $ Minimum Premium $ O. Total Estimated Annual Premiurn- $ If indicated below, interim adjustments of premium shall be made 0 Semi-Annually 0 Quarterly 0 Monthly Deposit Premium $ 0. 2,595, ,414, ,830,038200) ,830,198.00' Countersigned Date 08/12/96 Issue Date 08/12/96 mtm 8/14/96 By Authorized Representative THIS INFORMATION PAGE WITH THE WORKERS COMPENSATION AND EMPLOYERS LIABILITY ANY, ISSUED TO FORM A PART THEREOF, COMPLETES THE ABOVE NUMBERED POLICY. CJDL-8400 Ed. 4/84 1, 1 NSURANCE POLICY AND ENDORSEMENit, Mr 47Cr. n

192 WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE POLICY EXTENSION OF INFORMATION PAGE Policy Number: NWA /01/96 4. Premium WC 174 (4-84) Classifications Code No. Premium Basis Total Estimated Annual Remuneration Rate Per $100 of Remuneration Estimated Annual Premium CARLSON HOLDINGS, INC. OREGON CLERICAL OFFICE EMPLOYEES NOC ,495, ,629. 7,629. EL 1000/1000/1000 WITH WC % ,881, EXPERIENCE MODIFICATION ,329. OREGON WC SURCHARGE ( ) 0.00 OREGAN MANDAY ASSESSMENT 0.00 Total Estimated Annual Premium $ WC 174 (4-84) Page 1 of 1

193 WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE POLICY EXTENSION OF INFORMATION PAGE Policy Number: NWA /01/96 4. Premium WC 174 (4-84) Classifications Code No. Premium Basis Total Estimated Annual Remuneration Rate Per $100 of Remuneration Estimated Annual Premium CARLSON HOLDINGS, INC. TEXAS CLERICAL OFFICE EMPLOYEES NOC ,551, ,982. RESTAURANT NOC ,372, ,419,789. 2,462,771. EL 1000/1000/1000 WITH WC % 49,255. 2,512,026. EXPERIENCE MODIFICATION ' ,842.- i 2,336,184. ; SCHEDULE RATE CREDIT % 584, ,752,138. TEXAS WC SURCHARGE (.590%) 10,337.61,! I Total Estimated Annual Premium $ WC174 (4-84) Page 1 of 1

194 WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE POLICY EXTENSION OF INFORMATION PAGE WC 174 (4-84) POflayNumber. NWA /01/96 4. Premium Classifications Co de No. Premium Basis Total Estimated Annual Remuneration Rate Per $100 of Remuneration Estimated Annual Premium CARLSON HOLDINGS, INC. WISCONSIN CLERICAL OFFICE EMPLOYEES NOC ,751, ,229. HOTEL:ALL OTHER EMPLOYEES & ,841, ,230. SALESPERSONS, DRIVERS 73,459. EL 1000/1000/1000 WITH WC % 2, ,883. EXPERIENCE MODIFICATION , ,571. EXPENSE CONSTANT ,731. Total Estimated Annual Premium $ WC 174 (4-84) Page 1 of 1

195 Workers Compensation and Employers Liability insurance - Change Endorsement * * EFFECTIVE POLICY NUMBER POLICY PERIOD AGENCY NUMBER NWA FROM: 07 / 01 /96 TO: 07/01/ NAME OF INSURED AND ADDRESS CARLSON HOLDINGS, INC. 701 CARLSON PARKWAY P.O. BOX MINNEAPOLIS, MN AGENCY NAME AND ADDRESS JOHNSON & HIGGINs 1600 LINCOLN CENTER 333 SOUTH SEVENT ST. MINNEAPOLIS, MN WORKER'S COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE POLICY CHANGE ENDORSEMENT CHANGE ENDORSEMENT NUMBER SCHEDULE OF FORMS AND ENDORSEMENTS WC174 04/84 WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE POLICY EXTENSION OF INFORMATION PAGE WC000000A WC Wc WC WC WC WC WC WC IMOOR00700 WCOOR01200 WC /92 01/92 01/92, 01/92 01/92 01/92 01/92 01/92 01/92 03/94 03/94 07/85 WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE POLICY ENDT# 1 NAMED INSURED ENDORSEMENT-EXHIBIT I ENDT# 2 NAMED INSURED ENDORSEMENT-EXHIBIT II ENDT# 3 LOCATION SCHEDULES ENDT# 4 NON-CUMULATIVE LIMITS ENDORSEMENT ENDT# 5 AMENDING ENDORSEMENT ENDT# 6 EXTENDED PROTECTION-INDEMNIFICATION IN MONOPOLISTIC STATES ENDT# 7 REPATRIATION AND ENDEMIC DISEASE ENDORSEMENT ENDTO 8 "BORROWED SERVANT" ENDORSEMENT IN REM ENDORSEMENT CANCELLATION BY US FOREIGN VOLUNTARY COMPENSATION AND EMPLOYERS' LIABILITY COVERAGE ENDORSEMENT THIS ENDORSEMENT CHANGES THE POLICY TO WHICH IT IS ATTACHED AND IS EFFECTIVE ON THE DATE ISSUED UNLESS OTHERWISE STATED. (THE INFORMATION BELOW IS REQUIRED ONLY WHEN THIS ENDORSEMENT IS ISSUED SUBSEQUENT TO PREPARATION OF THE POLICY.) Premium $ Countersigned by Authorized Representative Date WC

196 Workers Compensation and Employers Liability insurance - Change Endorsement * * EFFECTIVE POLICY NUMBER POUCY PERIOD AGENCY NUMBER NWA FROM: 07/01/96 TO: 07/01/ NAME OF INSURED AND ADDRESS AGENCY NAME AND ADDRESS CARLSON HOLDINGS, INC. JOHNSON & HIGGINS 701 CARLsoN PARKWAY 1600 LINCOLN CENTER P.O. BOX SOUTH SEVENT ST. MINNEAPOLIS, MN MINNEAPOLIS, MN WORKER'S COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE POLICY CHANGE ENDORSEMENT CHANGE ENDORSEMENT NUMBER SCHEDULE OF FORMS AND ENDORSEMENTS cont'd. Wc000101A wc000106a Wc000109A wc000201a Wc WC000301A Wc000303B Wc000311A Wc WC WC Wc WC000503A 04/92 DEFENSE BASE ACT COVERAGE ENDORSEMENT 11/95 LONGSHORE AND HARBOR WORKERS' COMPENSATION ACT COVERAGE ENDORSEMENT 04/92 OUTER CONTINENTAL SHELF LANDS ACT COVERAGE ENDORSEMENT 04/92 MARITIME COVERAGE ENDORSEMENT 04/84 VOLUNTARY COMPENSATION MARITIME COVERAGE ENDORSEMENT 02/89 ALTERNATE EMPLOYER ENDORSEMENT 04/92 EMPLOYERS' LIABILITY COVERAGE ENDORSEMENT 08/91 VOLUNTARY COMPENSATION AND EMPLOYERS' LIABILITY COVERAGE ENDORSEMENT 04/84 WAIVER OF OUR RIGHT TO REcoVER FROM OTHERS ENDORSEMENT 04/88 EMPLOYERS' LIABILITY INSURANCE ENDORSEMENT 04/84 PENDING RATE CHANGE ENDORSEMENT 07/90 NOTIFICATION OF CHANGE IN OWNERSHIP ENDORSEMENT 09/91 RETROSPECTIVE PREMIUM ENDORSEMENT ONE YEAR PLAN THIS ENDORSEMENT CHANGES THE POLICY TO WHICH IT IS ATTACHED AND IS EFFECTIVE ON THE DATE ISSUED UNLESS OTHERWISE STATED. (THE INFORMATION BELOW IS REQUIRED PREPARATION OF THE POLICY.) Premium $ Countersigned by Authorized Representative WC ONLY WHEN THIS ENDORSEMENT IS ISSUED SUBSEQUENT TO Date

197 Workers Compensation and Employers Liability Insurance - Change Endorsement * * EFFECTIVE POLICY NUMBER POUCY PERIOD AGENCY NUMBER NWA FROM: 07/01/96 TO: 07/01/ NAME OF INSURED AND ADDRESS AGENCY NAME AND ADDRESS CARLSON HOLDINGS, INC. JOHNSON & HIGGINS 701 CARLSON PARKWAY 1600 LINCOLN CENTER P.O. BOX SOUTH SEVENT ST. MINNEAPOLIS, MN MINNEAPOLIS, MN WORKER'S COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE POLICY CHANGE ENDORSEMENT CHANGE ENDORSEMENT NUMBER SCHEDULE OF FORMS AND ENDORSEMENTS - CONT'D. WC /92 WC36R /94 WC360601A 01/89 RN42N /93 WC42R /96 WC420301D 01/96 WC /92 WC480601B 04/94 WC /87 OH/0 EMPLOYERS LIABILITY COVERAGE ENDORSEMENT OREGON NOTICE TO POLICYHOLDERS OREGON CANCELATION ENDORSEMENT IMPORTANT NOTICE TEXAS NOTICE TO POLICYHOLDERS TEXAS AMENDATORY ENDORSEMENT TEXAS MAINTENANCE TAX SURCHARGE RECOUPMENT ENDORSEMENT WISCONSIN LAW ENDORSEMENT FOREIGN COVERAGE ENDORSEMENT THIS ENDORSEMENT CHANGES THE POLICY TO WHICH IT IS ATTACHED AND IS EFFECTIVE ON THE DATE ISSUED UNLESS OTHERWISE STATED. (THE INFORMATION BELOW IS REQUIRED ONLY WHEN THIS ENDORSEMENT IS ISSUED SUBSEQUENT TO PREPARATION OF THE POLICY.) Premium $ Countersigned by Authorized Representative Date WC

198 WC A (Ed. 4-92) WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE POLICY WC 102 (4-92) PLEASE READ THE POLICY CAREFULLY. QUICK REFERENCE BEGINNING ON PAGE BEGINNING ON PAGE INFORMATION PAGE G. Umits Of ljability 3 H. Recovery From Others 3 GENERAL SECTION 1 I. AotIons Against Us 3 A. The Policy 1 B, Who Is insured 1 PART THREE OTHER STATES INSURANCE 4 C. Workers' Compensation Law 1 A. How Thls Insurance Applies 4 D, State 1 B. Notlos 4 E. Locations 1 PART ONE WORKERS' COMPENSATION INSURANCE A. How This Insurance Applles P ART FOUR YOUR DUTIES IF INJURY OCCURS 4 B. We Will Pay 1 PART FIVE PREMIUM 4 C. WeWill Defend 1 A. Our Manuals 4 D. We Will Also Pay 1 B. Classifications 4 E. Other Insurance 1 C, Remuneration 4 F. Payments You Must Make 1 D. Premium Payments 4 G. Recovery From Others 2 E. Final Premium 4 H. Statutory Provisions 2 F. Records 4 G. Audit 5 PART TWO EMPLOYERS' LIABILITY INSURANCE A. How This insurance Applies 2 PART SIX CONDITIONS 5 B, We Will Pay 2 A. Inspection 5 C. Exclusions. 2 B. Long Term Policy 5 D. We Will Defend 3 C. Transfer Of Your Rights And Duties 5 E We WIII Also Pay 3 D, Canoelation 5 F. Other Insurance 3 E. Sole Representative 5 IMPORTANT: This Quick Reference Ian at part of the Workers' Compensation and and Employers' Liability insurance Policy and does not provide overage. Refer to the Workers Compensation and Employers' Liability Insurance Policy itseiff or actual contractual provisions. POLICY: NWA /01/96 Copyright 1991 National Council on Compensation Insurance.

199 WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE POLICY In return for the payment of the premium and subject to all terms of this policy, we agree with you as follows. A. The Policy This policy Includes at Its effective date the information Page and all endorsements and Schedules listed there. It is a contract of Insurance between you (the employer named in item 1 of the Information Page) and us (the Insurer named on the Information Page). The only agreements relating to this Insurance are stated in this policy. The terms of this policy may not be changed or waived except by endorsement Issued by us to be part of this policy. B. Who Is Insured You are Insured if you are an employer named in Item 1 of the information Page. If that employer is a partnership, and if you are one of Its partners, you are Insured, but only In your capacity as an employer of the partnership's employees. C. Workers' Compensation Law A. How This Insurance Applies GENERAL SECTION Workers' Compensation Law means the workers' or workmen's compensation law and occupational disease law of each state or territory named in item 3.A of the Information Page. It includes any amendments to that lawwhich are in effect during the policy period. It does not include anyfederai workers or workmen's compensation law, any federal occupational disease law or the provisions of any law that provide nonoccupational disability benefits. D. State State means a ny state of the United States of America, and the District of Columbia. E. Locations PART ONE WORKERS' COMPENSATION INSURANCE This workers' compensation Insurance applies to bodily Injury by accident or bodily injury by disease. Bodily injury Includes resulting death. 1. Bodily injury by accident must occur during the policy period. 2. Bodily Injury by disease must be caused or aggravated by the conditions of your employment. The employee's last day of last exposure to the conditions causing or aggravating such bodily injury by disease must occur during the policy period. B. We Will Pay We will pay promptly when due the benefits required of you by the workers' compensation law. C. We Will Defend We have the right and duty to defend at our expense any claim, proceeding or suit against you for benefits payable by this Insurance. We have the right to Investigate and settle these claims, proceedings or suits. We have no duty to defend a claim, proceeding or suit that is not covered by this insurance. D. We Will Also Pay We will also pay these costs, in addition to other amounts payable under this Insurance, as part of any claim, proceeding or suit we defend: 1. reasonable expenses incurred at our request, but This poilcycovers ail of your workplaces listed in Items 1 or 4 of the information Page; and It covers all other workplaces in item 3.A states unless you have other Insurance or are self-insured for such workplaces. not loss of earnings; 2. premiums for bonds to release attachments and for appeal bonds in bond amounts up to the amount payable under this Insurance; 3. litigation costs taxed against you; 4. Interest on a judgment as required by law until we offer the amount due under this insurance; and 5. expenses we Incur. E. Other Insurance We will not pay more than our share of benefits and costs covered by this insurance and other insurance or self-insurance. Subject to any limits of liability that may apply, all shares will be equal until the loss is paid, If any Insurance or self-insurance is exhausted, the shares of all remaining insurance will be equal until the loss Is paid. F. Payments You Must Make You are responsible for any payments in excess of the benefits regularly provided by the workers' compensation law Including those required because: 1. of your serious and willful misconduct; 2. you knowingly employ an employee in violation of law; 3. you fall to comply with a health or safety law or regulation; or 4. you discharge, coerce or otherwise discriminate against any employee In violation of the workers' POLICY: NWA /01/96 WC 102(4-92) Page 1 of 5 Copyright 1991 National Council on Compensation Insurance. WC A (Ed. 4-92)

200 compensation law. If we make any payments in excess of the benefits regularly provided by the workers' compensation law on your behalf, you will reimburse us promptly. G. Recovery From Others We have your rights, and the rights of persons entitled to the benefits of this insurance, to recover our payments from anyone liable for the injury. You will do everything necessary to protect those rights for us and to help us enforce them. H. Statutory Provisions These statements apply where they are required by law. 1. As between an Injured worker and us, we have notice of the injury when you have notice. 2. Your default or the bankruptcy or Insolvency of you or your estate will not relieve us of our duties under this insurance after an Injury occurs. 3. We are directly and primarily liable to any person entitled to the benefits payable by this insurance. Those persons may enforce our duties; so may an agency authorized by law. Enforcement may be against us or against you and us. 4. Jurisdiction over you Is jurisdiction over us for purposes of the workers' compensation law. We are bound by decisions against you under that law, subject to the provisions of this policy that are not In conflict with that law. 5. This insurance conforms to the parts of the workers' compensation law that apply to: a. benefits payable by this Insurance; b. special taxes, payments into security or other special funds, and assessments payable by us under that law. 6. Terms of this insurance that conflict with the workers' compensation law are changed by this statement to conform to that law. Nothing In these paragraphs relieves you of your duties under this policy. PART TWO EMPLOYERS' LIABILITY INSURANCE A. How This Insurance Applies This employers' liability insurance applies to bodily injury by accident or bodily injury by disease. Bodily injury includes resulting death. 1. The bodily injury must arise out of and in the course of the injured employee's employment by you. 2. The employment must be necessary or incidental to your work in a state or territory listed In item 3.A of the Information Page. 3. Bodily injury by accident must occur during the policy period. 4. Bodily injury by disease must be caused or aggravated by the conditions of your employment. The employee's last day of last exposure to the conditions causing or aggravating such bodily Injury by disease must occur during the policy period. 5. if you are sued, the original suit and any related legal actions for damages for bodily injury by accident or by disease must be brought in the United States of America, Its territories or possessions, or Canada. B. We Will Pay We will pay all sums you legally must pay as damages because of bodily injury to your employees, provided the bodily Injury is covered by this Employers' Liability insurance. The damages we will pay, where recovery is permitted by law, include damages: 1. for which you are liable to a third party by reason of a claim or suit against you by that third party to recover the damages claimed against such third party as a result of injury to your employee; 2, for care and loss of services; and 3. for consequential bodily injury to a spouse, child, parent, brother or sister of the injured employee; provided that these damages are the,direct consequence of bodily Injury that arises out of and In the course of the injured employee's employment by you; and 4. because of bodily injury to your employee that arises out of and in the course of employment, claimed against you In a capacity other than as employer. C. Exclusions This insurance does not cover; 1. liability assumed under a contract. This exclusion does not apply to a warranty that your work will be done in a workmanlike manner; 2. punitive or exemplary damages because of bodily injury to an employee employed in violation of law; 3. bodily injury to an employee while employed in violation of law with your actual knowledge or the actual knowledge of any of your executive officers; 4. any obligation imposed by a workers' compensation, occupational disease, unemployment compensation or disability benefits law or any similar 5. bodily Injury intentionally caused or aggravated by you; 6. bodily injury occurring outside the United States of America, its territories or possessions and Can- POLICY: NWA /01/96 WC 102 (4-92) WC A (Ed. 4-92) Copyright 1991 National Council on Compensation In suranoe. Page 2 of 5

