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                              WORKERS' COMPENSATION
                             REINSURANCE ASSOCIATION


                              REINSURANCE AGREEMENT

                            EFFECTIVE JANUARY 1, 1999


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                       I.   NATURE AND SCOPE OF AGREEMENT

      A. PURPOSE. The purpose of this Reinsurance Agreement is to set forth 
         the basic conditions of the reinsuring agreement between the 
         Workers' Compensation Reinsurance Association ("Association") and 
         the Member. This Agreement is based on the Association's Enabling 
         Act (Minn. Stat. Section 79.34, et seq.), its Plan of Operation 
         ("Plan"), and its Operating Rules. The provisions of the Enabling 
         Act, Plan, and Operating Rules shall be controlling over the 
         provisions of this Agreement. This Agreement is not intended to 
         independently establish any rights, liabilities, or obligations for 
         either the Association or the Member.

         Reference: Plan, Article VI.K.

      B. PARTIES. This Agreement is solely between the Member and the 
         Association. All affiliated insurers or self-insurers within a 
         holding company system shall be considered a single entity for 
         purposes of the exercise of all rights and duties of membership in 
         the Association. Nothing in this Agreement shall establish any 
         rights in favor of any third party. Nothing in this Agreement shall 
         create any liability or responsibility on the part of the 
         Association for actions of the Member or other members. Nothing in 
         this Agreement shall limit the Member's liability to employers, 
         employees and others under Minn. Stat. chs. 79 and 176 and other 
         Minnesota law.

         References: Minn. Stat. Section 79.34. subd. 1.
                     Plan, Article VI. E.I., and VI. M.

      C. DEFINITIONS. To the extent defined in the Plan or in Operating 
         Rules, the words used in this Agreement shall have the meanings 
         given them by the Plan and Operating Rules.

         Reference: Plan, Article I.

      D. TERMS OF AGREEMENT CONFORMED TO ENABLING ACT, PLAN, AND OPERATING 
         RULES. The terms of this Agreement which are in conflict with the 
         Enabling Act, other provisions of Minnesota Law, the Plan, or 
         Operating Rules are hereby amended to conform thereto. This 
         Agreement shall be deemed to be automatically amended to conform to 
         any amendment to the Enabling Act, other provisions of Minnesota 
         law, the Plan, or the Operating Rules, or to the adoption of other 
         Minnesota law or Operating Rules after the effective date of this 
         Agreement. Such automatic amendment to this Agreement shall be 
         effective on the effective date of the amendment to the Enabling 
         Act, other provisions of Minnesota law, Plan, or Operating Rules, or 
         the adoption of other Minnesota law or Operating Rules.

         Reference: Plan, Article IX. E.

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II.   REINSURING AGREEMENTS

      A. LIABILITY OF ASSOCIATION.  The Association shall reinsure the 
         Member's Minnesota workers' compensation liability and shall 
         indemnify the Member for 100 percent of the amount of ultimate loss 
         arising out of each occurrence compensable under Minn. Stat. Ch. 176 
         to the extent that the ultimate loss exceeds the Member's retention 
         limit in effect at the time of the loss occurrence and subject to 
         the terms and conditions of the Enabling Act, Plan, and Operating 
         Rules.

         References:  Minn. Stat Section 79.34, subd.2.
                      Plan, Article VI. A.

      B. MEMBER'S DUTIES.  The Member shall comply with all requirements of 
         the Enabling Act, Plan, and Operating Rules.  These requirements 
         include, but are not limited to, the following: The Member shall 
         reinsure its Minnesota workers' compensation liability with the 
         Association, pay all benefits for losses reinsured by the Association,
         belong to the Association, accept indemnification from the Association,
         and report to the Association claims which may involve liability to the
         Association.

         References:  Minn. Stat. Section 79.34, subds. 1 and 2.
                      Plan, Article III. and Article VI.A.

