**Exhibit
10(dddd.2)**
 
 
 
 
 
 
 
 
 
 **PHYSICIANS’
RECIPROCAL MANAGERS, INC.**
 (Hereinafter
called the “Company”)
 
 
 **PROGRAM
MANAGER’S AGREEMENT**
 
 with
 
 **PROFESSIONAL
MEDICAL ADMINISTRATORS, L.L.C.**
 (Hereinafter
called the “Manager”)
 
 
    
  **PROGRAM
MANAGER’S AGREEMENT**
 
 **TABLE
OF CONTENTS**
 
 
 TERM
      OF AGREEMENT
    1APPOINTMENT
      OF MANAGER; LINES OF AUTHORITY
    1Lines
      of Authority
    1Territory
    1Exclusions
    1Reinsurance
      Availability
    1MANAGER’S
      DUTIES AND RESPONSIBILITIES
    2Solicitation
    2Binding
      of Risks
    2Policy
      Issuance
    2Risks
      Bound
    2Premium
      Rates
    2Compliance
      with Manuals
    2Premiums
    3Accounting
    3Fiduciary
      Capacity
    3Credit
      Extensions
    4Company
      Property
    4Manager
      Expenses
    4Legal
      Compliance
    4Governmental
      Contacts
    4Claim
      Notification
    4Premium
      Financing
    4Competent
      Staff
    5Company
      Interests
    5Accurate
      Records
    5Audit
    5Services
    5Licenses
    5Policy
      Cancellation
    6Sub-Producers
    6Manager’s
      Data Base
    6Catastrophe
      Funds
    7CLAIMS
      SETTLEMENT
    7MANAGER’S
      COMPENSATION
    7Production
      and Administration Commission
    7Unearned
      Commissions
    7
  -ii-
 TABLE
      OF CONTENTS (continued)ADVERTISING
    8REPRESENTATION
      WITH RESPECT TO POLICIES
    8INSURANCE
      OF MANAGER
    8Errors
      and Omissions
    8Comprehensive
      General Liability
    8Employee
      Dishonesty
    8INDEMNIFICATION
    8Manager
    8Company
    9FLAT
      CANCELLATION
    9OWNERSHIP
      OF EXPIRATIONS
    9Underwriting
      Records and Files
    9Account
      and Payment Delinquency
    9Limited
      License
    10Default
    10SUSPENSION
      OF MANAGER’S AUTHORITY
    10Administrative
      Allegation
    10Criminal
      Offense
    10Default
    11TERMINATION
      OF AGREEMENT
    11Company
      May Terminate
    11Immediately
    11Upon
      Thirty (30) Days’ Notice
    11Either
      Company or Manager
    12Manager
      May Terminate this Agreement Immediately
    12CONTINUING
      DUTIES OF MANAGER AFTER TERMINATION
    12WAIVER
      OF STATUTORY TERMINATION RIGHTS OF MANAGER
    13DISPUTE
      RESOLUTION
    13
  -iii-
 TABLE
      OF CONTENTS (continued)OTHER
      TERMS AND CONDITIONS
    13Waiver
      and Estoppel
    13Notice
      and Cure
    13Conflict
      with Law
    14Assignment
    14Headings
    14Governing
      Law
    14Honorable
      Undertaking
    14Promptly
    14Notices
    14Independent
      Contractor
    14Negotiated
      Agreement
    15Entire
      Agreement
    15Third
      Party Beneficiary
    15Confidentiality
    15EXHIBIT
      A (THE BUSINESS)
    17EXHIBIT
      B (CLAIMS AUTHORITY)
    18
 
 
   -iv-
   **PROGRAM
MANAGER’S AGREEMENT**
 
 
 
 This
AGREEMENT is made between Professional Medical Administrators, L.L.C., with
offices located at 111 East Shore Road, Manhasset, New York 11030, (hereinafter
referred to as “Manager”), and Physicians’ Reciprocal Managers, Inc. with
offices located at 2 North Second Street, 7 th Floor,
Harrisburg, Pennsylvania 17101-1604 (hereinafter referred to as the
“Company”).
 
 Manager
and the Company agree as follows:
 
 
 ARTICLE
I
 
 TERM
OF AGREEMENT
 
 This
Agreement shall have an effective date of January 1, 2004. It will continue
until terminated under the provisions of Article XIII.
 
 
 ARTICLE
II
 
 APPOINTMENT
OF MANAGER; LINES OF AUTHORITY
 
 The
Company appoints Manager for the Company as follows:
 
 A.
    Lines
      of Authority:
      Manager’s appointment and authority extends to the classes of business,
      policies of insurance, including all endorsements (the “Policies”); and
      lines and limits of insurance described in Exhibit A attached to this
      Agreement (the “Business”).
 
 B.
    Territory:
      Manager’s appointment and authority extends to risks principally located
      in the United States.
 
 C.
    Exclusions:
      Manager’s appointment and authority is subject to any exclusions set forth
      in Exhibit A.
 
 D.
    Reinsurance
      Availability:
      Manager’s appointment and authority for Business written under this
      Agreement is subject to the following:
 
 1.
    That
      the Company is able to obtain and maintain in force at all times
      reinsurance satisfactory to the Company for the Business, and such
      reinsurance shall be satisfactory if consistent with its customary or
      usual standards.
 
   1
   2.
    Obtaining
      reinsurance is the sole responsibility of the Company. When the Company
      obtains satisfactory reinsurance for all or some of the Business, the
      Company will notify Manager, in writing, that Manager may write and bind
      those classes of business, policies, and lines and limits of insurance for
      which reinsurance has been obtained.
 
 3.
    If
      reinsurance is terminated or no longer in full force and effect for all or
      any part of the Business, Manager’s authority for the Business affected
      shall be suspended, or limited immediately upon notice to Manager from the
      Company, and until further notice.
 
