EXHIBIT 10.1
	 

	 
		NEVADA STATE INDUSTRIAL INSURANCE
		SYSTEM
	 

	 
		DBA: EMPLOYERS INSURANCE COMPANY OF
		NEVADA
	 

	 
		QUOTA SHARE REINSURANCE
		PROGRAM
	 

	 
		Reinsurance Service Manual
	 

	 
		CONTRACT
	 

	 
		 
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 

	 
		 
	 



	 
	 

	 

	 
		QUOTA SHARE REINSURANCE
		AGREEMENT
	 

	 
			
				
				  ARTICLE
				

			 	
				
				  PAGE
				

			 
	 	 
	
				
				  PREAMBLE
				

			 	
				
				  2
				

			 
	
				
				  DEFINITIONS
				

			 	
				
				  2
				

			 
	
				
				  TERM AND COVERAGE
				

			 	
				
				  4
				

			 
	
				
				  REGULATORY APPROVALS
				

			 	
				
				  5
				

			 
	
				
				  TERRITORY
				

			 	
				
				  5
				

			 
	
				
				  EXCLUSION
				

			 	
				
				  5
				

			 
	
				
				  REINSURANCE CONSIDERATION AND
				  REINSURANCE PREMIUM
				

			 	
				
				  5
				

			 
	
				
				  CONTINGENT PROFIT COMMISSION
				

			 	
				
				  6
				

			 
	
				
				  REPORTS
				

			 	
				
				  7
				

			 
	
				
				  TRUST AGREEMENT OR LETTER OF
				  CREDIT
				

			 	
				
				  8
				

			 
	
				
				  REINSURANCE SECURITY
				

			 	
				
				  9
				

			 
	
				
				  SETTLEMENTS
				

			 	
				
				  10
				

			 
	
				
				  CLAIMS ADMINISTRATION AND
				  MANAGEMENT
				

			 	
				
				  11
				

			 
	
				
				  OFFSET
				

			 	
				
				  13
				

			 
	
				
				  SUBROGATION
				

			 	
				
				  13
				

			 
	
				
				  DELAYS, ERRORS, OR OMISSIONS
				

			 	
				
				  13
				

			 
	
				
				  ENTIRE AGREEMENT AND
				  AMENDMENTS
				

			 	
				
				  13
				

			 
	
				
				  WAIVERS
				

			 	
				
				  13
				

			 
	
				
				  ACCESS TO RECORDS
				

			 	
				
				  13
				

			 
	
				
				  INSOLVENCY
				

			 	
				
				  14
				

			 
	
				
				  MEDIATION
				

			 	
				
				  14
				

			 
	
				
				  ARBITRATION
				

			 	
				
				  15
				

			 
	
				
				  SEVERABILITY
				

			 	
				
				  16
				

			 
	
				
				  GOVERNING LAW
				

			 	
				
				  16
				

			 
	
				
				  FEDERAL EXCISE TAX
				

			 	
				
				  16
				

			 
	
				
				  TAXES
				

			 	
				
				  16
				

			 
	
				
				  CURRENCY
				

			 	
				
				  16
				

			 
	
				
				  SERVICE OF SUIT
				

			 	
				
				  16
				

			 
	
				
				  COMMUTATION
				

			 	
				
				  17
				

			 
	
				
				  EQUAL TERMS
				

			 	
				
				  18
				

			 
	
				
				  AGENCY
				

			 	
				
				  18
				

			 
	
				
				  INVESTIGATION
				

			 	
				
				  18
				

			 
	
				
				  ASSIGNMENT
				

			 	
				
				  18
				

			 
	
				
				  MISCELLANEOUS
				

			 	
				
				  18
				

			 
	
				
				  INTERMEDIARY
				

			 	
				
				  19
				

			 

 

	 
		 
	 

	 
		EXHIBIT A — TRUST
		AGREEMENT
	 

	 
		 
	 

	 
		1
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
		QUOTA SHARE REINSURANCE
		AGREEMENT
	 

	 
		(hereinafter referred to as the
		“Agreement”)
	 

	 
		  PREAMBLE 

	 

	 
		THIS AGREEMENT is made and entered into by
		and between STATE INDUSTRIAL INSURANCE SYSTEM OF NEVADA, D.B.A.: EMPLOYERS
		INSURANCE COMPANY OF NEVADA, Carson City, Nevada, and its successors, assigns,
		and beneficiaries, and its predecessor, THE NEVADA INDUSTRIAL COMMISSION
		(hereinafter collectively referred to as the “Company”) of the one
		part, and the various Reinsurers as identified by the Interests and Liabilities
		Agreements attaching to and forming a part of this Agreement (hereinafter
		referred to as the “Reinsurers”) of the other part.
	 

	 
		The parties hereto agree as hereinbelow, in
		consideration of the mutual covenants contained in the following Articles and
		upon the terms and conditions set forth therein:
	 

	 
		  DEFINITIONS
		
	 

	 
		The following definitions shall apply in
		respect of all use of the defined terms in this Agreement:
	 

	 
			
				
				   
				

			 	
				
				  A.
				

			 	
				
				  “Accident Year” shall mean
				  a period of 12 consecutive months commencing at any July 1 prior to July 1,
				  1995, and shall include all Losses with Dates Of Loss within said 12-month
				  period.
				

			 

 

	 
			
				
				   
				

			 	
				
				  B.
				

			 	
				
				  “Date Of Loss” shall mean
				  the date when an employee’s Workers Compensation injury or disease
				  occurred or as respects occupational disease or cumulative trauma, the Date Of
				  Loss shall mean the date when compensability of the employee commenced.
				

			 

 

	 
			
				
				   
				

			 	
				
				  C.
				

			 	
				
				  “Inuring Reinsurance”
				  shall mean any other reinsurance purchased by the Company which affects Loss.
				  In respect to Inuring Reinsurance that was in effect during the time of
				  original Dates Of Loss for claims included within Loss but which is subject
				  to:
				

			 

 

	 
			
				
				   
				

			 	
				
				  1.
				

			 	
				
				  Commutation taking place after the
				  effective date of this Agreement, any such commutation shall have no effect on
				  the liability of the Reinsurers and such Inuring Reinsurance shall be deemed to
				  continue in effect as respects all claims that were subject to such
				  commutation.
				

			 

 

	 
			
				
				   
				

			 	
				
				  2.
				

			 	
				
				  Commutation prior to the effective
				  date of this Agreement, the Reinsurers liability shall attach solely to:

				

			 

 

	 
			
				
				   
				

			 	
				
				  a.
				

			 	
				
				  Such amount of the Company’s
				  net retention on any such claim as has not been paid prior to the effective
				  date of this Agreement; and
				

			 

 

	 
		 
	 

	 
		2
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
			
				
				   
				

			 	
				
				  b.
				

			 	
				
				  The amount of such claim in excess
				  of the nominal amount at which the claim was commuted.
				

			 

 

	 
			
				
				   
				

			 	
				
				  3.
				

			 	
				
				  Sunset, any Loss that is excluded
				  from coverage by the Inuring Reinsurance solely as a consequence of such sunset
				  date shall become the liability of the Reinsurers and any Loss that would have
				  been payable by such Inuring Reinsurance but for the operation of the sunset
				  date shall be covered by this Agreement.
				

			 

 

	 
		Inuring Reinsurance shall not include any
		reinsurance purchased by the Company which expressly references this Agreement
		and states that it is excess to the coverage afforded hereby.
	 

	 
			
				
				   
				

			 	
				
				  D.
				

			 	
				
				  “Loss” shall mean the
				  amount of any settlement, award, or judgment Paid by the Company on or after
				  12:01 a.m. Pacific Standard Time, July 1, 1999, in respect of claims arising
				  out of the Company’s Policies with original Dates Of Loss prior to 12:01
				  a.m., Pacific Standard Time, July 1, 1995.
				

			 

 

	 
		All recoveries anti subrogations, which are
		actually recovered, and Inuring Reinsurance whether recovered or not, shall be
		deducted front the amount of the Loss. Loss shall not include Loss Expense nor
		the Loss Expense Allowance. Notwithstanding anything to the contrary contained
		in this Agreement, nothing in this definition shall be construed to mean that
		reimbursements under this Agreement are not recoverable until the final amount
		of the Company’s Loss has been ascertained.
	 

	 
			
				
				   
				

			 	
				
				  E.
				

			 	
				
				  “Loss Expense” shall mean
				  all expenses incurred by the Company in the investigation, appraisal,
				  adjustment, litigation, and defense of Loss reinsured hereunder, including
				  court costs, transportation and burial expense, claim-specific staff counsel,
				  adjuster, and rehabilitation worker expense, and interest accrued prior to and
				  after final judgment, but excluding internal office expenses, salaries, per
				  diem, and remuneration of other regular Company employees.
				

			 

 

	 
			
				
				   
				

			 	
				
				  F.
				

			 	
				
				  “Loss Expense Allowance”
				  shall mean *****% of Loss; however, if the Company is removed as the claims
				  handler as provided in the Claims Administration And Management Article, the
				  Loss Expense Allowance thereafter shall be 0%. The Loss Expense Allowance is
				  the agreed amount to be reimbursed to the Company by the Reinsurers in lieu of
				  an actual calculation of Loss Expense in respect to each Loss.
				

			 

 

	 
			
				
				   
				

			 	
				
				  G.
				

			 	
				
				  “Outstanding Loss” shall
				  mean all of the Company’s incurred but unpaid liability arising out of or
				  relating to its Policies for claims with original Dates Of Loss prior to 12:01
				  a.m., Pacific Standard Time, July 1, 1995, whether such liability is known and
				  carried as a reserve on the Company’s books or is unknown. It is warranted
				  by the Company that payments have been made on such claims in the 
				

			 

 

	 
		 
	 

	 
		3
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
		ordinary course of business up to 12:01
		a.m., July 1, 1999, and that at the inception of this Agreement there has been
		no build-up of payments due but not made.
	 

	 
			
				
				   
				

			 	
				
				  H.
				

			 	
				
				  “Paid” shall mean an
				  amount actually paid by the Company in satisfaction of a claim arising out of
				  or related to a Policy; provided, however, that in the event of the insolvency
				  of the Company, “Paid” shall also include any amount for which the
				  Company has become liable to pay under a Policy covered by this
				  Agreement.
				

			 

 

	 
			
				
				   
				

			 	
				
				  I.
				

			 	
				
				  “Policy” (or
				  “Policies”) shall mean any and all obligations arising from the
				  Company’s statutory obligation to provide Workers Compensation (limited as
				  set forth in the second sentence of subparagraph J. below).
				

			 

 

	 	
			 
				 
			 

		  	
			 
				J.
			 

		  	
			 
				“Workers Compensation” shall
				mean coverage for employees as provided under Nevada Revised Statutes Chapters
				616A, 616B, 616C, 616D, and 617, and the relevant sections of the Nevada
				Administrative Code, in effect on June 30, 1999, as interpreted by any court of
				competent jurisdiction. Any statutory or regulatory changes to the
				aforementioned chapters and sections that become effective after June 30, 1999,
				or are enacted after June 30, 1999, and any regulations, rules,
				interpretations, or changes promulgated by a regulatory agency of the state of
				Nevada that become effective after June 30, 1999, and which would otherwise
				affect Loss and Outstanding Loss hereunder shall in no way increase the
				Reinsurers’ liability under this Agreement and shall be disregarded for
				all purposes of establishing Loss and any reimbursements hereunder.
			 

		  


	 
		  TERM AND COVERAGE
		
	 

	 
		This Agreement shall take effect on June 30,
		1999, 11:59 p.m. Pacific Standard Time, provided that the conditions precedent
		stated in the Reinsurance Consideration and Reinsurance Premium Article and the
		Regulatory Approvals Article are met, and shall remain in effect until all
		claims for Loss and Outstanding Loss under the Company’s Policies have
		been closed, this Agreement is commuted, or the Reinsurers’ aggregate
		maximum limit of liability is exhausted, whichever occurs first.
	 

