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                                                                   EXHIBIT 10.18


                             EMPLOYMENT AGREEMENT
                             --------------------

THIS AGREEMENT between TERRA NOVA (BERMUDA) HOLDINGS LTD., a Bermuda corporation
(the "Company"), and JEAN M. WAGGETT ("Executive"), dated as of July 31, 1998.

                             W I T N E S S E T H:
                             --------------------

     WHEREAS, the Company has employed Executive in several key executive
officer positions, including currently as Senior Vice President, General Counsel
and Corporate Secretary.

     WHEREAS, the Company further believes that, in the event it is confronted
with a situation that could result in a change in ownership or control of the
Company, continuity of management will be essential to its ability to evaluate
and respond to such situation in the best interest of shareholders;

     WHEREAS, the Company deems it desirable and in its best interests to make
provision for the availability to the Company of Executive's services on the
terms set forth herein;

     NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is hereby agreed by and between the company and Executive
as follows:

1.   AGREEMENT TO EMPLOY.  Except as otherwise expressly provided herein, the
     -------------------                                                     
Company agrees to employ Executive for an initial period commencing on the date
hereof (the "Commencement Date") and ending on the later of the second
anniversary thereof, and December 31, 2001 ("Anniversary Date").  Upon that
Anniversary Date and each anniversary thereof, the term of this Agreement will
be extended for one (1) additional year without any action by the Company or
Executive, unless either the Company or Executive delivers written notice (the
"Notice") to the other party, at least 90 days prior to such Anniversary Date
stating that it or he does not want the term of this Agreement further extended;
provided that, except as provided in the next following sentence, if a Change of
---------------                                                                 
Control (as defined below) occurs during the term of this Agreement, this
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Agreement shall in all events continue in effect until the second anniversary of
the date upon which such Change of Control occurs (the "Change of Control
Date").  The period during which Executive is employed pursuant to this
Agreement, including any extension thereof in accordance with the preceding
sentence, shall be referred to as the "Employment Period."

2.   DUTIES AND RESPONSIBILITIES.  Executive shall be employed as the Company's
     ---------------------------                                               
Senior Vice President, General Counsel and Corporate Secretary, and shall serve
in such other executive capacity or capacities with the Company or its
subsidiaries as its Board of Directors (the "Board") may determine from time to
time and at any time prior to a Change of Control Date.  During the Employment
Period, Executive shall have the duties, responsibilities and obligations
customarily assigned to individuals serving in the position or positions in
which Executive serves hereunder and such other duties, responsibilities and
obligations as the Board shall from time to time specify.

     During the Employment Period, Executive shall devote his full time to the
services required of him hereunder, except for vacation time and reasonable
periods of absence due to sickness, personal injury or other disability, and
shall use his best efforts, judgement, skill and energy to perform such services
in a manner consonant with the duties of his position and to improve and advance
the business and interests of the Company and its subsidiaries. Nothing
contained herein shall preclude Executive from (i) serving on the board of
directors of any business corporation with the consent of the Board, (ii)
serving on the board of, or working for, any charitable or community
organization or (iii) pursuing his personal financial and legal affairs, so long
as such activities, individually or collectively, do not interfere with the
performance of Executive's duties hereunder. Executive shall at all times
perform his services for the Company at its headquarters in Hamilton, Bermuda,
except for reasonable periods of travel as are required in the performance of
his duties hereunder and consistent with past practices.

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3.   ANNUAL COMPENSATION
     -------------------

     (a)  BASE SALARY.  During the Employment Period, the Company shall pay
          ------------                                                     
Executive a base salary at the annual rate in effect on the date hereof.  The
annual base salary payable under this paragraph shall be reduced, however, to
the extent Executive elects to defer such salary under the terms of any deferred
compensation or savings plan or arrangement maintained or established by the
Company.  The Board shall annually review Executive's base salary in light of
the base salaries paid to other executive officers of the Company and the
performance of Executive and the Company may, in its discretion, increase such
base salary by an amount it determines to be appropriate.  Once increased, such
base salary shall not thereafter be decreased.  Any such increase shall not
reduce or limit any other obligation of the Company hereunder.  Executive's
annual base salary payable hereunder, as it may be increased from time to time
and without reduction for any amounts deferred as described above is referred to
herein as "Base Salary".  The Company shall pay Executive the portion of his
Base Salary not deferred in accordance with the Company's generally applicable
practices in respect of senior officers.