 4.
    The
      Company will use its best efforts to maintain satisfactory
      reinsurance.
 
 
 ARTICLE
III
 
 MANAGER’S
DUTIES AND RESPONSIBILITIES
 
 Manager
will faithfully perform all of its duties consistent with industry standards.
The Manager’s duties include the following:
 
 A.
    Solicitation:
      To solicit risks and classes of risk at limits and for lines of insurance
      authorized in Exhibit A, that in their pricing and insurability meet or
      exceed that underwriting and pricing standards from time to time
      established by the Company in writing.
 
 B.
    Binding
      of Risks:
      To bind risks only in accordance with Exhibit A and any other underwriting
      and pricing standards from time to time established by the Company in
      writing, and to forward to the Company for acceptance all other
      risks.
 
 C.
    Policy
      Issuance:
      To timely and properly issue, deliver and execute or countersign Policies,
      certificates, endorsements, and binders on forms approved by the Company
      and appropriate regulatory authorities, as required by law, for the
      Business described in Exhibit A, and to make, as may be required and in a
      timely manner, notice of, certify or provide evidence of coverage of
      Policies to the appropriate governmental
agencies.
 
 D.
    Risks
      Bound:
      To give the Company written notice for each risk or Policy bound or
      written under this Agreement as part of reporting to the Company as
      described in Article III (H).
 
 E.
    Premium
      Rates:
      To quote accurate and adequate premiums and rates for Policies bound or
      written under this Agreement in compliance with the approved and
      applicable rating manuals or rating plans of the
  Company.
 
 F.
    Compliance
      with Manuals:
      To comply fully, timely and promptly with all manuals, rules, regulations,
      guidelines, instructions and directions issued in writing by the Company
      and provided to Manager relating to the Business covered by this
      Agreement.
  2
  G.
    Premiums:
      To bill for and collect all premiums due on all Policies bound or written
      under this Agreement, and payments shall be sent to and made payable to
      Pennsylvania Physicians’ Reciprocal Insurers and its reinsurer as their
      interests appear.
 
 H.
    Accounting:
      To timely account for the Business as
follows:
 
 1.
    Manager
      shall prepare, in a form acceptable to the Company, and forward to the
      Company on a monthly basis, within fifteen (15) days of the end of each
      calendar month, a detailed bordereau and statement of account for the
      period (the “Account”), which Account will include all business written
      during the prior month. The Account shall include for each authorized line
      of insurance such information as the Company may request, including but
      not limited to the following:
 
 a.
    Gross
      Written Premium;
 b.
    Net
      Written Premium;
 c.
    Policies
      issued or bound;
 d.
    Policies
      cancelled;
 e.
    Premium
      adjustments due to endorsements or audits;
 f.
    Commissions
      payable to Manager, and
 g.
    Net
      Balance Due;
 h.
    Losses
      Paid;
 i.
    Loss
      Adjustment Expenses Paid;
 j.
    Case
      Reserves.
 
 2.
    Manager
      shall pay the Company balances due within forty-five (45) days of the end
      of each calendar month to correspond to bordereau required in Article III
      (H)(1) above.
 
 3.
    Cumulative
      reports from the beginning of each calendar year shall also be made on a
      monthly basis, within fifteen (15) days of the end of each such respective
      period.
 
 4.
    The
      Company may offset any balance or balances due from the Manager under this
      Agreement with any balance the Company holds due the
    Manager.
 
 I.
    Fiduciary
      Capacity:
      To deposit and hold all premiums and other amounts received by the Manager
      on behalf of the Company in a fiduciary capacity in accordance with
      applicable statutes and regulations and in a separate bank account or
      accounts clearly identifiable by name as for funds so held. The Company
      may, at its sole discretion, grant the Manager permission, where allowable
      by law, to commingle fiduciary funds held by the Manager for or on behalf
      of the Company with funds so held by the Manager on behalf of other
      insurers, provided that a separate, accurate and verifiable accounting is
      maintained on the books of the Manager. Provided the Manager has, in
      accordance with the terms of this Agreement, accounted for and paid to the
      Company all premiums and other monies legally due and owing, any
      investment income produced from the fiduciary funds held on behalf of the
      Company by the Manager shall vest and become the property of the
      Manager.
  3
  
 J.
    Credit
      Extensions:
      To assume the obligation for any extensions of credit to insureds and
      policyholders, and to be fully responsible for the full amount of the
      premium due the Company on risks or Policies written or bound under this
      Agreement whether or not Manager has collected the premium due from
      Policyholder and/or its authorized
representative.
 
 K.
    Company
      Property:
      To safeguard, maintain and account for all the Company Policies, forms,
      manuals, equipment, supplies or anything else furnished to Manager by the
      Company, all of which shall remain the property of the Company. Manager
      will return all property to the Company promptly upon
    demand.
 
 L.
    Manager
      Expenses:
      To pay, assume the obligation for and to be fully responsible for costs
      and expenses associated with the Manager’s performance of conducting its
      business under this Agreement, including: travel expense, employee and
      clerical salaries, benefits and expenses, fees, countersignature fees and
      expenses, policy printing, postage, advertising, exchanges, license fees,
      etc.
 
 M.
    Legal
      Compliance:
      Manager shall use all reasonable effort to monitor and enforce full
      compliance of such qualified and designated subagents and brokers with all
      laws, regulations, rules and requirements applicable to Manager’s
      activities, and, in addition, all written instructions provided from time
      to time by the Company concerning underwriting requirements and regulatory
      compliance in general; provided, however, that such written instructions
      shall not unreasonably alter or amend the terms of this
      Agreement.
 
 N.
    Governmental
      Contacts:
      To promptly notify the Company in writing of all contacts and
      correspondence received from insurance regulatory and other governmental
      authorities by Manager or its designated subagents or brokers, to forward
      promptly upon receipt all summonses, complaints, subpoenas or other court
      documents, and to cooperate fully with the Company in making any
      responses.
 
 O.
    Claim
      Notification:
      To immediately notify the Company in writing of all claims, suits and
      losses and to cooperate fully with the Company to facilitate the
      investigation, adjustment, settlement and payment of each and all claims
      and to assist the Company in the collection of deductible due and salvage
      or subrogation.
 