	 
		The Company shall cede to the Reinsurers,
		and the Reinsurers shall accept, a 100% quota share in respect to the
		Company’s Outstanding Loss as at 11:59 p.m. Pacific Standard Time, June
		30, 1999, under the Company’s Policies. The Reinsurers shall then be
		liable for Loss arising from such ceded Outstanding Loss, plus the Loss Expense
		Allowance related thereto; provided, however, that in no event shall the
		aggregate liability of the Reinsurers under this Agreement exceed the sum of
		$2,000,000,000.
	 

	 
		Subject, without limitation, to the
		definitions contained in the Definitions Article and all other terms and
		conditions of this Agreement, all reinsurance for which the Reinsurers shall be
		obligated by virtue of this Agreement shall be subject to the same terms,
		conditions, interpretations, waivers, modifications, and alterations as the
		Company’s Policies, the intent of 
	 

	 
		 
	 

	 
		4
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
		this Agreement being that the Reinsurers
		shall be bound, except as specifically limited herein, by all payments and
		settlements entered into by the Company in good faith, subject to all of the
		terms and conditions of this Agreement.
	 

	 
		Nothing herein shall in any manner create
		any obligations or establish any rights against the Reinsurers in favor of any
		third parties or any persons not parties to this Agreement except as provided
		in the Insolvency Article.
	 

	 
		  REGULATORY APPROVALS
		
	 

	 
		This Agreement shall become effective only
		when all necessary insurance regulatory and other filings and approvals, if
		any, have been obtained and only to the extent licenses, permits,
		authorizations, consents, orders, approvals, registrations, declarations, or
		filings with all regulatory bodies as may be required to be obtained or made
		with respect to either party in order to permit the parties to consummate the
		transactions contemplated hereby which are to be consummated on or prior to the
		effective date of this Agreement shall have been obtained or made, as the case
		may be.
	 

	 
		  TERRITORY
		
	 

	 
		The territorial scope of this Agreement
		shall follow that of the Company’s Policies.
	 

	 
		  EXCLUSION
		
	 

	 
		The Reinsurers shall not be liable to the
		Company for extra contractual obligations coverage or any legal costs and
		expenses incurred by the Company in connection therewith arising out of any
		conduct or events taking place during the time in which the Company is
		responsible for claims handling called for herein. “Extra contractual
		obligations” as used in this Agreement shall mean any liabilities other
		than under the Policies (including but not limited to compensatory, punitive,
		consequential, and exemplary damages, and statutory, administrative, or
		regulatory penalties and fines), which arise from the handling of any claim on
		business covered hereunder, such liabilities arising because of but not limited
		to, the following: failure to settle within the Policy limit, or by reason of
		alleged or actual negligence, fraud, or bad faith in rejecting an offer of
		settlement or in the preparation of the defense, or in the trial of any action
		against its insured, or in the preparation of prosecution of an appeal
		subsequent upon such action. The Reinsurers shall be responsible for any extra
		contractual obligations arising out of any conduct or events taking place
		during any time in which the Company is removed as the claims handler as
		provided in the Claims Administration And Management Article.
	 

	 
		  REINSURANCE
		CONSIDERATION AND REINSURANCE PREMIUM 
	 

	 
		As a condition precedent for coverage to
		exist under this Agreement:
	 

	 
			
				
				   
				

			 	
				
				  A.
				

			 	
				
				  A Reinsurance Consideration of
				  $745,000,000 shall be paid in full by the Company to the Reinsurers on or
				  before June 30, 1999.
				

			 

 

	 
		 
	 

	 
		5
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
			
				
				   
				

			 	
				
				  B.
				

			 	
				
				  In consideration for the adverse
				  development protection provided by this Agreement, the Company shall pay to the
				  Reinsurers a non-refundable Reinsurance Premium of $30,000,000 on or before
				  June 30, 1999.
				

			 

 

	 
		  CONTINGENT PROFIT
		COMMISSION 
	 

	 
		The Reinsurers shall allow the Company a
		contingent profit commission of 30% of the Net Profit of this Agreement.
		“Net Profit” as used herein is the amount by which the
		inception-to-date expected Loss and Loss Expense Allowance as in A. below, less
		inception-to-date actual Loss and Loss Expense Allowance as in B. below,
		produces a positive balance:
	 

	 
			
				
				   
				

			 	
				
				  A.
				

			 	
				
				  “Inception-to-date expected
				  Loss and Loss Expense Allowance” shall mean the following amounts at the
				  following calculation dates:
				

			 

 

	 
			
				
				  CALCULATION DATE
				

			 	

				
				  ALLOWANCE
				

			 
	
				
				  At June 30, 2004:
				

			 	

				
				  $300,000,000
				

			 
	
				
				  At June 30, 2009:
				

			 	

				
				  $550,000,000
				

			 
	
				
				  At June 30, 2014:
				

			 	

				
				  $775,000,000
				

			 
	
				
				  At June 30, 2019:
				

			 	

				
				  $970,000,000
				

			 
	
				
				  At June 30, 2024:
				

			 	

				
				  $1,120,000,000
				

			 

 

	 
			
				
				   
				

			 	
				
				  B.
				

			 	
				
				  “Inception-to-date actual Loss
				  and Loss Expense Allowance” means the actual amounts of Loss and Loss
				  Expense Allowance paid by the Reinsurers cumulatively since the inception of
				  this Agreement to the applicable calculation date; provided, however, that in
				  the event the Company is removed as the claims handler as provided in the
				  Claims Administration And Management Article, “inception-to-date actual
				  Loss and Loss Expense Allowance” shall mean, in respect of all amounts
				  paid by the Reinsurers after such removal, 107% of the actual amounts of Loss
				  paid by the Reinsurers cumulatively since the date of such removal.
				

			 

 

	 
		The contingent profit commission shall be
		first calculated by the Company as of June 30, 2004, and a statement forwarded
		to the Reinsurers within 30 days thereafter. Upon verification of amount due,
		the Reinsurers shall pay the Company any amount shown to be due within 45 days
		of receipt of the Company’s contingent profit commission statement.

	 

	 
		The contingent profit commission shall be
		recalculated as of each of the other calculation dates shown in A. above,
		within 30 days following each such calculation date. The debtor party shall pay
		the other party whatever amount, if any, that is due as a result of each
		recalculation within 45 days of such recalculation. If, at the time of any
		recalculation, it is determined that an overpayment of contingent profit
		commission has been made to the Company and a return amount of contingent
		profit commission is due the Reinsurers to properly reflect the cumulative
		amount of the contingent profit commission, such return amount shall be
		increased by a payment by the Company of interest on the amount being returned.
		The interest shall be calculated from the initial date of payment to the date
		of the return, at the average investment rate of U.S. 
	 

	 
		 
	 

	 
		6
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
		Treasury Bonds as determined from the
		Wall Street Journal plus 50 basis points; “U.S. Treasury Bonds”
		shall mean United States Treasury bonds with maturity dates of the same
		duration as the span of time used for the calculation; “average”
		shall mean the mathematical mean of the annual interest rates as at each June
		30 during the span of time used for the calculation; “span of time used
		for calculation” shall mean the difference in time between the initial
		date of payment and the date of return. In the event the Wall Street Journal is no longer being published at the time any
		calculation needs to be made, the United States Treasury itself shall serve as
		the source of the appropriate interest rates.
	 

	 
		  REPORTS 

	 

	 
		Within 30 days after the close of each
		calendar quarter, the Company shall furnish the Reinsurers with a report
		summarizing:
	 

	 
			
				
				   
				

			 	
				
				  A.
				

			 	
				
				  Paid amounts during the quarter of
				  Loss and Loss Expense, and the amount of the Loss Expense Allowance;
				

			 

 

	 
			
				
				   
				

			 	
				
				  B.
				

			 	
				
				  Subrogation recovered, recoveries
				  under Inuring Reinsurance, and any other monies recovered;
				

			 

 

	 
			
				
				   
				

			 	
				
				  C.
				

			 	
				
				  Total net amount due the Company or
				  the Reinsurers; and
				

			 

 

	 
			
				
				   
				

			 	
				
				  D.
				

			 	
				
				  Individual losses with settlements
				  or payments in excess of $250,000.
				

			 

 

	 
		Such report shall be split by category as
		follows: medical, fatal, pension (permanent total disability), rehabilitation,
		permanent partial disability; and temporary total disability/temporary partial
		disability, all separately with respect to each Accident Year. Additional
		information reasonably available to the Company may be requested by the
		Reinsurers for inclusion in the reports, and shall be provided by the
		Company.
	 

	 
		In the event that there is a change in the
		coverage under the governing statutes and sections referenced in the definition
		of Workers Compensation in the Definitions Article, which would otherwise
		increase Loss hereunder but for the definition of Loss in the Definitions
		Article, the report shall also indicate the amounts that the Company had paid
		under its Policies during the quarter in question, and the amounts payable by
		the Reinsurers under this Agreement.
	 

	 
		In the event that the Company exercises its
		option per the Settlements Article to receive reimbursements from Reinsurers
		monthly rather than quarterly, each reference to “quarter” or
		“quarterly” above shall be amended to “month” or
		“monthly,” respectively, in respect to each month during which the
		Company exercises such option.
	 

	 
		In addition, the Company shall furnish the
		Reinsurers with a quarterly statement of such other information reasonably
		available to the Company as may be required by the Reinsurers for completion of
		their statutory statements to be filed in their domiciliary
		jurisdictions.
	 

	 
		    
	 

	 
		7
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
		TRUST AGREEMENT OR LETTER OF
		CREDIT
	 

	 
		The Reinsurers hereby agree that they shall
		each establish, simultaneously with the execution of this Agreement, either a
		letter of credit or a trust fund pursuant to a trust agreement in a form
		substantially similar to that attached hereto as Exhibit A and forming a part
		of this Agreement, or a combination of both. The amount funded by the letter of
		credit and/or the trust fund shall equal the Reinsurer’s quota share of
		the Outstanding Loss discounted at 6% plus the Loss Expense Allowance
		proportionate to such discounted amount (hereinafter referred to as the
		“Reserve”); the letter of credit or trust agreement shall contain
		provisions acceptable to the regulatory authorities having jurisdiction over
		the Company’s Reserve. The Reinsurers shall have the option of determining
		the method of funding referred to above, and the Reinsurers shall further have
		the options to change the method of funding at a future date and to establish a
		different method of funding for any future increase in the required amount of
		funding, provided always that all other provisions of this Article are complied
		with.
	 

	 
		At annual intervals, or more frequently as
		agreed but never more frequently than quarterly, the Company shall prepare, for
		the sole purpose of amending the letter of credit and/or adjusting the funds in
		trust, a specific statement of the Reinsurers’ share of the Reserve. If
		the statement shows that the Reinsurers’ share of such Reserve exceeds the
		balance of the letter of credit and/or funds in trust as of the statement date,
		the Reinsurers shall, within 30 days after receipt of notice of such excess,
		secure delivery to the Company of an amendment of the letter of credit,
		increasing the amount of the letter of credit and/or increasing the balance of
		the funds in trust by the amount of such difference. If, however, the statement
		shows that the Reinsurers’ share of Reserve is less than the balance of
		the letter of credit and/or funds in trust as of the statement date, the
		Company shall, within 30 days after receipt of written request from the
		Reinsurers, release such excess from the letter of credit and/or funds in trust
		by agreeing to accept an amendment to the letter of credit reducing the amount
		available by the amount of such excess and/or reducing the balance of the funds
		in trust by the amount of such excess.
	 

	 
		In the event that the Company and the
		Reinsurers disagree over the Company’s valuation of the Reinsurers’
		share of the Reserve, an independent actuarial consultant mutually agreed to by
		the Company and the Reinsurers shall be contracted with to perform an
		independent assessment to determine the valuation of the Reinsurers’ share
		of Reserves. It is agreed that the costs of such assessment shall be borne
		equally by the Company and the Reinsurers and the Company shall cooperate with
		such independent actuarial consulting firm and provide all data and other
		information as may be required.
	 