     (b)  INCENTIVE COMPENSATION.  During the term of the Employment Period,
          -----------------------                                           
Executive shall participate in the Company's existing and future annual and long
term incentive compensation programs at a level commensurate with his position
at the Company and consistent with the Company's then current policies and
practices.

4.   BENEFITS, PERQUISITES AND EXPENSES
     ----------------------------------

     (a)  BENEFITS. During the Employment Period, Executive shall be eligible to
          --------      
participate in (i) each welfare benefit plan sponsored or maintained by the
Company, including, without limitation, each group life, hospitalization,
medical, dental, health, accident or disability insurance or similar plan or
program of the Company, and (ii) each pension, profit sharing, retirement,
deferred compensation or savings plan sponsored or maintained by the Company, in
each case, whether now existing or established hereafter, to the extent that
Executive is eligible to participate in any such  plan under the generally
applicable provisions thereof.  Without limiting the generality of the
foregoing, the Company reserves the right to amend or terminate any such pan in
its discretion.

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     (b)  PERQUISITES. During the Employment Period, Executive shall be entitled
          -----------     
to up to five weeks' paid vacation annually and all of the other current
perquisites set forth on Schedule A and shall also be entitled to receive such
perquisites as are generally provided to other senior officers of the Company in
accordance with the then current policies and practices of the Company.

     (c)  BUSINESS EXPENSES. During the Employment Period, the Company shall pay
          -----------------   
or reimburse Executive for all reasonable expenses incurred or paid by Executive
in the performance of Executive's duties hereunder, upon presentation of expense
statements or vouchers and such other information as the Company may require and
in accordance with the generally applicable policies and procedures of the
Company.
     (d)  INDEMNIFICATION.  The Company shall indemnify Executive and hold
          ---------------                                                 
Executive harmless from and against any claim, loss or cause of action arising
from or out of Executive's performance as an officer, director or employee of
the Company or any of its subsidiaries or in any other capacity, including any
fiduciary capacity, in which Executive serves at the request of the Company to
the maximum extent permitted by applicable law.  If any claim is asserted
hereunder with respect to which Executive reasonably believes in good faith he
is entitled to indemnification, the Company shall pay Executive's legal expenses
(or cause such expenses to be paid) on a quarterly basis, provided that
Executive shall reimburse the Company for such amounts, plus simple interest
thereon at the 90-day United States Treasury Bill rate as in effect from time to
time, compounded annually, if Executive shall be found by a court of competent
jurisdiction not to have been entitled to indemnification.

5.   DEFINITIONS
     -----------

     (a)  CHANGE OF CONTROL.  For the purposes of this Agreement, a "Change of
          -----------------                                                   
Control" shall mean (i) a merger or consolidation to which the Company is a
party and for which the approval of any shareholders of the Company is required;
(ii) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended) becoming the beneficial owner,
directly or indirectly, of securities of the Company representing 25% or more of
the combined voting power of the Company's 

                                       4
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then outstanding securities or (iii) a sale or transfer of substantially all of
the assets of the Company.

     (b)  POTENTIAL CHANGE OF CONTROL.  For the purposes of this Agreement, a 
          ---------------------------                                      
Potential Change of Control shall be deemed to have occurred if

          (i)   any "person" (as such term is used in Sections 13(d) and
                14(d)(2) of the Securities Exchange Act of 1934, as amended)
                commences a tender offer for securities, which if consummated,
                would result in such person owing 20% or more of the combined
                voting power of the company's then outstanding securities;

          (ii)  the Company enters into an agreement the consummation of which
                would constitute a Change of Control:

          (iii) proxies for the election of directors of the Company are
                solicited by anyone other than the Company; or

          (iv)  any other event occurs which is deemed to be a Potential Change
                of Control by the Board.