III.  RETENTION LIMITS

      The Member shall select the low, high or super retention limit for each 
      calendar year.  The retention limits may be changed annually on January 
      1.  The Member shall notify the Association by certified mail of any 
      change of its retention limit selection by December 1 of the year 
      preceding the coverage year.  All affiliated insurers or self-insurers 
      within a holding company system shall select the same retention limit.  
      If the Association is not notified of the Member's change of retention 
      limit for the next coverage year by December 1, the Member shall be 
      deemed to have chosen for the next coverage year the same retention 
      limit (low, high, or super retention limit) which was in effect on 
      December 1.

         References:  Minn. Stat. Section 79.34, subds. 1 and 2.
                      Plan, Article VI.A.

IV.  REINSURANCE PROVIDED BY ASSOCIATION EXCLUSIVE

     A Member selecting the high or super retention limit shall not purchase 
     reinsurance for losses below its retention limit except in certain 
     circumstances specified by statute. A

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     Member selecting the low retention limit may purchase reinsurance from 
     other organizations to provide indemnification for losses below its 
     retention limit. A Member shall not issue large deductible policies in 
     Minnesota for deductible amounts in excess of its selected retention 
     limit.

          References: Minn. Stat. Section 79.34, subd. 2.
                      Minn. Department of Commerce, Bulletin 91-5

V.    COVERAGE

      A. GENERAL SCOPE. The reinsurance provided by the Association shall 
         cover only benefits under Minn. Stat. Ch. 176 which are paid by the 
         Member, provided that for losses incurred on or after January 1, 
         1984, the reinsurance provided shall cover benefits paid by the 
         Member under the workers' compensation law of another state when the 
         injured worker is eligible for benefits under Minn. Stat. Section 
         176.041, subds. 2 or 3, but elects to receive benefits under the 
         workers' compensation statute of such other state, as provided in 
         Minn. Stat. Section 79.34 subd. 7. Any amounts paid by a Member 
         pursuant to Minn. Stat. Sections 176.183, 176.221, 176.225 and 
         176.82 shall not be included in ultimate loss and shall not be 
         indemnified by the Association. Employers' liability coverage is not 
         provided by the Association. The Association does not cover claims 
         under the Federal Employers' Liability Act, the Jones Act, the 
         Longshoremen's and Harbor Workers' Compensation Act, or any other 
         federal law.

         References: Minn. Stat. Section 79.34, subds. 2 and 7.
                     Minn. Stat. Section 176.041, subds. 2 and 3
                     Plan, Article VI.

      B. PER OCCURRENCE BASIS. Coverage shall be provided on a per 
         occurrence basis, as determined by the Association, except in the 
         case of occupational disease, where coverage is provided on a per 
         person per occurrence basis.

         References:  Minn. Stat. Section 79.34, subd. 2.
                      Plan, Article I. N. and Article VI.

      C. CLAIMS EXPENSES. Claims expenses, assessments, damages and penalties 
         shall not be indemnified by the Association. Claims expenses include 
         investigation and legal expenses, court costs, interest and 
         penalties. Expenses subject to indemnification include expenditures 
         incurred in the preparation and development of a rehabilitation plan 
         submitted to the Department of Labor and Industry and in the 
         provision of rehabilitation services rendered in accordance with 
         such a rehabilitation plan.

         References:  Minn. Stat. Section 79.34, subd. 2.


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                     Plan, Article I., Section H.
                     Operating Rule for Clarification of the Definition of
                     Claim Expenses.

      D. ASSESSMENTS.  Assessments, including Special Compensation Fund 
         assessments under Minn. Stat. Sections 176.129 and 176.131 (repealed 
         effective July 1, 1992), shall not be reimbursed by the Association.

         References:  Minn. Stat. Sections 176.129 and 79.34, subd. 2.
                      Plan, Article VI. V.

      E. EFFECTIVE DATE.  Coverage shall be effective on the date the Member 
         joins the Association.  In no case shall the Association be liable 
         for benefits for occurrences taking place prior to October 1, 1979.  
         The Association shall have no liability for death benefits where an 
         injury prior to October 1, 1979, causes death on or after October 1, 
         1979.  Effective January 1, 1984, certain benefits paid pursuant to 
         the workers' compensation laws of other states will be covered, as 
         provided in Article V. A. of this Agreement.

         References:  Minn. Stat. Section 79.34, subds. 2 and 7.

