EX-10.26



 





Confidential Treatment

Exhibit 10.26



PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECRETARY OF THE COMMISSION PURSUANT TO REGISTRANT’S APPLICATION OBJECTING TO
DISCLOSURE AND REQUESTING CONFIDENTIAL TREATMENT UNDER RULE 406. THE OMITTED
PORTIONS HAVE BEEN MARKED WITH BRACKETS.




CLAIM AGREEMENT




between




STRATEGIC OUTSOURCING, INC. (SOI)

(“Customer” or “Insured”)




and




SPECIALTY RISK SERVICES, LLC,

successor to SPECIALTY RISK SERVICES, INC.,

on behalf of itself and its affiliate, HARTFORD FIRE INSURANCE COMPANY

(“SRS”)




COVER PAGES




     IN THIS AGREEMENT, certain terms have these meanings:



	 	 	 	 	 
	1.

	 	CUSTOMER:
	 	Strategic Outsourcing, Inc.
	 

	 	 	 	5260 Parkway Plaza Blvd., Suite 140
	 

	 	 	 	Charlotte, NC 28217
	 
	 	 	 	 
	2.

	 	SRS:
	 	Specialty Risk Services, LLC.
	 

	 	 	 	One Goodwin Square, 225 Asylum Street
	 

	 	 	 	Hartford, Connecticut 06103
	 

	 	 	 	Attention: Michael Ryan
	 

	 	 	 	                 Vice President
	 
	 	 	 	 
	 

	 	 	 	Notice To Hartford by Customer:
	 

	 	 	 	In the event of bankruptcy by Customer,
	 

	 	 	 	notification and any and all correspondence is to
	 

	 	 	 	be sent to:
	 
	 	 	 	 
	 

	 	 	 	Hartford Fire Insurance Company
	 

	 	 	 	The Hartford
	 

	 	 	 	Hartford Plaza
	 

	 	 	 	Hartford, CT 06115
	 

	 	 	 	Attention: Mr. Thomas Makuch, T-21-88
	 
	 	 	 	 
	3.

	 	EFFECTIVE DATE:
	 	March 1, 2007
	 
	 	 	 	 
	4.

	 	PROGRAM DESCRIPTION:
	 	Policy 16 WBRJ76500 The following states will be covered under this policy:






 









 





	 	 	 	 	 
	 

	 	 	 	AL; AR; AZ; CO; CT; DC; DE; HI; IA; IL; IN; KS;
	 

	 	 	 	KY; LA; MA; MD; ME; Ml; MN; MO; MS; NC; ND;
	 

	 	 	 	NE; NJ; NM; NV; NY; OH; OK; OR; PA; Rl; SC; SD;
	 

	 	 	 	VA; WA; Wl; and WV
	 
	 	 	 	 
	 

	 	 	 	Policy 16 WBRJ79226 The following states will be covered under this policy:
	 

	 	 	 	CA; FL; GA; TN; and TX.






	 	 	 
	Policy Period(s):

	 	03/01/2007 — 03/01/2008
	03/01/2
	 	 
	Type(s):

	 	Workers’ Compensation-Conventional Retro
	 
	 	 
	Policy Number(s):
	 	 
	(as assigned)
	 	 
	 
	 	 
	Policy Period(s):

	 	03/01/2007 — 03/01/2008
	Type(s):

	 	Workers’ Compensation-Prefunded Deductible
	 
	 	 
	Policy Number(s):
	 	 
	(as assigned)
	 	 
	Policy Period(s):

	 	03/01/2007 — 03/01/2008
	Type(s):

	 	Workers’ Compensation-Guaranteed Cost







	5.	 	LOSS DEPOSIT OR INTEREST CHARGE:
	 
	 	 	Not Applicable
	 
	6.	 	SERVICE FEES:
	 
	 	 	Variable Fee To Conclusion
	 
	 	 	Customer will pay SRS a per claim Service Fee for all claims. For Covered Claims that are
Other than Medical Claims which remain open more than two years, Customer will also pay SRS
an additional Service Fee each month until the claim is closed, but only as long as it is a
Covered Claim.





Per claim Service Fee




Other Than Medical Only




2









 







	 	 	 	 	 
	*California
	 	$[___] per claim
	Florida
	 	$[___] per claim
	Texas
	 	$[___] per claim
	All other States
	 	$[___] per claim





All “Other Than Medical Only” claims remaining open 24 months from date the claim is reported will
be charged $78 per month and will repeat monthly for the life of the claim.




	 	 	 	 	 
	Medical Only — handle to a conclusion
	 	$[___] per claim
	Claim Incident Report
	 	$[___] per claim





Customer agrees to pre-pay estimated claims fee at a rate of $78,204 per month. Actual claim fees
will be calculated each month using the rates stated above against actual claim activity and will
be deducted from the pre-funded claims fee balance on hand. Upon exhaustion of the pre-funded
balance, customer will be direct billed each month for any additional claim fees incurred.



* California claim handler will be dedicated to Strategic Outsourcing during first quarter of
03/01/07 renewal (March, April, May) irregardless of claim intake and pending. In June
07 intake and pending will be reviewed with client and broker at which time if intake and pending
are below standard of 140 pending and 15 monthly intake discussions will take
place with Strategic Outsourcing and Broker to adding additional account (s) to bring
within SRS standards. If in the event SRS did not conduct these discussions with client
and broker they will waive claims service fees to date for said policy year (03/01/07-08)
in California only.



When a Covered Claim is billed as Medical Only but then becomes Other Than Medical Only; or when
billed as Other Than Medical Only but becomes Medical Only, SRS will issue a credit for the
previous charge and a debit for the new amount charged.



The following defines the SRS claim service fee charges:





	 	•	 	“Medical Only” means a compensable claim in which (i) the indemnity
incurred is zero; (ii) paid medical is less than $2,500; (iii) allocated
expense payments are limited to bill review; (iv) the claim does not require
contacts or investigation for purposes of determining compensability, medical
causation or subrogation; (v) claim does not require a formal denial and there
is no litigation or legal representation.
	 