 P.
    Premium
      Financing:
      To promptly and appropriately respond to all correspondence and notices
      related to financing or proposed financing of premiums on Policies issued
      under this Agreement, and forward copies to the Company. The Manager shall
      not accept premium financing on policies for which the premium is
      provisional, deposit, minimum, or otherwise adjustable. The Manager is not
      and shall not hold itself out as the agent of the Company for the purpose
      of obtaining premium financing. The Company reserves the right to refund
      premiums directly to the premium finance company upon cancellation of a
      policy(ies). The Manager shall refund applicable commission to the premium
      finance company in the event of a cancellation of a policy(ies). The
      Manager is responsible for collecting the gross written premium of any
      financed policy(ies) regardless of the financing of the
      premium.
  4
  
 Q.
    Competent
      Staff:
      To maintain sufficient supplies and equipment and a staff of competent and
      trained personnel, to produce, develop, underwrite, and supervise the
      Business covered by this Agreement.
 
 R.
    Company
      Interests:
      To promote and safeguard the best interests and good name of the
      Company.
 
 S.
    Accurate
      Records:
      To keep and maintain separate, identifiable, orderly, accurate, complete
      and timely records and accounts of all business and transactions
      pertaining to Policies bound or written under the Agreement, including
      complete underwriting and rate files. Such records and files may be copied
      by the Manager at the Manager’s expense, but shall at all times remain the
      property of the Company. Manager shall also implement a “Disaster Plan” to
      ensure that copies of said records and files would be available in the
      event of a disaster and shall provide a copy of said Plan to the Company
      within thirty (30) days of the execution of this
  Agreement.
 
 T.
    Audit:
      To permit the Company during the term of this Agreement and as long as the
      Company considers necessary, to visit, inspect, examine, audit and verify,
      at Manager’s offices or elsewhere, at such times and as often as the
      Company may deem appropriate, with or without prior notice, any of the
      properties, accounts, files, documents, books, reports, work papers and
      other records belonging to or in the possession or control of Manager or
      of any person relating to the Business covered by this Agreement. The
      Company shall also be entitled to audit such records and accounts of
      manager so as to determine Manager’s financial worth. The Company may make
      copies and extracts as may be reasonably necessary. The Company may
      conduct any audit through any person or persons it may designate. Manager
      shall, at the Company’s request, promptly provide the Company with
      statements of Manager’s financial worth prepared by a certified public
      accountant. However, if this Agreement has been terminated, forty-eight
      (48) hours notice is required by the Company to Manager, and the
      information obtained on such audit shall not be used by the Company in
      competition with Manager.
 
 U.
    Services:
      To provide for all usual and customary services to Insureds, Policyholders
      and sub-producers including, but not limited to, delivery of Policies,
      return of premiums due Insureds or Policyholders, if such premiums are in
      possession of Manager, and timely, appropriate responses to complaints,
      except as specified in Article III (N),
above.
 
 V.
    Licenses:
      To obtain and provide the Company, upon request, with copies of all
      licenses and permits required by Manager for the proper conduct of its
      duties under this Agreement. In the event the Manager will comply with
      licensing laws by utilizing the license of a principal director, officer
      or employee, then Manager promises, warrants and guarantees that the
      licensee will comply with all requirements of this Agreement and
      specifically with this Paragraph. In the event that any license the
      Manager utilizes to fulfill the requirements of the Agreement expires,
      terminates or is suspended for any reason, this Agreement terminates
      automatically and the Company may avail itself of any rights provided
      under Article XIII of this Agreement. The Manager shall be responsible to
      assure that all business is properly countersigned. The Manager shall be
      responsible for and pay any necessary counter-signature expense. The
      Company shall not be responsible for payment of any countersignature
      expense.
 
   5
   W.
    Policy
      Cancellation:
      To cancel or otherwise terminate risks or Policies bound or written by or
      through Manager as required by applicable underwriting standards and
      consistent with applicable regulatory and Policy conditions. The Company
      shall always retain the right to direct the termination of Policies by
      direct notice to the Insured or Policy holders. Manager shall not make,
      permit, or cause general or indiscriminate cancellations, terminations or
      replacements of Policies. Manager shall be responsible for notifying
      governmental agencies or other persons for whom Manager has certified
      coverage or provided evidence of insurance. No cancelled or terminated
      policy may be reinstated without the prior written approval of the
      Company.
 
 X.
    Sub-Producers:
 
 1.
    To
      accept proposals for insurance from other duly licensed agents or brokers.
      Manager shall determine the compensation payable to such other agents or
      brokers on proposals it accepts. The parties agree that any amounts paid
      such other agents or brokers will come from the compensation payable to
      Manager pursuant to Article V. Manager is responsible for the billing and
      collection of premium whether collectible or not, and payment of
      compensation for all such insurance placed with the Company by such agents
      or brokers.
 
 2.
    To
      use the facilities of properly licensed agents, brokers or solicitors to
      conduct business in all jurisdictions in which it intends to solicit or
      write the Business.
 
 Y.
    Manager’s
      Data Base:
 
 1.
    Within
      thirty (30) days from the execution of this Agreement, Manager shall
      provide to the Company, at the expense of the Manager, copies of the
      Manager’s Data Base in form and content satisfactory to the Company. Said
      Data Base shall be utilized by the Company only in the event Manager’s
      copy is unavailable or inaccessible and/or in performing any services
      relating to the Business in the event of termination of this Agreement.
      The term “Data Base” for purposes of this Agreement shall consist of a
      record or records, of information relating to the Business maintained by
      Manager or Manager’s computer containing at a minimum, but without
      limitation, the following information:
 
 a.
    Name
      of Insured, address, policy number, effective and expiration
      dates.
 
 b.
    By
      policy number, limits and coverages.
 
