ANNUAL PREMIUM

The Primary Insurers determine the annual premium for insurance coverage, and rates may vary based on several factors. In determining the amount of a Member’s annual premium, applicable premium tax is either included in or added to the annual premium. The Primary Insurers collect and remit the appropriate premium tax and/or fees as may actually be incurred. Future premiums will be in such amounts, and payable on such terms, as the Primary Insurer(s) may determine based upon the industry group, loss experience, the financial condition of the applicant and other relevant factors. The Primary Insurer(s) will not require retrospective increases in premium or authorize any other form of assessobility.

STRATEGIC ALLIANCE

The Sponsored Captive has formed a strategic alliance with one of the Primary Insurers, PMA. PMA views the Sponsored Captive as a good model for the alternative risk needs of some of its customers, and this alliance allows the offering of higher retention options, particularly for larger insureds. In order to strengthen the Sponsored Captive’s regulatory capital, Pennsylvania Manufacturers’ Association Insurance Company (further assigned to PMA Management Corp), has provided $100,000 to the Sponsored Captive, in the form of a “Surplus Note,” at a favorable interest rate. This Surplus Note is similar to a typical debt instrument, but qualifies as an asset of the Sponsored Captive. The Surplus Note is subordinate to the claims of policyholders, claimants and beneficiaries, and to all other classes of creditor other than surplus note holders. Repayment of principal and interest under the Surplus Note is subject to approval by the Vermont Insurance Commissioner. There can be no assurance that PMA will continue its relationship with the Sponsored Captive, and failure to secure a relationship could have an adverse impact on the Sponsored Captive’s ability to meet regulatory minimum capital requirements.

OWNERSHIP

The Company, as a mutual benefit company, is owned exclusively by its Members. Under the terms of the Company’s Amended and Restated Articles of Incorporation and Bylaws, and pursuant to the Membership Agreement, every Member of the Company is required to contribute surplus. Regardless of the amount of contribution, each Member has one vote at all meetings of Members. Each Member is assigned to a particular class corresponding to the Charter Partners industry membership group to which the particular Member belongs, as changed from time to time.