	 	•	 	“Incident Report” means a Claim reported as such, in which no financial
transaction, liability or payment arises with respect to a Claim handled
hereunder and the amount of indemnity incurred, medical incurred and Allocated
Claim Expenses incurred are each zero.




3









 





	 	•	 	“Other than Medical Only” means a Claim that is not a “Medical
Only” Claim or an “Incident Report”. “Other than Medical Only”
claims include claims in which there is an incurred indemnity
value or which have allocated claim expenses incurred other
than bill review.





     Additional Service Fee




For Other Than Medical Only claims that remaining open more than 2 years, the additional
Service Fee is $[___] each month until the claim is closed.



Management Fees





			
	Annual Administration Fee:	 	$[___]




Customer will pay SRS Management Fees for all claims as described below




     Case Management — $[___] per hour



     Vocational Rehabilitation Management — $[___] per hour.



     Special Investigative Unit — $[___] per hour.



     Utilization Management — $[___] per claim.



     Subrogation Fees — ([___]% of Recoveries)


Medical Cost Containment Charge: SOI will be invoiced semi-annually a per
bill rate of $13.50 for each medical invoice processed by SRS as non
allocated expense and billed as separate line item in invoice



Service Fees include one claim file review per office per year according to the

terms and conditions of Section I.E. of this Agreement.





	7.	 	PAYMENT SERVICE FEES:
	 
	 	 	Prepaid Service Fees:
	 
	 	 	Customer agrees to the following Prepaid Service Fees:




From the Effective Date of this Agreement, Customer agrees to pay SRS
Prepaid Service Fees in twelve (12) installments as follows:





Prepaid Service Fees Installment Schedule



	 	 	 	 	 
	Installment	 	Amount due
	March 1, 2005
	 	$	[___]	 
	April 1, 2005
	 	$	[___]	 
	May 1, 2005
	 	$	[___]	 
	June 1, 2005
	 	$	[___]	 






4









 





	 	 	 	 	 
	Installment	 	Amount due
	July 1, 2005
	 	$	[___]	 
	August 1, 2005
	 	$	[___]	 
	September 1, 2005
	 	$	[___]	 
	October 1, 2005
	 	$	[___]	 
	November 1, 2005
	 	$	[___]	 
	December 1, 2005
	 	$	[___]	 
	January 1, 2006
	 	$	[___]	 
	February 1, 2006
	 	$	[___]	 
	Total
	 	$	[___]	 







The Prepaid Service Fees represent SRS’s initial estimate of Customer’s obligations for
Service Fees for SRS’s services on Worker’s
Compensation claims subject to the this Agreement including claims
arising under the Indemnification provisions of the Policies and for which SRS provides Claim
Services during the 36 month period following the Effective Date of this Agreement. Each
month SRS will deduct actual Service Fees from the Prepaid Service Fees amount until the
Prepaid Service Fees amount is exhausted or all claims are closed. However, not withstanding
the foregoing, if at any time during the 36 month period following the Effective Date of this
Agreement, it is determined by SRS
that Prepaid Service Fees is inadequate, SRS may, at its sole discretion, adjust the Prepaid
Service Fees and Customer agrees to immediately
remit the required amount of additional Prepaid Service Fees to SRS.




No
interest shall accrue or be payable to Customer in respect of any Prepaid Service Fees.




As soon as practical, at the end of the 36 month period following the Effective Date of this
Agreement, SRS will reconcile Service Fees. SRS will calculate Customer’s actual Service Fees
due for the 36 month period
in accordance with Section 6 of the Cover Pages. SRS will then reconcile
the Service Fees as calculated with estimated Prepaid Service Fees held by SRS. SRS will also
calculate a new Prepaid Service Fee amount, such amount to equal 150% of the prior 12 month’s
actual fees, rounded to the next higher multiple of $10,000. The Subsequent Prepaid Service
Fee will never be less than $[___], unless all claims are closed. To the extent the actual
Service Fees calculated exceed the Prepaid Service Fees, SRS
will bill and Customer will pay to SRS the difference plus the Subsequent Prepaid Service
Fee. To the extent the actual Service Fees calculated
are less than the Prepaid Service Fees plus the Subsequent Prepaid Service Fees, SRS will
remit to Customer the difference.




For each subsequent 12 month interval after the initial 36 month period,
SRS will adjust the Subsequent Prepaid Service Fees to 150% of the previous 12 month’s actual
earned fees, rounded to the next higher
multiple of $10,000, but not less than $[___].



5









 






When all claims are closed, SRS will remit to Customer any remaining balance of Subsequent
Prepaid Service Fees. For any claims that arise after the such reconciliation, SRS will bill
Service Fees to Customer monthly thereafter based on the Service Fee charges in Section 6 of
the
Cover Pages. Customer agrees to pay Service Fees directly to SRS
within thirty (30) days of the billing date.




	8.	 	STATE SURCHARGES, TAXES AND ASSESSMENTS:
	 
	 	 	In accordance with Sections II and IV of this Agreement, Customer agrees
to pay all claims for surcharges, taxes and Assessments of any kind
that may be imposed on Customer or SRS as a result of the issuance of the Policies subject to
this Agreement, whether such surcharges, taxes or Assessments are calculated on the bases of
premium, losses covered under the Policies or any other basis.






	9.	 	CLAIM SETTLEMENT AUTHORITY FOR EXCESS INSURANCE OR SELF-INSURANCE:
	 
	 	 	Not Applicable






	10.	 	PRESETTLEMENT DISCUSSION FOR INSURANCE:
	 
	 	 	SRS may settle Covered Claims for a settlement amount under $15,000 without discussing
settlement with Customer.
	 
	 	 	SRS and Customer will discuss settlement of Covered Claims for a settlement amount in excess
of $15,000 prior to settlement. The failure of SRS to do so will constitute a waiver of
Service Fees on said claim settled for an amount in excess of $15,000 without prior
discussion with Customer.






	11.	 	CASH CALL:
	 
	 	 	None in addition to the cash calls provided for elsewhere.