 2.
    Manager’s
      Data Base so provided shall be updated not less frequently than quarterly,
      within twenty-five (25) days after the end of each quarter. Such updates
      shall include supplemental Data Base information of transactions relating
      to the Business since the last such update of Data Base
      information.
 
 3.
    Manager
      shall take the necessary steps to enable the Company to use any computer
      software utilized by Manager to monitor the Business, underwriting or
      otherwise service the Business or perform any other services under this
      Agreement (“the software”), including but not limited to obtaining a
      license, pursuant to this provision.
 
 
 6
 Z.
    Catastrophe
      Funds:
 
 Determine
applicability to the business of the Program of any state-mandated catastrophe
or other special assessment fund, including, but not limited to state guaranty
funds. If applicable, the Manager shall determine premium surcharges, collect
funds from the insureds, and regularly remit all such funds directly to the
catastrophe or other special assessment fund and shall send the Company a report
detailing premium surcharge calculations and indicating amounts payable to the
applicable state(s).
 
 
 ARTICLE
IV
 
 CLAIMS
SETTLEMENT
 
 Manager
has no authority to adjust, compromise, settle or pay any claim made on the
risks or Policies written or bound under this Agreement. However, the Manager
shall act as a claims consultant without fee to assist the Company.
 
 The
Manager will not be reimbursed by the Company for the salaries, office expenses
or any other expenses incurred in the handling of claims unless otherwise
expressly agreed to in writing by the Company.
 
 
 ARTICLE
V
 
 MANAGER’S
COMPENSATION
 
 The
Company will pay the Manager as full compensation for all of its duties and
responsibilities under this Agreement as follows:
 
 A.
    Production
      and Administration Commission:
      Manager shall be entitled to receive a production and administration
      commission of 14% of Net Written Premium received by the Company on
      Policies bound or written under this Agreement. (Net = Gross less D.D.R.
      reserve).
 
 B.
    Unearned
      Commissions:
      Manager shall promptly refund pro-rata to the Company Production and
      Administration Commissions (including commissions paid to sub-producers)
      on cancellations, refunds and return premiums. Alternatively, the Company
      and Manager, at the option of the Company, may make premium adjustments by
      debits of monies due Manager.
 
  7
  
 ARTICLE
VI
 
 ADVERTISING
 
 Manager
will not refer to the Company or the Business covered by this Agreement in any
advertisement, letter, circular, pamphlet or other publications or written
statement without the prior written consent of the Company. Whether or not the
Company gives its consent, the Company will not be responsible for any
advertising expense.
 
 
 ARTICLE
VII
 
 REPRESENTATION
WITH RESPECT TO POLICIES
 
 Manager
will not make, and will make a good faith effort not to allow any other person
to make, any written representation to applicants, Insureds, Policyholders or
claimants as to the existence or extent of coverage either available from the
Company or under a Policy that is not consistent with the terms and conditions
of coverages available from the Company or of a Policy.
 
 
 ARTICLE
VIII
 
 INSURANCE
OF MANAGER
 
 Manager
will maintain for as long as this Agreement remains in force with insurers and
on forms acceptable to the Company:
 
 A.
    Professional
      Errors and Omissions policy in an amount of
$2,000,000;
 
 B.
    Comprehensive
      General Liability policy in an amount of
$1,000,000;
 
 C.
    Blanket
      Employee Dishonesty bond covering all employees of Manager in an amount of
      $500,000.
 
 The
Company may require certificates of insurance or other evidence that the
insurance required by this Article is in force.
 
 
 ARTICLE
IX
 
 INDEMNIFICATION
 
 A.
    Manager
      shall be responsible to the Company and shall indemnify, save, defend and
      hold the Company, including its affiliates, and all officers, directors
      and employees, harmless against any and all claims, suits, hearings,
      actions, damages of any kind, liability, fines, penalties, loss or
      expense, including attorney’s fees caused by or resulting from any
      allegation of any misconduct, error, omission, or other act; or breach of
      this Agreement by Manager, or Manager’s employees, or representatives,
      unless the conduct giving rise to the allegation was performed at the
      specific direction of the Company, provided Manager has not contributed to
      or compounded the act alleged. Manager shall also indemnify the Company
      for any surplus lines taxes which may be owed by any insured of the
      Company or an appointed surplus lines broker of such insured on Business
      which has not been paid in compliance with applicable
  law.
 
 8
 B.
    The
      Company shall be responsible to Manager and shall indemnify, save, defend
      and hold Manager harmless against any and all claims, suits, hearings,
      actions, damages of any kind, liability, fines, penalties loss or expense,
      including attorney’s fees caused by or resulting from any allegation of
      any misconduct, error, omission or other act; or breach of this Agreement
      by the Company, or the Company’s employees, or representatives, unless the
      conduct giving rise to the allegation was performed at the specific
      direction of Manager, provided the Company has not contributed to or
      compounded the act alleged.
 
 
 ARTICLE
X
 
 FLAT
CANCELLATION
 
 A.
    If
      a policy is cancelled flat (back to the date of inception of the Policy),
      the originals of the cancelled Policy or a Lost Policy Release shall be
      promptly forwarded by Manager to the Company. Manager will not cancel flat
      a Policy after it has been in effect for more than thirty (30) days
      without the prior written consent of the Company, unless cancellation is
      requested by the insured or required by state
law.
 
 B.
    An
      appropriate premium charge shall be made for any Policy in force for a
      period in excess of thirty (30) days.
 