201 ada. This exclusion does not applyto body injury to a citizen or resident of the United States of America or Canada who Is temporarily outside these countries; 7. damages arising out of coercion, criticism, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation, discrimination against or termination of any employee, or any personnel practices, policies, acts or omissions; 8. bodily Injury to any person in work subject to the Longshore and Harbor Workers' Compensation Act (33 USC Sections ), the Nonappropriated Fund instrumentalities Act (5 USC Sections ), the Outer Continental Shelf Lands Act (43 USC Sections ), the Defense Base Act (42 USC Sections ), the Federal Coal Mine Health and Safety Act of 1969 (30 USC Sections ), any other federal workers' orworkmen's compensation law or other federal occupational disease law, or any amendments to these laws; 9. bodily injury to any person in work subject to the Federal Employers LiabilltyAct (45 USC Sections 51-60), any other federal laws obligating an employer to pay damages to an employee due to bodily injury arising out of or in the course of employment, or any amendments to those laws; 10. bodily Injury to a master or member of the crew of any vessel; 11. fines or penalties Imposed for violation of federal or state law; and 12. damages payable under the Migrant and Seasonal Agricultural Worker Protection Act (29) USC Sections ) and under any other federal law awarding damages for violation of those laws or regulations Issued thereunder, and any amendments to those taws. D. We Will Defend We have the right and dutyto defend, at our expense, any claim, proceeding or suit against you for damages payable by this insurance. We have the right to Investigate and settle these claims, proceedings and suits. We have no dutyto defend a claim, proceeding or suit that is not covered by this Insurance. We have no duty to defend or continue defending after we have paid our applicable limit of liability under this insurance. E. We Will Also Pay We will also pay these costs, In addition to other amounts payable under this Insurance, as part of any claim, proceeding or suit we defend: 1. reasonable expenses Incurred at our request, but not loss of earnings; 2. premiums for bonds to release attachments and for appeal bonds in bond amounts up to the limit of our liability under this insurance; 3. litigation costs taxed against you; 4. interest on a judgment as required by law until we offer the amount due under this insurance; and 5, expenses we incur. F. Other Insurance We will not pay more than our share of damages and costs covered by this Insurance and other insurance or self-insurance. Subject to any limits of liability that apply, all shares will be equal until the loss is paid. If any Insurance or self-insurance is exhausted, the shares of all remaining insurance and self-insurance will be equal until the loss is paid. G. Limits Of Liability Our liablittyto payfor damages Is limited. Our limits of liability are shown in item 3.9 of the Information Page. They apply as explained below. 1. Bodily Injury by Accident. The limit shown for "bodily injury by accident each accident" is the most we will pay for all damages covered by this insurance because of bodily injury to one or more employees In any one accident. A disease is not bodily Injury by accident unless it results directly from bodily Injury by accident. 2. BodllyInjury by Disease. The limit shown for "bodily Injury by disease policy limit" Is the most we will payfor all damages covered bythls Insurance and arising outof bodily injury bydlsease, regardless of the number of employees who sustain bodily injury by disease. The limit shown for "bodily injury by disease each employee" is the most we will pay for all damages because of bodily Injury by disease to any one employee. Bodily injury by disease does not include disease that results directly from a bodily injury by accident. 3. We will not pay any claims for damages after we have paid the applicable limit of our liability under this insurance. H. Recovery From Others We have your rights to recover our payment from anyone liable for an injury covered by this Insurance. You will do everything necessary to protect those rights for us and to help us enforce them. I. Actions Against Us There will be no right of action against us under this insurance unless: 1. you have compiled with all the terms of this policy; and 2. the amount you owe has been determined with our consent or by actual trial and final judgment. This Insurance does not give anyone the right to add us as a defendant In an action against you to determine your!lability. The bankruptcy or insolvency of you or your estate will not relieve us of our obligation under thls Part. POLICY: NWA /96 WO 102(4-92) Page 3of 5 Copyright 1991 Natonal Council on Compensation Insurance. WC A (Ed, 4-92)

202 PART THREE OTHER STATES INSURANCE A. How This Insurance Applies 1. This other states insurance applies only If one or more states are shown in item 3.0 of the information Page. 2. If you begin work in any one of those states after the effective date of this policyand are not insured or are not self-insured for such work, all provisions of the policy will apply as though that state were listed In Item 3.A of the Information Page. 3. We will reimburse you forth benefits required by the workers' compensation law of that state if we are not permitted to pay the benefits directly to persons entitled to them. 4. If you have work on the effective date of this policy In any state not listed In item 3.A of the information Page, coverage will not be afforded for that state unless vre are notified within thirty days, B. Notice Tell us at once If you begin work in any state listed in item 3.0 of the information Page. Tell us at once if injury occurs that may be covered by this policy. Your other duties are listed here. 1. Provide for Immediate medical and other services required by the workers' compensation law. 2. Give us or our agent the names and addresses of the Injured persons and of witnesses, and other Information we may need. 3. Promptly give us all notices, demands and legal pa- PART FOUR YOUR DUTIES IF INJURY OCCURS PART FIVE PREMIUM pers related to the injury, claim, proceeding or suit. 4. Cooperate with us and assist us, as we may request, In the investigation, settlement or defense of any claim, proceeding or suit. B. Do nothing after an injury occurs that would Interfere with our right to recover from others, 6. Do not voluntarily make payments, assume obligations or incur expenses, except at your own cost. A. Our Manuals All premium for this policy will be determined by our manuals of rules, rates, rating plans and classifications. We may change our manuals and apply the changes to this policy If authorized by law or a governmental agency regulating this insurance. B. Classifications Item 4 of the information Page shows the rate and premium basis for certain business o r work classifications. These classifications were assigned based on an estimate of the exposures you would have during the policy period, If your actual exposures are not properly described by those classifications, we will assign proper classifications, rates and premium basis by endorsement to this policy. C. Remuneration P rem lum for each work classification Is determined by multiplying a rate times a premium basis. Remuneration is the most common premium basis. This premium basis includes payroll and all other remuneration paid or payable during the policy period for the services of: 1. all your officers and employees engaged In work covered by this policy; and 2. all other persons engaged In work that could make us liable under Part One (Workers' Compensation insurance) of this policy. If you do not have payroll records for these persons, the contract price for their services and materials may be used as the premium basis. This paragraph 2. will not apply if you give us proof that the employers of these persons lawfully secured their workers' compensation obligations. D. Premium Payments You will pay all premium when due. You will pay the premium even if part or all of a workers' compensation law is not valid. E. Final Premium The premium shown on the information Page, Schedules and endorsements is an estimate. The final premium will be determined after this policy ends by using the actual, not the estimated, premium basis and the proper classifications and rates that lawfully appiyto the business and work covered bythls policy. If the final premium Is more than the premium you paid to us, you must pay us the balance. If it Is less, we will refund the balance to you. The final premium will not be lass than the highest minimum premium for the classifications covered by this policy. If this policy Is canceled, final premium will be determined in the following way unless our manuals provide otherwise. 1. if we cancel, final premium will be calculated pro rata based on the time this policy was in force. Final premium will not be less than the pro rata share of the minimum premium. 2. If you cancel, final premium will be more than pro rata; it will be based on the timethls policy was in force, and increased by our short rate canceiation table and procedure. Final premium will not be less than the minimum premium. F. Records POLICY: NWA /96 WC 102(4-82) WC A (Ed. 4-92) Copyright 1991 National Cou noii on Compensation insurance. Page 4 of

203 You will keep records of Informa kin needed to compute premium. You will provide us with copies of those records when we ask for them. G. Audit You will let us examine and audit all your records that relate to this policy. These records Include ledgers, journals, registers, vouchers, contracts, tax reports, payroll and d soursement records and programs for storing and retrieving data. We may conduct the audits during regular business hours during the policy period and within three years after the policy period ends. Information developed by audit will be used to determine final premium. insurance rate service organizations have the same rights we have under this provision. A. Inspection We have the right, but are not obliged to Inspect your workplaces at anytime. Our Inspections are not safety Inspections. They relate only to the Insurability of the workplaces and the preml ums to be charged. We may give you reports on the conditions we find. We may also recommend changes. While they may help reduce losses, we do not undertake to perform the duty of any person to provid for the health or safety of your employees or the public. We do not warrant that your workplaces are safe or healthful or that they comply with laws, regulations, codes or standards. Insurance rate service organizations have the same rights we have under this provision. S. Long Term Policy If the policy is longer than one year and sbcteen days, all provisions of this policy will apply as though a new policy were Issued on each annual anniversary that this policy Is In force. C. Transfer Of Your Rights And Duties Your rights or duties under this policy may not be transferred without our written consent. If you die and we receive notice within thirty days after PART SIX CONDITIONS your death, we will cover your legal representative as Insured, D. Cancelation 1. You may cancel this policy. You must mall or deliver advance written notice to us stating when the cancelation 1st take effect. 2. We maycancel this policy. We must mail or deliver to you not less than ten days advance written notice stating when the cancelation is to take effect. Mailing that notice to you at your mailing address shown in Item 1 of the information Page will be sufficient to prove notice. 3. The policy period will end on the day and hour stated In the cancelatlon notice. 4. Any of these provisions that conflicts with a law that controls the cancelation of the insurance In this policy Is changed byth Is statement to comply with that law. E. Sole Representative The Insured first named In Item 1 of the Information Page will act on behalf of all Insureds to change this policy, receive return premium and give or receive notice of cancelation. POLICY: NWA /01/96 WC 102 (4-92) Page 5 of 5 Copyright 1991 National Council on Compensation Insurance. WO CO A (Ed. 4-92)

204 EXHIBIT F INSURANCE POLICY JULY 1, 1997 JULY 1, 1998

205 WORKERS COMPENSATION AND 'PLOVERS LIABILITY INSURANCE POWPI INFORMATION PAGE (Minnesota) w NWA RE L_i-INCE NATIONAL INDEMNITY CO NEW YORK, NY Renewal of NWA (Name of insurer) (NCCIO Issuing Office Reliance and affiliate companies are required by law to provide its policyholders with certain accident prevention services as required by Section of the Minnesota Workers Compensation Statute. If you would like more information please call our Loss Control Department at (312) The Insured/Mailing Address: (No. CARLSON HOLDINGS, INC. 701 CARLSON PARKWAY P.O. BOX MINNEAPOLIS, MN Street, Town, County, State, Zip) Other Workplaces not shown above: Fein NO Policy Period: The policy period is from 07/01/97 at the Insured's Mailing Address. Agency Code, Name and Address JOHNSON & HIGGINS 1600 LINCOLN CENTER 333 SOUTH SEVENTH ST. MINNEAPOLIS, MN INDIVIDUAL 0 PARTNERSHIP Cal CORPORATION OR No to 07/01/98 12:01 A.M. Standard Time, 3. Coverage: A. Workers Compensation insurance: Part One of the policy applies to the Workers Compensation Law of the states listed here: OR TX WI B. Employer's Liability Insurance: Part Two of the policy applies to work In each state listed In item 3.A. The limits of our liability under Part Two are: Bodily injury by Accident $ 1,000,000. each accident Bodily Injury by Disease $ 1,000,000. each employee Bodily injury by Disease $ 1,000,000. policy limit C. Other States Insurance: Part Three of the policy applies to the states, if any, listed here: All states except Nevada, North Dakota, Ohio, Washington, West Virginia, Wyoming, States designated in item 3.A above and D. This policy includes these endorsements and schedules: SEE SCHEDULE OF FORMS AND ENDORSEMENTS ATTACHEI 4. Premium: The premium for this policy will be determined by our Manuals of Rules, Classifications, Rates and Rating Plans. All information required below is subject to verification and change by audit. Classifications Code Premium Basis Rate Per $100 of EStliriated No, Total Estimated.." - Annual Remuneration Remuneration ' açnual Premium SEE wo 174 Surcharge: OR TX 15, Total premium subject to the experience modification $ Premium modified to reflect experience modification of $EE JECHED, $ Other SEE SCHEE. Total Estimated Standard Premium $ Premium Discount, If applicable, N/A %$ Loss and/or Expense Constant Charge $ Minimum Premium $ 0- Total Estimated Annual Premium $ If indicated below, Interim adjustments of premium shall be made 0 Semi-Annually 0 Quarterly 0 Monthly Deposit Premium $ ,5*90 2,504,5764,0 607, ,896,912..` ,897, ffilYW'sglg Date 08/27/97 08/27J 7 By Authorized Representative THIS INFORMATION PAGE WITH THE WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY AND ENDORSEM8NT' S, IF ANY, ISSUED TO FORM A PART THEREOF, COMPLETES THE ABOVE NUMBERED POLICY, CJOL.6400 Ed. 4/84 WC 22 R Copyright 1987 National Council on Compensation Insurance WC A

206 WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE POLICY EXTENSION OF INFORMATION PAGE WC 174 (4-84) Policy Number: NWA /01/97 4. Premium Classifications Code No. Premium Basis Total Estimated Annual Remuneration Rate Per $100 of Remuneration Estimated Annual Premium CARLSON HOLDINGS, INC. OREGON CLERICAL OFFICE EMPLOYEES NOC ,700, ,505. 8,505. EL 1000/1000/1000 WITH WC % ,786. EXPERIENCE -MODIFICATION ,318;- 7,468. OREGON WC SURCHARGE ( OREGAN MANDAY ASSESSMENT 0.00 Total Estimated Annual Premium $ WO 174 (4-54) Page 1 of 1

207 WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE POLICY EXTENSION OF INFORMATION PAGE Policy Number: NWA /01/97 4. Premium WC 174 (4-84) Classifications Code No. Premium Basis Total Estimated Annual Remuneration Rate Per $100 of Remuneration Estimated Annual Premium CARLSON HOLDINGS, INC. TEXAS CLERICAL OFFICE EMPLOYEES NOC ,932, ,568. RESTAURANT NOC ,136, ,749,673. 2,803,241. EL 1000/1000/1000 WITH WC % 56,065. 2,859,306. EXPERIENCE MODIFICATION , ,430,410. SCHEDULE RATE CREDIT , ,822,807, TEXAS WC SURCHARGE (.850%) 15, Total Estimated Annual Premium $. WC 174 (4.84) Page 1 of 1

208 WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE POLICY EXTENSION OF INFORMATION PAGE Policy Number: NWA /01/97 4. Premium WC 174 (4-84) Classifications Code No, Premium Basis Total Estimated Annual Remuneration Rate Per $100 of Remuneration Estimated Annual Premium CARLSON HOLDINGS, INC. WISCONSIN CLERICAL OFFICE EMPLOYEES NOC ,909, ,729. HOTEL:ALL OTHER EMPLOYEES & ,885, ,231. SALESPERSONS, DRIVERS 75,960. EL 1000/1000/1000 WITH WC % 2, ,467. EXPERIENCE MODIFICATION , ,697. EXPENSE CONSTANT ,857. Total Estimated Annual Premium $ WC 174 {4-84) Page 1 of 1

209 Workers Compensatl n and Employers Liability Insurance - Change Endorsement POLICY NUMBER POLICY PERIOD * EFFECTIVE AGENCY NUMBER NWA NAME OF INSURED AND ADDRESS CARLSON HOLDINGS, INC. 701 CARLSON PARKWAY P.O. BOX MINNEAPOLIS, MN FROM: 07/01/97 TO: 07/01/98 AGENCY NAME AND ADDRESS JOHNSON & HIGGINS 1600 LINCOLN CENTER 333 SOUTH SEVENTH ST. MINNEAPOLIS, MN WORKER'S COMPENSATION AND EMPLOYERS' UABIUTY INSURANCE POLICY CHANGE ENDORSEMENT CHANGE ENDORSEMENT NUMBER A SCHEDULE OF FORMS AND ENDORSEMENTS WC174 WC000000A 04/84 WORKERS' COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY EXTENSION OF INFORMATION 04/92 WORKERS' COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY WC /92 ENDT ft 1 NAMED INSURED ENDORSEMENT - EXHIBIT I WC /92 ENDT If 2 NAMED INSURED ENDORSEMENT - EXHIBIT II WC /92 ENDT # 3 LIST OF LOCATIONS WC /92 ENDT # 4 NON-CUMULATIVE ENDORSEMENT WC /92 ENDT # 5 AMENDATORY ENDORSEMENT WC /92 ENDT # 6 EXTENDED PROTECTION-INDEMNIFICATION IN MONOPOLISTIC STATES WC /92 ENDT # 7 REPATRIATION AND ENDEMIC DISEASE ENDORSEMENT WC /92 ENDT # 8 "BORROWED SERVANT" ENDORSEMENT WC /92 ENDT # 9 UNINTENTIONAL ERRORS OR OMISSIONS ENDORSEMENT THIS ENDORSEMENT CHANGES ISSUED UNLESS OTHERWISE ST THE POLICY TO WHICH IT IS ATTACHED AND IS EFFECTIVE ON THE DATE ATED. (THE INFORMATION BELOW IS 'REPARATION OF THE POLICY.) REQUIRED ONLY WHEN THIS ENDORSEMENT IS ISSUED SUBSEQUENT TO Premium $ Countersigned by Authorized Representative Date wc as