6









 










WHEREAS:





	1.	 	SRS is engaged in providing Claim Services for insurance and self-insurance, and
	 
	2.	 	Customer wants SRS to provide service for claims under Policies or Self-Insurance as
identified on the Cover Pages, and
	 
	3.	 	SRS agrees to provide such service under the terms of this Agreement.




NOW, THEREFORE, in consideration of the premises and of the mutual promises herein, Customer and
SRS agree as follows:





	I.	 	CLAIM SERVICE






	 	A.	 	SRS shall provide Claim Services on behalf of Customer for Covered Claims.
	 
	 	B.	 	If handling Takeover Claims, SRS shall not be liable for the obligations of
Customer as a self-insurer nor for the obligations of any insurance company or other
entity resulting from their handling of claims.
	 
	 	C.	 	In the performance of its duties under this Agreement, SRS may retain attorneys
and others on behalf of Customer.
	 
	 	D.	 	SRS does not assume any liability for claims or expenses under the Policies or
Self-Insurance. When SRS services claims under Self-Insurance or under Policies issued
by a company affiliated with Hartford Fire Insurance Company, it makes payments of
judgments, settlements, losses and Allocated Claim Expenses solely at the expense of
Customer. However, payments under the self-insured retention of a Policy issued by a
company not affiliated with Hartford Fire will be made by SRS solely at the expense of
Customer or of Insurer.
	 
	 	E.	 	Upon written request and execution of a confidentiality agreement, and as
permitted by State and Federal Laws, Customer may be permitted to conduct audits or
claim file reviews of claim files. However, Customer shall not be entitled to any audit
or review unless Customer is current on obligations for Service Fees, premiums and
Security. Reviews will occur at SRS’s locations regular business hours upon a minimum of
thirty days prior notice to SRS (or less if mutually agreed). The result of said audit
or claim file review shall not be divulged to any third party without the prior written
permission of SRS. A copy of the result of each audit or claim file review will be
provided to SRS.




7









 





	 	F.	 	Customer will give SRS prompt notice of all Covered Claims, suits and of any
occurrences that are likely to result in any claims or suits, and Customer will
provide all necessary assistance and cooperation to SRS.
	 
	 	 	 	Nothing in this Paragraph is intended to alter the regulatory or
contractual rights and obligations of Customer or Insurance
Company under either Self- Insurance or Policies.
	 
	 	G.	 	1. SRS shall service Covered Claims in accordance with accepted practices and
applicable state law governing claim practices. SRS shall not be deemed to be an
insurer or a guarantor of Customer’s Obligations.






	 	2.	 	Within one hundred and eighty (180) calendar days after payment is due,
Customer shall notify SRS that it disputes any amount payable under this Agreement
and/or the settlement, adjustment, defense or payment of any claim represented by
such billed amount (“Dispute Notice”). If Customer fails to so notify SRS, then it
shall have waived all rights to dispute such payment and/or the settlement, defense,
adjustment and payment of any claim (“Claim Handling”). Said waiver shall include
the waiver of any potential causes of action sounding in tort or contract for the
alleged negligence or bad faith of SRS or its affiliates.
	 
	 	 	 	If Customer disputes the Claim Handling according to these terms:






	 	a)	 	Customer shall provide SRS, or the other party, with a brief
statement of the dispute within thirty (30) days of Dispute Notice;
	 
	 	b)	 	Represented by individuals with decision-making authority,
the parties will promptly meet to attempt in good faith to negotiate a
resolution;
	 
	 	c)	 	If the parties are unable to negotiate a resolution at said
meeting, the negotiation period shall end, and the parties shall submit the
dispute to mediation in accordance with the commercial Mediation Rules of the
American Arbitration Association and the parties agree to bear the costs of
the mediation equally;
	 
	 	d)	 	The parties will appoint a mediator within thirty (30) days
of the end of the negotiation period, or if the parties are unable to agree on
a mediator they will seek assistance from the American Arbitration
Association; and
	 
	 	e)	 	The parties agree to participate in good faith in the
mediation and negotiations.




8









 











	 	3.	 	If any other dispute arises between the parties with reference to the
interpretation of this Agreement or any rights or Obligations arising under this
Agreement, whether before or after its termination, the parties hereby agree to use
the above procedure to attempt to settle such dispute.






	 	H.	 	Except as required by applicable state or federal law, SRS shall not be
responsible for the reporting of a Loss to any excess insurance carrier. SRS shall
not be responsible for reading or interpreting any excess insurance policies or for
identifying which insurance carriers need to be notified. SRS hereby disclaims any
liability arising out of the failure of Client to render reports or notices to an
excess insurance carrier because of insufficient information provided by Client to
SRS.
	 
	 	 	 	Subsection H. above is replaced by the following provision only when SRS is
providing Claim Services for Client’s self-insured Workers’ Compensation Claims
arising in the State of Michigan: Client will identify in writing to SRS, as
soon as reasonably possible, the excess insurance carriers, policy numbers, and
dollar amounts
at which excess insurance carriers are liable and circumstances under which they
are required to be notified. SRS will notify Client in writing of any Claim which
falls within the guidelines for excess reporting in order for Client to make its
report to the excess carrier, and SRS will send a copy of said notice to the excess
carrier. SRS shall not be responsible for reading or interpreting any excess
insurance policies or to identify which insurance carriers need to be notified. SRS
hereby disclaims any liability arising out of the failure
of Client to render reports or notices to an excess insurance carrier because of
insufficient information provided by Client to SRS.
	 
	 	I.	 	This subsection I. applies only when SRS is providing Claim Services for
Client’s Workers’ Compensation Claims arising in the State of Nevada.






	 	1.	 	For five years after the transaction to which they relate, SRS shall
maintain at its principal office adequate books and records of all transactions
between SRS and Client. Such books and records shall be maintained in accordance with prudent standards of insurance
recordkeeping and Nevada insurance regulations. After five years SRS may remove
such books and records, store their contents on microfilm or return them to the
Client.
	 
	 	2.	 	The Nevada Commissioner of Insurance may examine, audit and inspect the
books and records referenced in subparagraph J.1.