	 
		If a Reinsurer’s choice of funding is
		by or includes a letter of credit, the following shall apply:
	 

	 
			
				
				   
				

			 	
				
				  A.
				

			 	
				
				  The Reinsurer hereby agrees that it
				  shall apply for and secure delivery to the Company of a clean, irrevocable,
				  unconditional letter of credit issued by a member of the Federal Reserve System
				  or any other bank approved for use by The NAIC Securities Valuation
				  Office.
				

			 

 

	 
		 
	 

	 
		8
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
			
				
				   
				

			 	
				
				  B.
				

			 	
				
				  The letter of credit shall be issued
				  for a period of not less than one year, and shall be automatically extended for
				  one year from its date of expiration or any future expiration date unless 30
				  days prior to any expiration date the issuing bank notifies the Company by
				  registered mail that the issuing bank elects not to consider the letter of
				  credit extended for any additional period. An issuing bank, not a member of the
				  Federal Reserve System or not chartered in the state of domicile of the
				  Company, shall provide 60 days notice to the Company prior to any expiration in
				  the event of non-extension.
				

			 

 

	 
			
				
				   
				

			 	
				
				  C.
				

			 	
				
				  Notwithstanding any other provisions
				  of this Agreement, the Company or its successor in interest as appointed by any
				  court, regulatory authority, or statute, may draw upon such letter of credit at
				  any time without diminution because of the insolvency of the Company or of any
				  Reinsurer for one or more of the following purposes only:
				

			 

 

	 
			
				
				   
				

			 	
				
				  1.
				

			 	
				
				  To pay the Reinsurer’s share or
				  to reimburse the Company for the Reinsurer’s share of any Loss and Loss
				  Expense Allowance reinsured by this Agreement, which has not been otherwise
				  paid.
				

			 

 

	 
			
				
				   
				

			 	
				
				  2.
				

			 	
				
				  To make refund of any sum in excess
				  of the actual amount required to pay the Reinsurer’s share of any
				  liability reinsured by this Agreement.
				

			 

 

	 
			
				
				   
				

			 	
				
				  3.
				

			 	
				
				  In the event of non-extension of the
				  letter of credit as provided for above, to establish deposit of the
				  Reinsurer’s quota share of the Outstanding Loss and Loss Expense Allowance
				  proportionate thereto (i.e., not the Reserve but the full amount). Such cash
				  deposit shall be held in an interest-bearing account separate from the
				  Company’s other assets. This subparagraph 3. shall not apply if the
				  non-renewed letter of credit is replaced simultaneously with its non-renewal by
				  other funding that complies with all of the terms of this Article.
				

			 

 

	 
			
				
				   
				

			 	
				
				  D.
				

			 	
				
				  The issuing bank shall have no
				  responsibility whatsoever in connection with the propriety of withdrawals made
				  by the Company or the disposition of funds withdrawn, except to ensure that
				  withdrawals are made only upon the order of properly authorized representatives
				  of the Company.
				

			 

 

	 
		  REINSURANCE
		SECURITY 
	 

	 
		During the currency of this Agreement, all
		Reinsurers shall maintain a rating of no less than A- as determined by A.M.
		Best Company or the equivalent rating as determined by another similar rating
		agency in the event A.M. Best no longer exists. In the event that a Reinsurer
		is unable to maintain such rating, the Company shall have the option of:

	 

	 
			
				
				   
				

			 	
				
				  A.
				

			 	
				
				  Requiring such Reinsurer to increase
				  the letter of credit and/or trust fund as provided for in the Trust Agreement
				  Or Letter Of Credit Article to an amount 
				

			 

 

	 
		 
	 

	 
		9
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
		equal to the Reinsurer’s quota share
		percentage of Outstanding Loss and the Loss Expense Allowance proportionate
		thereto (i.e., not the Reserve but the full amount).
	 

	 
			
				
				   
				

			 	
				
				  B.
				

			 	
				
				  Commuting the Reinsurer’s
				  liability. The Company shall submit a statement to the Reinsurer listing
				  amounts paid and reserved in respect of all Outstanding Loss included in the
				  commutation. The Company and the Reinsurer shall, by mutual agreement,
				  determine the present value of such Outstanding Loss, and the Reinsurer shall
				  pay its proportion of the amount so determined to be the present value of such
				  Outstanding Loss.
				

			 

 

	 
		If agreement cannot be reached the Company
		and the Reinsurer shall mutually appoint an independent actuary to investigate,
		determine and establish the present value of such Outstanding Loss. If both
		parties then agree, the Reinsurer shall pay its proportion of the amount so
		determined to be the present value of such Outstanding Loss.
	 

	 
		If the parties fail to agree, then any
		difference shall be settled by a panel of three independent actuaries, one to
		be chosen by each party and the third by the two so chosen. If either party
		refuses or neglects to appoint an actuary within 30 days, the other party may
		appoint two actuaries. If the two actuaries fail to agree on the selection of a
		third actuary within 30 days of their appointment, each of them shall name two,
		of whom the other shall decline one and the decision shall be made by drawing
		lots. All the actuaries shall be regularly engaged in the valuation of
		Workers’ Compensation claims and shall be Fellows of the Casualty
		Actuarial Society or any equivalent organization should the Casualty Actuarial
		Society no longer exist. None of the actuaries shall be under the control of
		either party to this Agreement.
	 

	 
		Each party shall submit its case to its
		actuary within 30 days of the appointment of the third actuary. The decision in
		writing of any two actuaries, when filed with the parties hereto, shall be
		final and binding on both parties. The expense of the actuaries and of the
		commutation shall be equally divided between the two parties.
	 

	 
		Payment by the Reinsurer of its proportion
		of the amount determined by any of the above procedures shall constitute a
		complete and final release of the Reinsurer of all Loss and Loss Expense
		Allowance obligations hereunder.
	 

	 
		  SETTLEMENTS
		
	 

	 
		The Company shall have the right to settle
		all claims for Loss under its Policies; provided, however, that upon reasonable
		request by the Reinsurers, the Company shall afford the Reinsurers, at the
		Reinsurers’ own expense, an opportunity to be associated with the Company
		in the defense of any claim, suit, or proceeding involving a Loss under this
		Agreement, and the Company and the Reinsurers shall cooperate in every respect
		in such defense. Subject to all of 
	 

	 
		 
	 

	 
		10
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
		the terms and conditions of this Agreement,
		all settlements, provided they are within the terms of the Policies, shall be
		unconditionally binding on the Reinsurers in proportion to their quota share
		participation in this Agreement. Reimbursement for settlements shall be paid to
		the Company based on the quarterly reports called for in the Reports Article
		within 5 business days following receipt of the report by the Reinsurers. Such
		reimbursements may be made, at the option of the Reinsurers, either by payment
		in cash (via wire transfer) by the Reinsurers, or by drawing down by the
		Company from the letter of credit or the trust fund upon written instruction
		from the Reinsurers to the Company to do so.
	 

	 
		Without limiting the generality of the
		foregoing, the Company may elect monthly rather than quarterly reimbursements,
		subject to 15 days prior written notice to the Reinsurers of its choice of such
		election, subject to the balance of the conditions respecting reimbursement as
		stated above, and subject to payment by the Company (via deduction from the
		amount of reimbursement) of interest equal to 1% of payments for the first
		month of each quarter plus .5% of payments for the second month of each
		quarter. If, at any time, the Company elects monthly reimbursement, it may
		revert at the beginning of any subsequent quarter to quarterly reimbursements
		upon written notice to the Reinsurers.
	 

	 
		  CLAIMS
		ADMINISTRATION AND MANAGEMENT 
	 

	 
		The Reinsurers shall establish a claims
		oversight committee to meet periodically at the offices of the Company for
		purposes of claims administration and management, including but not limited to
		coordinating and conducting claims audits, reviewing and monitoring the
		Company’s claims policies and procedures, and maintaining liaison with the
		Company’s claims personnel. The Company shall appoint one of its employees
		to serve as its representative on the committee, and such appointee shall be
		allowed to attend all of the committee’s meetings. Any reports generated
		by the committee shall be shared with the Company. Prior reasonable notice
		shall be given to all parties of each meeting, and at all meetings of the
		committee a quorum shall require the presence of the lead Reinsurer, Gerling
		Global International Reinsurance Company, Ltd., and one of the other
		Reinsurers. If the claims handling responsibility is removed from the Company
		in accordance with the following paragraph, the claims oversight committee
		shall continue to exist in the same form and shall perform the same claims
		oversight functions as respects the successor claims handler.
	 

	 
		In the event that the lead Reinsurer plus at
		least one other Reinsurer (hereinafter referred to as the Determining
		Reinsurers) determine that the Company’s claims handling is unsatisfactory
		to them, the Reinsurers shall have the right to initiate action to assume the
		claims handling responsibilities from the Company or to assign the claims
		handling responsibilities to a third party. The Reinsurers shall notify the
		Company immediately, in writing, of their intention to remove claims handling
		responsibilities from the Company. Such notice shall set forth in reasonable
		detail the reasons for the Reinsurers’ dissatisfaction with the
		Company’s claims handling. In the event that the Company fails to rectify
		its claims handling in a manner reasonably acceptable to the Reinsurers within
		60 days from the Company’s receipt of the notice (hereinafter referred to
		as the “Cure Period” ), the Reinsurers shall have, the right, subject
		to the provisions of this Article and the execution of an Administrative
		Services Agreement acceptable 
	 

	 
		 
	 

	 
		11
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
		to the Company and the Reinsurers, to assume
		all of the claims handling and related administrative functions of the Company
		or to assign such responsibilities to a qualified third party, it being
		understood that any such assignment shall not relieve the Reinsurers from any
		of their obligations under this Agreement.
	 

	 
		In the event the Company is not able to
		satisfy the Determining Reinsurers by the end of the Cure Period that it has
		rectified its claims handling in a manner acceptable to such Determining
		Reinsurers, the Reinsurers shall provide the Company with one of the following
		within 15 days of the end of the Cure Period:
	 

	 
			
				
				   
				

			 	
				
				  A.
				

			 	
				
				  If the Reinsurers are to assume
				  claims handling responsibilities (upon agreement of the Determining Reinsurers
				  to this course of action), the Reinsurers and the Company shall jointly prepare
				  a transition plan outlining the parameters of such assumption including
				  staffing requirements, system specifications, management oversight, and
				  scheduled time frames.
				

			 

 

	 
			
				
				   
				

			 	
				
				  B.
				

			 	
				
				  If the Reinsurers are to assign
				  claims handling responsibilities to a third party:
				

			 

 

	 
			
				
				   
				

			 	
				
				  1.
				

			 	
				
				  All of the Reinsurers shall
				  participate in the process of nominating two candidates for third party
				  administrator to handle the future processing, settling, administering,
				  management, and payment of claims; however:
				

			 

 

	 
			
				
				   
				

			 	
				
				  a.
				

			 	
				
				  In the event all three Reinsurers
				  cannot agree on two candidates, then the Determining Reinsurers shall nominate
				  both third party administrators, but
				

			 

 

	 
			
				
				   
				

			 	
				
				  b.
				

			 	
				
				  If the Determining Reinsurers are
				  unable to agree on two third party administrators, each Reinsurer may present
				  one third party administrator for consideration by the Company.
				

			 

 

	 
		The list of third party administrators shall
		be submitted to the Company in order of preference of those Reinsurers who
		chose them except in the event of b. above, in which case no indication of
		preference shall be given.
	 

	 
			
				
				   
				

			 	
				
				  2.
				

			 	
				
				  The Company shall have the ability
				  to review the capabilities of each administrator recommended and shall confirm
				  the Reinsurers’ recommendation for the preferred third party
				  administrator, if applicable, or alternately request the assignment of (one of)
				  the other recommended administrator(s). Such selection shall be made by the
				  Company no later than 20 days after receipt of the Reinsurers’
				  recommendations.
				