210 Workers Compensatl& and Employers Liability insuranco - Change Endorsement * * EFFECTIVE POLICY NUMBER POLICY PERIOD AGENCY NUMBER NWA FROM: 07/01 97 TO: 07/01/ NAME OF INSURED AND ADDRESS CARLSON HOLDINGS, INC. 701 CARLSON PARKWAY P.O. BOX MINNEAPOLIS, MN AGENCY NAME AND ADDRESS JOHNSON & HIGGINS 1600 LINCOLN CENTER 333 SOUTH SEVENTH ST. MINNEAPOLIS, MN WORKER'S COMPENSATION AND EMPLOYERS' UABILITY INSURANCE POLICY CHANGE ENDORSEMENT CHANGE ENDORSEMENT NUMBER A SCHEDULE OF FORMS AND ENDORSEMENTS (CONT'D) WC WCOOR01200, WC000101A.WC000106A WC000109A WC000201A WC WC WC000303B WC000311A WC WC /92 ENDT #I0 INSTALLMENT ENDORSEMENT 03/94 CANCELLATION BY US 04/92 DEFENSE BASE ACT COVERAGE ENDORSEMENT 11/95 LONGSHORE AND HARBOR WORKERS' COMPENSATION ACT COVERAGE ENDORSEMENT 04/92 OUTER CONTINENTAL SHELF LANDS ACT COVERAGE ENDORSEMENT 04/92 MARITIME COVERAGE ENDORSEMENT 04/84 VOLUNTARY COMPENSATION MARITIME COVERAGE ENDORSEMENT 02/89 ALTERNATE EMPLOYER ENDORSEMENT 12/93 EMPLOYERS LIABILITY COVERAGE ENDORSEMENT 06/91 VOLUNTARY COMPENSATION AND EMPLOYERS LIABILITY COVERAGE ENDORSEMENT 04/84 WAIVER OF OUR RIGHT TO RECOVER FROM OTHERS ENDORSEMENT 04/84 PENDING RATE CHANGE ENDORSEMENT THIS ENDORSEMENT CHANGES THE POLICY TO WHICH IT IS ATTACHED AND IS EFFECTIVE ON THE DATE ISSUED UNLESS OTHERWISE STATED. (THE INFORMATION BELOW IS REQUIRED ONLY WHEN THIS ENDORSEMENT IS ISSUED SUBSEQUENT TO PREPARATION OF THE POLICY.) Premium $ Countersigned by Authorized Representative Date wc

211 Workers Compensation and Employers Liability Insurance - Change Endorsement * * EFFECTIVE POLICY NUMBER POLICY PERIOD AGENCY NUMBER NWA FROM: 07/01/97 TO: 07/01/ NAME OF INSURED AND ADDRESS CARLSON HOLDINGS, INC. 701 CARLSON PARKWAY P.O. BOX MINNEAPOLIS, MN AGENCY NAME AND ADDRESS JOHNSON & HIGGINS 1600 LINCOLN CENTER 333 SOUTH SEVENTH ST. MINNEAPOLIS, MN WORKER'S COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY CHANGE ENDORSEMENT CHANGE ENDORSEMENT NUMBER A SCHEDULE OF FORMS AND ENDORSEMENTS (CONT'D) WC WC000503A WC990603D WC360601B WC36R01700 RN42N01400 WC42R01700 WC420301D WC WC480601B WC /90 NOTIFICATION OF CHANGE IN OWNERSHIP ENDORSEMENT 09/91 RETROSPECTIVE PREMIUM ENDORSEMENT ONE YEAR PLAN 07/85 FOREIGN VOLUNTARY COMPENSATION AND EMPLOYERS LIABILITY COVERAGE ENDORSEMENT 05/96 OREGON CANCELATION ENDORSEMENT 06/94 OREGON WORKERS' COMPENSATION NOTICE TO POLICYHOLDERS 01/93 IMPORTANT NOTICE - TEXAS 04/96 WORKERS' COMPENSATION NOTICE TO POLICYHOLDERS - TEXAS 01/96 TEXAS AMENDATORY ENDORSEMENT 10/92 TEXAS MAINTENANCE TAX SURCHARGE RECOUPMENT ENDORSEMENT 04/94 WISCONSIN LAW ENDORSEMENT 11/67 FOREIGN COVERAGE ENDORSEMENT - WISCONSIN THIS ENDORSEMENT CHANGES THE POLICY TO WHICH IT IS ISSUED UNLESS OTHERWISE STATED. (THE INFORMATION BELOW IS REQUIRED ONLY WHEN THIS?REPARATION OF THE POLICY.) Premium $ Countersigned by Authorized Representative WC ATTACHED AND IS EFFECTIVE ON THE DATE ENDORSEMENT IS ISSUED SUBSEQUENT TO Date

212 WC A (Ed. 4-92) WC 102 (4-92) WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE POLICY PLEASE READ THE POLICY CAREFULLY. QUICK REFERENCE BEGINNING ON PAGE BEGINNING ON PAGE INFORMATION PAGE G. Limits Of Liability 3 H. Recovery From Others 3 GENERAL SECTION 1 I. Actions Against Us 3 A. The Policy 1 B. Who Is Insured 1 PART THREE OTHER STATES INSURANCE 4 C. Workers Compensation Law 1 A. How This Insurance Applies 4 D. Stale 1 B. Notloe 4 E. Locations 1 PART ONE WORKERS' COMPENSATION INSURANCE ' A. How This Insurance Applies 1 PART FOUR YOUR DUTIES IF INJURY OCCURS 4 B. We Will Pay 1 PART FIVE PREMIUM 4 C. We Will Defend 1 A, Our Manuals 4 D. We W1I1Also Pay 1 B. Classifications 4 E. Other Insurance 1 C. Remuneration 4 F. Payments You Must Make 1 D. Premium Payments 4 G. Recovery From Others 2 E. Final Premium 4 H. Statutory Provisions 2 F. Records,,...,....., G. Audit 5 PART TWO EMPLOYERS' LIABILITY INSURANCE A. How This Insurance Applies 2 PART SIX CONDITIONS 5 B. We Will Pay 2 A. Inspection 5 C. Exclusions 2 B. Long Term Policy 5 D. We Will Defend 3 C. Transfer Of Your Rights Anci Duties 5 E WOW! Also Pay 3 D. Cancelatl on 5 F. Other Insurance 3 E. Sole Representative 5 IMPORTANT. This Quick Reference Is not part of the Workers' Compensation and and Employers' Liability Insurance Policy and does not provide coverage. Refertoth a Workers' Compensation and Emptoyers' Liability Insurance Policy Itself for actual contractual provisions, POLICY: NYVA /01/97 Copyright 1991 National Council on Compensation Insurance.

213 WORKERS' COMPENSATIOri AND EMPLOYERS LIABILITY INSURANCE POLICY 'In return for the payment of the premium and subject to all terms of this policy, we agree with you as follows. A. The Policy This policy includes at its effective date the Information Page and all endorsements and Schedules listed there. it is a contract of Insurance between you (the employer named In item 1 of the Information Page) and us (the Insurer named on the information Page). The only agreements relating to this insurance are stated in this policy. The terms of this policy may not be changed or waived except by endorsement issued by us to be part of this policy. B. Who is Insured You are Insured if you are an employer named in item 1 of the Information Page. If that employer is a partnership, and if you are one of its partners, you are Insured, but only in your capacity as an employer of the partnership's employees. C. Workers' Compensation Law A. How This Insurance Applies GENERAL SECTION PART ONE WORKERS' COMPENSATION INSURANCE This workers' compensation insurance applies to bodily injury by accident or bodily injury by disease. Bodily Injury includes resulting death. 1. Bodily injury by accident must occur during the policy period. 2. Bodily Injury by disease must be caused or aggravated by the conditions of your employment. The employee's last day of fast exposure to the conditions causing or aggravating such bodily injury by disease must occur during the policy period. B. We Will Pay We will pay promptly when due the benefits required of you by the workers' compensation law. C. We Will Defend We have the right and duty to defend at our expense any claim, proceeding or suit against you for benefits payable by this insurance. We have the right to investigate and settle these claims, proceedings or suits. We have no duty to defend a claim, proceeding or suit that is not covered by this Insurance. D. We Will Also Pay We will aiso pay these costs, in addition to other amounts payable under this insurance, as part of any claim, proceeding or suit we defend: 1. reasonable expenses Incurred at our request, but Workers' Compensation Law means the workers' or workmen's compensation law and occupational disease law of each state or territory named In item 3.A of the information Page. It Includes any amendments to that lawwhich are In effect during the policy period. it does not include any federal workers' or workmen's compensation law, any federal occupational disease law or the provisions of any law that provide nonoccupational disability benefits. D. State State means anystate of the United States of America, and the District of Columbia. E. Locations This policy covers all of yourworkplaces listed In items 1 or 4 of the Information Page; and it covers all other workplaces in Item 3.A states unless you have other insurance or are self-insured for such workplaces. not loss of earnings; 2. premluma for bonds to release attachments and for appeal bonds in bond amounts up to the amount payable under this insurance; 3. litigation costs taxed against you; 4. interest on a judgment as required by law until we offer the amount due under this Insurance; and 5. expenses we incur. E. Other Insurance We will not pay more than our share of benefits and costs covered by this Insurance and other insurance or self-insurance. Subject to any limits of liability that may apply, all shares will be equal until the loss is paid. If any Insurance or self-insurance is exhausted, the shares of all remaining insurance will be equal until the loss is paid. F. Payments You Must Make You are respo nsi bie for any payments in excess of the benefits regularly provided by the workers' compensation law including those required because: 1. of your serious and willful misconduct; 2. you knowingly employ an employee in violation of law; 3. you fail to comply with a health or safety law or regulation; or 4. you discharge, coerce or otherwise discriminate against any employee In violation of the workers' POLICY: NWA WC 102(4.92) Pag1 of 5 Copyright 1991 National Council on Compensation Insurance. WC A (Ed, 4-92)

214 compensation law. if we make any payments in excess of the benefits regularly provided by the workers' compensation law on your behalf, you will reimburse us promptly. G. Recovery From Others We have your rights, and the rights of persons entitled to the benefits of this insurance, to recover our payments from anyone liable for the injury. You will do everything necessary to protect those rights for us and to help us enforce them. H. Statutory Provisions These statements apply where they are required by law. 1. As between an injured worker and us, we have notice of the Injury when you have notice. 2. Your default or the bankruptcy or insolvency of you or your estate will not relieve us of our duties under this insurance after an injury occurs. 3. We are directly and primarily liable to any person entitled to ine benefits payable by this insurance. Those persons may enforce our duties; so may an agency authorized bylaw. Enforcement may be against us or against you and us. 4. Jurisdiction over you Is jurisdiction over us fo,(- purposes of the workers' compensation law. We are bound by decisions against you under that law, subject to the provisions of this policy that are not In conflict with that law. 5. This insurance conforms to the parts of the workers' compensation law that apply to: a. benefits payable by this Insurance; b. special taxes, payments into security or other special funds, and assessments payable by us under that law. 6. Terms of this Insurance that conflict with the workers' compensation law are changed by this statement to conform to that law. Nothing in these paragraphs relieves you of your duties under this policy. PART TWO EMPLOYERS' LIABILITY INSURANCE A. How This Insurance Applies This employers' liability insurance applies to bodily Injury by accident or bodily injury by disease. Bodily injury includes resulting death. 1. The bodily injury must arise out of and In the course of the Injured employee's employment by you. 2. The employment must be necessary or incidental to your work in a state or territory listed in Item 3.A of the information Page. 3. Bodily injury by accident must occur during the policy period. 4. Bodily injury by disease must be caused or aggravated by the conditions of your employment. The employee's last day of last exposure to the conditions causing or aggravating such bodily Injury by disease must occur during the policy period. 5. If you are sued, the original suit and any related legal actions for damages for bodily injury by accident or by disease must be brought in the United States of America, its territories or possessions, or Canada. B. We Will Pay We will pay all sums you legally must pay as damages because of bodily Injury to your employees, provided the bodily injury is covered bythis Employers' Liability Insurance. The damages we will pay, where recovery is permitted by law, include damages: 1. for which you are liable to a third party by reason of a claim or suit against you by that third party to recover the damages claimed against such third party as a result of injury to your employee; 2. for care and loss of services; and 3. for consequential bodily injury to a spouse, child, parent, brother or sister of the injured employee; provided that these damages are the direct consequence of bodily injury that arises out of and in thp course of the injured employee's employment by mi. and 4. because of bodily injury to your employee that arises out of and in the course of employment, claimed against you in a capacity other than as employer. C. Exclusions This insurance does not cover: 1. liability assumed under a contract. This exclusion does not apply to a warranty that your work will be done in a workmanlike manner; 2. punitive or exemplary damages because of bodily injury to an employee employed In violation of law; 3. bodily Injury to an employee while employed in violation of law with your actual knowledge or the actual knowledge of any of your executive officers; 4. any obligation Imposed by a workers' compensation, occupational disease, unemployment compensation or disability benefits law or any similar law; 5. bodily Injury intentionally caused or aggravated by you; 6. bodily injury occurring outside the United Statelt, of America, Its territories or possessions and Can- POLICY; NVVA /01/97 WC 102(4.92) WC ODA (Ed. 4-92) Copyright 1991 National Council on Compensation Insurance. Page 2 of 5

215 0:ff- ad a. This exclusion does not apply to bodily injury to a citizen or resident of the United States of America or Canada who is temporarily outside these countries; 7. damages arising out of coercion, criticism, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation, discrimination against or termination of any employee, or any personnel practices policies, acts or omissions; 8. bodily Injury to any person In work subject to the Longshore and Harbor Workers' Compensation Act (33 USC Sections ), the Nonappropriated Fund Instrumentalities Act (5 USC Sections ), the Outer Continental Shelf Lands Act (43 USC Sections ), the Defense Base Act (42 USC Sections ), the Federal Coal Mine Health and Safety Act of 1969 (30 USC Sections ), any other federal workers' orworkmen's compensation law or other federal occupational disease law, or any amendments to these laws: 9. bodily Injury to any person in work subject to the Federal Employers' LlabilityAct (45 USC Sections 51-60), any other federal laws obligating an employer to pay damages to an employee due to bodily injury arising out of or in the course of employment, or any amendments to those laws; 10. bodily Injury to a master or member of the crew of any vessel; 11. fines or penalties imposed for violation of federal or state law; and 12. damages payable under the Migrant and Seasonal Agricultural Worker P totection Act (29) USC Sections ) and under any other federal law awarding damages for violation of those laws or regulations issued thereunder, and any amendments to those laws. D. We Will Defend We have the right and dutyto defend, at our expense, any claim, proceeding or suit against you for damages payable by this insurance. We have the right to Investigate and settle these claims, proceedings and suits. We have no duty to defend a claim, proceeding or suit that Is not covered by this insurance. We have no duty to defend or continue defending after we have paid our applicable limit of liability under this Insurance. E. We Will Also Pay We will also pay these costs, In addition to other amounts payable under this Insurance, as part of any claim, proceeding or suit we defend: 1. reasonable expenses incurred at our request, but not loss of earnings; 2. premiums for bonds to release attachments and for appeal bonds in bond amounts up to the limit of our liability under this Insurance; 3. litigation costs taxed against you; 4. interest on a judgment as required by law until we offer the amount due under this Insurance; and 5. expenses we Incur. F. Other Insurance We will not pay more than our share of damages and costs covered by this insurance and other insurance or self-insurance. Subject to any limits of liability that apply, all shares will be equal until the loss is paid. if any insurance or self-insurance is exhausted, the shares of all remaining insurance and self-insurance will be equal until the loss is paid. G. Limits Of Liability Our liabilityto pay for damages is limited, Our limits of liability are shown in item 3.B of the Information Page. They apply as explained below. 1. Bodily Injury by Accident. The limit shown for "bodily Injury by accident each accident" Is the most we will pay for all damages covered by this insurance because of bodily i nj ury to one or more employees In any one accident. A disease is not bodily injury by accident unless It results directly from bodily Injury by accident, 2. BodllyinjurybyDisease. The limit shown for "bodily injury by disease policy limit" Is the most we will payfor all damages covered by this Insurance and arising out of bodily Injury by disease, regardless of the number of employees who sustain bodily injury by disease. Thelirlitt shown for "bodily injury bydlsease each employee" Is the most we will pay for all damages because of bodily injury by disease to any one employee. Bodily injury by disease does not Include disease that results directly from a bodily injury by accident. 3. We will not pay any claims for damages after we have paid the applicable limit of our liability under this insurance. H. Recovery From Others We have your rights to recover our payment from anyone liable for an Injury covered by this insurance. You will do everything necessary to protect those rights for us and to help us enforce them. I. Actions Against Us There will be no right of action against us under this Insurance unless: 1. you have complied with all the terms of this policy; and 2. the amount you owe has been determined with our consent or by actual trial and final judgment. This Insurance does not give anyone the right to add us as a defendant In an action against you to determine your liability. The bankruptcy or insolvency of you or your estate will not relieve us of our obligation under this Part. POLICY: NWA WC 102 (4-92) Page 3 of 5 Copyright 1901 National Council on Compensation Insurance, WC A (Ed. 4-92)