VI.   PREMIUMS

      A. ANNUAL PREMIUM.  The Member shall pay an annual premium for the 
         reinsurance coverage provided by the Association at the rate 
         determined by the Board of Directors of the Association ("Board of 
         Directors") and approved by the Minnesota Commissioner of Labor and 
         Industry ("Commissioner").  Estimated premium shall be calculated in 
         accordance with procedures established in the Operating Rule for 
         Determination of Exposure Base.  The estimated exposure base for a 
         Member may be revised after six months of the coverage year if the 
         member verifies that its current annualized six month exposure base 
         is at least fifteen percent higher or lower than its estimated 
         exposure base.  When the actual exposure base figures for the 
         billing year become available, the actual premium shall be 
         calculated.  A premium adjustment shall be made as provided in 
         Article VI. of this Agreement.

         References:  Minn. Stat. Section 79.35(d).
                      Plan, Article VI. D.
                      Operating Rule for Determination of Exposure Base.

      B. BILLING OF PREMIUM.  The estimated premium shall be billed on a 
         quarterly basis, and shall be payable within 30 days of the date of 
         the premium notice, with late payments subject to interest charges 
         established by the Board of Directors.

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         Reference:  Plan, Article VI. D.3.

      C. OFFSET. The Association may offset indemnification payable to the 
         Member against premium payable by the Member. Premiums payable shall 
         not be offset against indemnification claimed by the Member.

         References: Plan, Article VI. D.3.c.

      D. ANNUAL ADJUSTMENT OF PREMIUM. The Association shall annually provide 
         to the Member a statement indicating adjustments for previous years' 
         premium. Amounts due the Association as a result of the adjustment 
         shall be paid by the Member within 30 days of the billing date, with 
         late payments subject to interest charges established by the Board 
         of Directors. Amounts due the Member shall be credited to the 
         Member's premium account with the Association, and any credit 
         premium balance shall be refunded to the Member within 30 days.

         References:  Plan, Article VI. D.2.b.
                      Operating Rule for Determination of Exposure Base.
                      Operating Rule for Annual and Audit Premium Adjustment 
                      Refunds

      E. INTERIM ADJUSTMENT OF PREMIUM. A Member who ceases doing business in 
         Minnesota or a self-insurer Member who ceases to be an approved 
         self-insurer may request an interim adjustment of estimated annual 
         premium.

         Reference: Operating Rule for Interim Adjustment of Estimated Annual 
         Premium.

      F. SURPLUS DISTRIBUTIONS AND DEFICIENCY ASSESSMENTS. The Board of 
         Directors may declare a distribution of surplus or assessment of 
         deficiencies in the form of member excess or deficient premiums or 
         policyholder excess surplus or deficiencies as required by the 
         Operating Rule for the Determination of Surplus. Such distributions 
         or assessments may result from statutory changes, changes in the 
         exposure base, or a profit or loss. Distributions of surplus and 
         deficiency assessments shall be made as required by the Board of 
         Directors in accordance with the Enabling Act, Plan and Operating 
         Rule for the Determination of Surplus as they have been interpreted 
         by the courts.

         References:  Minn. Stat. Section 79.34, et seq.
                      Plan, Article VI. D. 1.d. and VI. N.
                      Operating Rule for the Determination of Surplus

      G.  CATASTROPHIC PREMIUMS. In the event that benefits paid or expected to 
          be paid on a claim in a calendar year exceed the prefunded limit in 
          effect at the time the loss was 

                                                                        WCRA 5

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         incurred, the Association shall calculate and charge to all Members 
         an additional premium for that year sufficient to cover the payments 
         in excess of the prefunded limit.  The premium shall be charged and 
         collected in the same manner as the annual premium.

         References:  Minn. Stat. Section 79.35(d).

      H. PREMIUM AUDITS.  The Association may inspect and audit any Member's 
         records to determine the accuracy of the premium calculation.  The 
         Member shall timely provide all information requested and shall in 
         all respects cooperate fully in providing information during the 
         course of an audit.

         References:  Plan, Article VI.D.2.f.