			 

 

	 
		Should any event reduce the number of
		Reinsurers to less than three, such as but not limited to the merger of any
		Reinsurers, or commutation with the Company by any Reinsurer of its
		participation in the Agreement, or insolvency of any Reinsurer, all provisions
		of this Article that call for action by the Determining Reinsurers shall be
		altered to require agreement of all remaining Reinsurers.
	 

	 
		    
	 

	 
		12
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
		OFFSET
	 

	 
		The Company and each Reinsurer hereunder
		shall be entitled to deduct from amounts due to the other party under this
		Agreement any amounts due itself from the other party under this Agreement;
		provided, however, that in the event of the insolvency of any party hereto,
		offset shall be in accordance with the law of the jurisdiction having control
		over the estate of the insolvent party.
	 

	 
		  SUBROGATION
		
	 

	 
		The Reinsurers shall be credited with their
		share of subrogation less actual costs to the Company, in respect of claims and
		settlements under this Agreement. Unless the Company and Reinsurers agree to
		the contrary, the Company shall enforce its right to subrogation and shall
		prosecute all claims arising out of such right.
	 

	 
		  DELAYS, ERRORS, OR
		OMISSIONS 
	 

	 
		Any inadvertent delay, error, or omission
		shall not be held to relieve either party hereto from any liability that would
		attach to it hereunder if such delay, error, or omission had not been made,
		providing any error or omission shall be rectified upon discovery.
	 

	 
		  ENTIRE AGREEMENT
		AND AMENDMENTS 
	 

	 
		This Agreement constitutes the entire
		agreement between the parties with respect to the business being reinsured
		hereunder, and the obligations of the parties are determined solely by the
		terms of this Agreement. Any change or modification to this Agreement shall be
		made by written amendment to this Agreement and signed by the parties
		hereto.
	 

	 
		  WAIVERS 

	 

	 
		The terms of this Agreement may be waived
		only by a written instrument signed by the party waiving compliance. No delay
		on the part of any party in exercising any right, power, or privilege hereunder
		shall operate as a waiver thereof, nor shall any waiver on the part of any
		party of any right, power, or privilege, nor any single or partial exercise of
		any such right, power, or privilege, preclude any further exercise thereof or
		the exercise of any other such right, power, or privilege.
	 

	 
		  ACCESS TO RECORDS
		
	 

	 
		Provided the Company receives at least 15
		days prior written notice, the Reinsurers or their designated representatives
		shall have the right to inspect and copy (at the Reinsurers’ own expense)
		at any reasonable time, all records of the Company that pertain to this
		Agreement, and the Company shall make available such personnel of itself or its
		agents as the Reinsurers may reasonably request to interview in connection with
		this Agreement. Such access shall be exercised by the Reinsurers in a manner
		that shall not unnecessarily interfere with the operations of the
		Company.
	 

	 
		 
	 

	 
		13
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
		During the term of this Agreement and
		thereafter, the Company and each Reinsurer agrees that they shall not, except
		as otherwise required by applicable law or by governmental or regulatory
		authorities, or in response to court order, or as required by a
		Reinsurer’s retrocessionaires (if any), or with the prior written consent
		of the other party, disclose to any other person or permit their authorized
		representatives to disclose any proprietary or confidential information
		contained in the books and records transferred or otherwise received from the
		other party or otherwise obtained during the performance of this
		Agreement.
	 

	 
		  INSOLVENCY
		
	 

	 
		In the event of the Company’s
		insolvency, the reinsurance afforded by this Agreement shall be payable by the
		Reinsurers on the basis of the Company’s liability reinsured without
		diminution because of the Company’s insolvency or because its liquidator,
		receiver, conservator, or statutory successor has failed to pay all or a
		portion of any claims provided, however, that the Reinsurers shall not be
		liable in respect of any Loss unless and until all conditions precedent to the
		Company’s liability in the absence of the Company’s insolvency have
		been established (so that the Company is, but for its insolvency, absolutely
		and unconditionally liable to pay the Loss to or for the account of its insured
		or insureds), and subject to the right of the Reinsurers to offset against such
		funds due hereunder, any sums that may be payable to them by said insolvent
		Company in accordance with the Offset Article. The reinsurance shall be payable
		by the Reinsurers directly to the Company, or to its liquidator, receiver,
		conservator, or statutory successor except (a) where this Agreement
		specifically provides another payee of such reinsurance in the event of the
		Company’s insolvency or (b) where the Reinsurers, with the consent of the
		direct insured or insureds, have assumed such Policy obligations of the Company
		as direct obligations of itself to the payees under such Policies in
		substitution for the Company’s obligation to such payees.
	 

	 
		The Company’s liquidator, receiver,
		conservator, or statutory successor shall give written notice of the pendency
		of a claim against the Company as respects business covered hereunder within a
		reasonable time after such claim is filed in the insolvency proceeding. During
		the pendency of such claim, the Reinsurers may investigate said claim and
		interpose in the proceeding where the claim is to be adjudicated, at their own
		expense, any defense that it may deem available to the Company, its liquidator,
		receiver, conservator, or statutory successor. The expense thus incurred by the
		Reinsurers shall be chargeable against the Company, subject to court approval,
		as part of the expense of conservation or liquidation to the extent that such
		proportionate share of the benefit shall accrue to the Company solely as a
		result of the defense undertaken by the Reinsurers. Where two or more
		Reinsurers are involved in the same claim, and a majority in interest elect to
		interpose defense to such claim, the expense shall be apportioned in accordance
		with the terms of this Agreement as though such expense had been incurred by
		the Company.
	 

	 
		  MEDIATION
		
	 

	 
		To the extent there is a dispute between the
		Company and one or more Reinsurers under this Agreement, any amounts not in
		dispute shall be paid in accordance with the terms of this 
	 

	 
		 
	 

	 
		14
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
		Agreement and only the amounts in dispute
		shall be subject to the mediation and arbitration provisions of this
		Article.
	 

	 
		The parties agree that any and all disputes
		arising from or associated with this Agreement shall be submitted to mediation
		before any party may initiate arbitration of said dispute. The parties agree to
		appoint a neutral, qualified mediator and agree that each party to the dispute
		shall assign and delegate a senior officer, with binding settlement authority,
		from their respective companies to participate in the mediation. The mediation
		period shall be not less than sixty days from the appointment of the mediator.
		The parties acknowledge and agree that successful mediation is in the best
		interest of all parties to this Agreement.
	 

	 
		  ARBITRATION
		
	 

	 
		In the event of failure of mediation, all
		matters in difference between the parties arising under, out of, or in
		connection with this Agreement, and whether arising during or alter the, period
		of this Agreement, shall be referred to an arbitration tribunal in the manner
		hereinafter set out.
	 

	 
		Unless the parties appoint a sole arbitrator
		within 14 days of one receiving a written request from the other for
		arbitration, the claimant (the party requesting arbitration) shall appoint its
		arbitrator and give written notice thereof to the respondent. Within 30 days of
		receiving such notice the respondent shall appoint its arbitrator and give
		written notice thereof to the claimant, failing which the claimant may appoint
		an arbitrator on behalf of the respondent.
	 

	 
		The two arbitrators shall appoint a third
		arbitrator who shall act as chairman of the arbitration tribunal. Should they
		fail to agree upon such a third arbitrator within 30 days of the appointment of
		the respondent’s arbitrator then within 10 days thereafter each of them
		shall name three, of whom the other shall decline two, and the decision shall
		be made by drawing lots. The three arbitrators shall decide by majority. If no
		majority can be reached, the verdict of the chairman shall prevail.
	 

	 
		Unless the parties otherwise agree the
		arbitration tribunal shall consist of persons (including those who have
		retired) with not less than ten years’ experience of insurance or
		reinsurance as persons engaged in the industry itself or as lawyers or other
		professional advisers.
	 

	 
		The arbitration tribunal shall have power to
		fix all procedural rules for the holding of the arbitration including
		discretionary power to make orders as to any matters which it may consider
		proper in the circumstances of the case with regard to pleadings, discovery,
		inspection of the documents, examination of witnesses and any other matter
		whatsoever relating to the conduct of the arbitration and may receive and act
		upon such evidence whether oral or written strictly admissible or not as it
		shall in its discretion think fit. In reaching its decision, the arbitration
		tribunal shall have no authority to change or modify the terms of this
		Agreement.
	 

	 
		All costs of the arbitration shall be
		determined by the arbitration tribunal who may direct to and by whom and in
		what manner they shall be paid.
	 

	 
		 
	 

	 
		15
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
		The place of arbitration may be chosen by
		the parties, but in default of such choice, the place of arbitration shall be
		London, England.
	 

	 
		The award of the arbitration tribunal shall
		be in writing and binding upon the parties who consent to carry out the same.
		The arbitration panel may not award any punitive, exemplary, special, or
		consequential damages.
	 

	 
		  SEVERABILITY
		
	 

	 
		In the event any provision of this Agreement
		is rendered illegal or unenforceable by the laws or regulations of any
		jurisdiction, such provision shall be considered void as respects that
		jurisdiction only, and such a consideration shall not affect the validity or
		enforceability of any other provision of this Article in that jurisdiction nor
		the enforceability of such provision in any other jurisdiction. Upon
		determination that any term or condition of this Agreement is invalid or
		unenforceable, the panics hereto shall negotiate in good faith to modify such
		term or condition as to effect the original intent of the parties as closely as
		possible in a mutually acceptable manner.
	 

	 
		  GOVERNING LAW
		
	 

	 
		This Agreement shall be deemed to have been
		made under and governed by the laws of the state of Nevada without regard to
		Nevada’s choice of law rules.
	 

	 
		  FEDERAL EXCISE TAX
		
	 

	 
		The Reinsurers (excepting Reinsurers that
		are not subject to Federal Excise Tax) shall reimburse, within 5 business days,
		the Company or the Intermediary for the purpose of paying any Federal Excise
		Tax (plus related interest and penalties, if any) imposed under Section 4371 of
		the Internal Revenue Service Code to the extent that this Agreement is subject
		to such tax, interest, or penalties.
	 

	 
		  TAXES 
	 

	 
		It is recognized that the Company is not
		subject to any taxes. Nevertheless, should the Company become liable for any
		taxes, the Company shall pay all such taxes (except Federal Excise Tax, which
		is the responsibility of Reinsurers as provided in the Federal Excise Tax
		Article) relating to this Agreement.
	 

	 
		  CURRENCY
		
	 

	 
		The sign “$” in this Agreement
		refers to United States of America dollars, and all payments hereunder shall be
		made in that currency.
	 

	 
		  SERVICE OF SUIT
		
	 

	 
		(This Article applies to Reinsurers
		domiciled outside the United States of America and/or unauthorized in any
		state, territory, or district of the United States 
	 

	 
		 
	 

	 
		 
	 

	 
		16
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
		of America that has jurisdiction over the
		Company and in which a subject suit has been instituted. This Article is not
		intended to conflict with or override the parties’ obligation to arbitrate
		their disputes in accordance with the Arbitration Article.)
	 

	 
		In the event any Reinsurer hereon fails to
		pay any amount claimed due hereunder, such Reinsurer, at the request of the
		Company, shall submit to the jurisdiction of a court of competent jurisdiction
		within the United States and shall comply with all requirements necessary to
		give that court jurisdiction. Nothing in this Article constitutes or should be
		understood to constitute a waiver of the Reinsurer’s right to commence an
		action in any court of competent jurisdiction in the United States, to remove
		an action to a United States District Court, or to seek a transfer of a case to
		another court as permitted by the laws of the United States or of any state in
		the United States. Service of process in such suit may be made upon the party
		specifically designated in the applicable interests and Liabilities Agreement
		attached hereto. In any suit instituted against it upon this Agreement, the
		Reinsurer shall abide by the final decision of such court or of any appellate
		court in the event of an appeal.
	 