216 PART THREE OTHER STATES INSURANCE A. How This Insurance Applies 1. This other states Insurance applies only if one or more states are shown in item 3.0 of the information Page. 2. if you begin work in any one of those states after the effective date of this policy and are not insured or are not self-insured for such work, all provisions of the policy will apply as though that state were listed In item 3.A of the information Page. 3. We will reimburse you for the benefits required by the workers' compensation law of that state if we are not permitted to pay the benefits directly tir persons entitled to them. 4. If you have work on the effective date of this policy in any state not listed in item 3.A of the information Page, coverage will not be afforded for that state unless we are notified within thirty days, B. Notice Tell us at once If you begin work In any state listed In Item 3.0 of the information Page, PART FOUR YOUR DUTIES IF INJURY OCCURS Tell us at once if injury occurs that may be covered by this policy. Your other duties are listed here. 1. Provide for Immediate medical and other services required by the workers' compensation law. 2. Give us or our agent the names and addresses of the Injured persons and of witnesses, and other information we may need. 3. Promptly give us all notices, demands and legal pa- pars related to the injury, claim, proceeding or suit. 4. Cooperate with us and assist us, as we may request, In the investigation, settlement or defense of any claim, proceeding or suit. 5. Do nothing after an injury occurs that would interfere with our right to recover from others. 6. Do not voluntarily make payments, assume obligations or Incur expenses, except at your own cost. PART FIVE PREMIUM A. Our Manuals Al premium for this policy will be determined by our manuals of rules, rates, rating plans and classifications. We may change our manuals and apply the changes to this policy if authorized by law or a governmental agency regulating this insurance. B. Classifications Item 4 of the information Page shows the rate and premium basis for certain business or work classifications. These classifications were assigned based on an estimate of the exposures you would have during the policy period. If your actual exposures are not properly described by those classifications, we will assign proper classifications, rates and premium basis by endorsement to this policy. C. Remuneration Premiumfor each work classification is determined by multiplying a rate times a premium basis. Remuneration is the most common premium basis, This premium basis includes payroll and all other remuneration paid or payable during the policy period for the services of: 1. all your officers and employees engaged in work covered by this policy; and 2. all other persons engaged in work that could make us liable under Part One (Workers' Compensation insurance) of this policy. If you do not have payroll records for these persons, the contract price for tt*ir services and materials may be used as the premium basis. This paragraph 2. will not apply if you give us proof that the employers of these persons lawfully secured their workers' compensation obligations. D. Premium Payments You will pay all premium when due. You will pay tri premium even if part or all of a workers' compensation law Is not valid. E. Final Premium The premium shown on the Information Page, Schedules and endorsements is an estimate. The final premium will be determined after this policy ends by using the actual, not the estimated, premium basis and the proper classifications and rates that lawfully apply to the business and work covered bythis policy. If thefinai premium is morethanthe premium you paid to us, you must pay us the balance. If It is less, we will refund the balance to you. The final premium will not be less than the highest minimum premium for the classifications covered by this policy. If this policy Is canceled, final premium will be determined in the following way unless our manuals provide otherwise. 1. if we cancel, final premium will be calculated pro rata based on the time this policy was In force. Final premium will not be less than the pro rata share of the minimum premium. 2. if you cancel, final premium will be more than pro rata; It will be based on the time this policy was in force, and increased by our short rate cancdation table and procedure. Final premium will not be' less than the minimum premium. F. Records POLICY: NWA /01/97 wc 102 (4.921 WC A (Ed. 4-82) Copyright 1991 National Council on Compensation Insurance. Page 4 of 5

217 You will keep records of Informakion needed to compute preml um. You will provide us with copies of those records when we ask for them. G. Audit You will let us examine and audit all your records that relate to this policy. These records include ledgers, Journals, registers, vouchers, contracts, tax reports, payroll and disbursement records and programs for storing and retrieving data. We may conduct the audits during regular business hours during the policy period and within three years after the policy period ends. Information developed by audit will be used to determine final premium. Insurance rate service organizations have the same rights we have under this provision. A. Inspection We have the right, but are not obliged to inspect your workplaces at anytime. Our inspections are not safety Inspections. They relate only to the insurability of the workplaces and the preml urns to be charged. We may give you reports on the conditions we find. We may also recommend changes. While they may help reduce losses, we do not undertake to perform the duty of any personto provide for the health or safety of your employees or the public. We do not warrant that your workplaces are safe or healthful or that they comply with Jaws, regulations, codes or standards. Insurance rate service organizations have the same rights we have under this provision. B. Long Term Policy lithe policy Is longer than one year and sixteen days, all provisions of this policy will apply as though a new policy were issued on each annual anniversary that this policy is In force. C. Transfer Of Your Rights And Duties Your rights or duties under this policy may not be transferred without our written consent. If you die and we receive notice within thirty days after PART SIX CONDITIONS your death, we will cover your legal representative as Insured. D. Cancelation 1. You may cancel this policy. You must mall or deliver advance written notice to us stating when the cancelation Is to take effect. 2. We may cancel this policy. We must mall or dellve r to you not less than ten days advance written notice stating when the cancelation Is to take effect. Mailing that notice to you at your mailing address shown In item 1 of the Information Page will be sufficient to prove notice. 3. The policy period will end on the day and hour stated In the cancelation notice. 4. Any of these provisions that conflicts with a law that controls the cancelation of the Insurance In this policy is changed bythls statement to comply with that law. E. Sole Representative The Insured first named in Item 1 of the Information Page will act on behalf of all Insureds to change this policy, receive return premium and give or receive notice of canceiation, POLICY: NWA /01/97 WC 102 (4-92) Page 5 of 5 Copyright 1991 National Council on Compensation insurance. WC A (Ed. 4-92)

218 EXHIBIT G INSURANCE POLICY JULY 1, JULY 1, 1999

219 WORKERS.COMPENS'ATION AND ""IPLOYERS LIABILITY INSURANCE PC 'V INFORMATION PAGE (Minnesota) NWA RE HOE. NATIONAL INDEMNITY CO NEW YORK, NY Renewal of (Name of insurer) NwA (NccIft) issuing Office Reliance and affiliate companies are required by law to provide its policyholders with certain accident prevention services as required by Section of the Minnesota Workers Compensation Statute. If you would like more information please call our Loss Control Department at (312) The insured/mailing Address: (No. Street, Town, County, State, Zip) Agency Code, Name and Address J&H MARSH & MCLENNAN CARLSON HOLDINGS, INC. 701 CARLSON PARKWAY P.O. BOX LINCOLN CENTER 333 SOUTH SEVENTH ST. MINNEAPOLIS, MN MINNEAPOLIS, MN INDIVIDUAL El PARTNERSHIP Other Workplaces not shown above: 1213 CORPORATION OR Fein No LO. No Policy Period: The policy period is from 7/01/98 at the Insured's Mailing Address. to 7/01/99 12:01 A.M. Standard Time, 3. Coverage: A. Workers Compensation Insurance: Part One of the policy applies to the Workers Compensation Law of the states listed here: OR TX WI B. Employer's Liability insurance: Part Two of the policy applies to work in each state listed in item 3.A. The limits of our liability under Part Two are: Bodily Injury by Accident $ 1,000,000 each accident Bodily Injury by Disease $ 1,000,000 each employee Bodily Injury by Disease $ 1,000,000 policy limit C. Other States Insurance: Part Three of the policy applies to the states, if any, listed here: All states except Nevada, North Dakota, Ohio, Washington, West Virginia Wyoming, States designated in item 3.A above and D. This policy includes these endorsements and schedules: SEE SCHEDULE OF FORMS AND ENDORSEMENTS 4. Premium: The premium for this policy will be determined by our Manuals of Rules, Classifications, Rates and Rating Plans. All Information required below Is subject to verification and change by'.audit. Classifications Code Premium Basis Rate Per SEE WC 174 Surcharge; OR TX 0.00 No. Total Estimated $100 of Annual Remuneration Remuneration J&H MARSH & McLENNAN Total premium subject to the experience modification $ Premium modified to reflect experience modification of SE SCHED $ Other SEE SCHED. Total Estimated Standard Premium $ Premium Discount, If applicable, N/A %$ Loss and/or Expense Constant Charge $ Minimum Premium $ 0 Total Estimated Annual Premium $ If indicated below, interim adjustments of premium shall be made 0 Semi-Annually 0 Quarterly 0 Monthly Deposit Premium $ 0 A hfarsh & McLennan COmpaity Estimated annual Premium 333 South 7th Sou; Suite I 600 Minneapolis. MN Fax: 6/ ,553, ,320, , , , CoupbtegtignBiklalte 7/28/98 7 4fr 8 By Authorized Representative THIS INFORMATION PAGE WITH THE WORKERS COMPENSATION AND EMPLOYERS LIAISE ITV INSURANCE POLICY AND ENDORSEMENTS, IF ANY, ISSUED TO FORM A PART THEREOF, COMPLETES THE ABOVE NUMBERED POLICY. C.IDL-6400 Ed. 4/84 WC 22 R Copyright 1087 National Council on Compensation Insurance WC A

220 Reliance IN WITNESS WHEREOF, the Company has caused this policy to be executed and attested, and, If required by state law, this policy shall not be valid unless countersigned by a duly authorized representative of the company. Reliance National Indemnity Company HOME OFFICE - MADISON, WISCONSIN ADMINISTRATIVE OFFICE- NEW YORK, NEW YORK (ASTOCKINSURANCECOMPANY) J44.te A. WagA05.,,, Secretary P racent RN 00 P I LI3 P-8301-PL Ed.11/90 NWA /01/98

221 WC 174 (4-84) WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE POLICY EXTENSION OF INFORMATION PAGE PoticyNumber: NWA /01/98 Page 1 4. Premium OREGON Classifications CARLSON HOLDINGS, INC. Code Na Premium Basis Total Estimated Annual Remuneration Rate Per $100 of Remuneration Estimated Annual Premium CLERICAL OFFICE EMPLOYEES NOC ,726, ,735 6,735 EL 1000/1000/1000 WITH WC % 189 6,924 EXPERIENCE MODIFICATION ,039-5,885 OREGON WC SURCHARGE (7.3%) OREGON WC SURCHARGE (7.3%).00 Total Estimated Annual Premium $ Cont'd on Page 2 WC 174(4.84) Page 1 of 1

222 WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE POLICY EXTENSION OF INFORMATION PAGE WC 174 (4-84) Policy Number: NWA /01/98 4. Premium Page 2 Classifications Code No. Premium Basis Total Estimated Annual Remuneration Rate Per $100 of Remuneration Estimated Annual Premium TEXAS CARLSON HOLDINGS, INC. CLERICAL OFFICE EMPLOYEES HOC ,525, ,776 RESTAURANT HOC ,643, ,223,759 1,412,535 EL 1000/1000/1000 WITH WC % 39,551 1,452,086 EXPERIENCE MODIFICATION ,813-1,234,273 SCHEDULE RATE CREDIT , ,554 TEXAS WC MAINTENANCE TAX.00 SURCHARGE (.000%) Total Estimated Annual Premium., Cont'd on Page 3 WC 174 (4.84) Page 1 of 1

223 WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE POLICY EXTENSION OF INFORMATION PAGE WC 174 (4-84) Policy Number: NWA /01/98 Page 3 4. Premium Classifications Code No. Premium Basis Total Estimated Annual Remuneration Rate Per $100 of Remuneration Estimated Annual Premium WISCONSIN CARLSON HOLDINGS, INC. CLERICAL OFFICE EMPLOYEES NOC ,315, ,946 HOTEL:ALL OTHER EMPLOYEES & ,091, ,639 SALESPERSONS, DRIVERS 91,585 EL 1000/1000/1000 WITH WC % 2,564 94,149 EXPERIENCE MODIFICATION ,122-60,027 EXPENSE CONSTANT ,207 Total Estimated Annual Premium $ WC 174(4.84) Pagel off

224 Workers Compensatioif and Employers Liability Insurance - Change Endorsement RELIANCE NATIONAL INDEMNITY CO * EFFECTIVE IIMINININNIIMINIIIIMINVIMINIMIN 1OLICY NUMBER POLICY PERIOD AGENCY NUMBER NWA FROM: 7/01/98 TO: 7/01/ NAME OF INSURED AND ADDRESS AGENCY NAME AND ADDRESS CARLSON HOLDINGS, INC. J&H MARSH & MCLENNAN 701 CARLSON PARKWAY 1600 LINCOLN CENTER P.O. BOX SOUTH SEVENTH ST. MINNEAPOLIS, MN MINNEAPOLIS, MN WORKER'S COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE POLICY CHANGE ENDORSEMENT CHANGE ENDORSEMENT NUMBER A SCHEDULE OF FORMS AND ENDORSEMENTS Page 1 WC000000A 4/92 WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSUR. POLICY WC /92 ENDT# 1 EXHIBIT I WC /92 ENDT# 2 EXHIBIT II WC /92 ENDS* 3 LIST OF LOCATIONS ENDOSEMENT WC /92 ENDT# 4 ENDORSEMENT WC /92 ENDT# 5 AMENDATORY ENDORSEMENT WC /92 ENDT# 6 PROTECTION-INDEMNIFICATION IN MONOPOLISTIC STATES WC /92 ENDT# 7 DISEASE ENDORSEMENT WC /92 ENDTO 8 "BORROWED SERVANT" ENDORSEMENT WC /92 ENDT# 9 OR OMISSIONS ENDORSEMENT WO /92 ENDT# 10 INSTALLMENT ENDORSEMENT WCOOR /94 CANCELLATION BY US WC000101A 4/92 DEFENSE BASE ACT COVERAGE ENDORSEMENT WC000106A 11/95 LONGSHORE AND HARBOR WORKERS' COMPENSATION ACT COVERAGE ENDT Cont'd on Page 2 THIS ENDORSEMENT CHANGES THE POLICY TO WHICH IT IS ATTACHED AND IS EFFECTIVE ON THE DATE ISSUED UNLESS OTHERWISE STATED. (THE INFORMATION BELOW IS REQUIRED ONLY WHEN THIS ENDORSEMENT IS ISSUED SUBSEQUENT TO PREPARATION OF THE POLICY.) Premium $ Countersigned by Authorized Representative wc

225 Workers Compensation and Employers Liability insurance - Change Endorsement RELIANCE NATIONAL INDEMNITY CO ** EFFECTIVE 'OLICY NUMBER POLICY PERIOD AGENCY NUMBER NWA FROM: 7/01/98 TO: 7/01/ ,..y...,. NAME OF INSURED AND ADDRESS CARLSON HOLDINGS, INC. 701 CARLSON PARKWAY P.O. BOX MINNEAPOLIS, MN AGENCY NAME AND ADDRESS J&H MARSH & MCLENNAN 1600 LINCOLN CENTER 333 SOUTH SEVENTH ST. MINNEAPOLIS, MN WORKER'S COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE POLICY CHANGE ENDORSEMENT CHANGE ENDORSEMENT NUMBER A SCHEDULE OF FORMS AND ENDORSEMENTS Page 2 WC000109A WC000201A WC WC000301A 4/92 OUTER CONTINENTAL SHELF LANDS ACT COVERAGE ENDORSEMENT 4/92 MARITIME COVERAGE ENDORSEMENT 4/84 VOLUNTARY COMPENSATION MARITIME COVERAGE ENDORSEMENT 2/89 ALTERNATE EMPLOYER ENDORSEMENT ( 1C000303B 4/92 EMPLOYERS LIABILITY COVERAGE ENDORSEMENT WC WC WC WC000503A WC WC040101A WC360601B WC420301E 4/84 WAIVER OF OUR RIGHT TO RECOVER FROM OTHERS ENDORSEMENT 4/84 PENDING RATE CHANGE ENDORSEMENT 7/90 NOTIFICATION OF CHANGE IN OWNERSHIP ENDORSEMENT 9/91 RETROSPECTIVE PREMIUM ENDORSEMENT-ONE YEAR PLAN 7/85 WORKER'S COMP AND EMPLOY LIAB. FOREIGN VOLUNTARY COVERAGE ENDORSEMENT 4/92 LoNGSHORE AND HARBOR WORKERS COMPENSATION ACT COVERAGE ENDORSEMENT 5/96 OREGON CANCELAT/ON ENDORSEMENT 3/97 TEXAS AMENDATORY ENDORSEMENT Cont'd on Page 3 THIS ENDORSEMENT CHANGES THE POLICY TO WHICH IT IS ATTACHED AND IS EFFECTIVE ON THE DATE ISSUED UNLESS OTHERWISE STATED. (THE INFORMATION BELOW IS REQUIRED ONLY WHEN THIS ENDORSEMENT IS ISSUED SUBSEQUENT TO?REPARATION OF THE POLICY.) Premium $ Countersigned by Authorized Representative / thé Date WC

