Producer Agreement

I.

PRODUCER’S AUTHORITY

A.

Subject to any requirements imposed upon the Producer and the Company by any governmental entity, the terms of this Agreement, and the underwriting rules and regulations of the Company, the Producer is authorized to:

1.

Solicit, receive and transmit to the Company applications for contracts of workers’ compensation insurance; and

2.

Collect and receive Producer Billed premiums and, as full compensation, to retain such commission out of premiums so collected as specified in addenda attached hereto and made a part hereof or as declared in contracts of insurance. In connection therewith, the Producer shall:

a.

Hold all premiums and other monies collected in a separate fiduciary account by line on behalf of the Company until delivered to the Company, and the authority granted herein by the Company to the Producer to retain commission shall not be construed as changing the fiduciary relationship and duties of the Producer to the Company, all as more fully detailed herein;

b.

Account for and remit premiums to the Company in accordance with the terms and provisions of the addendum, entitled “Premium Accounting and Payment Terms,” which is attached hereto and made a part hereof;

c.

Return to the Company commissions retained on return premiums (by reason of cancellation or otherwise) at the same rate previously allowed the Producer upon the premiums charged, or, at the Company’s discretion, the Producer shall add any retained commission to the premiums which the Producer returns to any Insured so that the Insured may receive the full gross unearned portion of any premiums which it has paid.

B.

Subject to any requirements imposed upon the Producer and the Company by any governmental entity, the terms of this Agreement and the underwriting rules and regulations of the Company, it is not the responsibility of the Producer to collect Direct Billed premiums. In the event the producer does receive any Direct Billed premiums it is the responsibility of the Producer to immediately forward said payments to the Company without placing funds in Producer’s accounts or deducting any commissions from any monies received on behalf of the Company.

C.

Producer understands and agrees that:

1.

All Direct Billed monies received should be immediately forwarded to the Company and all Producer Billed monies collected for the Company are the property of the Company and shall be held in a separate account, by line by the Producer, acting in a fiduciary capacity.

2.

Producer has no interest in the monies collected except for the commission specified in this Agreement.

3.

Producer shall not withhold, deduct, or set-off from said monies any amounts resulting from any disputed matters.

4.

Producer shall not use any of said monies for any personal or operating purpose.

5.

Pay-by-Pay® Provisions Program provision are provided in Addendum 1 to this Producer Agreement.

6.

Producer acknowledges that in connection with this Agreement the Producer will, or may, gain access to non-public personal information relating to Company policyholders, customers, consumers or claimants. Producer shall comply with all applicable federal and state laws, rules, regulations and statutes pertaining to privacy currently in force or as may be subsequently amended or adopted.

II.

POLICY CANCELLATION OR NON-RENEWAL

A.

Subject to requirements imposed by law or by the provisions of any contract of insurance, the Company reserves the right to cancel any contract of insurance by direct notice to the Insured. The Company further reserves the right to non-renew any contract of insurance.

B.

The Producer shall not cancel any contract of insurance issued by the Company without the specific permission of the Company.

III.

INDEPENDENT CONTRACTOR

A.

The Producer is an independent contractor and not an employee of the Company.

B.

The Producer shall be considered an agent of the Company for the limited duties of delivering the policy to, and collecting premium from, the Insured, the Producer’s client.

C.

The Producer may not bind the Company to any insurance coverage unless the Producer is specifically authorized to do so, in writing, by the Company.

IV.

INDEMNIFICATION

A.

The Company shall indemnify and hold the Producer harmless against all civil liability, including reasonable attorney’s fees and costs of investigation and defense incidental thereto, arising as a direct result of:

1.

Company error or omission in the preparation, processing, handling, or billing of Company direct billed business, or any other business placed by the Producer with the Company, except to the extent that the Producer shall have caused or contributed to such error;

2.

Failure of an Insured to receive notice of cancellation, or any other notice affecting coverage on Company direct billed business, where such notices are sent directly to the Insured by the Company, except to the extent that the Producer shall have caused or contributed to such error;

3.

Failure of the Company to comply with the requirements of the Fair Credit Reporting Act, Federal Truth in Lending Law, Fair Credit Billing Act, federal and state privacy laws, or failure to comply with the requirements of any other law where the Producer is using forms supplied by the Company, or following instructions or procedures established by the Company, except to the extent that the Producer shall have caused or contributed to such failure;

4.