	 
		The party named in the applicable Interests
		and Liabilities Agreement is authorized and directed to accept service of
		process on behalf of the Reinsurer in any such suit and/or upon the request of
		the Company to give a written undertaking to the Company that they shall enter
		a general appearance upon the Reinsurer’s behalf in the event such a suit
		is instituted.
	 

	 
		Pursuant to Nevada Revised Statute
		681A.210.1(b), the Reinsurer hereby designates the Commissioner of Insurance of
		the state of Nevada or other officer specified for that purpose in the statute,
		or the successor or successors in office, as its true and lawful attorney upon
		whom may be served any lawful process in any action, suit, or proceeding
		instituted by or on behalf of the Company or any beneficiary hereunder arising
		out of this Agreement, and hereby designates the party named in the applicable
		Interests and Liabilities Agreement as the person to whom the said officer is
		authorized to mail such process or a true copy thereof.
	 

	 
		  COMMUTATION
		
	 

	 
		This Article shall only take effect should
		the parties hereto mutually agree to commute one or any number of claims making
		up Outstanding Loss under this Agreement; provided, however, there shall be no
		obligation on the part of either party to so commute. Upon mutual agreement of
		the Company and the Reinsurers to commute one or any number of claims making up
		Outstanding Loss, the Company shall submit a statement to the Reinsurers
		listing amounts paid and reserved in respect of all Outstanding Loss to be
		included in the commutation. The Company and the Reinsurers shall, by mutual
		agreement, determine the present value of such Outstanding Loss, and the
		Reinsurers shall pay their proportion of the amount so determined to be the
		present value of such Outstanding Loss. Failure to agree shall result in
		abandonment of commutation, but shall not prevent another attempt at
		commutation at a future date. Payment by the Reinsurers of their proportion of
		the amount or amounts determined shall constitute a complete and final release
		of the Reinsurers of all Loss and Loss Expense Allowance obligations hereunder
		in respect of the Outstanding Loss commuted.
	 

	 
		 
	 

	 
		17
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
		Nothing in this Article or elsewhere in this
		Agreement shall be interpreted as preventing the Company from commuting all or
		any part of Outstanding Loss with one Reinsurer or several Reinsurers, if the
		other Reinsurers do not choose to commute or cannot agree to the same present
		value amounts as any other Reinsurer or Reinsurers.
	 

	 
		  EQUAL TERMS
		
	 

	 
		Except for customary differences in terms
		for unauthorized and foreign reinsurers, and except for percentage
		participations, the Company represents that this Agreement is offered on the
		basis of equal terms for all Reinsurers. The phrase “equal terms”
		means that all of the terms, conditions, and provisions of this Agreement are
		identical for earl Reinsurer hereon.
	 

	 
		  AGENCY 
	 

	 
		For purposes of sending and receiving
		notices and payments required by this Agreement, the reinsured company that is
		set forth first in the definition of “Company” in the Preamble to
		this Agreement shall be deemed the agent of all other reinsured companies
		referenced in the Preamble. In no event, however, shall any reinsured company
		be deemed the agent of another with respect to the terms of the Insolvency
		Article.
	 

	 
		  INVESTIGATION
		
	 

	 
		The Reinsurers have conducted their own
		independent review and analysis of the Policies and the exposures relating
		thereto and acknowledge that the Company has provided the Reinsurers, for the
		purpose of investigation, access to the personnel, properties, books, and
		records relating to the Policies. In entering into this Agreement, the
		Reinsurers have relied solely upon their own expertise, investigation, and
		analysis, and each Reinsurer has conducted the necessary and proper due
		diligence. The Reinsurers do not waive any rights under this Agreement in
		connection with an act of fraud, misrepresentation, or material non-disclosure
		by the Company.
	 

	 
		  ASSIGNMENT
		
	 

	 
		This Agreement shall be binding upon and
		inure to the benefit of the parties hereto and their respective successors and
		assigns and legal representatives. This Agreement is not assignable except by
		operation of law or by mutual consent of the parties hereto.
	 

	 
		  MISCELLANEOUS
		
	 

	 
		Headings
	 

	 
		The headings in this Agreement are for the
		convenience of reference only and shall not affect its interpretation.
	 

	 
		 
	 

	 
		18
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
		Preparation
	 

	 
		This Agreement has been jointly prepared by
		the parties hereto and the terms hereof shall not be construed in favor of or
		against any such party by reason of its participation in such
		preparation.
	 

	 
		Reasonableness
	 

	 
		Each of the parties hereto shall act
		reasonably and in good faith on all matters within the terms of this
		Agreement.
	 

	 
		Incontestability
	 

	 
		In consideration of the mutual covenants and
		agreements contained herein, the parties hereto do hereby agree that this
		Agreement, and each and every provision hereof, is and shall be enforceable by
		and between them according to its terms, and the parties do hereby agree that
		they shall not contest the validity or enforceability hereof.
	 

	 
		  INTERMEDIARY
		
	 

	 
		Aon Re Inc., an Illinois corporation, or one
		of its affiliated corporations duly licensed as a reinsurance intermediary, is
		hereby recognized as the Intermediary negotiating this Agreement for all
		business hereunder. All communications (including but not limited to notices,
		statements, premiums, return premiums, commissions, taxes, losses, loss
		expenses, salvages, and loss settlements) relating to this Agreement shall be
		transmitted to the Company or the Reinsurers through the Intermediary. Payments
		by the Company to the Intermediary shall be deemed payment to the Reinsurers.
		Payments by the Reinsurers to the Intermediary shall be deemed payment to the
		Company only to the extent that such payments are actually received by the
		Company.
	 

	 
		 
	 

	 
		19
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
		EXHIBIT A
	 

	 
		 
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
		NEVADA STATE INDUSTRIAL INSURANCE
		SYSTEM
	 

	 
		DBA: EMPLOYERS INSURANCE COMPANY OF
		NEVADA
	 

	 
		QUOTA SHARE REINSURANCE
		PROGRAM
	 

	 
		Reinsurance Service Manual
	 

	 
		TRUST AGREEMENT
	 

	 
		 
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
		EXHIBIT A — TRUST AGREEMENT
	 

	 
		Trust Agreement made this ___ day of ___________, 1999, by and among
		[IDENTITY OF REINSURER], a corporation organized and existing under the laws
		of ___________________ (hereinafter the “Grantor”), and STATE
		INDUSTRIAL INSURANCE SYSTEM OF NEVADA D.B.A. EMPLOYERS INSURANCE COMPANY OF
		NEVADA AND ITS SUCCESSORS an insurer existing under the laws of Nevada (such
		insurer and its successors by operation of law, including, without limitation,
		any rehabilitator, conservator, or liquidator thereof being hereinafter
		referred to as the “Beneficiary”) and CITIBANK, N.A.,
		a national banking association organized and existing under the laws of the
		United States (the “Trustee”).
	 

	 
		W I T N E S S E T H :
	 

	 
		WHEREAS, Grantor and Beneficiary have entered into certain
		Reinsurance Agreements listed in Schedule “A”, whereby Grantor, as
		reinsurer, has agreed to indemnify Beneficiary, as cedent, against loss
		(hereinafter referred to as the “Reinsurance Agreement”); and
	 

	 
		WHEREAS, Grantor and Beneficiary desire to create a reinsurance
		trust account to hold assets as security for the performance by Grantor for
		Loss and Loss Expense Allowance as such terms are defined in the Reinsurance
		Agreement (hereinafter also referred to as Grantor’s Obligations) under
		the Reinsurance Agreement.
	 

	 
		NOW, THEREFORE, in consideration of the mutual premises and covenants
		contained herein and other good and valuable consideration the receipt and
		sufficiency of which is hereby acknowledged, the parties agree as
		follows:
	 

	 
		ARTICLE I
	 

	 
		 
	 

	 
		DEPOSITS
	 

	 
		Section 1.01.    Grantor hereby establishes a
		trust account (the “Trust Account”) with the Trustee for the sole use
		and benefit of Beneficiary, upon the terms and conditions hereinafter set
		forth.
	 

	 
		Section 1.02.     The Trustee is and its
		lawfully appointed successors are authorized and shall have power to receive
		such securities and other property (“Assets”) as Grantor from time to
		time may transfer or remit to or vest in said Trustee or place in or under said
		Trustee’s control, and to hold, invest, reinvest, manage and dispose of
		the same for the uses and purposes and in the manner and according to the
		provisions hereinafter set forth. All such trusteed assets at all times shall
		be maintained as a trust account, separate and distinct from all other assets,
		and shall be continuously kept within the United States of America unless
		otherwise approved in writing by the Commissioner of Insurance for the State of
		Nevada.
	 

	 
		Section 1.03.     (a)        Assets
		deposited in the Trust Account by Grantor and investments and reinvestments
		thereof shall consist only of:
	 

	 
		 
	 

	 
		1
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
			
				
				   
				

			 	
				
				  1.
				

			 	
				
				  Securities issued by or guaranteed
				  by the Federal Government of the United States or an agency thereof;
				

			 

 

	 
			
				
				   
				

			 	
				
				  2.
				

			 	
				
				  Bonds, debentures, bills of exchange
				  or other commercial notes or bills and securities of any solvent corporation
				  designated no lower than NAIC Designation 4 by the Securities Valuation Office
				  of the National Association of Insurance Commissioners so long as the weighted
				  average credit quality of the combination of securities enumerated in this and
				  the foregoing paragraphs is no lower than “A-” as rated by
				  Standard & Poors;
				

			 

 

	 
			
				
				   
				

			 	
				
				  3.
				

			 	
				
				  Certificates of Deposit issued by
				  qualified United States financial institutions;
				

			 

 

	 
			
				
				   
				

			 	
				
				  4.
				

			 	
				
				  Non-affiliated stocks listed on a
				  regulated United States Exchange;
				

			 

 

	 
			
				
				   
				

			 	
				
				  5.
				

			 	
				
				  Cash;
				

			 

 

	 
			
				
				   
				

			 	
				
				  6.
				

			 	
				
				  Any other investment approved by the
				  Commissioner of Insurance of the State of Nevada; 
				

			 

 

	 
		collectively “Authorized
		Investments.”
	 

	 
		(b)          The Grantor hereby notifies the Trustee that
		derivatives, including futures, options, and forwards (collectively, the
		“Derivatives”), constituting 20% or less of the entire Trust Account
		at any one time will be used as economically appropriate for the reduction of
		risks in the conduct and management of the Trust Account, that is, for duration
		management, income enhancement, and modification of asset allocation. The
		Derivatives will be used as tools in the overall process of asset/liability
		management, the primary purpose of which will be to ensure that asset liquidity
		is sufficient to meet required loss payments and that the trust principal of
		the Trust Account is preserved in order to meet future claims payments. The
		parties hereto agree and acknowledge that only the Authorized Investments and
		not the Derivatives shall comprise either the Assets or the Authorized
		Investments under this Trust Agreement, and that the Trustee shall have no
		obligation hereunder with respect to the Derivatives; such Derivatives,
		together with any accounting and reporting requirements in connection
		therewith, shall remain the obligation of the Grantor or its duly appointed
		agents.
	 

	 
		(c)          The Grantor hereby represents and warrants (i) that any
		Assets transferred by the Grantor to the Trustee for deposit to the Trust
		Account will be in such form that the Beneficiary whenever necessary may, and
		the Trustee upon direction by the Beneficiary will be able to, negotiate any
		such Assets without consent or signature from the Grantor or any person or
		entity, other than a Central Depository (as such term is hereinafter defined),
		in accordance with the terms of this Agreement and (ii) that all Assets
		transferred by the Grantor to the Trustee for deposit to the Trust Account
		shall consist only of cash and other Authorized Investments.
	 

	 
		(d)          The Grantor will adopt an investment strategy, utilizing
		the Authorized Investments, which will seek to achieve returns with low
		volatility. This will be achieved through asset allocation, manager selection
		displaying low positive correlation, and diversification, including absolute
		return strategies which may employ leverage.
	 