9









 




	 	 	 	above in order to carry out the provisions of Nevada Revised Statutes 679B.230 to
679B.300 inclusive relating to the examination of insurers.
	 
	 	3.	 	The names and addresses of insured persons and any other
material which is in the books and records of SRS are confidential except when used
in a proceeding by the Insurance Commissioner against SRS.
	 
	 	4.	 	Client may inspect and examine the books and records to the extent
necessary to fulfill all contractual obligations to individuals, subject to any
restrictions in its agreement with SRS.
	 
	 	5.	 	Each Claim paid by SRS from money collected for or on behalf of Client
shall be paid by a check or draft upon and as authorized by Client.






	II.	 	SERVICE FEES AND LOSS PAYMENTS






	 	A.	 	Customer shall reimburse SRS for amounts paid on its behalf and pay Service Fees
and charges listed below and on the Cover Pages. Per Claim Service Fees are payable in
the month subsequent to the month in which the claim is reported to SRS.
	 
	 	B.	 	SRS will issue a monthly Billing Statement for the following amounts:






	 	1.	 	Loss reimbursements for amounts paid by SRS, which are not subject to
Cash Call,
	 
	 	2.	 	Service Fees and costs,
	 
	 	3.	 	State Surcharges, Taxes and Assessments if applicable, and
	 
	 	4.	 	Late Charges if applicable.
	 
	 	5.	 	If there is no Loss Deposit, Customer will pay interest for the use of
funds in the amount stated on the Cover Pages.
	 
	 	6.	 	If Customer has Prefunded Deductible Losses, the amount of the
Prefunded Deductible Losses on the Cover Pages is the initial estimate of the
Customer’s obligation for reimbursement of losses within the Policy’s deductible
provision. Customer remains liable
for Prefunded Deductible Loss amounts paid in excess of any amounts actually
received by SRS. For the first year after Policy inception, Customer shall pay by
installments to SRS the total Prefunded Deductible Amount. The Prefunded Deductible
Amount excludes Service Fees and other charges under this Agreement.




10









 




	 	 	 	Any additional amount(s) owed by Customer under the deductible provisions of the
Policy will not be billed until the first or subsequent adjustments, except as
provided for under Section 12 of the Cover Pages.
	 
	 	 	 	Except as provided for under Section 12 of the Cover Pages, there shall be no
change in the original amount of Prefunded Deductible Losses prior to the first
adjustment date shown on the Cover Pages. SRS’s calculation of the Prefunded
Deductible Losses shall be determined according to the calculation indicated on the
Cover Pages.
	 
	 	 	 	If Customer has Prepaid Service Fees, the amount of the Prepaid Service Fees on the
Cover Pages includes the initial estimate of
the Customer’s obligation for claim services provided by Hartford (SRS) under the
Policies subject to this Agreement. Customer remains liable for Service Fees paid
in excess of any Prepaid Service Fee amounts actually received by HARTFORD. For
the first year after Policy inception, Customer shall pay by installments to HARTFORD
(SRS) the total Prepaid Service Fees amount. Any adjustments to the Prepaid Service
Fees shall be made in accordance with Section 7 of the Cover Pages.






	 	C.	 	All amounts are due and payable when billed. If balances in full are not received by
SRS within thirty (30) days of the billing date on a thirty-day billing cycle or within 72
hours of the issuance of SRS’s bill on wire transfer billing agreements, Customer will pay
SRS a late charge of one and one-half percent (1.5%) of the outstanding bill for each
subsequent thirty (30) day period or any part thereof until all balances due are received
by SRS.
	 
	 	 	 	Customer shall not be required to pay interest or late charges in excess of the rate
allowed by the laws of the state having jurisdiction. The parties intend to comply with
applicable statutes and regulations; therefore, the interest or late charges shall be
limited to that permitted under such law.
	 
	 	D.	 	After the Effective Date of this Agreement, if SRS is required by law or under the
authority, enactment, or order of an entity exercising jurisdiction over the parties or
either of them to provide services or documents not currently required, the parties will
negotiate payment to SRS for the cost and fee for providing such service. If the parties
fail to reach agreement, SRS may terminate this Agreement, unless otherwise prohibited by law.





	III.	 	SERVICE FEE CALCULATION









11








 











	 	A.	 	SRS shall service Covered Claims commencing on the Effective Date, subject to the
provisions of this Agreement regarding termination, as long as all amounts due and duties owed to SRS by Customer have been paid and performed
and the Policies subject to this Agreement remain in effect.
	 
	 	B.	 	Handle to Conclusion — Customer will pay SRS Service Fees to handle Covered Claims to
conclusion. These Service Fees will be priced either on a per claim basis or as a guaranteed fee for all Covered Claims, according to
the terms established on the Cover Pages.
	 
	 	C.	 	Variable Fee to Conclusion — The per claim Service Fee applies for the term indicated
on the Cover Pages from the date the claim is reported or as a guaranteed fee for all Covered Claims, according to the terms established on the
Cover Pages, if any. After this term or guaranteed Service Fee has expired, the Customer
will be required to pay an additional Service Fee each month until the claim is closed.
	 
	 	D.	 	Management Fee — Customer will pay SRS Management Fees for management services as
indicated on the Cover Pages.
	 
	 	E.	 	Cost Containment Charges — Customer will pay SRS Cost Containment Charges as indicated on the Cover Pages.
	 
	 	F.	 	Percentage of Incurred or Paid Losses - As Service Fees, Customer will pay SRS a
percentage of the total of either Incurred Losses plus incurred Allocated Claim Expenses
or Paid Losses plus paid Allocated Claim Expenses for each Covered Claim, as shown on the
Cover Pages. This Service Fee includes the value of handling Covered Claims to conclusion.
	 
	 	G.	 	SRS will bill Customer for Service Fees as follows:






	 	1)	 	Per Claim Medical Only — In the month following the month in which
payment is made.
	 
	 	2)	 	Per Claim For All Other — In the month following the month in which SRS
has established the Covered Claim in its claims processing system.
	 