VII.  REIMBURSEMENT PROCEDURE

      Requests for reimbursement shall be submitted in a form approved by the 
      Association.  The first request shall be submitted within six months 
      after the Member's payments on a loss exceed the Member's Retention 
      Limit.  Thereafter the Member, if entitled to indemnification by the 
      Association, shall file a reimbursement request form semi-annually 
      until the claim is closed.  The request shall be submitted to the 
      Association during the month of the anniversary and half-year 
      anniversary of the loss occurrence date provided that, if the initial 
      reimbursement request for a claim was submitted prior to December 1, 
      1983, the Member may, at its option, continue to submit reimbursement 
      requests in January and July.  The Member and the Association may, in 
      the alternative, agree upon a semi-annual reimbursement cycle, whereby 
      all of the Member's reimbursement requests, regardless of loss 
      occurrence date, are filed on the same cycle.  If a claim settles on a 
      full, final and complete basis, or the claim file is closed, a 
      reimbursement request may be filed at anytime.  If payments for which 
      reimbursement is due exceed $30,000 in the three months following a 
      regularly scheduled reimbursement date, a reimbursement request may be 
      filed in the following month.  The reimbursement request shall itemize 
      all payments since submission of the last reimbursement request.

      Proper and complete reimbursement requests shall be promptly paid by 
      the Association.

         References:  Plan, Article VI.
                      Operating Rule for Reimbursement Procedures.

VIII. MANAGEMENT OF CLAIMS AND LOSSES

      A. CLAIMS.  The Member shall have the primary responsibility for the 
         investigation, management, and defense of all claims and losses

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         If the Association determines that the claims procedures or 
         practices of a Member are inadequate to properly limit the 
         liabilities of the Association, or may, in any way, jeopardize the 
         interests of the Association, the Association may withhold 
         reimbursements from the Member until it determines that the 
         deficiencies in the claims procedures have been resolved, or the 
         Association may, with the approval of the Board of Directors and at 
         the Member's expense, undertake directly or contract with another 
         person, including another Member, to adjust or assist in the 
         adjustment of a Claim or Claims which create a potential liability 
         to the Association. The Association may charge the costs and 
         expenses of these activities, including legal expenses, to the 
         Member, and the Member shall cooperate fully with the Association in 
         such claims management. If the Board of Directors determines that 
         the claims procedures or practices of a Member are inadequate to 
         properly service the liabilities of the Association, or may, in any 
         way, jeopardize the interests of the Association, the Association 
         may also recommend to the Commissioner and the Commissioner of 
         Commerce that an Insurer Member's license to transact workers' 
         compensation insurance, or a Self-insurer Member's authorization to 
         self-insure workers' compensation liability, pursuant to Minn. Stat. 
         Section 176.181, be revoked.

         References:  Minn. Stat. Section 79.35(g).
                      Plan, Article VI.F.4.
                      Operating Rule for the Adjustment of Claims.
    
      B. CLAIMS AUDITS. The Association may inspect and audit the Member's 
         records relating to all claims or related matters. The Member shall 
         timely provide all information requested and shall in all respects 
         cooperate fully in providing information during the course of an 
         audit.
    
         References:  Minn. Stat. Section 79.35(g).
                      Plan, Article VI.F.3.

      C. REPORTING REQUIREMENTS. The Member shall promptly report to the 
         Association any claim meeting either of the following reporting 
         criteria:
    
         1. CLAIM COST CRITERIA. When a Member estimates that the total 
            incurred cost (payments and reserves for future payments) of a 
            claim exceeds 50 percent of the retention limit which was in 
            effect during the year when the loss was incurred, or

        2. CLAIM INJURY CRITERIA. When a claimant has suffered a serious 
           injury as described in the following list:

           a. Central Nervous System Injury.