226 Workers Compensation and Employers Liability Insurance Change Endorsement RELIANCE NATIONAL INDEMNITY CO * * EFFECTIVE 50LICY NUMBER POLICY PERIOD AGENCY NUMBER NWA FROM: 7/01/98 TO: 7/01/ NAME OF INSURED AND ADDRESS AGENCY NAME AND ADDRESS carlson HOLDINGS, INC. J&H MARSH & McLENNAN 701 CARLSON PARKWAY 1600 LINCOLN CENTER P.O. BOX SOUTH SEVENTH ST. MINNEAPOLIS, MN MINNEAPOLIS, MN WORKER'S COMPENSATION AND EMPLOYERS'LIABIUTYINSURANCE poucn, CHANGE ENDORSEMENT CHANGE ENDORSEMENT NUMBER A SCHEDULE OF FORMS AND ENDORSEMENTS Page 3 WC420306A WC480601B GU7966a 3/97 TEXAS MAINTENANCE TAX SURCHARGE RECOUPMENT ENDORSEMENT 4/94 WISCONSIN LAW ENDORSEMENT 5/59 COUNTERSIGNATURE ENDORSEMENT THIS ENDORSEMENT CHANGES THE POLICY TO WHICH IT IS ISSUED UNLESS OTHERWISE STATED. (THE INFORMATION BELOW IS REQUIRED ONLY WHEN THIS PREPARATION OF THE POLICY.) Premium $ Countersigned by Authorized Representative WC ATTACHED AND ENDORSEMENT IS EFFECTIVE ON THE DATE IS ISSUED SUBSEQUENT TO Date

227 WC A (Ed. 4-92) WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE POLICY PLEASE READ THE POLICY CAREFULLY. WC 102 (4-92) QUICK REFERENCE BEGINNING ON PAGE BEGINNING ON PAGE INFORMATION PAGE G. UmIts Of Liability 3 H. Recovery From Others 3 GENERAL SECTION 1 I. Actions Against Us 3 A. The Polley 1 B. Who is Insured 1 PART THREE OTHER STATES INSURANCE 4 C. Workers' Compensation Law 1 A. How This insurance Applies 4 0, State 1 B. Notice 4 E. Locations 1 PART ONE WORKERS' COMPENSATION INSURANCE A. How This Insurance Applies. 1 P ART FOUR YOUR DUTIES IF INJURY OCCURS 4 B. We Will Pay 1 PART FIVE PREMIUM 4 C. We Will Defend 1 A. Our Manuals 4 D. We Will Also Pay 1 a Classifications 4 E. Other Insurance 1 C. Remuneration 4 F. Payments You Must Make 1 D. Premium Payments 4 G. Fterxwery From Others 2 E. Final Premium 4 H. Statutory Provisions 2 F. Records 4 G. Audit 5 PART TWO EMPLOYERS' LIABILITY INSURANCE A. How This insurance Apogee 2 PART SIX CONDITIONS 5 B. We Will Pay 2 A. Inspection 5 C. Exclusions 2 B. Long Term Policy 5 D. We Will Defend 3 C. Transfer Of Your Rights And Duties 5 E We Will Also Pay 3 D. Cancolation 5 F. Other Insurance 3 E. Sole Representative 5 IMPORTANT: This Quick Reference Is not part of the Workers' Compensation and and Employers' LiabIllty Insurance Policy and does not provide coverage. Referto the Workers' Compensation and Employers' Liability Insurance Policy Itselffor actual contractual provisions. NWA /01/98 Copyright 1991 National Council on Compensation Insurance,

228 WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE POLICY In return for the payment of the premium and subject to all terms of this policy, we agree with you as follows. A. The Policy This policy Includes at its effective date the Information Page and all endorsements and Schedules listed there. It Is a contract of Insurance between you (the employer named In item 1 of the information Page) and us (the Insurer named on the Information Page). The only agreements relating to this Insurance are stated In this policy. The terms of this policy may not be changed or waived except by endorsement issued by us to be part of this policy. B. Who Is Insured You are Insured if you are an employer named In Item 1 of the information Page. If that employer Is a partnership, and If you are one of Its partners, you are Insured, but only In your capacity as an employer of the partnership's employees. C. Workers' Compensation Law A. How This Insurance Applies GENERAL SECTION D. E. Workers' Compensation Law means the workers' or workmen's compensation law and occupational disease law of each state or territory named in item 3,A of the Information Page. it includes any amendments to that law which are In effect during the policy period. It does not include any federal workers' or workmen's compensation law, any federal occupational disease law or the provisions of any law that provide nonoccupational disability benefits. State State means any state of the United States of America, and the District of Columbia. Locations PART ONE WORKERS' COMPENSATION INSURANCE This workers' compensation Insurance applies to bodily Injury by accident or bodily Injury by disease. Bodily injury Includes resulting death. I. Bodily Injury by accident must occur during the policy period. 2. Bodily injury by disease must be caused or aggravated by the conditions of your employment. The employee's last day of last exposure to the conditions causing or aggravating such bodily Injury by disease must occur during the policy period. B. we Will Pay We will pay promptly when due the benefits required of you by the workers' compensation law. C. We Will Defend We have the right and duty to defend at our expense any claim, proceeding or suit against you for benefits payable by this Insurance. We have the right to Investigate and settle these claims, proceedings or suits. We have no duty to defend a claim, proceeding or suit that Is not covered by this Insurance. D. We Will Also Pay We will also pay these costs, In addition to other amounts payable under this Insurance, as part of any claim, proceeding or suit we defend: 1. reasonable expenses Incurred at our request, but This policy covers al I of yourworkpiaces listed In Items 1 or 4 of the information Page; and It covers all other workplaces in Item 3.A states unless you have other Insurance or are self-insured for such workplaces. not loss of earnings; 2. premiums for bonds to release attachments and( for appeal bonds in bond amounts up to the, amount payable under this insurance; 3. litigation costs taxed against you; 4. Interest on a Judgment as required by law until we offer the amount due under this insurance; and 5, expenses we Incur. E. Other insurance We will not pay more than our share of benefits and costs covered by this insurance and other insurance or self-insurance. Subject to any limits of liability that may apply, all shares will be equal until the loss is paid. If any Insurance or self-insurance Is exhausted, the shares of all remaining Insurance will be equal until the loss is paid. F. Payments You Must Make You are responsibiefor any payments In excess of the benefits regularly provided by the workers' compensation law Including those required because: 1. of your serious and willful misconduct; 2. you knowingly employ an employee In violation of law; 3. you fall to comply with a health or safety law or regulation; or 4. you discharge, coerce or otherwise discriminat( against any employee In violation of the workers' Page 1 of 5 NVVA OS 7101/98 WC 102 (4-92) Copyright 1991 National Council on Compensation Insurance. WC MA (Ed. 4-92)

229 compensation law. if we make any payments in excess of the benefits regularly provided by the workers' compensation law on your behalf, you will reimburse us promptly. G. Recovery From Others We have your rights, and the rights of persons entitled to the benefits of this insurance, to recover our payments from anyone liable for the injury. You will do everything necessary to protect those rights for us and to help us enforce them. H. Statutory Provisions These statements apply where they are required by law. 1. As between an Injured worker and us, we have notice of the injury when you have notice. 2. Your default or the bankruptcy or insolvency of you or your estate will not relieve us of our duties under this insurance after an injury occurs. 3. We are directly and primarily liable to any person entitled to te le benefits payable by this Insurance. Those persons may enforce our duties; so may an agency authorized by law. Enforcement may be against us or against you and us. 4. Jurisdiction over you Is jurisdiction over us for purposes of the workers' compensation law. We are bound by decisions against you under that law, subject to the provisions of this policy that are not in conflict with that law. 5. This Insurance conforms to the parts of the workers' compensation law that apply to: a. benefits payable by this Insurance; b. special taxes, payments Into security or other special funds, and assessments payable by us under that law. 6. Terms of this insurance that conflict with the workers' compensation law are changed by this statement to conform to that law. Nothing in these paragraphs relieves you of your duties under this policy. A. How This Insurance Applies This employers' liability insurance applies to bodily Injury by accident or bodily injury by disease. Bodily injury includes resulting death. 1. The bodily injury must arise out of and In the course of the Injured employee's employment by you. 2. The employment must be necessary or Incidental to yourwork In a state or territory listed In item 3.A of the Information Page. 3. Bodily Injury by accident must occur during the policy period. 4. Bodily Injury by disease must be caused or aggravated by the conditions of your employment. The employee's last day of last exposure to the conditions causing or aggravating such bodily injury by disease must occur during the policy period. 5. If you are sued, the original suit and any related legal actions for damages for bodily injury by accident or by disease must be brought in the United States of America. its territories or possessions, or Canada. B. We WIII Pay We will pay all sums you legally must pay as damages because of bodily Injury to your employees, provided the bodily injury Is covered bythis Employers' Liability insurance. The damages we will pay, where recovery is permitted by law, include damages: 1. for which you are liable to a third party by reason of a claim or suit against you by that third party to recover the damages claimed against such third PART TWO EMPLOYERS 'LIABILITY INSURANCE party as a result of injury to your employee; 2. for care and loss of services; and 3. for consequential bodily injury to a spouse, child, parent, brother or sister of the injured employee; provided that these damages are the direct consequence of bodily injury that arises out of and in the course of the injured employee's employment by you; and 4. because of bodily Injury to your employee that arises out of and In the course of employment, claimed against you in a capacity other than as employer. C. Exclusions This Insurance does not cover: 1. liability assumed under a contract. This exclusion does not apply to a warranty that your work will be done in a workmanlike manner; 2. punitive or exemplary damages because of bodily injury to an employee employed In violation of law; 3. bodily Injury to an employee while employed in violation of law with your actual knowledge or the actual knowledge of any of your executive officers; 4. any obligation Imposed by a workers' compensation, occupational disease, unemployment cornpensation or disability benefits law or any similar law; 5. bodily Injury intentionally caused or aggravated by you; 6. bodily injury occurring outside the United States of America, its territories or possessions and Can- NWA /01/98 WC 102(4-92) WC A (Ed. 4-92) Copyright 1991 National Council on Compensation at suran oe. Page 2 of 5

230 ada. This exclusion does not a isdlyto bodily Injury to a citizen or resident of the United States of America or Canada who is temporarily outside these countries; 7. damages arising out of coercion, criticism, demotion, evaluation, reassignment, discipline, defamation, harassment, humiliation, discrimination against or termination of any employee, or any personnel practices, policies, acts or omissions; 8. bodily Injury to any person in work subject to the Longshore and Harbor Workers' Compensation Act (33 USC Sections ), the Nonappropriated Fund instrumentalities Act (5 USC Sections ), the Outer Continental Shelf Lands Act (43 USC Sections ), the Defense Base Act (42 USC Sections ), the Federal Coal Mine Health and Safety Act of 1969 (30 USC Sections ), any other federal workers' orworkmen's compensation law or other federal occupational disease law, or any amendments to these laws; 9. bodily injury to any person In work subject to the Federal Employers' Liability Act (45 USC Sections 51-60), any other federal laws obligating an employer to pay damages to an employee due to bodily injury arising out of or In the course of employment, or any amendments to those laws; 10. bodily injury to a master or member of the crew of any vessel; 11. fines or penalties Imposed for violation of federal or state law; and 12. damages payable under the Migrant and Seasonal Agricultural Worker Protection Act (29) USC Sections ) and under any other federal law awarding damages for violation of those laws or regulations issued thereunder, and any amendments to those laws. D. We Will Defend We have the right and duty to defend, at our expense, any claim, proceeding or suit against you for damages payable by this Insurance. We have the right to Investigate and settle these claims, proceedings and suits. We have no duty to defend a claim, proceeding or suit that Is not covered by this Insurance. We have no duty to defend or continue defending after we have paid our applicable limit of liability under this insurance. E. We Will Also Pay We will also pay these costs, in addition to other amounts payable under this insurance, as part of any claim, proceeding or suit we defend: 1. reasonable expenses Incurred at our request, but not loss of earnings; 2. premiums for bonds to release attachments and for appeal bonds In bond amounts Up to the limit of our liability under this Insurance; 3. litigation cos taxed against you; 4. interest on a judgment as required by law until we offer the amount due under this Insurance; and 5. expenses we incur. F. Other insurance We will not pay more than our share of damages and costs covered by this insurance and other insurance or self-insurance. Subject to any limits of liability that apply, all shares will be equal until the loss Is paid. If any Insurance or self-insurance Is exhausted, the shares of all remaining Insurance and self-insurance will be equal until the loss Is paid. G. LimitsOf Liability Our Ilabilityto pay for damages is limited. Our limits of liability are shown In item 3,15 of the information Page. They apply as explained below. 1. Bodily Injury by Accident. The limit shown for "bodily Injury by accident each accident" is the most we will pay for all damages covered by this insurance because of bodily injury to one or more employees in any one accident. A disease Is not bodily Injury by accident unless it results directly from bodily Injury by accident. 2. Bodily injury by Disease. The limit show nfor"bodily injury by disease policy limit" Is the most we will payfor all damages covered bythis insurance and arising out of bodily Injury by disease, regardless of the number of employees who sustain bodily Injury by disease. The limitshownfor "bad- Ily Injury by disease each emp4oyee" Is the most( We will pay for all damages because of bodily Injury by disease to any one employee. Bodily Injury by disease does not include disease that results directly from a bodily injury by accident. 3. We will not pay any claims for damages after we have paid the applicable limit of our liability under this insurance. Ff. Recovery From Others We have your rights to recover our payment from anyone liable for an injury covered by this insurance. You will do everything necessary to protect those rights for us and to help us enforce them. I. Actions Against Us There will be no right of action against us under this Insurance unless: 1. you have compiled with all theterms of this policy; and 2. the amount you owe has been determined with our consent or by actual trial and final judgment. This insurance does not give anyone the right to add us as a defendant in an action against you to determine your liability. The bankruptcy or Insolvency of you or your estate will not relieve us of our obilgatior( under this Pan. PaGa 3 of 5 NWA /01/98 WC 102 (492) Copyright 1991 National Council on Compensation Insurance. WC A (Ed, 4-92)

231 A. How This Insurance Applies 1. Thls other states Insurance applies only if one or more states are shown in item 3.0 of the information Page. 2. If you begin work In any one of those states after the effective date of this poi icy and are not insured orare not self-insured for such work, all provisions of the policy will apply as though that state were listed in item 3.A of the information Page. 3. We will reimburse you forthe benefits required by Tell us at once if injury occurs that may be covered by this policy. Your other duties are listed here. 1. Provide for immediate medical and other services required by the workers' compensation law. 2. Give us or our agent the names and addresses of the Injured persons and of witnesses, and other information we may need. 3. Promptly give us ail A. Our Manuals 'PART THREE OTHER STATES INSURANCE B. the workers' compensation law of that state if we are not permitted to pay the benefits directly to persons entitled to them. 4. If you havework on the effective date of this policy in any state not listed in item 3.A of the information Page, coverage will not be afforded for that state unless we are notified within thirty days. Notice PART FOUR YOUR DUTIES IF INJURY OCCURS 6. Do not voluntarily make payments, assume obliga- tions or incur expenses, except at your own cost. notices, demands and legal pa- All premium for this policy will be determined by our manuals of rules, rates, rating plans and classifications. We may change our manuals and apply the changes to this policy if authorized by law or a governmental agency regulating this Insurance. B. Classifications item 4 of the Information Page shows the rate and premium baslsfor certain business or work classifications. These classifications were assigned based on an estimate of the exposures you would have during the policy period. if your actual exposures are not properly described by those classifications, we will assign proper classifications, rates and premium basis by endorsement to this policy. C. Remuneration Premium for eachworkciassification Is determined by multiplying a rate times a premium basis. Remuneration is the most common premium basis. This premium basis includes payroll and all other remuneration paid or payable during the policy period for the services of: 1. all your officers and employees engaged in work covered bythls policy; and 2. ail other persons engaged in work that could make us liable under Part One (Workers' Compensation insurance) of this poilcy. If you do not have payroll records for these persons, the contract price for their services and materials may be used as the premium basis. This paragraph 2. will not apply if you give us proof that the employers PART FIVE PREMIUM Tell us at once if you begin work in any state listed in item 3.0 of the information Page. pers related to the injury, claim, proceeding or suit. Cooperate with us and assist us, as we may request, In the investigation, settlement or defense of any claim, proceeding or suit. 5. Do nothing after an injury occurs that would interfere with our right to recover from others. of these persons lawfully secured their workers' compensation obligations. D. Premium Payments You will pay all premium when due. You will pay the premium even if part or all of a workers' compensation law is not valid. E. Final Premium The premium shown on the Information Page, Schedules and endorsements is an estimate. The final premium will be determined after this policy ends by using the actual, not the estimated, premium basis and the proper classifications and rates that lawfully appiyto the business and work covered by this policy. if the final premium is more than the premium you paid to us, you must pay us the balance, if it is less, we will refund the balance to you. The final premium will not be less than the highest minimum premium for the classifications covered by this policy. if this policy is canceled, final premium will be determined in the following way unless our manuals provide otherwise. 1. If we cancel, final premium will be calculated pro rata based on the time this policy was In force. Final premium will not be less than the pro rata share of the minimum premium. 2. If you cancel, final premium will be more than pro rata; it will be based on the time this policy was in force, and increased by our short rate cancelation table and procedure. Final premium will not be less than the minimum premium. F. Records NWA /01198 WO 102(4.92) WO A (Ed 4-92) Copyright 1091 National Council on Compensation insurance, Pno 4 of 5