	 
		 
	 

	 
		2
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
		Section 1.04.     (a)       Grantor
		shall, from time to time hereafter as requested, execute assignments or
		endorsements in blank of all securities or other property standing in
		Grantor’s name which are delivered to the Trustee to form a part of the
		Trust Account so that, whenever necessary, Trustee can negotiate any such Asset
		without the consent or signature of Grantor or any other person or entity other
		than a Central Depository. Any assets received by the Trustee which are not in
		such proper negotiable form shall not be accepted by the Trustee and shall be
		returned to Grantor as unacceptable. In addition, the Trustee may hold assets
		of the Trust Account in bearer form or in its own name or that of a
		nominee.
	 

	 
		(b)          The Grantor shall transfer to the Trustee, for deposit
		to the Trust Account, Authorized Investments, and may transfer to the Trustee,
		for deposit to the Trust Account, such other Authorized Investments as it may
		from time to time desire.
	 

	 
		ARTICLE II
	 

	 
		 
	 

	 
		WITHDRAWALS
	 

	 
		Section 2.01.     (a)        Except
		as provided in Section 4.04(b), without notice to the Grantor, the Beneficiary
		shall have the right, at any time and from time to time, to withdraw from the
		Trust Account, upon written notice to the Trustee (the “Withdrawal
		Notice”), such amounts or Assets as are specified in such Withdrawal
		Notice. The Withdrawal Notice shall (i) specify the amounts and/or Assets to be
		delivered and (ii) any conditions of delivery for such Assets. The Beneficiary
		need present no statement or document other than the Withdrawal Notice in order
		to withdraw Assets.
	 

	 
		(b)          Upon receipt of a Withdrawal Notice, the Trustee shall
		immediately take any and all steps reasonably necessary to transfer the amount
		or the Assets as specified in such Withdrawal Notice, and shall deliver such
		amount or Assets to or for the account of the Beneficiary as specified in such
		Withdrawal Notice.
	 

	 
		Section 2.02.    The Beneficiary agrees and covenants to the Grantor that
		it shall only withdraw the amounts or Assets from the Trust Account to satisfy
		amounts due without diminution because of the insolvency of Beneficiary or
		Grantor, for the following purposes only:
	 

	 
		(a)          to pay or reimburse the Beneficiary for the
		Grantor’s share under the Reinsurance Agreement for Grantor’s
		Obligations paid by Beneficiary but not recovered from the Grantor;
	 

	 
		(b)          to allow Grantor to reduce the Trust Account by any
		amounts held in the Trust Account that exceed the actual amount required to
		fund Grantor’s Obligations under the Reinsurance Agreement; or
	 

	 
		(c)         where Beneficiary has received Termination Notice (as
		hereinafter defined) of the Trust Account pursuant to Section 7.01 hereof and
		where Grantor’s Obligations under the Reinsurance Agreement remain
		unliquidated and undischarged ten (10) days prior to the 
	 

	 
		 
	 

	 
		3
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
		Termination Date (as hereinafter defined),
		to withdraw amounts equal to such Grantor’s Obligations and deposit such
		amounts in a separate account, in the name of Beneficiary in any United States
		bank or trust company, apart from its general assets, in trust for such uses
		and purposes specified in subsections (a) and (b) above, as may remain
		executory after such withdrawal and for any period after the Termination Date.
		
	 

	 
		Section 2.03.    The Trustee shall have no
		responsibility whatsoever to determine that any amounts or Assets withdrawn
		from the Trust Account pursuant to Article II hereof will be used and applied
		in a manner consistent with Section 2.02 above.
	 

	 
		ARTICLE III
	 

	 
		 
	 

	 
		MANAGEMENT OF AUTHORIZED
		INVESTMENTS
	 

	 
		Section 3.01.     The responsibility for
		directing investment and reinvestment of Assets in the Trust Account shall be
		that of the Grantor and the Trustee shall not be required to take any action
		with respect to the investment and reinvestment, of the Assets in the Trust
		Account.
	 

	 
		Section 3.02.     From time to time at the
		instruction or order (“Investment Order”) of the Grantor or at the
		instruction or order of an Investment Manager, which the Grantor shall from
		time to time designate, the Trustee shall invest Assets in the Trust Account in
		Authorized Investments.
	 

	 
		Section 3.03.    The Trustee shall have no
		responsibility to determine whether the Assets are sufficient to secure the
		Grantor’s Obligations under the Reinsurance Agreement. Furthermore, the
		Trustee shall have no responsibility whatsoever to determine the value of any
		Assets that have been substituted or whether such substituted Assets constitute
		Authorized Investments. The Grantor covenants and agrees that any notice,
		direction, instruction, order, request, demand, acknowledgment or other
		communication delivered hereunder to the Trustee from the Investment Manager
		shall have the same force and effect and the Trustee shall be entitled to rely
		thereupon to the same extent as if such notice, direction, instruction, order,
		request, demands, acknowledgment or other communication were from the
		Grantor
	 

	 
		Section 3.04.   The Grantor and Beneficiary agree that all investments
		and substitutions of securities referred to in Sections 3.01, 3.02 and 3.03
		above shall be in compliance with the definition of “Authorized
		Investments” in Section 1.03 of this Agreement. The Trustee shall execute
		Investment Orders and settle securities transactions by itself or by means of
		an agent or broker. The Trustee shall not be responsible for any act or
		omission, or for the solvency of any such agent or broker. When the Trustee is
		directed to deliver Assets against payment, or payment against the delivery of
		Assets, delivery or payment will be made in accordance with generally accepted
		market practices. Any loss incurred from any investment pursuant to the terms
		of this Article III shall be borne exclusively by the Trust Account.
	 

	 
		 
	 

	 
		4
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
		ARTICLE IV
	 

	 
		 
	 

	 
		TRUST ACCOUNT MANAGEMENT
	 

	 
		Section 4.01.    All dividends, interest and other income resulting from
		the investment of the Assets (“Income”) in the Trust Account shall be
		the property of the Grantor. To the extent that the Trustee shall collect and
		receive Income from the Trust Account, it shall pay over the amount of such
		Income (not more often than monthly) upon the written direction of the Grantor,
		and may deposit such Income in a separate account established in the
		Grantor’s individual name and capacity; provided, however, that the
		Trustee shall have no duties or obligations as Trustee with respect to the
		payment of Income by the issuer of the Assets or the deposit of such Income as
		provided herein. The Trustee may deduct the Trustee’s compensation and
		expenses, as provided in Section 5.04 of this Agreement, from Income.
	 

	 
		Section 4.02.     The Trustee will forward
		all annual and interim stockholder reports and all proxies and proxy materials
		relating to the Assets in the Trust Account to the Grantor or its designee. The
		Grantor or its designee shall have the full and unqualified right to vote any
		Assets in the Trust Account. The Trustee is authorized to open all mail
		directed to the Grantor, or its designee received by the Trustee.
	 

	 
		Section 4.03.    The Trustee will surrender for payment all maturing
		Assets called for redemption and deposit the principal amount of the proceeds
		of any such payment received by the Trustee to the Trust Account.
	 

	 
		Section 4.04.     (a)        The
		Trustee shall furnish to Grantor and the Beneficiary an accounting of all
		Assets in the Trust Account upon its inception and thereafter at intervals no
		less frequent than as of the end of each calendar quarter. Such accountings
		shall be given as soon as practicable, but in no event later than 15 business
		days after such date.
	 

	 
		(b)          The Trustee shall furnish to the Grantor and the
		Beneficiary with notice of any deposits to or withdrawals from the Trust
		Account within fifteen (15) calendar days of the occurrence of such
		event.
	 

	 
		ARTICLE V
	 

	 
		 
	 

	 
		PROVISION RELATING TO TRUSTEE
	 

	 
		Section 5.01.    Before accepting any Asset for
		deposit to the Trust Account, the Trustee shall determine that such Asset is in
		such form that the Beneficiary whenever necessary may, or the Trustee upon
		direction by the Beneficiary may, negotiate such Asset without consent or
		signature from the Grantor or any person or entity (other than a Central
		Depository and the Trustee) in accordance with the terms of this
		Agreement.
	 

	 
		 
	 

	 
		5
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
		Section 5.02.    The Trustee shall have no
		responsibility whatsoever to determine that any Assets in the Trust Account are
		or continue to be Authorized Investments nor whether such Assets remain in
		negotiable form (due to change in law or otherwise).
	 

	 
		Section 5.03.    The Trustee may maintain the
		Assets in book-entry form with, and utilize the services of, any Federal
		Reserve Bank, The Depository Trust Company, The Participant’s Trust
		Company, Euroclear and Cedel, or similar such depositories (“Central
		Depositories”) as appropriate. Assets may be held in the name of a nominee
		maintained by the Trustee or any Central Depository.
	 

	 
		Section 5.04.    The Trustee shall be entitled to
		receive a fee as compensation for its services hereunder, computed and payable
		at such time and rate as may be agreed from time to time in writing between
		Grantor and the Trustee. Grantor shall be solely responsible for the payment of
		the fee of the Trustee and all reasonable costs and expenses of the Trustee,
		including reasonable fees and expenses of counsel (except as same shall be
		proven to arise from the Trustee’s own negligence, willful misconduct or
		lack of good faith). The Trust Account shall not be utilized for the payment of
		such fees and expenses except that the Trustee may deduct its fees, expenses
		and costs from Income.
	 

	 
		Section 5.05.    The Trustee shall be responsible
		for the safekeeping and administration of the Trust Account in accordance with
		provisions of this Trust Agreement. The Trustee shall not be liable nor
		responsible for any loss to the Trust Account unless such loss shall be caused
		by its own negligence, willful misconduct or lack of good faith. The Grantor
		hereby indemnifies the Trustee and holds it harmless from and against any loss,
		liability and expense and costs (including reasonable fees and expenses of
		counsel) incurred or made by the Trustee and arising in connection with the
		performance of its obligation pursuant to the terms of this
		Agreement.1
	 

	 
		Section 5.06.    Upon the written request of the
		Grantor or the Beneficiary (at such party’s own expense), the Trustee
		shall promptly permit the Grantor or the Beneficiary, their respective agents,
		employees or independent auditors to examine, audit, excerpt, transcribe and
		copy, during the Trustee’s normal business hours, any books, documents,
		papers and records relating to the Trust Account or the Assets in the Trust
		Account.
	 

	 
		Section 5.07.    (a)         Unless
		otherwise provided in this Agreement, the Trustee is authorized to follow and
		rely upon all notices and instructions given by persons named in incumbency
		certificates or letters of authorization furnished to the Trustee from time to
		time by the Grantor and the Beneficiary, respectively, and by any
		attorneys-in-fact acting under written authority furnished to the Trustee by
		the Grantor or the Beneficiary including, without limitation, notices and
		instructions given by letter, telephone, facsimile transmission, telegram,
		teletype, cablegram or electronic media, if the Trustee believes such notices
		and instructions to be genuine and to have been signed, sent or presented by
		the proper party or parties. The Trustee shall not incur 
	 

	 
		_________________
	 

	 	
			 
				1
			 

		  	
			 
				If an Investment Manager other than
				CITIBANK, N.A. is employed, a separate indemnification agreement of the Bank
				should be obtained.
			 

		  


	 
		 
	 

	 
		6
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
		any liability to any person or entity
		resulting from actions taken or not taken by the Trustee in reliance in good
		faith on such notices and instructions. The Trustee shall not incur any
		liability in executing or not executing instructions (i) from any
		attorney-in-fact prior to receipt by it or notice of the revocations of the
		written authority of the attorney-in-fact or (ii) from any person purporting to
		represent the Grantor or the Beneficiary named in an incumbency certificate or
		letter of authorization delivered hereunder prior to receipt by it of a more
		current certificate or letter.
	 