 ARTICLE
XI
 
 OWNERSHIP
OF EXPIRATIONS
 
 A.
    Records
      of Insureds, Policyholders and Policies and their use and control for
      solicitation of Business written or bound by or through Manager
      (“expirations”), as between Manager and the Company, shall be the sole and
      exclusive property of Manager except:
 
 1.
    Underwriting
      Records and Files:
      As described in Article III (T) above.
 
 2.
    Account
      and Payment Delinquency:
      If Manager’s authority under this Agreement is suspended or terminated in
      part or in full for a material breach of this Agreement, or Manager fails
      to render all accounts due or pay any amounts due to the Company except
      minor accounting differences, and Manager fails to cure the breach on five
      (5) days notice from the Company to Manager, the Company will be entitled
      to solicit, write and to sell insurance to any and all existing Insureds
      or Policyholders written by or through Manager. The expirations will vest
      in and become the sole and exclusive property of the
    Company.
  9
  
 3.
    Limited
      License:
      If the Manager’s authority is suspended or terminated under this
      Agreement, and if any applicable insurance law or regulation prohibits the
      Company from terminating any Policies or obligates the Company to continue
      or to renew, directly or through another producer of the Company, any
      Policies, or Insured or Policyholders previously bound or written under
      this Agreement, then the Company shall be permitted and is hereby granted
      by Manager a limited license in, and a right to use the expirations of
      those Policies, Insured and Policyholders to permit the Company to comply
      within its reasonable discretion and in good
faith.
 
 4.
    Default:If
      this Agreement is terminated by the Company for a reason that permits
      immediate notice of termination to Manager under Article XIII, the
      expiration will vest in and become the sole and exclusive property of the
      Company.
 
 B.
    Upon
      the occurrence of any event which gives rise to the vesting of the
      ownership of expirations in the Company, the Company make take immediate
      possession of all records relating to those expirations and Manager shall
      upon request immediately gather such records together at Manager’s
      principal place of business and allow the Company access to take
      possession of those records. The Company may service those expirations
      directly or dispose of them in any commercially reasonable manner. The
      Company may collect premiums directly from any Insured or Policyholder who
      has not made payment to Manager.
 
 C.
    If,
      in disposing of Manager’s records and expirations, the Company does not
      realize sufficient money to discharge in full any and all of Manager’s
      indebtedness to the Company (including reasonable costs incurred by the
      Company in connection with its recovery and disposal of the records and
      expirations), Manager will remain liable to the Company for the balance of
      the Manager’s indebtedness to the Company. Manager shall have no right to
      or interest in any commissions which may be generated as a result of the
      Company’s servicing those expirations.
 
 D.
    If
      there is any excess over the Manager’s indebtedness to the Company
      (including any cost incurred by the Company in connection with its
      recovery and disposal of records and expirations) realized by the Company,
      it shall be remitted to Manager.
 
 
 ARTICLE
XII
 
 SUSPENSION
OF MANAGER’S AUTHORITY
 
 The
Company may, by immediate notice to Manager, suspend any part or all of
Manager’s authority under this Agreement for such time as the Company may deem
necessary to protect its interests or reputation if any of the following
occur:
 
 A.
    An
      administrative allegation of violation of insurance law or regulation
      against Manager or any of Manager’s executive officers by an insurance
      regulatory agency;
  10
  
 B.
    The
      Manager or any of Manager’s executive officers is indicted for a criminal
      offense, the conviction of which would permit termination of Manager under
      this Agreement; or
  C.
    The
      default of Manager under this Agreement, or delinquency by Manager in
      timely remitting accounts and monies to the Company, Insureds or
      Policyholders.
 
 
 ARTICLE
XIII
 
 TERMINATION
OF AGREEMENT
 
 A.
    The
      Company may terminate this Agreement as
follows:
  1.
    Immediately
      upon notice to Manager in the event of:
 
 a.
    License
      Suspension or Revocation:
      An order of suspension or revocation of Manager’s license by any insurance
      regulatory authority; or
 
 b.
    Ownership
      Change: A
      significant change in the ownership or management or in the event of the
      execution of an agreement of sale, transfer or merger of Manager without
      prior notice and consent of the Company; or
 
 c.
    Misapplication
      of Funds: A
      misapplication, misdirection, or misappropriation by Manager of funds or
      property of the Company or funds received for it or Policyholders by
      Manager, or in the event of failure by Manager to remit to the Company or
      Policyholders, funds due promptly after written demand therefore by the
      Company; or
 
 d.
    Default: A
      material default under this Agreement by Manager or Manager’s failure to
      timely and fully comply with the Company’s directives, rules, regulations
      or manuals in connection with this program;
or
 
 e.
    Conviction: A
      charge brought against Manager or any of Manager’s executive officers of
      violation of the insurance laws or regulations of any jurisdiction or of
      any law constituting a felony in the jurisdiction in which committed, or
      of any law whose violation reflects adversely upon the honesty or
      integrity of Manager or any of Manager’s executive officers whether or not
      classified as a felony; or
 
 f.
    Bankruptcy:
      Bankruptcy, receivership or common law composition of creditors whether by
      the Manager voluntarily or involuntarily.
 
 2.
    Upon
      thirty (30) days’ notice to Manager in the event
of:
 
 a.
    Excessive
      Complaints:
      The number of complaints received by the Company relating to Manager’s
      performance and service to Insureds, Policyholders, sub-producers or
      members of the public is excessive, as may be determined by the Company in
      its sole discretion; or
  11
  
 b.
    Adverse
      Legislation:
      Enactment of legislation which in the opinion of the Company would
      adversely affect the Company’s rights under this Agreement or liabilities
      under the Policies; or
 
 c.
    Conflict
      with Law:
      As provided for in Article XVII (c).
 
 d.
    Breach
      of Agreement:
      This Agreement may be terminated at any time by either party by written
      notice if the other party materially breaches this Agreement (and such
      breach is not cured within the time specified below for cure) and provided
      the party seeking to terminate this Agreement has given the other party
      ten (10) days’ prior written notice of the nature of the claimed breach
      and its intent to terminate if the claimed breach is not cured within such
      ten (10) day period.
 
 B.
    Either
      the Company or Manager may terminate this Agreement at any time upon one
      hundred-eighty (180) days prior written notice to the
    other.
 C.
    Manager
      may terminate this Agreement immediately in the
event:
 
 1.
    The
      Company is subject to a regulatory order that has a material impact on the
      Company’s ability to perform.
 