232 You will keep records of Inform,, needed to compute premium. You will provide us with copies of those records when we ask for them. G. Audit You will let us examine and audit all your records that relate to this policy. These records include ledgers, journals, registers, vouchers, contracts, tax reports, payroll and cik rsernent records and programs for storing and retrieving data. We may conduct the audits during regular business hours during the policy period and within three years after the policy period ends. Information developed by audit will b- used to determine final premium. Insurance rate serk. vice organizations have the same rights we have under this provision. A. Inspection We have the right, but are not obliged to Inspect your workplaces at anytim e. Our Inspections are not safety Inspections. They relate only to the Insurability of the workplaces and the prerniumsto be charged. We may give you reports on the conditions we find. We may also recommend changes. While they may help reduce losses, we do not undertake to perform the duty of any person to provide for the health or safety of your employees or the public. We do not warrant that your workplaces are safe or healthful or that they comply with laws, regulations, codes or standards. Insurance rate service organizations have the same rights we have under this provision. B. Long Term Policy If the policy is longer than one year and sixteen days, all provisions of this policy will apply as though a new policy were Issued on each annual anniversary that this policy Is in force. C. Transfer Of Your Rights And Duties Your rights or duties under this policy may not be transferred without our written consent. if you die and we receive notice within thirty days after PART SIX CONDITIONS your death, we will cover your legal representative as insured. D. CancelatIon 1. You may cancel this policy. You must mail or deliver advance written notice to us stating when the canceiation is to take effect. 2. We maycancel this policy. We must mail or dei Ivor to you not less than ten days advance written notice stating when the canceiation is to take effect. Mailing that notice to you at your mailing address shown in Item 1 of the information Page will be sufficient to prove notice. 3. The policy period will end on the day and hour stated In the cancelation notice. 4. Any of these provisions that conflicts with a law that controls the cancelation of the Insurance In this policy Is changed bythis statement to comply with that law. E. Sole Representative The insured first named in item 1 of the Information' Page will act on behalf of all Insureds to change this policy, receive return premium and give or receive notice of cancelation. Page 5 of 5 NWA /01/98 WC 102 (4-92) Copyright 1991 National Council on Compensation Insurance. WC A (Ed, 4-92)

233 EXHIBIT H REINSURANCE AGREEMENT JULY 1, JULY 1, 1993

234 REINSURANCE AGREEMENT This Reinsurance Agreement effective July 1, 1992, between Planet Insurance Company, an insurance corporation with business offices at 77 Water Street, New York, New York (the "Company") and Nafco Insurance Co., Ltd, an insurance corporation with its principal business office at #11 Victoria Street, Hamilton, Bermuda HM11, (the "Reinsurer") In consideration of the payment of the reinsurance premium, and subject to the terms, conditions and limits of liability set forth below, the Reinsurer does hereby reinsure the company in respect of the Company's Policies. ARTICLE I. DEFINITIONS The following terms shall have these meanings; A. "Policy" or "Policies" - Policies of insurance and any extension or renewals including endorsements written through Johnson & Higgins under Producer Code Number 80301, and issued by the Company to Carlson Holdings, Inc. first named insured, and as described in schedule I to this Agreement. B. "Incurred Losses" - All Paid Losses, plus reserves for unpaid Losses both reported and unreported attributable to Policies and as established by the Company. C. "Paid Losses" - Payments for claims under the Policies, including any Deductible Amounts made by the Company, and not reimbursed by the Insured; D. "Allocated Loss Adjustment Expenses" - Expenses that the Company, or any claims administrator, under the Companyts accounting practices, directly allocates to a particular claim which shall include expenses paid by the Company in connection with the Policies, whether or not related to Paid Losses. These Allocated Loss Adjustment Expenses may include: attorney's fees, court costs and related costs such as filing fees; the costs of medical examinations, expert medical or other review or testimony, laboratory services, x-rays, autopsies; and the costs for stenographic services, witnesses, summonses and copies of documents. Allocated Loss Adjustment Expense shall also include expenses incurred in connection with determining questions of the construction of Policies, their validity, and proceedings to determine the rights, duties or obligations if any of any insureds pr parties to the Policies. Allocated Loss Adjustment Expenses do not include Unallocated Loss Adjustment Expense. CRAA Page 1 of 11

235 E. "Unallocated Loss Adjustment Expenses" - Expenses which are not directly allocated to a particular claim and shall include the expenses of the Company's employees or of claims administrators, including their salaries and traveling expenses, and the Company's overhead. F. "Return Premiums" - Amounts payable to insureds under Policies as return of unearned premiums on canceled or amended policies, adjustments arising out of premium audits or as required by law or rating plans, or as dividends. G. Terms defined or given special meanings within Policies have the same meanings in this Agreement as those given to them in the Policies. H. other terms or phrases may be given special meanings within this Agreement. ARTICLE II. COVERAGE The Reinsurer is liable to the Company under this Agreement for the following: A. Workers' Compensation i. Up to and including the first $500,000 of Incurred Losses covered under Part One - Workers' Compensation Insurance of Policies described as Workers' Compensation in Schedule I arising out of any accident involving one or more employees of an Insured; plus all Allocated Loss Adjustment Expense attributable to such Losses on a pro-rata basis. 2. Up to and including the first $500,000 of Incurred Losses covered under Part One - Workers' Compensation Insurance of Policies described as Workers' Compensation in Schedule I arising out of occupational disease affecting any one employee of the Insured; plus all Allocated Loss Adjustment Expenses attributable to such Losses on a pro-rata basis. B. Workers' Compensation/Employer's Liability 1. Up to and including the first $500,000 of Incurred Losses covered under Part Two - Employer's Liability Insurance of Policies described as Workers' Compensation in Schedule I arising out of bodily injury by accident; plus all Allocated Loss Adjustment Expenses attributable to such Losses on a pro-rata basis; and CRAA Page 2 of 11

236 2. Up to and including the first $500,000 of Incurred Losses covered under Part Two - Employer's Liability Insurance of Policies described as Workers' Compensation in Schedule I arising out of bodily injury by disease; plus all Allocated Loss Adjustment Expenses attributable to such Losses on a pro-rata basis. C. For all costs and expenses incurred by the Company in connection with seeking recovery as salvage or subrogation for Paid Losses subject to reinsurance under this Article. D. For 100% of Paid Losses in excess of Policy limits, but otherwise within the terms and conditions of the Policy arising as the result of an action against the Company to recover damages, which an insured under the Policy is legally obligated to pay to a third party, alleging negligence or bad faith in rejecting a settlement within the Policy limits, or in discharging its duty to defend an insured under the Policy including prosecuting any appeals; plus all Allocated Loss Adjustment Expenses attributable to such Losses. E. For 100% of any punitive, exemplary, compensatory or consequential damages, but not including amounts payable under II.D, II.E, payable by the Company as the result of an action against the company alleging negligence or bad faith in the handling of any claim made under a Policy; plus Allocated Loss Adjustment Expenses attributable to such Losses. ARTICLE III. CLAIMS A. The Company or its authorized representatives shall adjust, settle or compromise any and all claims arising under the Policies and shall further commence, continue, defend, or withdraw from actions, suits or proceedings under the Policies, and generally do all things relating to claims thereunder that it deems necessary or expedient. Any authorized representative shall follow the Company, s claims processing guidelines. While the Reinsurer is not required to investigate or defend claims or suits under the Policies, it may associate, at its own expense, with the Company and its authorized representatives in the defense of any claim, suit or proceeding involving this reinsurance. Except as otherwise specifically provided for in this Agreement, it is the intent of this Agreement that the Reinsurer's liability shall, in all respect, follow the fortunes of the Company CRAA Page 3 of 11

237 under the Policies. All adjustments, settlements and compromises by the Company and its authorized representatives of claims involving Policies, when made by the Company or its authorized representatives, shall be unconditionally binding on the Reinsurer. B. All records pertaining to this Agreement and claims arising under the Policies shall be owned by the Company. The Company will, at the request of the Reinsurer, furnish the Reinsurer a copy of any of the Policies and all endorsements and shall make available for inspeption and place at the disposal of the Reinsurer at reasonable times any of its records or claims subject to reinsurance under this Agreement. C. The Company will pay or credit the Reinsurer up to the amount of the Reinsurers interest for amounts attributable to salvage, reimbursement obtained or recovery made by the Company relating to any of the Policies, including recovery for any Deductible Amounts as set forth in the Policies which were paid by the Company, after deducting the direct cost (excluding Unallocated Loss Adjustment Expenses) of obtaining such salvage or reimbursement or making such recovery, and after the Company has been reimbursed up to the amount of any Paid Losses for which the Reinsurer is not liable under Article II. ARTICLE IV. PAID LOSS DEPOSIT FUND A. The Reinsurer will provide funds for the company to establish and maintain in its own name a Paid Loss Deposit Fund, for payment of the Reinsurerls liabilities under Article II of this Agreement. The Company may at its option adjust the level of the Paid Loss Deposit Fund. B. The Reinsurer shall, upon receipt of a written request by the Company or a designated claims administrator forward by wire transfer within three (3) business days funds to the Company sufficient to maintain the Paid Loss Deposit Fund balance at the minimum level required in Section A above. C. In the event the Company is required to make a payment for Paid Losses including Allocated Loss Adjustment Expense on any one claim in the amount of $25,000, or greater, the Reinsurer shall, notwithstanding the availability of funds in the Paid Loss Deposit Fund, immediately upon receipt of notice forward by wire transfer funds for the full amount of the payments. CR2A Page 4 of 11

238 D. The Company may increase the required level of the Paid Loss Deposit Fund each time the Reinsurer fails to make any payment to the Company within the time required by this Agreement. No one individual increase will increase the required level to more than twice that required before the increase. - ARTICLE V. REINSURANCE PREMIUM A. The reinsurance premium shall be the monies actually received and recorded by the Company as premium for the Policies less Return Premiums: 1. For Workers' Compensation Policies: a. 4.2% of such premium for Company Expenses; b. 9.9% of such premium for: (1) premium taxes; (2) fees for board and bureaus; and (3) liabilities for assessments and pools; B. Within twenty (20) days after the end of each calendar quarter, the Company will send the Reinsurer a Reconciliation Statement including: a. Premiums received by the Company under the Policies; b. Return Premiums; c. Premiums payable to the Reinsurer; d. Payments made by the Reinsurer; e. Paid Losses; f. Allocated Loss Adjustment Expense; g. Amounts required to fund the Paid Loss Deposit Fund; h. Federal Insurance Excise Tax or other tax on Reinsurance Premium paid by the Company. 1. Any, other amounts paid or recovered by the Company subject to this Agreement; j. Reconciliation Balance; k. Claims reported; and 1. Such other information and in such form and detail as shall be mutually agreed upon in writing by the Company and the Reinsurer r, or that may be required by regulatory authorities with jurisdiction over either party. CRAA Page 5 of 11

239 C. If the result of any such reconciliation is that the Reinsurer owes money to the Company, the Reinsurer will within thirty (30) days after receipt of the Reconciliation Statement pay the amount due. D. If the result of any such reconciliation is that the Company owes money to the Reinsurer, the Company will pay the amount due within thirty (30) days as set forth in the Reconciliation Statement. E. All amounts due the Reinsurer or the Company under this Agreement or any other agreement between the parties shall be subject to the right of offset. ARTICLE VI. COLLATERAL A. The Reinsurer shall deliver to the Company cash, a Letter of Credit or other security in an amount and form acceptable to the Company ("Collateral"), for the purpose of securing the Reinsurer's obligations under this Agreement. B. The Reinsurer's obligations being secured shall include: I. Losses and Allocated Loss Adjustment Expenses, including any Deductible Amounts set forth in the Policies, which were paid by the Company but not recovered from the Reinsurer, for which the Reinsurer is liable under Article II; 2. Company's reserves for Losses reported and Allocated Loss Adjustment Expense on such Losses for which the Reinsurer is liable under Article II; 3. Company's reserves for Losses incurred but not reported and Allocated Loss Adjustment Expense on such Losses for which the Reinsurer is liable under Article II; 4. The Reinsurer's liabilities under Articles II.D and II.E. 5. Return premiums paid by the Company, but not recovered from the Reinsurer; 6. Company's reserves for unearned premiums; 7. Maintaining the level of the Paid Loss Deposit Fund in Article IV; CRAA Page 6 of 11

240 All without diminution because of the insolvency of the Company or the Reinsurer. C. Any Letter of Credit shall be issued or confirmed by a Federal Reserve System member bank acceptable to the Company with an office for presentment and payment in New York City, New York. D. Any Letter of Credit shall name each of the Company as beneficiary. E. Any Letter of Credit shall be in accordance with its terms automatically renewable for successive annual periods unless the issuing bank gives the Company at least sixty (60) days advance notice of its intention not to renew. F. The Company, any successor by operation of law including any liquidator, rehabilitator, receiver or conservator may, notwithstanding any other provisions in this Agreement, draw the full amount of the Collateral at any time: 1. for reimbursement of Reinsureris obligations paid by the Company or its designated third-party claims administrator but not recovered from the Reinsurer, or 2. to fund an account with the Company equal to the Reinsurerts obligations as determined by the Company. G. The Reinsurer$s duty to provide Collateral is continuous and extends until the company is satisfied that all of the Reinsurer$s obligations under this Agreement have been or will be met. The Reinsurer$s liabilities under this Agreement may extend beyond the time during which the Company will be receiving premiums under the Policies and beyond the termination of the Policies or this Agreement. H. The Reinsurer will, not less than thirty (30) days prior to any termination or expiration of any Letter of Credit, deliver to the Company, a replacement Letter of Credit or other Collateral in an amount and form acceptable to the Company which will become effective immediately upon the termination or expiration of the prior Collateral. I. The Company may require the Reinsurer to provide additional Collateral before the end of any calendar year by giving at least sixty (60) days notice to the Reinsurer of the amount of additional Collateral that will be required. Such Collateral shall comply with all the requirements of this Article. CR2A Page 7 of 11

241 . - J. The Reinsurer shall deliver any Collateral to the Company at: RELIANCE NATIONAL RISK SPECIALISTS 77 Water Street New York, New York (Attn: Financial Department) K. If the Reinsurer fails to provide the Company with any additional or substitute Collateral, the Company shall have the unconditional right to draw upon the full amount of any existing Letter of Credit or other Collateral and to hold and apply such funds in accordance with the provisions of Article VI.F. ARTICLE VII. TAXES A. The Company is responsible for the payment of all taxes on premiums received under the Policies. B. The Reinsurer is responsible for the payment of all taxes on reinsurance premiums hereunder, and shall reimburse the Company for any taxes it may pay on such premiums including any Foreign Insurance Excise Tax (PIET). ARTICLE VIII. TERMINATION A. This Agreement may be terminated in whole or in part by the Company by giving ninety (90) days prior written notice to the Reinsurer. The Reinsurer shall have the right to terminate this Agreement by giving prior written notice to the Company which shall be not less than sixty (60) days more than the longest period required for notice of cancellation under the Policies or the laws and regulations of any jurisdiction in which Policies are issued or delivered. B. The Reinsurer shall be entitled to credit for a prorata portion of the reinsurance premium to which it would have been entitled had this Agreement not been terminated. ARTICLE IX. SURVIVAL OF OBLIGATIONS A. Reinsurer recognizes that the Company's obligations which accrue during the term of the Policies will survive the termination of those Policies, and that Reinsurers obligations under this Agreement will survive the termination of those Policies and this Agreement. CRAA Page 8 of 11

242 B. If this Agreement terminates, the Reinsurer's obligations and responsibilities under this Agreement will continue with respect to Losses on Policies issued or renewed prior to the effective date of termination of this Agreement. C. Any Policy required to be renewed under any state law, or regulation or order shall be deemed renewed prior to the termination of this Agreement whether or not renewed prior to the date of termination. D. The Company and Reinsurer agree that they will cooperate in the handling of all such outstanding business existing on the effective date of termination until such business has expired either by cancellation or by the terms of the Policies, and all regulatory requirements are met. ARTICLE X. INTEREST AND COLLECTION COSTS A. Reinsurer will reimburse the Company for Company's attorneys' fees and court costs incurred in attempting to collect amounts, including interest, which are due the Company under this Agreement but not paid within the time required by this Agreement. B.' Either party will pay to the other interest at the monthly rate of one and one-half percent (1.5%) on any amount that is not paid within the time required by this Agreement. Interest shall accrue from the time any payment is payable under this Agreement. ARTICLE XI, ERRORS AND OMISSIONS Inadvertent delays (other then in payments due), errors or omissions made by the Company or the Reinsurer in connection with this Agreement or any transaction hereunder shall not relieve the other party from any liability which would have attached, had such delay, error or omission not occurred, provided that such error or omission is rectified as soon as possible after discovery. ARTICLE XII. INSOLVENCY A. The Reinsurer hereby agrees that, as to all reinsurance made, ceded, renewed or otherwise becoming effective hereunder, all amounts payable under this Agreement shall be paid by the Reinsurer on the basis of the liability of the CRAA Page 9 of 11