                                                                         WCRA 7

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              (1)  Spinal cord injury resulting in paraplegia or quadriplegia.
              (2)  Brain damage affecting cognition and/or such conditions as 
                   permanent disorientation, behavior disorder, personality 
                   change, seizure disorder, sensorimotor deficits, aphasia, or 
                   coma.

           b.  Fatality, except for a no dependent exposure.

           c.  Third degree burns covering 10 percent of the body, or second 
               degree burns covering 30 percent of the body, or if 
               significant medical costs can be anticipated.

           d.  Amputations of a significant portion of one extremity or 
               multiple amputations.

           e.  Impairment of total vision by 50 percent or more.

           f.  Peripheral nerve damage causing major muscle dysfunction or 
               paralysis in an upper or lower extremity.

           g.  Serious internal injuries resulting from blunt, penetrating, or 
               crushing injuries to the chest or abdomen.

           h.  Multiple fractures, or significant degloving injuries, involving 
               more than one arm, hand, or leg, malunion, or significant 
               shortening of the limbs.

           i.  Fracture of both heel bones (bilateral os calcis).

           j.  Occupational disease allegedly caused by working conditions or 
               other job-related factors, including asbestosis, or chronic 
               pulmonary disease or other occupational disease which results 
               in disability expected to last two years or more.

         References:  Plan, Article VI. B.1.
                      Operating Rule for Claim Reporting Procedure.

      D. LEGAL PROCEEDINGS.  The Association may intervene in legal 
         proceedings under Minnesota Statutes Chapter 176 where the result of 
         the proceeding is considered likely to affect the interests of the 
         Association.  The Association shall notify the affected Member prior 
         to intervening.

         References:  Minn. Stat. Section 79.36(f).

                                                                         WCRA 8
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                      Plan, Article VI.H.2.
                      Operating Rule for Intervention in Claim Proceedings.

IX. SUBROGATION, SALVAGE, AND THIRD PARTY RECOVERIES

    The Member shall, to the extent permitted by law, prosecute or intervene 
    in any and all claims against third parties arising out of any covered 
    loss occurrence and all recoveries therefrom shall be applied to reduce 
    the loss which the Association is required to reimburse to the Member.

    Should the Member fail or neglect to enforce any such claims, the 
    Association may be subrogated to the Member's interest in the claim. The 
    net proceeds recovered shall be distributed first to the Association to 
    the extent of amounts paid or payable in the future by the Association 
    for the claim. Any excess recovered by the Association shall be paid to 
    the Member or other person entitled to the proceeds, as determined by the 
    Board of Directors.
    
    If the Member desires to waive subrogation, it must promptly notify the 
    WCRA and must secure advance approval by the WCRA staff before agreeing 
    to waive subrogation. If the Member waives its subrogation rights after a 
    claim has occurred without first obtaining the agreement of the 
    Association, and the Association determines that it was not in its best 
    interests to waive subrogation, the Association may refuse to indemnify 
    the Member for that claim to the extent of amounts which the Association 
    determines would have been recoverable through subrogation. The 
    Association may withhold reimbursements to the Member for other claims to 
    recover reimbursements already made on the claim where subrogation was 
    waived.
    
         References:  Minn. Stat. Section 79.36(g).
                      Plan, Article VI.E.3. and VI.G.
                      Operating Rule for the Adjustment of Claims.
                      Operating Rule for Approval of Waivers of Subrogation


X.  RESOLUTION OF DISPUTES

    Any member or other interested party aggrieved by any action or 
    decision of the Board of Directors or the Association, or any agent of 
    the Association, may, in addition to any other recourse available at law, 
    including judicial review, file a written complaint with the Association 
    concerning such action or decision within 30 days. The complaint will be 
    resolved either through binding arbitration or by the Member Appeals 
    Committee in accordance with the following procedures.

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    Any dispute between a Member (or Former Member or successor in interest 
    of a Member) and the Association with respect to Article VI. of the Plan 
    or any provisions in the Reinsurance Agreement or Operating Rules adopted 
    by the Board of Directors relating to coverage, claim, or premium issues, 
    as determined by the Association, shall be decided through binding 
    arbitration in accordance with procedures established in Article X of the 
    Plan.

    Any other unresolved complaint filed by a Member (or Former Member or 
    successor in interest of a member) shall be decided by a Member Appeals 
    Committee appointed in accordance with Article X. C. of the Plan.  Any 
    Member aggrieved by a determination by the Member Appeals Committee may 
    appeal such determination to the Commissioner within 30 days, provided 
    that, in addition, such Member shall have any other recourse available at 
    law, including judicial review.