	 
		(b)          The parties hereto agree that that attached Schedule
		“B” shall govern any and all funds transfers from the Trust
		Account.
	 

	 
		Section 5.08.     The duties and obligations of the Trustee shall only be
		such as are specifically set forth in this Agreement, as it may from time to
		time be amended, and no implied duties or obligations shall be read into this
		Agreement against the Trustee. The Trustee shall be liable only for its own
		negligence, willful misconduct or lack of good faith.
	 

	 
		Section 5.09.     No provision of this
		Agreement shall require the Trustee to take any action which, in the
		Trustee’s reasonable judgment, would result in any violation of this
		Agreement or any provision of law.
	 

	 
		Section 5.10.   Whenever in the administration of the Trust Account
		created by this Trust Agreement the Trustee shall deem it necessary or
		desirable that a matter be proved or established prior to taking, suffering or
		omitting any action thereunder, such matter (unless other evidence in respect
		thereof be herein specifically prescribed) may be deemed to be conclusively
		proved and established by a statement or certificate signed by or on behalf of
		Grantor and/or Beneficiary and delivered to the Trustee and said statement or
		certificate shall be full warrant to the Trustee for any action taken, suffered
		or omitted by it on the faith thereof; but in its discretion, the Trustee may,
		in lieu thereof, accept other evidence of the fact or matter or may require
		such other or additional evidence as it may deem reasonable.
	 

	 
		Section 5.11.    Except as otherwise expressly
		provided in this Trust Agreement, any statement, instruction, certificate,
		notice, request, consent, approval, or other instrument to be delivered or
		furnished by Grantor and/or Beneficiary shall be sufficiently executed if
		executed in the name of Grantor and/or Beneficiary by such officer or officers
		of Grantor and/or Beneficiary or by such other agent or agents of Grantor
		and/or Beneficiary as may be designated in a resolution or letter of advice by
		Grantor and/or Beneficiary. Written notice of such designation by Grantor
		and/or Beneficiary shall be filed with the Trustee. The Trustee shall be
		protected in acting upon any written statement or other instrument made by such
		officer or agent (or purported officer or agent) of Grantor and/or Beneficiary
		with respect to the authority conferred therein.
	 

	 
		Section 5.12.    The Trustee may consult with
		counsel selected by it who may be counsel for Grantor or Beneficiary. The
		opinion of said counsel shall be full and complete authority and protection for
		the Trustee with respect to any action taken, suffered or omitted by it in good
		faith and in accordance with the opinion of said counsel other than with
		respect to the withdrawal of Assets by the Beneficiary.
	 

	 
		 
	 

	 
		7
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
		Section 5.13.    The Trustee hereby accepts the trust herein created and
		declared upon the terms herein expressed.
	 

	 
		ARTICLE VI
	 

	 
		 
	 

	 
		RESIGNATION OF TRUSTEE
	 

	 
		Section 6.01.     (a)         The
		Trustee may resign at any time by giving not less than 90 days’ written
		notice thereof to the Beneficiary and to the Grantor, such resignation to
		become effective on the acceptance of appointment by a successor Trustee and
		the transfer to such successor Trustee of all Assets in the Trust Account in
		accordance with paragraph (b) of this Section 6.01.
	 

	 
		(b)          Upon receipt of the Trustee’s notice of
		resignation, the Grantor and the Beneficiary shall promptly appoint a successor
		Trustee. Any successor Trustee shall be a bank that is a member of the Federal
		Reserve System and shall not be a parent, a subsidiary or an affiliate of the
		Grantor or the Beneficiary. Upon the acceptance of the appointment as Trustee
		hereunder by a successor Trustee and the transfer to such successor Trustee of
		all Assets in the Trust Account, the resignation of the Trustee shall become
		effective. Thereupon, such successor Trustee shall succeed to and become vested
		with all the rights, powers, privileges and duties of the resigning Trustee,
		and the resigning Trustee shall be discharged from any future duties and
		obligations under this Agreement, but the resigning Trustee shall continue
		after such resignation to be entitled to the benefits of the indemnities
		provided herein for the Trustee. The resigning Trustee shall have the right to
		demand a final accounting of the Trust Account.
	 

	 
		ARTICLE VII
	 

	 
		 
	 

	 
		TERMINATION OF THE AGREEMENT
	 

	 
		Section 7.01.     (a)       The
		Trust Account and this Agreement, except for the indemnities provided herein,
		may be terminated only after (i) the Grantor and the Beneficiary, upon mutual
		agreement, have given the Trustee written notice of its intention to terminate
		the Trust Account (the “Notice of Intention”) and (ii) the Trustee
		has given the Grantor and the Beneficiary the written notice specified in
		paragraph (b) of this Section 7. The Notice of Intention shall specify the date
		on which the notifying Party intends the Trust Account to terminate (the
		“Proposed Date”).
	 

	 
		(b)          Within three (3) days following receipt by the Trustee
		of the Notice of intention, the Trustee shall give written notice (the
		“Termination Notice”) to the Beneficiary and the Grantor of the date
		(the “Termination Date”) on which the Trust Account shall terminate.
		The Termination Date shall be (i) the Proposed Date if the Proposed Date is at
		least 30 days but no more than 45 days subsequent to the date the Termination
		Notice is given; (ii) 30 days subsequent to the date the Termination Notice is
		given, if the Proposed Date is fewer than 30 days subsequent to the date the
		Termination Notice is given; or (iii) 45 days subsequent to the date the
		Termination Notice is given, if the Proposed Date is more than 45 days
		subsequent to the date the Termination Notice is given.
	 

	 
		 
	 

	 
		8
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
		(c)          On the Termination Date, upon receipt of written
		approval of the Beneficiary, the Trustee shall transfer to the Grantor any
		Assets remaining in the Trust Account, at which time all responsibility and
		liability of the Trustee with respect to such Assets shall cease.
	 

	 
		ARTICLE VIII
	 

	 
		 
	 

	 
		MISCELLANEOUS PROVISIONS
	 

	 
		Section 8.01.    The Trustee irrevocably submits
		to the jurisdiction of the state and/or United States courts of the State of
		Nevada; provided, however, the Trustee shall not be obligated to bring or
		defend any proceeding in such courts if the Trustee would be required to be
		qualified to do business in such state or to be licensed as a Trustee or bank
		in such state or if, on the advise of counsel, the Trustee would reasonably be
		subject to tax in such state. The provisions of and validity and construction
		of this Trust Agreement and any amendments hereto shall be governed by, and
		construed in accordance with the laws of the State of New York and the Trust
		Account created hereunder shall be administered in accordance with the laws of
		the State of New York without regard for conflict of law principles.
	 

	 
		Section 8.02.    This Trust Agreement maybe
		modified or amended and any provisions herein waived only upon the written
		amendment or waiver signed by all of the Parties hereto.
	 

	 
		Section 8.03.    In the event any provision of
		this Trust Agreement shall be held invalid or unenforceable for any reason,
		such invalidity or unenforceability shall not affect the remaining parts of
		this Trust Agreement.
	 

	 
		Section 8.04.    This Trust Agreement may be
		executed in any number of counterparts, each of which shall be deemed an
		original, and the counterparts shall constitute but one and the same
		instrument, which shall be sufficiently evidenced by any one
		counterpart.
	 

	 
		Section 8.05.     No Party may assign this
		Agreement or any of its rights or obligations hereunder, whether by merger,
		consolidation, sale of all or substantially all of its assets, liquidation,
		dissolution or otherwise, except as expressly permitted by this
		Agreement
	 

	 
		Section 8.06.    Unless otherwise provided in this Agreement, all
		notices, directions, requests, demands, acknowledgments and other
		communications required or permitted to be given or made under the terms hereof
		shall be in writing and shall be deemed to have been duly given or made (a)(i)
		when delivered personally, (ii) when made or given by prepaid telex, telegraph
		or telecopier, or (iii) in the case of mail delivery, upon the expiration of
		three (3) days after any such notice, direction, instructions, orders, request,
		demand, acknowledgment or other communication shall have been deposited in the
		United States mail for transmission by first class mail, postage prepaid, or
		upon receipt thereof, whichever shall first occur and (b) when addressed as
		follows:
	 

	 
		 
	 

	 
		9
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
			
				
				   
				

			 	
				
				  If to the Grantor:
				

			 	______________________________
	 	 	______________________________
	 	 	______________________________

 

	 
			
				
				   
				

			 	
				
				  If to the Beneficiary:

				

			 	
				
				  Jay Hoppe 
				

				
				  Employers Insurance Co. of
				  Nevada
				

				
				  515 E. Musser
				

				
				  Carson City, NV 89714
				

				
				   
				

				
				  with copy to:
				

				
				  Douglas D. Dirks,
				  C.E.O.
				

				
				  Employers Insurance Co. of
				  Nevada
				

				
				  515 E. Musser
				

				
				  Carson City, NV 89714
				

			 

 

	 
			
				
				   
				

			 	
				
				  If to the Trustee:
				

			 	
				
				  [CITIBANK, N.A.],
				

				
				  111 Wall Street
				

				
				  New York, NY 10005
				

				
				  Attn: _______________________
				  Department
 ____________________________, Vice President
				

			 

 

	  

	  

	 
		Each Party may from time to time designate a
		different address for notices, directions, requests, demands, acknowledgments
		and other communications by giving written notice of such change to the other
		Parties. All notices, directions, requests, demands, acknowledgments and other
		communications relating to the approval of authorization to substitute Assets
		and to the termination of the Trust Account shall be in writing.
	 

	 
		Section 8.07.    The headings of the Articles and
		Sections have been inserted for convenience of reference only and shall not be
		deemed to constitute a part of this Agreement
	 

	 
		[GRANTOR]
	 

	 
			
				
				  By:
				

			 	 	 	
				
				  By:
				

			 	 
	
				
				   
				

			 	
				
				  Name:
				

			 	 	 	
				
				  Name:
				

			 
	
				
				   
				

			 	
				
				  Tide:
				

			 	 	 	
				
				  Title:
				

			 

 

	 
		[BENEFICIARY]
	 

	 	
			 
				By:
			 

		  	 	 	 	 
	
			 
				 
			 

		  	
			 
				Name:
			 

		  	 	 	 
	
			 
				 
			 

		  	
			 
				Tide:
			 

		  	 	 	 


	 
		 
	 

	 
		10
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
		[CITIBANK, N.A.],
	 

	 
			
				
				  By:
				

			 	 	 	 	 
	
				
				   
				

			 	
				
				  Name:
				

			 	 	 	 
	
				
				   
				

			 	
				
				  Tide:
				

			 	 	 	 

 

	 
		 
	 

	 
		11
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
		EXHIBIT B
	 

	 
		 
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
		INTERESTS AND LIABILITIES AGREEMENT
	 

	 
		attaching to and forming a part of
	 

	 
		QUOTA SHARE REINSURANCE AGREEMENT
	 

	 
		between
	 

	 
		STATE INDUSTRIAL INSURANCE SYSTEM OF NEVADA,
		
	 

	 
		D.B.A.: EMPLOYERS INSURANCE COMPANY OF
		NEVADA
	 

	 
		and
	 

	 
		its successors, assigns, and
		beneficiaries,
	 

	 
		and
	 

	 
		its predecessor,
	 

	 
		THE NEVADA INDUSTRIAL COMMISSION
	 

	 
		(hereinafter collectively referred to as the
		“Company”)
	 

	 
		and
	 

	 
		GERLING GLOBAL INTERNATIONAL REINSURANCE
		COMPANY, LTD.
	 

	 
		(hereinafter referred to as the
		“Subscribing Reinsurer”)
	 

	 
		It is hereby mutually understood and agreed
		by and between the Company and the Subscribing Reinsurer that as of June 30,
		1999, 21:59 p.m. Pacific Standard Time, the Subscribing Reinsurer’s share
		in the interests and liabilities of the Reinsurers on the attached Agreement
		will be 55% and that this represents the lead participation in the
		attached Agreement.
	 