Damages sustained and caused by acts or omissions of the Company in connection with the preparation of any reports for the Producer’s clients or customers, except to the extent that the Producer shall have caused or contributed to such acts or omissions; and

5.

Any other action or inaction of the Producer based upon the Producer’s use of forms supplied by the Company, or following instructions or procedures established by the Company, except to the extent that the Producer shall have caused or contributed to such failure.

B.

As a condition precedent to the Company’s obligation and/or liability set forth in Article IV, Section A of this Agreement, the Producer shall notify the Company immediately upon the receipt of notice of the commencement of any action relating to any such liabilities therein set forth, and the Company shall solely, at its own discretion, be entitled to participate in such action or to assume the defense of any such action. Should the Company assume the defense of any such action, it shall not be liable to the Producer for any legal or other expenses subsequently incurred by the Producer in connection with such action, unless the Company shall otherwise agree to such expenses in writing.

C.

During the term of this Agreement, Producer agrees to maintain Errors and Omissions coverage.

V.

ACCESS TO RECORDS

VI.

AMENDMENTS TO THIS AGREEMENT

VII.

SUSPENSION

VIII.

TERMINATION

A.

This Agreement shall terminate automatically without notice if the Producer’s authority to engage in an insurance business is terminated or suspended by any public authority.

B.

This Agreement, if in effect for less than one year, may be immediately terminated by either party giving five (5) days prior written notice to the other. After this Agreement has been in effect for at least one year or supersedes a previous Agreement between the parties, this Agreement may be terminated by either party at any time by giving at least one hundred twenty (120) days advance written notice to the other party.

C.

This Agreement shall terminate automatically on the effective date of a sale or transfer of the Producer’s business or consolidation with a successor.

D.

This Agreement may be terminated immediately by either party at any time by giving two (2) business days prior written notice to the other party in the event of gross and willful misconduct, or failure to comply with any provision of this Agreement by the other party.

E.

If the Producer is a general partnership, upon the death of a general partner, the Company may, in its discretion, immediately terminate this Agreement by giving written notice to the Producer. If the Producer is a sole proprietorship, this Agreement shall terminate automatically upon the death of the Producer.

F.

Any binding authority under Section III C of this Agreement may be terminated at any time by the Company by giving ten (10) days prior written notice to the Producer.

G.

Failure to remit premiums in accordance with this Agreement and any addenda may result in immediate suspension or termination of this Agreement.

IX.

OWNERSHIP OF EXPIRATIONS

A.

If the Producer is not in default of any financial obligation due to the Company, the use and control of expirations, including those on direct billed business, the records thereof and the Producer’s work product, shall remain in the undisputed possession and ownership of the Producer, and the Company shall not use its records of those expirations in any marketing method for the sale, service or renewal of any form of insurance coverage, or other product which shall abridge the Producer’s rights of ownership, use and control, nor shall the Company refer or communicate this expiration information or work product to any other Producer.

B.

In the event of termination of this Agreement, however, if the Producer has not then properly accounted for and paid all premiums to the Company for which it is liable, the use and control of such expirations including all rights, title and interest in and to the records thereof shall be vested in the Company as of the date of such termination. In the exercise of its right to collect any indebtedness due from the Producer through use and control of such expirations, the Company shall use reasonable business judgment in selling such expirations and shall be accountable to the Producer for any sums received which, net of expenses, exceed the amount of indebtedness. The Producer shall remain liable for the excess of the indebtedness over the sums received by the Company. Any indebtedness due from the Producer shall not prevent application of the ownership of expirations clause in favor of the Producer if the Producer furnishes collateral or security acceptable to the Company in the amount of such indebtedness to be held by the Company until the indebtedness is satisfied.

C.

In the event of termination or suspension, the rights, duties and obligations as set forth in the Agreement shall continue as respects policies in force until those policies are canceled or renewed elsewhere.

X.

GENERAL

A.

Unless specifically authorized by the Company, the Producer shall not commit the Company as to liability in connection with any claim or loss which may occur under any contract of insurance. The Producer shall promptly report all claims and losses and turn over all legal process involving coverages placed with the Company to the nearest claims office of the Company.

B.