         References:  Minn Stat. Section 79.36 (h).
                      Plan, Article X.

XI. INSOLVENCY

    If the Member becomes insolvent, indemnification for losses payable by 
    the Association shall be payable by the Association directly to the 
    Member or its liquidator, receiver, or statutory successor.

    If the Member or any other member becomes insolvent, any liability of the 
    insolvent member to the Association shall be apportioned among the 
    remaining members on the same basis as reinsurance premiums are charged.  
    The Association shall have, on behalf of all of the remaining members, 
    all rights allowed by law against the estate or funds of the insolvent 
    member for sums due the Association, and any amounts received by the 
    Association as a result thereof shall be credited to the members on the 
    same basis as reinsurance premiums are charged.

         References:  Minn Stat. Section 79.34, subd. 4.
                      Plan, Article III. A.2.

XII. TERMINATION

     The Commissioner or Commissioner of Commerce may, upon notice to a 
Member, take any appropriate action against a Member pursuant to procedures 
available to the Commissioner or Commissioner of Commerce, including 
revocation of the license of an Insurer to transact workers' compensation 
insurance or revocation of authorization of a 

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    Self-insurer to self-insure workers' compensation liability as authorized 
    by law, for failure to pay Premiums to the Association when due, failure 
    to comply with the Plan, Reinsurance Agreement, or Operating Rules, or 
    failure to comply with Minnesota law. Revocation of authority to write 
    workers' compensation insurance by an Insurer or to self-insure 
    automatically terminates membership in the Association. An Insurer may 
    voluntarily withdraw from membership in the Association only upon ceasing 
    to be authorized by the Commissioner of Commerce to transact workers' 
    compensation insurance in Minnesota. A Self-insurer may voluntarily 
    withdraw from membership in the Association only when it stops 
    self-insuring its workers' compensation liability, which voluntary 
    withdrawal is effective on the date determined by the Commissioner of 
    Commerce. Any unpaid Premiums which have been charged to a withdrawing or 
    terminated Member shall be due and payable as of the effective date of 
    withdrawal or termination, as determined by the Commissioner of Commerce. 
    A Former Member shall continue to be bound by the Act, Plan, and any 
    Reinsurance Agreement or Operating Rules with respect to the performance 
    and completion of any unsatisfied liabilities and obligations to the 
    Association.

         References: Minn. Stat. Section 79.34, subd. 3.
                     Plan, Article III. A.1.


Adopted by action of the Board of Directors of the Workers' Compensation 
Reinsurance Association at its meeting duly called on the 10th day of 
December, 1998; and approved by the Minnesota Commissioner of Labor and 
Industry on the 4th day of January, 1999.


                                    WORKERS' COMPENSATION
                                    REINSURANCE ASSOCIATION


                                    By  /s/ Jay Y. Benanav
                                       ----------------------------------------
                                          Jay Y. Benanav
                                          Its President

ATTEST

By   /s/ Carl W. Cummins III
   ----------------------------------------
    Carl W. Cummins III
    Its Secretary






                                                                       WCRA 11

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                              STATE OF MINNESOTA
                       DEPARTMENT OF LABOR AND INDUSTRY

                 BEFORE THE COMMISSIONER OF LABOR AND INDUSTRY


In the matter of the Amended Plan of                 ORDER APPROVING AMENDMENTS
Operation and Reinsurance Agreement                    TO THE PLAN OF OPERATION
of the Workers' Compensation                          AND REINSURANCE AGREEMENT
Reinsurance Association                            OF THE WORKERS' COMPENSATION
                                                        REINSURANCE ASSOCIATION




                                     ORDER

      In accordance with Minn. Stat. Section 79.38, subd.3 (1996) and 
Articles I.AA and IX of the WCRA Plan of Operation, IT IS HEREBY ORDERED that 
the Amendments to the WCRA Plan of Operation and Reinsurance Agreement, as 
approved by the WCRA Board of Directors on December 10, 1998, are approved.



Dated: 1-4-99, 9:45 am                      /s/ Gretchen Maglich
       --------------------               -------------------------
                                          GRETCHEN MAGLICH
                                          Commissioner of Labor and Industry