	 
		The share of the Subscribing Reinsurer will
		be separate and apart from the shares of the other Reinsurers and will not be
		joint with those of the other Reinsurers, and the Subscribing Reinsurer will in
		no event participate in the interests and liabilities of the other
		Reinsurers.
	 

	 
		The Subscribing Reinsurer designates the
		following as the party to whom service of process will be made for proposes of
		the Service of Suit Article contained in the attached Agreement:
	 

	 
		Morgan, Lewis & Bockius, 101 Park
		Avenue, New York, New York 10178-0060, U.S.A., Attn: F. Sedgwick Browne
	 

	 
		It is finally understood and agreed that the
		Subscribing Reinsurer shall not be a party to the Intermediary Article
		appearing in the attached Agreement, rather it shall be subject to the
		following Article:
	 

	 
		 
	 

	 
		1
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
		INTERMEDIARIES
	 

	 
		“Gerling Global Financial Products Inc.
		is hereby recognized as the Intermediary for all business under this Agreement
		with respect to Gerling Global International Reinsurance Company, Ltd., and Aon
		Re Inc. is hereby recognized as the Intermediary for all business under this
		Agreement with respect to the Company. All communications relating to this
		Agreement shall be transmitted to the Company and the Subscribing Reinsurer
		through the Intermediaries.
	 

	 
		“Payments by the Company to Aon shall
		be deemed to constitute payment to the Subscribing Reinsurer only to the extent
		that such payments are actually received by the Subscribing Reinsurer, and
		payments by the Subscribing Reinsurer to Aon shall be deemed to constitute
		payment to the Company only to the extent that such payments are actually
		received by the Company.”
	 

	 
		* **
	 

	 
		This Agreement may be executed in two or
		more counterparts, each of which will be deemed an original, but all of which
		together will constitute one and the same instrument.
	 

	 
		The Company and the Subscribing Reinsurer
		represent and warrant, with respect to the attached Agreement, this Agreement,
		and the transaction associated therewith, that the Company and the Subscribing
		Reinsurer are authorized to enter into the aforesaid Agreements and that their
		representatives are duly authorized to execute this Agreement on their
		behalf.
	 

	 
		IN WITNESS WHEREOF, the parties hereto have
		caused this Interests and Liabilities Agreement to be executed by their duly
		authorized representatives.
	 

	 
		Signed at CARSON CITY, NEVADA
	 

	 
		STATE INDUSTRIAL INSURANCE SYSTEM OF
		NEVADA,
	 

	 
		D.B.A.: EMPLOYERS INSURANCE COMPANY OF
		NEVADA
	 

	 
		THE NEVADA INDUSTRIAL COMMISSION
	 

	 
			
				
				  Signature:
				

			 	
				
				  /s/ [Illegible]
				

			 	 	
				
				  Title:
				

			 	
				
				  Chief Executive Officer
				

			 
	
				
				  Attest:
				

			 	  	 	
				
				  Date:
				

			 	
				
				  June 25, 1999
				

			 

 

	 
		Signed at ST. MICHAEL, BARBADOS
	 

	 
		GERLING GLOBAL INTERNATIONAL REINSURANCE
		COMPANY, LTD.
	 

	 	
			 
				Signature:
			 

		  	
			 
				/s/ John Clayton
			 

		  	 	
			 
				Title:
			 

		  	
			 
				Senior Vice President
			 

		  
	
			 
				Attest:
			 

		  	
			 
				/s/ [Illegible]
			 

		  	 	
			 
				Date:
			 

		  	
			 
				June 30, 1999
			 

		  


	  

	 
		 
	 

	 
		2
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
		INTERESTS AND LIABILITIES AGREEMENT
	 

	 
		attaching to and forming a part of
	 

	 
		QUOTA SHARE REINSURANCE AGREEMENT
	 

	 
		between
	 

	 
		STATE INDUSTRIAL INSURANCE SYSTEM OF NEVADA,
		
	 

	 
		D.B.A.: EMPLOYERS INSURANCE COMPANY OF
		NEVADA
	 

	 
		and
	 

	 
		its successors, assigns, and
		beneficiaries,
	 

	 
		and
	 

	 
		its predecessor,
	 

	 
		THE NEVADA INDUSTRIAL COMMISSION
	 

	 
		(hereinafter collectively referred to as the
		“Company”)
	 

	 
		and
	 

	 
		ACE BERMUDA INSURANCE LTD.
	 

	 
		(hereinafter referred to as the
		“Subscribing Reinsurer”)
	 

	 
		It is hereby mutually understood and agreed
		by and between the Company and the Subscribing Reinsurer that as of June 30,
		1999, 11:59 p.m. Pacific Standard Time, the Subscribing Reinsurer’s share
		in the interests and liabilities of the Reinsurers on the attached Agreement
		will be 10%.
	 

	 
		The share of the Subscribing Reinsurer will
		be separate and apart from the shares of the other Reinsurers and will not be
		joint with those of the other Reinsurers, and the Subscribing Reinsurer will in
		no event participate in the interests and liabilities of the other
		Reinsurers.
	 

	 
		The Subscribing Reinsurer designates the
		following as the party to whom service of process will be made for purposes of
		the Service of Suit Article contained in the attached agreement:
	 

	 
		General Counsel – Ace Bermuda Insurance
		Ltd.
	 

	 
		The Ace Building, 30 Woodbourne
		Avenue,
	 

	 
		Hamilton HM 08, Bermuda
	 

	 
		Phone: 299 9291
	 

	 
		Fax: 296 7797
	 

	 
		This Agreement may be executed in two or
		more counterparts, each of which will be deemed an original, but all of which
		together will constitute one and the same instrument.
	 

	 
		The Company and the Subscribing Reinsurer
		represent and warrant, with respect to the attached Agreement, this Agreement,
		and the transaction associated therewith, that the Company 
	 

	 
		 
	 

	 
		1
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
		and the Subscribing Reinsurer are authorized
		to enter into the aforesaid Agreements and that their representatives are duly
		authorized to execute this Agreement on their behalf.
	 

	 
		IN WITNESS WHEREOF, the parties hereto have
		caused this Interests and Liabilities Agreement to be executed by their duly
		authorized representatives.
	 

	 
		Signed at CARSON CITY, NEVADA
	 

	 
		STATE INDUSTRIAL INSURANCE SYSTEM OF
		NEVADA,
	 

	 
		D.B.A.: EMPLOYERS INSURANCE COMPANY OF
		NEVADA
	 

	 
		THE NEVADA INDUSTRIAL COMMISSION
	 

	 	
			 
				Signature:
			 

		  	
			 
				/s/ [Illegible]
			 

		  	 	
			 
				Title:
			 

		  	
			 
				Chief Executive Officer
			 

		  
	
			 
				Attest:
			 

		  	  	 	
			 
				Date:
			 

		  	
			 
				June 23, 1999
			 

		  


	  

	 
		Signed at HAMILTON, BERMUDA
	 

	 
		ACE BERMUDA INSURANCE LTD.
	 

	 	
			 
				Signature:
			 

		  	
			 
				/s/ [Illegible]
			 

		  	 	
			 
				Title:
			 

		  	
			 
				Vice President
			 

		  
	
			 
				Attest:
			 

		  	  	 	
			 
				Date:
			 

		  	
			 
				June 29, 1999
			 

		  


	  

	 
		NOTE: Signature of the Subscribing Reinsurer
		is conditional upon the form of trust agreement language appearing in Exhibit A
		– Trust Agreement no applying to its participation in the attached
		Agreement. At the inception of this Agreement, the Subscribing Reinsurer shall
		be funding its obligations under the Trust Agreement or Letter of Credit
		Article in the attached Agreement by letter of credit; if, at any future date,
		the Subscribing Reinsurer wishes to fund its obligations thereunder in whole or
		part by trust agreement, such trust agreement shall contain provisions
		acceptable to the regulatory authorities having jurisdiction over the
		Company’s Reserve and the Subscribing Reinsurer.
	 

	 
		 
	 

	 
		2
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission. 
	 

	 
		 
	 



	 
	 

	 

	 
		INTERESTS AND LIABILITIES AGREEMENT
	 

	 
		attaching to and forming a part of
	 

	 
		QUOTA SHARE REINSURANCE AGREEMENT
	 

	 
		between
	 

	 
		STATE INDUSTRIAL INSURANCE SYSTEM OF NEVADA,
		
	 

	 
		D.B.A.: EMPLOYERS INSURANCE COMPANY OF
		NEVADA
	 

	 
		and
	 

	 
		its successors, assigns, and
		beneficiaries,
	 

	 
		and
	 

	 
		its predecessor,
	 

	 
		THE NEVADA INDUSTRIAL COMMISSION
	 

	 
		(hereinafter collectively referred to as the
		“Company”)
	 

	 
		and
	 

	 
		XL MID OCEAN REINSURANCE COMPANY
		LIMITED
	 

	 
		(hereinafter referred to as the
		“Subscribing Reinsurer”)
	 

	 
		It is hereby mutually understood and agreed
		by and between the Company and the Subscribing Reinsurer that as of June 30,
		1999, 11:59 p.m. Pacific Standard Time, the Subscribing Reinsurer’s share
		in the interests and liabilities of the Reinsurers on the attached Agreement
		will be 35%.
	 

	 
		The share of the Subscribing Reinsurer will
		be separate and apart from the shares of the other Reinsurers and will not be
		joint with those of the other Reinsurers, and the Subscribing Reinsurer will in
		no event participate in the interests and liabilities of the other
		Reinsurers.
	 

	 
		The Subscribing Reinsurer designates the
		following as the party to whom service of process will be made for purposes of
		the Service of Suit Article contained in the attached agreement:
	 

	 	 
	 


	 
		This Agreement may be executed in two or
		more counterparts, each of which will be deemed an original, but all of which
		together will constitute one and the same instrument.
	 

	 
		The Company and the Subscribing Reinsurer
		represent and warrant, with respect to the attached Agreement, this Agreement,
		and the transaction associated therewith, that the Company 
	 

	 
		 
	 

	 
		1
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission.
	 

	 
		 
	 



	 
	 

	 

	 
		and the Subscribing Reinsurer are authorized
		to enter into the aforesaid Agreements and that their representatives are duly
		authorized to execute this Agreement on their behalf.
	 

	 
		IN WITNESS WHERE OF, the parties hereto have
		caused this Interests and Liabilities Agreement to be executed by their duly
		authorized representatives.
	 

	 
		Signed at CARSON CITY, NEVADA
	 

	 
		STATE INDUSTRIAL INSURANCE SYSTEM OF
		NEVADA,
	 

	 
		D.B.A.: EMPLOYERS INSURANCE COMPANY OF
		NEVADA
	 

	 
		THE NEVADA INDUSTRIAL COMMISSION
	 

	 	
			 
				Signature:
			 

		  	
			 
				/s/ [Illegible]
			 

		  	 	
			 
				Title:
			 

		  	
			 
				Chief Executive Officer
			 

		  
	
			 
				Attest:
			 

		  	  	 	
			 
				Date:
			 

		  	
			 
				June 25, 1999
			 

		  


	 

	 
		Signed at HAMILTON, BERMUDA
	 

	 
		XL MID OCEAN REINSURANCE COMPANY
		LIMITED
	 

	 	
			 
				Signature:
			 

		  	
			 
				/s/ [Illegible]
			 

		  	 	
			 
				Title:
			 

		  	
			 
				SR Actuary/SR. VP
			 

		  
	
			 
				Attest:
			 

		  	
			 
				/s/ [Illegible]
			 

		  	 	
			 
				Date:
			 

		  	
			 
				30 June 1999
			 

		  


	  

	 
		 
	 

	 
		 
	 

	 
		2
	 

	 
		* Confidential treatment has been requested
		with respect to certain portions of this exhibit. Such portions are marked with
		a “[*]” in place of the redacted language. Omitted portions are filed
		separately with the Securities and Exchange Commission.