243 Company under the Policies, without diminution because of the insolvency of the Company, directly to the company or to its liquidator, receiver or other statutory successor. B. It is further agreed and understood that in the event of insolvency of the Company, the liquidator or receiver or statutory successor of the Company shall give written notice to the Reinsurer of the pendency of any claim against the insolvent Company under any of the Policies within a reasonable time after such claim is filed in the insolvency proceeding; and that during the pendency of any, such claim the Reinsurer may investigate such claim and interpose, at its own expense, in the proceeding where any such claim is to be adjudicated any defense or defenses which it may deem available to the Company or its liquidator or receiver or statutory successor. Any expense thus incurred by the Reinsurer shall be chargeable subject to court approval against the insolvent Company as part of the expense of liquidation to the extent of a proportionate share of the benefit which may accrue to the Company solely as a result of the defense undertaken by the Reinsurer as the assuming insurer. C. It is further agreed and understood that as to all reinsurance made, ceded, renewed or otherwise becoming effective hereunder, in the event of insolvency of the Company all amounts payable under this Agreement shall be paid by the Reinsurer to the Named Insured under the Policies when the Reinsurer with the consent of the Named Insureds under the Policies has assumed the obligations of the Company under any of the Policies as direct obligations of the Reinsurer to the payees under any such Policy and in substitution for the obligations of the Company to such payees. ARTICLE XIII. MISCELLANEOUS A. This Agreement shall be governed by and construed according to the laws of the State of New York. B. This Agreement may not be assigned by the Reinsurer unless the written approval of the Company is first obtained. C. Any notices, requests or other communications hereunder will be in writing and will be deemed to have been received when deposited in the United States mail with proper postage fees prepaid, addressed as follows: CRAA Page 10 of 11

244 1. If to the Reinsurer, then to: Nafco Insurance Co., Ltd. #11 Victoria Street Hamilton, Bermuda HM11 2. If to Company, then to: RELIANCE NATIONAL RISK SPECIALISTS 77 Water Street New York, New York (Attn: Financial Department) D. Except for a termination in accordance with the provisions of Article VIII.A, this Agreement may not be released, discharged, changed or modified except by an instrument in writing signed by a duly authorized representative of both of the parties. IN WITNESS WHEREOF, the parties hereto, by their respective duly authorized persons, intending to be legally bound have signed this Agreement. REINSuRER: Nafco Insurance Co., Ltd COMPANY: Planet Insurance Corn any By: By: 4e7,4V kri0 Titlez) Date: WITNEss:Q. 41,42,e6. a / 41_, Title: Date: WITNESS: ) 3 I Ved../ CRAA Page 11 of 11

245 Exhibit "C" Assumption and Substitution by Reinsurer 1. Pursuant to Insurance Policies #NWA (7/1/92-711/93), -01 ( /1/94, -02 (7/1/94-7/1/95), -03 (7/1/95-7/1/96), -04 (7/1/96-7/1/97), -05 (7/1/97-7/1/98), and -06 (7/1/98-7/1/99), including any and all endorsements, riders and addenda thereto (hereinafter "Policies") issued by Reliance Insurance Company (hereinafter "Reliance") to Carlson Holdings, Inc. (hereinafter "Policyholder"), Policyholder was insured by Reliance for the period July 1, 1992 to July 1, For purposes of this document, "Policyholder" shall refer collectively to the Policyholder and any and all insureds or persons who claim rights or benefits through or under the Policy. The term "Reliance" shall include Reliance Insurance Company and its former subsidiaries, which were previously merged into Reliance Insurance Company, including Reliance National Indemnity Company, Reliance National Insurance Company, United Pacific Insurance Company, Reliance Direct Insurance Company, Reliance Surety Company, Reliance Universal Insurance Company, United Pacific Insurance Company of New York, Reliance Insurance Company of Illinois, and Planet Insurance Company. 2. On October 3, 2001, an Order of Liquidation declaring Reliance insolvent was entered by the Commonwealth Court of Pennsylvania, Docket No. 269 MD 2001 (hereinafter the "Order of Liquidation"). Pursuant to this Order of Liquidation, M. Diane Koken, Insurance Commissioner of the Commonwealth of Pennsylvania, in her official capacity as Liquidator of Reliance (hereinafter "the Liquidator"), was vested with all powers, rights and duties authorized under Article V of the Insurance Department Act of 1921, 40 P.S. Section 221.1, et seq. (hereinafter "the Act."). In accordance with that authority, the Liquidator has directed that certain payments by Reliance in the ordinary course will be stayed, and payments

246 for amounts due and owing under policies of insurance issued by Reliance (including the Policy) may only be made pursuant to a claim in the liquidation proceedings. 3. The Policies issued by Reliance were reinsured by NAFCO Insurance Company, Ltd., (hereinafter referred to as "Reinsurer"), pursuant to reinsurance agreements effective July 1, 1992 (a copy is attached as Exhibit A), and for each referenced policy year thereafter, the "Reinsured Coverage" was for the first $500,000 of Incurred Loss, and attributable allocated loss adjustment expense, covered under each of the policies (collectively "the Reinsurance Contracts"). The Reinsurance Contracts between Reliance and Reinsurer contain a provision which permits, under certain circumstances, and if consistent with applicable law, the direct payment of the reinsurance proceeds directly to the Policyholder. 4. The Liquidator has informed Reinsurer that this provision comports with the requirements of 40 P.S. Section of the Act and the Guidelines For Enforcement of 40 P.S. Section issued by the Liquidator. Accordingly, upon consent of Policyholder (as evidenced by the execution of an Informed Consent to Substitution of Reliance and submission of this form to the Liquidator), the Liquidator will pennit direct payment of amounts due and owing under the Policies by Reinsurer directly to the Policyholder, and will accept that the Reinsurer will assume the direct policy obligation to Policyholder for the Reinsured Coverage. 5. Pursuant to the Liquidator's approval, provisions of the Reinsurance Contract, 40 P.S of the Act and the Guidelines For Enforcement of 40 P.S issued by the Liquidator, Reinsurer agrees to assume the direct coverage obligations of Reliance under the Policy for the Reinsured Coverage and shall substitute for Reliance in respect to all obligations for all payments and obligations under the Policy to Policyholder for the Reinsured Coverage. Reinsurer agrees and acknowledges that Reliance has not transferred or assigned to it -2-

247 any inuring reinsurance with respect to the obligations assumed herein. Reinsurer further agrees and acknowledges that Reliance shall have no further rights, duties and obligations under the Policy to the Policyholder or to the Reinsurer for the Reinsured Coverage. 6. By execution of the Informed Consent to Substitution of Reliance, Policyholder has agreed and confirmed that the Policyholder understands that the Reinsurer will substitute for Reliance under the Policy for the Reinsured Coverage. Effective on October 3, 2001 and upon execution of the Informed Consent to Substitution of Reliance, Reinsurer does hereby assume as direct policy obligations and will be obligated for all payments and obligations under the Policy for the Reinsured Coverage. Reinsurer acknowledges that the Policyholder has expressly agreed to waive, release and forego any and all rights, liabilities, claims and defenses against Reliance or the Liquidator in any matter relating to or arising from the Policy for the Reinsured Coverage or the agreement by the Reinsurer to assume the direct obligation of coverage to the Policyholder under the Policy and will look solely to the Reinsurer for any rights under the Policy for the Reinsured Coverage. Reinsurer further expressly understands that Policyholder will have no further rights against Reliance or Liquidator relating to the Policy for the Reinsured Coverage or the assumption as a result of this substitution. Upon execution of the Informed Consent to Substitution of Reliance, direct coverage will be assumed by Reinsurer and Reliance will be released in all respects from the Policy for all time for the Reinsured Coverage. A copy of the Policyholder's executed Informed Consent to Substitution of Reliance is acknowledged by the Reinsurer, and its terms and conditions are incorporated by reference into this Agreement. Since October 3, 2001, to the extent that guaranty associations or related entities have paid claims and incurred other expenses related to Reinsurer's direct coverage obligation to the Policyholder under the Policy, thereby creating subrogation rights in the -3-

248 guaranty associations or related entities, Reinsurer hereby acknowledges and accepts its obligation to satisfy the subrogation fights of the relevant guaranty associations or related entities through reimbursement of all such claims payments and related claims administration expenses. 7. Upon execution of the Informed Consent to Substitution of Reliance, the Policies issued by Reliance to Policyholder shall be null and void as to the Reinsured Coverage and shall have no further effect as an obligation of Reliance for the Reinsured Coverage, and Reinsurer shall be deemed to have assumed all of the rights, duties and obligations under the Policy to the Policyholder as a direct coverage obligation for the Reinsured Coverage. 8. Reinsurer expressly waives, releases and foregoes any and all rights, liabilities, claims and defenses against Reliance or the Liquidator in any matter relating to or arising from the Policies for the Reinsured Coverage or the agreement by the Reinsurer to assume the direct obligation of coverage to the Policyholder under the Policy for the Reinsured Coverage. Reinsurer further expressly understands that Reinsurer will have no further rights against Reliance or Liquidator relating to the Policy for the Reinsured Coverage or the assumption as a result of this substitution. Notwithstanding the foregoing and except to the extent provided in Paragraph 9 herein, neither the Reinsurer nor Reliance releases or waives any rights with respect to any collateral held by Reliance pursuant to any agreements regarding the establishment or maintenance of collateral securing the obligations of the Reinsurer to Reliance under the relevant reinsurance agreements. Provided, however, upon approval of this Assumption and Substitution By Reinsurer, Reliance and the Liquidator have agreed to reduce the Reinsurer's collateral securing obligations by releasing collateral to the Reinsurer for covered Policy losses in that amount that were directly paid by the Reinsurer to the Policyholder. -4-

249 9. Any and all disputes or claims, between the reinsurer and Reliance, arising from or related in any way to the meaning, enforcement or execution of this Assumption and. Substitution by Reinsurer shall be governed by the law of the Commonwealth of Pennsylvania, without regard to its choice of law provisions, and the Reinsurer agrees to submit to the sole and exclusive jurisdiction of the Commonwealth Court of Pennsylvania with respect to any such disputes or claims and any disputes or claims arising from or related to the Reinsurance Contracts or the Policies. SO AGREED: Reinsurer: NAPCO Insurance Company, Ltd. By: Print Name: Title: Bradley M. Hall Vice President Treasurer & Strategic Analysis -5-

250 EXHIBIT A REINSURANCE AGREEMENT JULY 1, JULY 1, 1993

251 REINSURANCE AGREEMENT This Reinsurance Agreement effective July 1, 1992, between Planet Insurance Company, an insurance corporation with business offices at 77 Water Street, New York, New York (the "Company") and Nafco Insurance Co., Ltd, an insurance corporation with its principal business office at #I1 Victoria Street, Hamilton, Bermuda HMII, (the "Reinsurer") In consideration of the payment of the reinsurapce premium, and subject to the terms, conditions and limits of liability set forth below, the Reinsurer does hereby reinsure the company in respect of the Company's Policies. ARTICLE I. DEFINITIONS The following terms shall have these meanings: A. "Policy" or "Policies" - Policies of insurance and any extension or renewals including endorsements written through Johnson & Higgins under Producer Code Number 80301, and issued by the Company to Carlson Holdings, Inc. first named insured, and as described in Schedule I to this Agreement. B. "Incurred Losses" - All Paid Losses, plus reserves for unpaid Losses both reported and unreported attributable to Policies and as established by the Company. C. "Paid Losses" - Payments for claims under the Policies, including any Deductible Amounts made by the Company, and not reimbursed by the Insured; D. "Allocated Loss Adjustment Expenses" - Expenses that the Company, or any claims administrator, under the Company's accounting practices, directly allocates to a particular claim which shall include expenses paid by the Company in connection with the Policies, whether or not related to Paid Losses. These Allocated Loss Adjustment Expenses may include: attorneys fees, court costs and related costs such as filing fees; the costs of medical examinations, expert medical or other review or testimony, laboratory services, x-rays, autopsies; and the costs for stenographic services, witnesses, summonses and copies of documents. Allocated Loss Adjustment Expense shall also include expenses incurred in connection with determining questions of the construction of Policies, their validity, and proceedings to determine the rights, duties or obligations if any of any insureds or parties to the Policies. Allocated Loss Adjustment Expenses do not include Unallocated Loss Adjustment Expense. CRAA Page 1 of 11

252 E. "Unallocated Loss Adjustment Expenses" - Expenses which are not directly allocated to a particular claim and shall include the expenses of the Company's employees or of claims administrators, including their salaries and traveling expenses, and the Company's overhead. F. "Return Premiums" - Amounts payable to insureds under Policies as return of unearned premiums on canceled or amended policies, adjustments arising out of premium audits or as required by law or rating plans, or as dividends. G. Terms defined or given special meanings within Policies have the same meanings in this Agreement as those given to them in the Policies. H. Other terms or phrases may be given special meanings within this Agreement. ARTICLE II. COVERAGE The Reinsurer is liable to the Company under this Agreement for the following: A. Workers' Compensation 1. Up to and including the first $500,000 of Incurred Losses covered under Part One - Workers' Compensation Insurance of Policies described as Workers' Compensation in Schedule I arising out of any accident involving one or more employees of an Insured; plus all Allocated Loss Adjustment Expense attributable to such Losses on a pro-rata basis. 2. Up to and including the first $500,000 of Incurred Losses covered under Part One - Workers' Compensation Insurance of Policies described as Workers' Compensation in Schedule I arising out of occupational disease affecting any one employee of the Insured; plus all Allocated Loss Adjustment Expenses attributable to such Losses on a pro-rata basis. B. Workers' Compensation/Employer's Liability 1. Up to and including the first $500,000 of Incurred Losses covered under Part Two - Employer's Liability Insurance of Policies described as Workers' Compensation in Schedule I arising out of bodily injury by accident; plus all Allocated Loss Adjustment Expenses attributable to such Losses on a pro-rata basis; and C1UAA Page 2 of 11

253 2. Up to and including the first $500,000 of Incurred Losses covered under Part Two - Employer's Liability Insurance of Policies described as Workers' Compensation in Schedule I arising out of bodily injury by disease; plus all Allocated Loss Adjustment Expenses attributable to such Losses on a pro-rata basis. C. For all costs and expenses incurred by the Company in connection with seeking recovery as salvage or subrogation for Paid Losses subject to reinsurance under this Article. D. For 100% of Paid Losses in excess of Policy limits, but otherwise within the terms and conditions of the Policy arising as the result of an action against the company to recover damages, which an insured under the Policy is legally obligated to pay to a third party, alleging negligence or bad faith in rejecting a settlement within the Policy limits, or in discharging its duty to defend an insured under the Policy including prosecuting any appeals; plus all Allocated Loss Adjustment Expenses attributable to such Losses. E. For 100% of any punitive, exemplary, compensatory or consequential damages, but not including amounts payable under II.D, II.E, payable by the Company as the result of an action against the Company alleging negligence or bad faith in the handling of any claim made under a Policy; plus Allocated Loss Adjustment Expenses attributable to such Losses. ARTICLE III. CLAIMS A. The Company or its authorized representatives shall adjust, settle or compromise any and all claims arising under the Policies and shall further commence, continue, defend, or withdraw from actions, suits or proceedings under the Policies, and generally do all things relating to claims thereunder that it deems necessary or expedient. Any authorized representative shall follow the Company's claims processing guidelines. While the Reinsurer is not required to investigate or defend claims or suits under the Policies, it may associate, at its own expense, with the company and its authorized representatives in the defense of any claim, suit or proceeding involving this reinsurance. Except as otherwise specifically provided for in this Agreement, it is the intent of this Agreement that the Reinsurer's liability shall, in all respect, follow the fortunes of the Company CRAA Page 3 of 11

254 under the Policies. All adjustments, settlements and compromises by the Company and its authorized representatives of claims involving Policies, when made by the Company or its authorized representatives, shall be unconditionally binding on the Reinsurer. B. All records pertaining to this Agreement and claims arising under the Policies shall be owned by the Company. The Company will, at the request of the Reinsurer, furnish the Reinsurer a copy of any of the Policies and all endorsements and shall make available for inspeption and place at the disposal of the Reinsurer at reasonable times any of its records or claims subject to reinsurance under this Agreement. C. The Company will pay or credit the Reinsurer up to the amount of the Reinsurer's interest for amounts attributable to salvage, reimbursement obtained or recovery made by the Company relating to any of the Policies, including recovery for any Deductible Amounts as set forth in the Policies which were paid by the Company, after deducting the direct cost (excluding Unallocated Loss Adjustment Expenses) of obtaining such salvage or reimbursement or making such recovery, and after the Company has been reimbursed up to the amount of any Paid Losses for which the Reinsurer is not liable under Article II. ARTICLE IV. PAID LOSS DEPOSIT FUND A. The Reinsurer will provide funds for the Company to establish and maintain in its own name a Paid Loss Deposit Fund, for payment of the Reinsurer's liabilities under Article II of this Agreement. The Company may at its option adjust the level of the Paid Loss Deposit Fund. B. The Reinsurer shall, upon receipt of a written request by the Company or a designated claims administrator forward by wire transfer within three (3) business days funds to the Company sufficient to maintain the Paid Loss Deposit Fund balance at the minimum level required in Section A above. C. In the event the Company is required to make a payment for Paid Losses including Allocated Loss Adjustment Expense on any one claim in the amount of $25,000, or greater, the Reinsurer shall, notwithstanding the availability of funds in the Paid Loss Deposit Fund, immediately upon receipt of notice forward by wire transfer funds for the full amount of the payments. CRAA Page 4 of 11