 
 ARTICLE
XIV
 
 CONTINUING
DUTIES OF MANAGER AFTER TERMINATION
 
 A.
    If
      the Company elects upon termination of this Agreement, and for as long as
      the Company elects, Manager will perform all of the duties necessary for
      the proper servicing of all risks or Policies bound or written under this
      Agreement until all those Policies shall have expired or been terminated.
      These services shall include, but are not limited to, canceling, issuing
      mandatory endorsements, and collecting and returning premiums due the
      Company.
 
 B.
    So
      long as the Manager continues to perform duties in accordance with this
      Article, the Manager shall continue to receive the Production and
      Administration Commission set forth in Article V (A), and the Company will
      not unreasonably preclude Manager from performing the duties referred to
      herein.
 
 C.
    Should
      Manager not continue to perform any duties for any reason the Company
      shall discontinue payment of any Production and Administration Commission
      set forth in Article V (A).
 
 D.
    If
      this Agreement is terminated by the Company for any reason under Article
      XIII for which immediate notice may be given, and the Company is required
      to renew any policies under the law of any jurisdiction, the Manager will
      not be entitled to any Production and Administration Commission with
      respect to that renewal business.
  12
  ARTICLE
XV
 
 WAIVER
OF STATUTORY TERMINATION RIGHTS OF MANAGER
 
 Both
Manager and the Company are aware that there are or may be laws or regulations
in the various jurisdictions served by Manager that may be interpreted to
provide Manager with certain rights of notice, “run-off”, continuation of
business written through Manager, prevention of termination and regulatory
review and possible disapproval of the termination of this Agreement. Because
this Agreement has been mutually entered into for a special purpose, and places
responsibilities, duties and obligations upon Manager both beyond those and
different from those of a normal soliciting agent, Manager acknowledges that
this therefore involves and necessitates a different relationship. Manager
hereby specifically waives any and all rights with respect to termination of
this Agreement that may now or hereafter be provided Manager by such statute or
regulation in recognition of that different relationship, and agrees not to
impose upon or require compliance by the Company of any obligations relating to
termination of this Agreement other than those provided for specifically in this
Agreement.
 
 
 ARTICLE
XVI
 
 DISPUTE
RESOLUTION
 
 If a
dispute between the Company and the Manager should arise concerning a provision
of this Agreement or concerning its interpretation or validity (whether arising
before or after the termination of this Agreement) the parties agree to attempt
in good faith to resolve such dispute by non-binding mediation. The mediation
shall be held in Harrisburg, Pennsylvania and will be completed within ninety
(90) days of the date on which both parties have been notified. However, nothing
in this clause will preclude either party from thereafter pursuing any means of
dispute resolution, including but not limited to litigation, should mediation
fail to result in a mutually acceptable solution to the dispute.
 
 
 ARTICLE
XVII
 
 OTHER
TERMS AND CONDITIONS
 
 A.
    Waiver
      and Estoppel:
      The failure of the Company or Manager to insist on strict compliance with
      this Agreement, or to exercise any right or remedy shall not constitute a
      waiver of any rights provided under this Agreement, nor estop the parties
      from thereafter demanding full and complete compliance nor prevent the
      parties from exercising such a remedy in the
future.
 
 B.
    Notice
      and Cure:
      Whenever there is a default under this Agreement, either party shall be
      entitled to written notice of default and have the right to cure such
      default within ten (10) days from notice of such
  default.
  13
  
 C.
    Conflict
      with Law:
      If any provision of this Agreement should be declared invalid by a court
      of general jurisdiction and superseded by specific law or regulation, such
      law or regulation shall control to the extent of such conflict without
      affecting the remaining provisions of this
Agreement.
 
 D.
    Assignment:
      Neither this Agreement nor any rights or obligations under this Agreement
      may be assigned or delegated by Manager without the prior written consent
      of the Company.
 
 E.
    Headings:
      The headings preceding the text of the Articles and paragraphs of the
      Agreement are intended and inserted solely for the convenience of
      reference and shall not affect the meaning, construction or effect of this
      Agreement.
 
 F.
    Governing
      Law:
      This Agreement shall be governed as to performance, administration and
      interpretation by the laws of the State of
Pennsylvania.
 
 G.
    Honorable
      Undertaking:
      This Agreement shall be considered as an honorable undertaking made in
      good faith and shall be subject to a liberal construction for the purpose
      of giving effect to the good faith and honorable intentions of Manager and
      the Company.
 
 H.
    Promptly:
      Unless the context and circumstances require action sooner, the term
      “promptly” in this Agreement shall be defined to mean “within five (5)
      business days.”
 
 I.
    Notices:
      Wherever notice is required under this Agreement, it shall be in writing,
      sent by certified mail, or reputable overnight carrier, and
      addressed:
 
 A. If to the
Company:
 
 Anthony
Bonomo
 President
 Physicians
Reciprocal Managers, Inc.
 2 North
Second Street, 7 th Floor
 Harrisburg,
PA 17101-1604
 
 B. If to
Manager:
 
 Steven
Ostrer
 President
 Professional
Medical Administrators, L.L.C.
 111 East
Shore Road
 Manhasset,
NY 11030
 
 J.
    Independent
      Contractor:
      This Agreement is not a contract of employment and nothing contained in
      this Agreement shall be construed to create the relationship of joint
      venture, partnership, or employer and employee between the Company and
      Manager. Manager is an independent contractor and shall be free, subject
      to the terms and conditions of this Agreement, to exercise judgment and
      discretion with regard to the conduct of
business.
  14
  
 K.
    Negotiated
      Agreement:
      This Agreement has been negotiated by the parties and the fact that the
      initial and final draft shall have been prepared by a particular party
      shall not be used in any forum in the construction or interpretation of
      this Agreement of any of its provisions.
 
 L.
    Entire
      Agreement:
      This Agreement supersedes all previous agreements, whether written or
      oral, between the Company and Manager, or their predecessors with respect
      to the Business to be written under this
Agreement.
 