	 	3)	 	Management Fees — In the month following the month in which SRS has
established the Covered Claim in its claims processing system or in which the
management services are performed.
	 
	 	4)	 	Cost Containment Charges — In the month following the month in which
the Savings occur.




12









 





	 	5)	 	Percentage of Incurred Losses, Percentage of Paid Losses — SRS will
bill Customer as losses are incurred or paid.






	IV.	 	ASSESSMENTS
	 
	 	 	If at any time while this Agreement is in effect, or within five (5) years after
its termination, any claim arises for premium taxes or Assessments with respect to claim
amounts, Allocated Claim Expenses, or Service Fees that have been paid hereunder, SRS shall
notify Customer of such claim and, if there is, in SRS’ judgment, any credible basis for
contesting such Assessment, afford Customer the opportunity to contest such claim and join in
any proceeding to contest such claim. Customer agrees to defend, indemnify and hold harmless
SRS, its parent or affiliate(s) from such claims for taxes and Assessments according to the
indemnification provisions in
this Agreement.
	 
	 	 	The indemnities provided under this Section shall specifically inure to the benefit of any
parent or affiliated company of SRS that may also be subject
to a claim for premium taxes or Assessments arising out of the amounts
paid pursuant to this Agreement.






	V.	 	INDEMNIFICATION AND REMEDIES






	 	A.	 	SRS agrees to defend, indemnify, and hold Customer, its officers, directors,
employees, agents, and affiliates harmless from and against any and all actions, claims,
suits, damages and punitive damages brought against Customer, whether resolved by judgment
or by settlement, to the extend resulting from:






	 	1.	 	SRS’ negligent acts or omissions, or willful misconduct, in the
use of Confidential Personal Information contained in Client’s claim files; or
	 
	 	2.	 	SRS’ negligent acts or omissions, or willful misconduct, in the
performance of its duties under this Agreement except if such acts were taken
at the direction of Client.






	 	B.	 	Customer agrees to defend, indemnify, and hold SRS, its officers, directors,
employees, agents, and affiliates harmless from and against any and all actions, claims,
suits, damages and punitive damages brought against SRS, whether resolved by judgment or
settlement, to the extent resulting from:






	 	•	 	Customer’s negligent acts or omissions, or willful misconduct, in the use of
Confidential Personal Information which SRS provides to Customer in the handling of
its Claims, or




13









 





	 	•	 	SRS’s being named as the insurer of record in a claim or suit, or an allegation or
claim that SRS is responsible for the obligations of the insurance carrier(s) or
the self-insured, or
	 
	 	•	 	The imposition of Assessments as provided herein, or
	 
	 	•	 	Any action or failure to act by SRS based upon instructions received from
Customer.






	 	C.	 	As a precondition to a claim for indemnity, the parties agree to comply with the
following procedures. The party seeking indemnification
agrees to give the indemnifying party prompt notice of actions, claims and suits brought
or threatened against it. The indemnifying party shall have the right to participate
in, or assume, at its expense, the defense
of any such claim or process or settlement thereof and the party
seeking indemnification shall cooperate in said defense. The party seeking
indemnification retains the right to hire separate counsel to participate in its own
representation.
	 
	 	D.	 	If Customer does not make payments in full to SRS of Service Fees, charges, loss
reimbursements, and Allocated Claim Expenses, SRS will no longer be obligated to advance
funds on behalf of Customer, unless otherwise required by law. If SRS chooses to make
further payments, SRS will either issue to Customer a Cash Call for adequate funds prior
to making any further payments of charges, loss reimbursements, or Allocated Claim
Expenses, or will make payments for which Customer will reimburse SRS.
	 
	 	E.	 	If Customer does not compensate and reimburse SRS in accordance with the terms of
this Agreement, or if Customer has defaulted on any other Obligation to SRS or any of its
affiliates, SRS may draw upon
any applicable Loss Deposit or Prefunded Loss Amount and may hold Customer responsible
for expenses of collection, including but not limited to attorney fees.
	 
	 	F.	 	In no event shall either party be responsible for any indirect, incidental, special
or consequential damages, but damages under this Agreement shall be limited to the amount
of actual damages sustained by SRS or the Customer.
	 
	 	G.	 	The indemnities provided under this Section shall specifically inure to
the benefit of any parent or affiliate company or SRS.
	 
	 	H.	 	Private Investigators




14









 










	 	1.	 	SRS has developed certain guidelines and standards of conduct for private
investigation professionals engaged by SRS (the “Standards of Conduct”).
SRS has entered into agreements with certain private investigation
professionals who are appropriately licensed and who have agreed to provide
“Investigation Services” (as such term is more particularly described
below), in accordance with the Standards of Conduct (“Contracted
Investigators”).
	 
	 	2.	 	Client acknowledges that SRS customarily retains only
Contracted Investigators to provide Investigation Services. Client
acknowledges that it may elect to direct SRS to use private investigators of
Client’s choice who are not Contracted Investigators (such investigators
“Non-Contracted Investigators”).
	 
	 	3.	 	For the purpose of this Agreement, the term “Investigation
Services” shall mean those services provided by the private investigation
professional which include, but are not limited
to, confidential activity checks of specified individuals and confidential
surveillance of specified individuals.
	 
	 	4.	 	Client agrees to indemnify, defend, and hold harmless SRS
from any and all liability, claims, loss, damages, fines, penalties and costs,
including expenses and attorneys’ and other professionals’ fees, which SRS may
sustain by reason of:






	 	a)	 	a Non-Contracted Investigator’s negligence in
performance of Investigation Services or any violation of applicable
state, local and/or federal law(s), including without limitation, violation(s) of state

insurance laws, regulations or rules;
	 
	 	b)	 	a Non-Contracted Investigator’s failure to
comply with the Standards of Conduct, a copy of which is available
from SRS upon Client’s request; or
	 
	 	c)	 	a Non-Contracted Investigator’s failure to
maintain appropriate licensure, including but not limited to any
state, municipal or other licensure.