All forms and other supplies furnished by the Company shall remain its property and to the extent not used by the Producer in its business shall be returned upon demand.

C.

The Company shall not be responsible for any Producer’s expenses whatsoever, unless specifically authorized by the Company in writing.

D.

Failure of the Company for any reason to insist upon compliance by the Producer with the provisions of this Agreement, or the rules and regulations of the Company, shall not be construed as or constitute a waiver thereof.

E.

This Agreement supersedes all previous Producer, Broker, or Agency Agreements, whether written or oral, between the Producer or its predecessors in interest and the Company.

F.

This Agreement shall not enure to the benefit of any successor in interest of Producer nor may any interest in this Agreement be assigned by Producer without the prior written consent of Company, which consent shall not be unreasonably withheld.

G.

Producer shall not broadcast, publish or distribute any advertisements or other matters referring to Company, or to Company’s contracts of insurance, not originated by Company, without first securing Company’s approval in writing.

H.

In the event the Producer pays premiums on behalf of the Insured, the Producer is deemed to have extended its credit and not that of the Company and accepts full responsibility for the collection and payments of such premiums.

I.

The rates of commission on all workers’ compensation and employers’ liability insurance policies shall be as determined on an individual risk basis as negotiated between Company and Producer. This agreement is subject to any requirements imposed upon the Producer and the Company by any governmental entity.

By: 

/s/ [Illegible]

Title:

President

Date:

May 9, 2005

By: 

/s/ Douglas D. Dirks

Douglas D. Dirks

Title:

President & Chief Executive Officer

Date:

4/29/05

I.

PRODUCER BILLED POLICIES:

A.

Itemized billing statements shall be prepared monthly by the Company.

B.

The balances showing on the statement due the Company or due the Producer shall be payable no later than forty-five (45) days from the end of the month in which the billing was made, subject to the following exception:

C.

The Producer shall be responsible to the Company for collection and payment of initial deposit premiums (both new and renewal business) whether or not such deposit premiums are collected by the Producer from the Insured.

D.

All premiums are due and payable to the Company as specified in this Addendum, and the Company shall have the right, after notification by Producer that it is unable to collect any premiums, to undertake direct collection of delinquent premiums, and, regardless of the method of payment used by the Insured, no commission shall accrue to and the Producer shall not be entitled to any commission with respect to such delinquent premium.

E.

Excepting initial deposit premiums, if the Producer is unable to collect any premiums due and fails to request direct collection by the Company of such premiums within the following stipulated periods, the Producer shall be liable for and shall remit to the Company the net premiums when such premiums become due. The Producer may, however, be relieved of the responsibility for the payment of such premiums, provided:

1.

For premiums resulting from physical or final audits or retrospective rating adjustments, the Producer has notified the Company in writing within forty-five (45) days from the end of the month in which the billing was made.

2.

For premiums due on interim payroll reports, the Producer has notified the Company in writing no later than forty-five (45) days from the end of the month in which the billing was made.

3.

For deposit premium adjustments, the Producer has notified the Company in writing within forty-five (45) days from the end of the month in which the billing was made.

4.

For installment or automatic billings, the Producer has notified the Company in writing within forty-five (45) days from the end of the effective month.

5.

On any premium returned by the Producer to the Company for direct collection, the Producer shall not be entitled to any commission, regardless of the method of payment used by the Insured.

F.

In the event that the Producer initiates a cancellation of the Insured’s contract of insurance as of the effective date of such contract of insurance (flat cancellation), the Producer shall return the contract of insurance or lost policy release to the Company within thirty (30) days of the effective date of such contract of insurance. Should the Producer fail to return such contract of insurance or lost policy receipt to the Company within the required time, the Producer shall be liable for the premium for such contract of insurance up to the date the policy or lost policy receipt is returned to the Company. Short-term policies issued for a period of sixty (60) days or less must be returned to the Company prior to the effective date to obtain flat cancellation; otherwise, the Producer assumes full responsibility for payment of premiums earned. The above time limits, however, may be waived, provided proof of alternate coverage is furnished, and no claims have been reported to the Company.

G.

Premium remitted directly to the Company by the Insured will be posted to the Company’s monthly statement following receipt of the premium. Commission due the Producer shall be payable to the Producer no later than thirty (30) days following the end of the account month for which such statement was prepared.