 1.
    This
      Agreement may be amended, altered or modified only in writing signed by
      both parties.
 
 2.
    Manuals,
      rules, regulations, guidelines, instructions and directions issued in
      writing by the Company from time to time as provided in this Agreement,
      shall bind the parties as though a part of this
  Agreement.
 
 M.
    Third
      Party Beneficiary:
      Nothing in this Agreement, except as expressly stated herein, is intended
      to create any benefit for any third party not a party
    hereto.
 
 N.
    Confidentiality:
      Each party shall treat as confidential any and all information received
      from the other party pursuant to this Agreement, and shall not disclose
      any such information to any third party without the prior written consent
      of the other party. Each party shall not disclose directly or indirectly
      to any third party any term or provision of this Agreement without the
      prior written consent of the other party. These obligations of
      confidentiality shall survive termination of this
    Agreement.
  15
  
 The
Manager and the Company, intending to be bound, have executed this Agreement in
duplicate, each of which shall serve as an original:
 
 PHYSICIANS’
RECIPROCAL MANAGERS, INC.
 
 /s/
Anthony J. Bonomo
 Anthony
Bonomo
 President
 Physicians
Reciprocal Managers, Inc.
 
 
 PROFESSIONAL
MEDICAL ADMINISTRATORS, L.L.C.
 
 /s/
Steven Ostrer
 Steven
Ostrer
 President
 Professional
Medical Administrators, L.L.C.
 
 
 
   16
   **PROGRAM
MANAGER’S AGREEMENT**
 
 **(The
Business)**
 
 
 EXHIBIT
A
 
 
 
 The
Company extends underwriting authority to the Manager as follows:
 
 Professional
Liability for physicians and surgeons, nurse practitioners, nurse anesthetists,
physician assistants, nurse midwives and any other healthcare professionals as
per the Rates, Rules, Underwriting Guidelines and forms filed with the
Pennsylvania Insurance Departments and other state regulatory departments as
agreed from time to time which shall be part of and is hereby incorporated into
this Agreement.
 
 
 
   17
   PROGRAM
MANAGER’S AGREEMENT
 
 (Claims
Authority)
 
 
 EXHIBIT
B
 
 
 ____
extends claims authority to the Manager as follows:
 
 All
claims shall be administered by Administrators for the Professions, Inc. (“AFP”)
on behalf of the Manager.
 
 It is
agreed that Manager shall be responsible for and administer claims arising under
the ____ policies which constitute the Business, subject to the requirements and
limitations set forth below:
 
 A.
    All
      subject claims shall be handled by Manager until their final disposition,
      except as otherwise indicated in this Agreement, and in compliance with
      all applicable laws, regulations and guidelines. The Manager shall
      establish and maintain claim files on each claim reported and advise the
      insured of procedures to be followed when a claim
  arises.
 
 B.
    Reporting
      Requirements
 
 1.
    The
      Manager must report all claims on monthly bordereaux which reflect the
      status and change of status for each claim. Each claim so reported will
      reflect an individual ____ claim number assigned by Manager and in a
      format acceptable to ____. Such bordereaux will be provided to ____ as
      specified in Section F., Monthly Reporting, subsection - Claims
      Bordereaux. Additionally, Manager shall prepare detailed written reports
      on any particular claim as may be requested by
____.
 
 2.
    All
      claims involving any one of the following criteria outlined below will be
      considered a “Catastrophic Occurrence.”
 
 a.
    Incidents
      involving a fatality.
 
 b.
    Brain
      damage injuries (skull fracture, concussion, loss of consciousness,
      etc.)
 
 c.
    Spinal
      injury with potential for paraplegia or
quadriplegia.
 
 d.
    Dismemberment
      or other serious disfigurement potential.
 
 e.
    Injuries
      involving nerve damage.
 
 f.
    Burn
      injuries.
 
   18
   g.
    Injuries
      involving a fracture or multiple fractures.
 
 h.
    Serious
      vision and/or hearing impairment injuries.
 
 i.
    Environmental
      claims.
 
 j.
    Any
      claim involving extra contractual obligations, excess, or direct claims
      against the company or State Insurance Department
    inquiries.
 
 k.
    Any
      claims or loss involving class actions.
 
 l.
    Any
      claim alleging sexual abuse or molestation.
 
 m.
    Any
      claim valued in excess of $500,000
indemnity.
 
 3.
    All
      Catastrophic Occurrences, as defined in Section A(2), will be subject to
      the following additional reporting
requirements:
 
 a.
    The
      Manager will report such claims to ____ immediately upon notice or receipt
      by Manager and on a monthly basis, as described in Section
    F.
 
 b.
    The
      Manager will report these claims, regardless of its opinion as to
      likelihood of liability for each such Catastrophic
    Occurrence.
 
 c.
    The
      Manager will also provide a written report concerning the development of
      these Catastrophic Occurrence Claims on a regular basis, at intervals not
      to exceed 90 days or sooner upon notice of material
      development.
 
 C.
    Manager’s
      Authority
 
 1.
    All
      claims shall be autonomously handled by the Manager. AFP shall have
      authority to initiate or transact a settlement or compromise, or make full
      payment of the indemnity demands for such
claims.
 
 2.
    Manager
      shall provide immediate written notice to ____ of any claim in which
      coverage is denied to an Insured without the advice of outside counsel. A
      complete copy of the claim file shall accompany such notice and all
      subsequent received or produced information shall immediately be forwarded
      to ____.
  19
  
 3.
    Manager
      shall provide immediate written notice to ____ of any claim immediately
      upon Manager reasonably determining that the expected indemnity value will
      equal or exceed $500,000. A complete copy of the claim file shall be sent
      to ____ upon their request.
 
 4.
    Manager
      is authorized to incur such reasonable expenses allocable to individual
      claims as are necessary for the proper administration of this
      Agreement.
 
 D.
    Indemnity
      Payments
 
 Manager
shall arrange for and make indemnity payments, in compliance with Section C.,
above, and in conformance with the following:
 
 1.
    Claim
      payments do not require written authority and approval from
      ____.
 
 2.
    Indemnity
      payments will be made by ____ at the request of Manager within 48 hours of
      receipt from the reinsurer of the indemnity amount
    requested.
 