	 	5.	 	This indemnification provision shall survive the expiration
or prior termination of this Agreement.






	VI.	 	TERMINATION





15









 










A. For Self-Insurance only:

Upon sixty (60) days’ prior written notice (the “Termination Notice”), either
party may terminate this Agreement and SRS will not service claims
occurring or reported beyond the termination date. Upon the giving of the Termination Notice,
if Customer has Percentage of Paid Losses for its
Service Fee calculation, then the Service Fee calculation will be amended
to apply to Percentage of Incurred Losses. This termination provision does not apply to
service provided within the insurance program underwritten by
an affiliate of SRS.




	 	B.	 	Section VI.A. above is replaced by the following termination provision only
when SRS is providing claim services for client’s self-insured Workers’ Compensation
Claims arising in the State of Michigan: 
	 
	 	 	 	Claim Services shall continue until all Covered Claims subject to this Agreement are
handled to conclusion, unless SRS is relieved of that responsibility by the Michigan
Bureau of Workers’ Compensation, subject to the following termination provisions.
SRS will discontinue providing Claim Services, effective on the specified date, only
upon
the approval of the Bureau of Workers’ Compensation. This
Agreement may be terminated in accordance with the following:






	 	1.	 	By either party, without cause, at any time during the term
hereof by providing sixty (60) days’ prior written notice to the other party of
its intent to so terminate, at the expiration of which time this Agreement
shall terminate.
	 
	 	2.	 	Immediately, for cause, at any time by either party due to the
insolvency or bankruptcy of the other party to this Agreement or its successor.
	 
	 	3.	 	By either party in the event of a material breach of the terms
and conditions of this Agreement by the other party, effective thirty (30) days
following written notice of such breach, unless such breach is cured before the
expiration of the thirty (30) day period. Notwithstanding the foregoing, SRS
shall have the right to terminate this Agreement immediately in the event of a
failure to pay any monies required to be paid to SRS under this Agreement.
	 
	 	4.	 	At any time by mutual agreement of the parties.






With respect to Covered Claims required to be handled to conclusion by
SRS following termination under subparagraph A. or subparagraph B.
above that are not finally adjudicated or settled at such time, the terms and



16









 






conditions of this Agreement, with the exception of I.F., Vl.A. and VLB.,

shall continue in full force and effect with respect to such ‘open’ Covered Claims until such
time as the last such Covered Claim is closed or
withdrawn by Client or Client’s insurance carrier.




	VII.	 	Confidential Personal Information
	 
	 	 	For purposes of this Agreement, “Confidential Personal Information” (or “Information”) means
any information that Hartford may, directly or indirectly, disclose to Customer that relates
to an individual and that is not available to the public. This includes, but is not limited
to, credit history; income; financial benefits; application, policy or claim information;
health information; medical records; lists of individuals derived from nonpublic personally
identifiable information; and the identification of an individual as a customer. Only those
employees of Customer who need to know Confidential Personal Information to perform their
duties in furtherance of this Agreement shall be given
access to the Information. Customer shall maintain the security and the confidentiality of
Confidential Personal Information and shall use it only for
the purposes for which we have disclosed it to you under this Agreement. You shall not
disclose said Information to any other person except to your agents and other persons who
require such Information to further the objectives of this Agreement and who agree in writing
to maintain its security and confidentiality. If any applicable state or federal law or
regulation, now or hereafter in effect, imposes a higher standard of confidentiality with
respect to such Confidential Personal Information, such standard shall prevail over the
provisions of this Agreement.
	 
	VIII.	 	DEFINITIONS
	 
	 	 	Agreement means this entire contract, including the Cover Pages, and any exhibits
attached hereto.
	 
	 	 	Allocated Claim Expenses means expenses not otherwise included as loss that can be
directly allocated to the handling of a particular claim as the
result of; 1) independent medical examinations and medical reports/records;
2) court costs and fees for service of process; 3) attorneys and hearing representatives; 4)
court reporter services and transcripts; 5) stenographic services and transcripts; 6) witness
fees and expenses; 7) vendor interface charges; 8) bond premiums; 9) printing costs related to
trials and appeals; 10) testimony, opinions, appraisals, reports, surveys, and analyses of professionals and
experts; 11) trial and hearing attendance fees; 12) depositions, video statements, private
investigators; 13) a charge shown on the Cover Pages for savings realized by the Customer
resulting from services associated with utilization review, hospital bill audit, provider bill
audit; 14) Preferred Provider Organization utilization charges; 15) case management and
vocational rehabilitation management charges to the extent any portion of these costs are attributable to Allocated Claim
Expenses; 16) alternative dispute resolution fees; 17) protection and pursuit




17









 





	 	 	of subrogation and recovery rights; 18) Special Investigative Unit; and 19) expenses which are
not defined as loss and are directly related to and directly allocated to the handling of a particular claim.
	 
	 	 	Assessment means any assessment, tax or other charge, whether payment
is required by law or required as a condition of continued opportunity to service deductible
claims or transact insurance or self-insurance in the applicable state. This includes but is
not limited to assessments for participation in any “residual market plan,” guarantee fund,
guarantee association or other facility protecting claimants against the uncollectibility of
insurance or self-insurance proceeds, second injury fund or state administrative bureau cost.
As used herein, “residual market plan” means
any plan, program or facility (whether voluntary or required by law) by which insurers or self
insurers share in the risk of providing insurance for eligible employers or insureds.
	 
	 	 	Authorized Personnel means employees of Customer who have a business need to know and
have access to data provided to Customer under this Agreement.
	 
	 	 	Billing Statement means the periodic notice of amounts due to SRS by Customer.
	 
	 	 	Canceled Claim means a claim that has been investigated and is closed either without
payment or with only Allocated Claim Expenses having been paid.
	 
	 	 	Cash Call means notice to Customer to make immediate payment of the amount due.
	 
	 	 	Claim Services means those services related to investigation, defense, negotiation and
settlement of Covered Claims, including legally permitted activities related to salvage,
subrogation and other recoveries.
	 
	 	 	Covered Claims means claims that are brought either against Self-
Insurance covered under this Agreement and reported by Customer during the term of this
Agreement; or that are claims to the extent that they are covered under Policies.
	 