H.

The omission of any item from a monthly statement shall not affect the responsibility of the Producer to account for and pay all amounts due to the Company, nor shall it prejudice the rights of the Company to collect all such amounts due from the Producer.

I.

In the event the Producer pays premiums on behalf of Insureds, the Producer is deemed to have extended its credit and not that of the Company and accepts full responsibility for the collection and payment of such premiums from the Insureds, subject to the provisions of Section E above.

J.

Disputed premium shall be identified and the reasons noted in writing by the Producer so that the parties can expedite resolution. Further, the Producer shall make payment of the undisputed portion of the disputed premium within forty-five (45) days from the end of the billed month. Upon resolution of the disputed premium, the Producer shall make payment of said resolved premium to the Company immediately.

K.

The Producer shall not take a premium credit and omit payment on a premium debit for the same Insured, regardless of invoice date.

II.

DIRECT BILLED POLICIES:

A.

When existing business of the Producer is changed to Direct Billed, the Company shall assume responsibility for billing and collecting the premium which is earned from the entry date of the change to Direct Bill.

B.

The Company shall be responsible for all premium billing and collection, unless otherwise mutually agreed to in writing by the Producer and the Company.

C.

Commissions on premium shall be paid to the Producer no later than thirty (30) days following the month in which such premiums are received and recorded by the Company, subject to offset by the Company of any return commissions due from the Producer. The Company may take into Direct Collection any delinquent premiums and the Producer hereby waives any claim to commission on such delinquent premiums subsequently recovered by the Company.

D.

The Company shall clearly and prominently identify the Producer by name when transmitting contracts of insurance, endorsements, premium notices, cancellation notices and reinstatement notices. The Company shall promptly provide the Producer with a copy of all such items sent to Insureds.

E.

Premium payments for installments are due from the Insured ten (10) days prior to the expiration of the installment period. Premium payments for interim payroll reports are due from the Insured twenty (20) days from invoice date or forty-five (45) days from the expiration of the reporting period, whichever is earliest. Final audit premiums and deposit premium adjustments are due from the Insured twenty (20) days from invoice date.

Employers Compensation Insurance
Company

Automatic Data Processing
Insurance Agency, Inc.

By: 

/s/ Douglas D. Dirks

By: 

Douglas D. Dirks

Title:

President & Chief Executive Officer

Title:

President

Date:

4/29/05

Date:

May 9, 2005

Employers Compensation Insurance
Company

Automatic Data Processing
Insurance Agency, Inc.

By: 

/s/ Douglas D. Dirks

By: 

/s/ [Illegible]

Douglas D. Dirks

Title:

President & Chief Executive Officer

Title:

President

Date:

4/29/05

Date:

May 9, 2005

1.

To the extent now or hereafter permitted by the laws of the State of California and the regulations and rulings of the Insurance Commissioner of said State, the Company consents to the deposit of funds held by the Producer for the Company in trustee bank accounts and interest bearing accounts, or in the purchase of certain permissible United States bonds, certificates or other obligations enumerated under Sections 1733, 1734 and 1734.5 of the California Insurance Code with the institution(s) named below (see attached list), subject to the following conditions.

(a)

Each such account shall be in the name of the Producer and the name of the Producer shall be followed immediately by these words:

(b)

Such deposits or purchases shall not relieve the Producer of the obligation to remit to the Company all sums becoming due to the Company as soon as they become due and the Producer assumes all risk of loss on such deposits or purchases.

2.

Subject to the foregoing conditions, the Company assigns to the Producer as additional commissions, any right which the Company might have to interest and dividends earned on such account; and, the Producer agrees to pay all State and Federal income taxes on such interest and dividends and to indemnify and hold the Company harmless against any claim or such taxes as may be asserted against the Company.

3.

This Agreement will automatically terminate once the Producer/Company Agreement terminates. Termination of this Agreement does not relieve the Producer of any pre-termination obligations arising under Sections 1(b) and 2.

Employers Compensation Insurance Company

Automatic Data Processing Insurance Agency, Inc.

By: 

/s/ Douglas D. Dirks

By: 

/s/ [Illegible]

Douglas D. Dirks

Title:

President & Chief Executive Officer

Title:

President

Date:

4/29/05

Date:

May 9, 2005

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