 E.
    Expense
      Payments
 
 Manager
shall arrange for and make payment of expenses reasonably incurred by it,
pursuant to Section C. of this Agreement, and in conformance with the following
restrictions:
 
 1.
    Expenses
      not incurred directly by Manager:
 
 a.
    Expense
      payments do not require written authority and approval from
      ____.
 
 b.
    Expenses
      directly incurred by Manager.
 
 c.
    Expense
      payments will be made by the Manager from the fiduciary account and such
      payments will be deducted from the monthly premium remitted to ____ and
      the reinsurer as their interests appear. If, however, expense payments are
      more than the premium for the month, ____ will remit to the Manager the
      additional amount required within 48 hours of receiving payment from the
      reinsurer.
 
 2.
    Expenses
      Directly Incurred by Manager.
 
 a.
    Labor
      Expenses of Manager:
 
 $750.00
per claim file per year, or if open for part of a year, prorated from the first
day of the month of opening to the first day of the month following the month of
closing. Payment shall be made monthly and in advance, the first payment to
include the month of opening and the month that follows.
  20
  
 b.
    Other
      Manager Expenses:
 
 The
Manager shall be entitled to reimbursement by ____ and its reinsurer as their
interests appear for the cost of the following internal expenses incurred by its
employees:
 
 i.
    Fees
      to obtain records, x-rays and study models;
 ii.
    Fees
      for copying records, x-rays and study
models;
 iii.
    Fees
      for expert review of file;
 iv.
    Fees
      for clinical examination of
plaintiff/claimant;
 v.
    Fees
      for outside investigator for background investigation, i.e., fraud,
      criminal;
 vi.
    Fees
      for service of legal papers or subpoenas;
 vii.
    Court
      reporter bills for deposition and/or trial
transcripts;
 viii.
    Fees
      to obtain prior transcripts for experts, both ours and our
      adversary’s;
 ix.
    Fees
      to obtain material related to investigation, i.e., legal research and/or
      medical research;
 x.
    Fees
      to obtain information from governmental agencies related to Insured or
      claimants;
 xi.
    Fees
      to Insureds for attendance at trial as provided for under the policy,
      and
 xii.
    Any
      other specific expenses approved, in writing, by
____.
 
 
 F.
    Monthly
      Reporting
 
 1.
    Claims
      Bordereau
 
 a.
    The
      Manager shall provide a separate Inception-to-Date and a Month-to-Date
      Claims Bordereaux, on a diskette (on a format agreed upon by Manager and
      ____) as well as a hard copy by the 25thof
      every calendar month or the last prior working day. Such Claims Bordereaux
      shall include the following information:
 
 1.
    Inception-to-Date
      Claims Bordereau
 
 a.
    PMA
      Claim Number
 b.
    ____
      Claim Number
 c.
    Policy
      Number
 d.
    Named
      Insured
 e.
    Policy
      Effective Date
 f.
    Policy
      Expiration Date
 g.
    Retroactive
      Date
 h.
    Status
      of Claim (open/closed)
 i.
    Claimant
      Name
 j.
    Date
      of Loss
 k.
    Report
      Date of Loss
 l.
    ITD
      Balance of Outstanding Reserves
 21
 m.
    ITD
      Balance of Losses Paid
 n.
    ITD
      Balances of Expenses Paid (Outside)
 o.
    ITD
      Balances of Expenses Paid (Inside)
 p.
    ITD
      Subrogation Recoveries
 q.
    ITD
      Subrogation Expenses
 r.
    ITD
      Amount of Claim (sum of l-r)
  2.
    Month-to-Date
      Claims Bordereau
 a.
    PMA
      Claim Number
 b.
    ____
      Claim Number
 c.
    Policy
      Number
 d.
    Named
      Insured
 e.
    Policy
      Effective Date
 f.
    Policy
      Expiration Date
 g.
    Retroactive
      Date
 h.
    Status
      of Claim (open/closed/changed)
 i.
    Claimant
      Name
 j.
    Date
      of Loss
 k.
    Report
      Date of Loss
 l.
    MTD
      Outstanding Reserves
 m.
    MTD
      Losses paid
 n.
    MTD
      Expenses Paid (Outside)
 o.
    MTD
      Expenses Paid (Inside)
 p.
    MTD
      Subrogation Recoveries
 q.
    MTD
      Subrogation Expenses
 r.
    MTD
      Amount of Claim (sum of l-r)
  G.
    Recovery
 The
Manager shall diligently pursue all avenues of possible recovery, i.e.,
subrogation or recovery or recoupment of loss or expense paid. All recoveries
must be made payable to ____ and its reinsurer as their interests appear. The
amount of the Recovery paid shall be included in the bordereaux which reflects
activity for the month that the Recovery was received by the Manager. Manager
shall provide any additional details concerning a recovery as may be requested
by ____.
  H.
    Service
      of Suit
 ____
hereby appoints the Manager agent for service of process on any suit or
proceeding involving a claim or loss arising out of a policy issued by the
Manager on behalf of ____.
  22
   I.
    Compensation
 
 Manager’s
full compensation for rendering claims services for the Business as provided
herein shall be its direct incurred labor expenses detailed in Section E.2.a.,
above.
 
 
 The
Manager and ____, intending to be bound, have executed this Claims Authority,
Exhibit B, to the Agreement in duplicate, each of which shall serve as an
original:
 
 First
Professionals Insurance Company, Inc.
 
 __________________________________
 Robert E.
White
 Senior
Vice President - Administration
 First
Professionals Insurance Company, Inc.
   Professional Medical Administrators, L.L.C.
    Administrators for the Professions, Inc.__________________________________
    __________________________________Anthony Bonomo
    Anthony BonomoPresident
    Chief Executive Officer/PresidentProfessional Medical Administrators, L.L.C.
    Administrators for the Professions,
Inc.