	 	 	The definition of covered claims above is replaced by the following definition only when
SRS is providing Services for Client’s self-insured Workers’ Compensation Claims arising in the state of Michigan:
Covered Claims means (1) Claims in Michigan (defined as any monetary demand or suit
arising out of or in connection with any actual or alleged incident, occurrence or accident in
Michigan with dates of injury or disease within the term of this Agreement) that are brought
against Workers’




18









 





	 	 	Compensation self-insurance covered under this Agreement or that are Takeover Claims, or (2)
all other Claims that are brought against insurance
or self-insurance covered under this Agreement and reported by Client
during the term of this Agreement, or that are Takeover Claims. SRS may
be relieved of its responsibility for the future handling of Workers’ Compensation Claims in
Michigan upon approval of the Michigan Bureau of Workers’ Disability Compensation.
	 
	 	 	Cover Pages means the pages specifically described as Cover Pages in
this Agreement.
	 
	 	 	Effective Date means the beginning date for services provided under this Agreement as
defined in the Cover Pages.
	 
	 	 	Incident Report means a Claim reported as such, in which no financial transaction,
liability or payment arises with respect to a Claim handled hereunder and the amount of
indemnity incurred, medical incurred and Allocated Claim Expenses incurred are each zero.
	 
	 	 	Incurred Losses means the total of Paid Losses, Unpaid Losses and Allocated Claim
Expenses for all Covered Claims. Incurred Losses includes expenses for case management and
vocational rehabilitation management, at the current Hartford rates shown on the Cover Pages,
directly allocated to the handling of a particular claim. Case
management and vocational rehabilitation management expenses may be defined as indemnity losses, medical
losses or Allocated Claim Expenses by The National Council on Compensation Insurance, any state
independent rating bureau or any state department of insurance.
	 
	 	 	Insurance Policies means the policy or policies to which service under this Agreement
applies.
	 
	 	 	Insurance Companies or Insurers means companies that have issued Policies.
	 
	 	 	Large Risk Alternative Rating and Insurance Program Agreement
means that contract entered into between Customer and Hartford
establishing their respective rights and obligations pursuant to the insurance
rating programs provided by the policies subject to this Agreement.
	 
	 	 	Loss Deposit means a fund established for the payment of losses as
defined on the Cover Pages.
	 
	 	 	Medical Only means a compensable claim In which (i) the indemnity
incurred is zero; (ii) paid medical is less than $2,500; (iii) allocated expense payments are
limited to bill review; (iv) the claim does not require contacts




19









 





	 	 	or investigation for purposes of determining compensability, medical
causation or subrogation; (v) claim does not require a formal denial and
there is no litigation or legal representation.
	 
	 	 	Other Than Medical Only means a Claim that is not a “Medical Only” Claim or an
“Incident Report”. “Other than Medical Only” claims include claims in which there is an
incurred indemnity value or which have allocated claim expenses incurred other than bill
review.
	 
	 	 	Paid Losses means total payments made on Covered Claims for losses and Allocated Claim
Expenses. Paid Losses includes expenses for case management and vocational rehabilitation
management, at the current Hartford rates shown on the Cover Pages, directly allocated to the
handling of a particular claim. Case management and vocational rehabilitation management expenses may
be defined as indemnity losses, medical losses or Allocated Claim Expenses by The National
Council on Compensation Insurance, any state independent rating bureau or any state department
of insurance.
	 
	 	 	Pre-Settlement Discussion means the discussions between SRS and Customer prior to
settlement of a Covered Claim.
	 
	 	 	Self-Insurance means those programs of Self-Insurance identified on the Cover Pages.
	 
	 	 	Service Fees means payments owed to SRS by Customer for services provided under this
Agreement.
	 
	 	 	Service Period means that period of time during which SRS agrees to
service Covered Claims, conditioned upon the payment of all amounts due and performance of all
duties owed to SRS by Customer.
	 
	 	 	Takeover Claims means those claims identified on the Cover Pages as having been opened
or opened and closed prior to the date shown on the Cover Pages.
	 
	 	 	Unpaid Losses or Unpaid Loss Reserves means those reserves established by SRS for
Unpaid Losses and unpaid Allocated Claim Expenses under the Policy. Unpaid Losses includes
expenses for case management and vocational rehabilitation management, at the current Hartford
rates shown on the Cover Pages, directly allocated to the handling
of a particular claim. Case management and vocational rehabilitation management expenses may be
defined as indemnity losses, medical losses
or Allocated Claim Expenses by The National Council on Compensation




20









 





	 	 	Insurance, any state independent rating bureau or any state department of insurance.
	 
	 	 	Wrapped-Up Loss Deposits means the consolidation of Loss Deposit requirements for all
of the contracts listed on the Cover Pages into a single requirement.






	IX.	 	GENERAL CONDITIONS






	 	A.	 	Except as otherwise provided, all notices shall be in writing and
delivered by personal service or by certified mail, postage prepaid and return receipt
requested, to the party at its address established on the Cover Pages.
	 
	 	B.	 	The rights, duties, and obligations of Customer shall not be assigned, delegated, or
otherwise transferred in whole or in part without the prior express written consent of
SRS. SRS may assign some or all of its rights, duties, and obligations under this
Agreement to any of its “affiliated companies,” which shall mean a company directly or
indirectly controlled by Hartford Fire Insurance Company. A company is
controlled by the direct or indirect ownership of more than fifty (50%) percent of the
stock issued and entitled to vote for directors of the company or persons performing a
function similar to that of directors.
	 
	 	C.	 	The parties hereto agree that claim files may contain confidential and private
medical data related to the adjustment of individuals’ claims.
SRS agrees to handle such medical data as confidential and to comply with applicable
federal and state statutes and regulations when
handling said medical data, the claim files, and the information
contained therein. When said data is transmitted to or reviewed by Customer, Customer
will also handle said data as confidential and according to federal and state law and
regulations, developing and enforcing guidelines and procedures for limited access to
data by Authorized Personnel. Customer agrees to limit its use of medical and other
confidential information to monitor the adjustment of Covered Claims.
	 