255 D. The Company may increase the required level of the Paid Loss Deposit Fund each time the Reinsurer fails to make any payment to the Company within the time required by this Agreement. No one individual increase will increase the required level to more than twice that required before the increase. _ ARTICLE V. REINSURANCE PREMIUM A. The reinsurance premium shall be the monies actually received and recorded by the Company as premium for the Policies less Return Premiums: 1. For Workers Compensation Policies: a. 4.2% of such premium for Company Expenses; b. 9.9% of such premium for: (1) premium taxes; (2) fees for board and bureaus; and (3) liabilities for assessments and pools; B. Within twenty (20) days after the end of each calendar quarter, the Company will send the Reinsurer a Reconciliation Statement including: a. Premiums received by the Company under the Policies; b. Return Premiums; c. Premiums payable to the Reinsurer; d. Payments made by the Reinsurer; e. Paid Losses; f. Allocated Loss Adjustment Expense; g. Amounts required to fund the Paid Loss Deposit Fund; h. Federal Insurance Excise Tax or other tax on Reinsurance Premium paid by the Company. i. Any other amounts paid or recovered by the Company subject to this Agreement; j. Reconciliation Balance; k. Claims reported; and 1. Such other information and in such form and detail as shall be mutually agreed upon in writing by the Company and the Reinsurer,or that may be required by regulatory authorities with jurisdiction over either party. CRAA Page 5 of 11

256 C. If the result of any such reconciliation is that the Reinsurer owes money to the Company, the Reinsurer will within thirty (30) days after receipt of the Reconciliation Statement pay the amount due. D. If the result of any such reconciliation is that the Company owes money to the Reinsurer, the Company will pay the amount due within thirty (30) days as set forth in the Reconciliation Statement. E. All amounts due the Reinsurer or the Company under this Agreement or any other agreement between the parties shall be subject to the right of offset. ARTICLE VI. COLLATERAL A. The Reinsurer shall deliver to the Company cash, a Letter of Credit or other security in an amount and form acceptable to the Company ("Collateral"), for the purpose of secilring the Reinsurers obligations under this Agreement. B. The Reinsurer's obligations being secured shall include: 1. Losses and Allocated Loss Adjustment Expenses, including any Deductible Amounts set forth in the Policies, which were paid by the Company but not recovered from the Reinsurer, for which the Reinsurer is liable under Article II; 2. Company's reserves for Losses reported and Allocated Loss Adjustment Expense on such Losses for which the Reinsurer is liable under Article II; 3.. Company's reserves for Losses incurred but not reported and Allocated Loss Adjustment Expense on such Losses for which the Reinsurer is liable under Article II; 4. The Reinsurer's liabilities under Articles MD and II.E. 5. Return premiums paid by the Company, but not recovered from the Reinsurer; 6. Company's reserves for unearned premiums; 7. Maintaining the level of the Paid Loss Deposit Fund in Article IV; CRAA Page 6 of 11

257 All without diminution because of the insolvency of the Company or the Reinsurer. C. Any Letter of Credit shall be issued or confirmed by a Federal Reserve System member bank acceptable to the Company with an office for presentment and payment in New York City, New York. Ti. Any Letter of Credit shall name each of the Company as beneficiary. E. Any Letter of Credit shall be in accordand -e with its terms automatically renewable for successive annual periods unless the issuing bank gives the Company at least sixty (60) days advance notice of its intention not to renew. F. The Company, any successor by operation of law including any liquidator, rehabilitator, receiver or conservator may, notwithstanding any other provisions in this Agreement, draw the full amount of the Collateral at any time; 1. for reimbursement of Reinsureris obligations paid by the Company or its designated third-party claims administrator but not recovered from the Reinsurer, or 2. to fund an account with the Company equal to the Reinsurerts obligations as determined by the Company. G. The Reinsureris duty to provide Collateral is continuous and extends until the Company is satisfied that all of the Reinsurerts obligations under this Agreement have been or will be met. The Reinsurerts liabilities under this Agreement may extend beyond the time during which the company will be receiving premiums under the Policies and beyond the termination of the Policies or this Agreement. H. The Reinsurer will, not less than thirty (30) days prior to any termination or expiration of any Letter of Credit, deliver to the Company, a replacement Letter of Credit or other Collateral in an amount and form acceptable to the Company which will become effective immediately upon the termination or expiration of the prior Collateral. I. The Company may require the Reinsurer to provide additional Collateral before the end of any calendar year by giving at least sixty (60) days notice to the Reinsurer of the amount of additional Collateral that will be required. Such Collateral shall comply with all the requirements of this Article. CRAA Page 7 of 11

258 J. The Reinsurer shall deliver any Collateral to the Company at: RELIANCE NATIONAL RISK SPECIALISTS 77 Water Street New York, New York (Attn: Financial Department) K. If the Reinsurer fails to provide the Company with any additional or substitute Collateral, the Company shall have the unconditional right to draw upon the full amount of any existing Letter of Credit or other Collateral and to hold and apply such funds in accordance with the provisions of Article VI.F. ARTICLE VII. TAXES A. The Company is responsible for the payment of all taxes on premiums received under the Policies. B. The Reinsurer is responsible for the payment of all taxes on reinsurance premiums hereunder, and shall reimburse the Company for any taxes it may pay on such premiums including any Foreign Insurance Excise Tax (FIET). ARTICLE VIII. TERMINATION A. This Agreement may be terminated in whole or in part by the Company by giving ninety (90) days prior written notice to the Reinsurer. The Reinsurer shall have the right to terminate this Agreement by giving prior written notice to the Company which shall be not less than sixty (60) days more than the longest period required for notice of cancellation under the Policies or the laws and regulations of any jurisdiction in which Policies are issued or delivered. B. The Reinsurer shall be entitled to credit for a prorate portion of the reinsurance premium to which it would have been entitled had this Agreement not been terminated. ARTICLE IX. SURVIVAL OF OBLIGATIONS A. Reinsurer recognizes that the Company's obligations which accrue during the term of the Policies will survive the termination of those Policies, and that Reinsurer's obligations under this Agreement will survive the termination of those Policies and this Agreement. CRAA Page 8 of 11

259 B. If this Agreement terminates, the Reinsurer's obligations and responsibilities under this Agreement will continue with respect to Losses on Policies issued or renewed prior to the effective date of termination of this Agreement. C. Any Policy required to be renewed under any state law, or regulation or order shall be deemed renewed prior to the termination of this Agreement whether or not renewed prior to the date of termination. D. The Company and Reinsurer agree that they will cooperate in the handling of all such outstanding business existing on the effective date of termination until such business has expired either by cancellation or by the terms of the Policies, and all regulatory requirements are met. ARTICLE X. INTEREST AND COLLECTION COSTS A. Reinsurer will reimburse the Company for Company's attorneys' fees and court costs incurred in attempting to collect amounts, including interest, which are due the Company under this Agreement but not paid within the time required by this Agreement. B. Either party will pay to the other interest at the monthly rate of one and one-half percent (1.5%) on any amount that is not paid within the time required by this Agreement. Interest shall accrue from the time any payment is payable under this Agreement. ARTICLE XI. ERRORS AND OMISSIONS Inadvertent delays (other then in payments due), errors or omissions made by the Company or the Reinsurer in connection with this Agreement or any transaction hereunder shall not relieve the other party from any liability which would have attached, had such delay, error or omission not occurred, provided that such error or omission is rectified as soon as possible after discovery. ARTICLE XII. INSOLVENCY A. The Reinsurer hereby agrees that, as to all reinsurance made, ceded, renewed or otherwise becoming effective hereunder, all amounts payable under this Agreement shall be paid by the Reinsurer on the basis of the liability of the CRAA Page 9 of 11

260 Company under the Policies, without diminution because of the insolvency of the Company, directly to the Company or to its liquidator, receiver or other statutory successor. B. It is further agreed and understood that in the event of insolvency of the Company, the liquidator or receiver or statutory successor of the Company shall give written notice to the Reinsurer of the pendency of any claim against the insolvent Company under any of the Policies within a reasonable time after such claim is filed in the insolvency proceeding; and that during the pendency of an such claim the Reinsurer may investigate such claim and interpose, at its own expense, in the proceeding where any such claim is to be adjudicated any defense or defenses which it may deem available to the company or its liquidator or receiver or statutory successor. Any expense thus incurred by the Reinsurer shall be chargeable subject to court approval against the insolvent company as part of the expense of liquidation to the extent of a proportionate share of the benefit which may accrue to the Company solely as a result of the defense undertaken by the Reinsurer as the assuming insurer. C. It is further agreed and understood that as to all reinsurance made, ceded, renewed or otherwise becoming effective hereunder, in the event of insolvency of the Company all amounts payable under this Agreement shall be paid by the Reinsurer to the Named Insured under the Policies when the Reinsurer with the consent of the Named Insureds under the Policies has assumed the obligations of the Company under any of the Policies as direct obligations of the Reinsurer to the payees under any such Policy and in substitution for the obligations of the Company to such payees. ARTICLE XIII. MISCELLANEOUS A. This Agreement shall be governed by and construed according to the laws of the State of New York. B. This Agreement may not be assigned by the Reinsurer unless the written approval of the Company is first obtained. C. Any notices, requests or other communications hereunder will be in writing and will be deemed to have been received when deposited in the United States mail with proper postage fees prepaid, addressed as follows: C1AA Page 10 of 11

261 1. If to the Reinsurer, then to: Nat= Insurance Co., Ltd. #11 Victoria Street Hamilton, Bermuda HM11 2. If to Company, then to: RELIANCE NATIONAL RISK SPECIALISTS 77 Water Street New York, New York (Attn: Financial Department) D. Except for a termination in accordance with the provisions of Article VIII.A, this Agreement may not be released, discharged, changed or modified except by an instrument in writing signed by a duly authorized representative of both of the parties. IN WITNESS WHEREOF, the parties hereto, by their respective duly authorized persons, intending to be legally bound have signed this Agreement. REINSURER: Nafco Insurance Co. Ltd By: Title0 AW Date: / -11 WITNESS: fibe-ee. (la& COMPANY: Planet Insurance Coin By: _441/Vd 6 (61- Title: JL Date: J4'S 1; WITNESS: 4,4/JAWA Ved CRAA Page 11 of 11

262 SCHEDULE I To the Reinsurance Agreement between Planet Insurance Company (the "Compa1y49 and Nafco Insurance Co Inc. (the "Reinsurer, Effective: July 1, 1992 POLICY # POLICY TYPE INSURED LIMITS NWA Workers Compensation/ Employers' Liability Carlson Holdings, Inc. A: Statutory B: 1,000,000 Each Accident/ Bodily Injury CRAA

263 APPENDIX I. ROBINS, KAPLAN, MILLER BOO LASALLE AvENuE m 281NONOEA LApS0LAL IsL MN TEL: FAX: October 7, 2011 RICHARD B. ALLYN rballyn Hunc.com Ms. Claire Rocco Associate General Counsel Reliance Insurance Company In Liquidation Three Parkway, 5th Floor Philadelphia, PA Re: NAFCO Insurance Company, Ltd. ("NAFC0"); Reserves and cut-through Dear Ms. Rocco: Thank you for your 8/25/11 voice mail and . We have also reviewed the 2003 and 2009 RR, form letters apparently sent to Carlson Holdings, Inc. ("Carlson") concerning certain of their commercial liability insurance policies with deductibles. This letter is intended to focus in a hopefully clearer fashion on Reliance issued incurred loss workers compensation policies for the policy years 7/1/92-7/1/93 through 7/1/ /99. 1 This limited category of workers compensation coverage required no deductible of Carlson. Reliance was (and its estate is) liable for all incurred losses arising from occurrences during the referenced policies. The upper limit was whatever amount a state law mandated. However, to mitigate its exposure, Reliance reinsured the first $500,000 of its incurred loss liability, including allocated loss adjustment expense, with NAFCO Insurance Co., Ltd, a Bermuda corporation. At the outset, a significant area of disagreement appears to lie in the factual history of how this reinsured incurred loss program worked. Reliance and NAFCO entered into a Reinsurance Agreement for each of the referenced policy years. (Exemplar is attached.) Pursuant to the Agreement, claims were to be adjusted, settled, and/or defended by Reliance or its "authorized representative." NAFCO was bound by the adjustment decisions ("follow the form"). Reliance required NAFCO to provide money to Reliance or its "designated claims administrator" to fund and maintain a Paid Loss Deposit Fund. The purpose of this fund was to cover payment of claims and expense that fell within NAFC0's share of the Reliance also issued a policy for 7/1/99-7/1/2000 but it was novated by Lumberman's Mutual Cas. Co. ATLANTA BOSTON LOS ANGELES MINNEAPOLIS NAPLES NEW YORK

264 Ms. Claire Rocco October 7, 2011 Page 2 liabilities. In addition, NAFCO was required to provide Reliance with a letter of credit as collateral to secure NAFC0's contractual obligations. The LOC could only be drawn down by Reliance: for reimbursement of Reinsurer's obligations paid by the Company or its designated third-party claims administrator but not recovered from the Reinsurer, or 2. to fund an account with the Company equal to the Reinsurer's Obligations as determined by the Company. 2 I. NAFCO IS ENTITLED TO A RESERVE REDUCTION A key point here for you to consider is that Reliance delegated the entire claim handling and reporting to its "authorized representative" and "designated claims administrator," Crawford & Company (subsequently known as "Broadspire"). This delegation included Crawford collecting the Paid Loss Deposit Fund monies from NAFCO and using such monies to pay claims and related expenses. NAFCO did not pay claims; NAFCO did not pay money to Carlson. We are attaching a copy of the Claim Service Agreement between Reliance and Crawford covering the 7/1/92-7/1/93 policy year. It appears from Crawford records that there was a new Claim Service Agreement executed for each of the Carlson policy years. Such Agreement, on it face, continued in force for so long as claims expenses had to be paid in the years subsequent to the occurrence. Thus, no new Agreements were needed after Carlson no longer purchased work comp insurance from Reliance in While Carlson was not a direct party to the Claim Service Agreement, Reliance directed Carlson to submit its work comp claims to Reliance's agent, Crawford. The Paid Loss Fund Account was used by Crawford to pay NAFCO reinsured claims expense and administrative costs. Periodically, Crawford replenished the funding for this account from NAFCO. Thus, as Crawford, not NAFCO, paid claims and expenses, it was reimbursed and compensated from the Paid Loss Fund. Crawford was required to furnish Reliance with a monthly "Loss Run" and "Loss fund Activity Report" detailing each open claim. The next key point is that after the liquidation commenced in 2001, Crawford, now the Liquidator's agent, continued to apply and operate the various Claim Service 2 As of this point in time, neither Reliance nor the Liquidator has paid any NAFCO obligations that NAFCO hasn't funded.

265 Ms. Claire Rocco October 7, 2011 Page 3 Agreements. As the "designated claim representative" Crawford handled and paid NAFC0 reinsured claims continuously until replaced by Gallagher Bassett Services, Inc., with no change in Crawford continuously withdrew money from NAFC0's bank account and deposited the sums into the Paid Loss Deposit Fund (see attached Authorized Agreement for Direct Payments). In addition to Crawford's reporting to the Liquidator, the Liquidator had it own user ID for direct electronic access to Carlson's data consolidator to obtain NAFCO loss information. We can tell this access was used by the Liquidator at least through July Reliance (and the Liquidator) therefore has had knowledge of all Carlson and NAFCO work comp claim adjustment and payment activity by Crawford for an extended time after the Liquidation commenced in You provided us with two RIL form letters the Liquidator sent to policyholders with Large Deductible liability policies. These letters instructed the insured entities handling there own claims within their Large Deductible to proceed under certain limitations. However, note neither Carlson nor NAFCO were handling their own reinsured Incurred Loss claims. NAFCO and Carlson were required by Crawford to continue with the status quo. As far as our files reflect, the Liquidator took no steps to direct Carlson or NAFCO to deal any differently with Crawford or to handle claims other than the way they were before the Liquidation. Certainly, there is no dispute that Carlson and NAFCO consented to Crawford continuing to adjust claims from the Paid Loss Deposit Fund financed by NAFCO. And, that's the critical point: NAFC0 has paid into the Fund all of the inguri.ei_lass_money that heli uid pause or fail, since the 2001 Liquidation commenced. Thus, because the Liquidator (1) permitted its agent to continue to seek the NAFCO claim deposits, (2) accepted the continued NAFCO payments, and (3) obtained the benefit of the payments (such claim amounts are not now a claim against the Liquidation estate), it is estopped from requiring NAFCO to pay the Liquidator collateral amounts ($381,088) representing "captive losses paid post liquidation." (See from RIL' s Reese Roche dated 7/12/11.) Furthermore, the Reinsurance Contract condition that might permit the Liquidator to draw down a letter of credit or require more collateral has not been met: for reimbursement of Reinsurer's obligations paid by the Company or its designated third-party claims administrator but not recovered from the Reinsurer... (Reinsurance Agreement, 7/1/92-7/1/93, Article VI.F.) The Reinsurer NAFCO has fully satisfied all of its "obligations." Crawford recovered all monies to pay claims and expenses from the Paid Loss Fund financed by NAFCO.