	 	 	 	SRS may use data contained in claim files to file reports with governmental or other
regulatory agencies and, without identifying insured or its claimants, to prepare and
disseminate analytical reports.
	 
	 	D.	 	Neither party shall be deemed to have breached this Agreement by reason of any delay
or failure in its performance arising from acts beyond its control.




21









 





	 	E.	 	This Agreement supersedes and cancels all prior agreements between the parties
relating to the subject matter hereof and shall not be amended or revised except by a
written supplement signed by all parties.
	 
	 	F.	 	All the rights and duties of the parties arising from or relating in any way to this
Agreement shall be governed, construed and enforced in accordance with the laws of the
State of Connecticut, without regard to principles or rules of conflict of laws. Any
legal action brought concerning any issues or disputes arising out of
this Agreement must be brought exclusively in an appropriate state or federal court in Connecticut.
	 
	 	G.	 	A waiver of a breach or default under this Agreement shall not be a waiver of any
other previous or subsequent breach or default. The failure or delay by either party to
enforce any term or condition of this Agreement shall not constitute a waiver of such term
or condition unless such term or condition is expressly waived in writing.
	 
	 	H.	 	If any provision of this Agreement shall be held to be invalid, unenforceable or
illegal, the validity, enforceability, and legality of the remaining provisions shall not
in any way be affected or impaired.
	 
	 	I.	 	In any litigation or arbitration between the parties, the prevailing party shall be
entitled to reasonable attorney’s fees and all costs of proceeding incurred in enforcing this Agreement.
	 
	 	J.	 	This Agreement may be executed in two or more counterparts, each of which shall be an
original, but all of which shall constitute one Agreement.
	 
	 	K.	 	The headings of sections of this Agreement are inserted for convenience of reference
only and shall not constitute a part hereof.
	 
	 	L.	 	All words or terms used in this Agreement, regardless of the number or gender in
which they are used, shall be deemed to include any other number and any other gender as
the context may require.
	 
	 	M.	 	This Agreement shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
	 
	 	N.	 	Nothing contained herein is intended to create any relationship between the parties other
than that of independent contractors.




22









 





	 	P.	 	Upon prior written notification to Client, SRS may use the name of, and identify
Client as a SRS customer in advertising, publicity, or similar materials distributed or
displayed to prospective clients.
	 
	 	Q.	 	This Agreement does not govern the provision of access to the ©venture system; such access
is governed by the terms and conditions of the Risk Management Information Services Agreement, which is separate and apart from this
Agreement. The terms and conditions of the Risk Management Information Services Agreement
shall not alter the terms and conditions of this Agreement.
	 
	 	R.	 	Structured Settlements — Structured settlements funded by annuities may be used by SRS, as
appropriate, as part of the claim settlement process. The annuities used to fund these settlements are issued by The Hartford Life
Insurance Company, and through a group of nationally recognized brokers which SRS operates
through. SRS receives a small internal expense allocation offset from Hartford Life as a
result of structured settlements which it generates. Client has the right to direct the use
of a different insurance carrier to write the annuities funding such settlements, and Client
also has the right to direct SRS to use a broker of Client’s choice with respect to these
settlements.




IN WITNESS WHEREOF, the parties hereto have read and agreed to this Agreement and have
directed its execution in duplicate by their respective authorized officers.




	 	 	 	 	 
	 	 	SPECIALTY RISK SERVICES, LLC. (“SRS”)
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Michael Ryan
	 

	 	 	 	 
	 

	 	 	 	(Signature) Its Duly Authorized Officer

Michael Ryan
(Printed/Typed Name)

Title: Vice President






	 	 	 	 	 	 	 
	State of Connecticut

	 	 	 	 	 	 )
	 

	 	 )
	 	ss.	 	 
	County of Hartford

	 	 	 	 	 	 )






     On this 1st day of June, 2007, before me, Loretta W. Richardson the undersigned
officer, personally appeared Michael Ryan who acknowledged him/herself to be the Vice
President of Specialty Risk Services, LLC. (“SRS”), a corporation, and that
he/she, as such officer, being so authorized, executed the foregoing instrument for the purposes therein
contained, by signing the name of the corporation to said instrument, on behalf of the
corporation, by authority of his/her office.



	 	 	 	 	 
	
 


	 	OR
	 	Loretta W. Richardson
	 

	 	 	 	 
	Corporate Secretary

	 	 	 	Notary Public
	(Corporate Seal)
	 	 	 	 
	 

	 	 	 	My commission expires on: 9-29-2009
	(SEAL)
	 	 	 	 






23









 





	 	 	 	 	 
	Corporate Secretary

	 	 	 	Notary Public
	(Corporate Seal)
	 	 	 	 
	 

	 	 	 	My commission expires on:
	(SEAL)
	 	 	 	 






	 	 	 	 	 
	 	 	STRATEGIC OUTSOURCING, INC. (“CUSTOMER”)
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Carl Guidice
	 

	 	 	 	 
	 

	 	 	 	(Signature) Its Duly Authorized Officer

Carl Guidice
(Printed/Typed Name)

Title: CEO






	 	 	 	 	 	 	 
	State of Connecticut

	 	 	 	 	 	 )
	 

	 	 )
	 	ss.	 	 
	County of Hartford

	 	 	 	 	 	 )






     On this 17th day of May     , 2007, before me, __________________, the undersigned officer,
personally appeared Carl Guidice, who acknowledged him/herself to be the  CEO                    of  SOI                   , a corporation, and
that he/she, as such officer, being so authorized, executed the foregoing instrument for the
purposes therein contained, by signing the name of the corporation to said instrument, on behalf of
the corporation, by authority of his/her office.



	 	 	 	 	 
	
 


	 	OR
	 	Roxanne G. Knowles
	 

	 	 	 	 
	Corporate Secretary

	 	 	 	Notary Public
	(Corporate Seal)
	 	 	 	 
	 

	 	 	 	My commission expires on: 8/17/2011
	(SEAL)
	 	 	 	 







24