6.   TERMINATION
     -----------

     (a)  DEATH, DISABILITY OR RETIREMENT.  This Agreement shall terminate
          -------------------------------                                 
automatically upon Executive's death, termination due to "Disability" (as
defined below) or voluntary retirement under any of the Company's retirement
plans as in effect from time to time.  For purposes of this Agreement,
Disability shall mean Executive's inability to perform the duties of his
position, as determined in accordance with the policies and procedures
applicable with respect to the Company's long-term disability plan, as in effect
from time to time, except that, following a Change of Control disability shall
be determined based on the policies and procedures in effect immediately prior
to the Change of Control Date.

     (b)  VOLUNTARY TERMINATION.  Notwithstanding anything in this Agreement to
          ---------------------                                                
the contrary, following a Change of Control Executive may, upon not less than 60
days' written notice to the Company, voluntarily terminate his employment for
any reason (including early retirement under the terms of any of the Company's
retirement plans as 

                                       5
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in effect from time to time), PROVIDED THAT any termination by Executive
                              -------------                
pursuant to Section 6(d) on account of Good Reason (as defined therein) shall
not be treated as a voluntary termination under this Section 6(b).

     (c)  CAUSE.  The Company may terminate Executive's employment for Cause.
          -----                                                               
For purposes of this Agreement, "Cause" means

          (i)   Executive's conviction or plea of nolo contendere to a felony;
                                                  ---------------             
          (ii)  an act or acts of dishonesty or gross misconduct on Executive's
                part which result or are intended to result in material damage
                to the Company's business or reputation; or

          (iii) repeated material violations by Executive of his obligations
                under Section 2 of this Agreement, PROVIDED THAT, following a
                                                   -------------             
                Change of Control Date, Cause shall not exist due to such
                violations of Executive's obligations unless such violations are
                demonstrably wilful and deliberate on Executive's part and
                result in material damage to the Company's business or
                reputation.

     (d)  GOOD REASON.  Executive may terminate his employment for Good Reason.
          -----------                                                           
For purposes of this Agreement, "Good Reason" means the occurrence of any of the
following, without the express written consent of Executive, except that
subclauses (iv) and (v) below shall only apply after the occurrence of a Change
of Control:

          (i)   a)  the assignment to Executive of any duties inconsistent
                    in any material adverse respect with Executive's position,
                    authority or responsibilities as contemplated by Section 2
                    of this Agreement, or

                b)  any other material adverse change in such position,
                    including titles, authority or responsibilities.

          (ii) any failure by the Company to comply with any of the provisions
               of Section 3 of this Agreement, other than an insubstantial or
               inadvertent failure remedied by the Company promptly after
               receipt of notice thereof given by Executive;

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          (iii)  the Company's requiring Executive to be based at any office or
                 location more than 35 miles from that location specified under
                 the provisions of Section 2;

          (iv)   the failure by the Company to permit Executive to participate
                 in all long-term incentive compensation programs for key
                 executives at a level that is commensurate with Executive's
                 participation in such plans immediately prior to the Change of
                 Control Date (or, if more favorable to Executive, at the level
                 made available to Executive or other similarly situated
                 officers at any time thereafter); or

          (v)    the failure by the Company to permit Executive (and, to the
                 extent applicable, his dependents) to participate in or be
                 covered under all pension, retirement, deferred compensation,
                 savings, medical, dental, health, disability, group life,
                 accidental death and travel accident insurance plans and
                 programs of the Company and its affiliated companies at a level
                 that is commensurate with Executive's participation in such
                 plans immediately prior to the Change of Control Date (or, if
                 more favorable to Executive, at the level made available to
                 Executive or other similarly situated officers at any time
                 thereafter); or

          (vi)   any failure by the Company to obtain the assumption and
                 agreement to perform this Agreement by a successor as
                 contemplated by Section 11(b).

In no event shall the mere occurrence of a Change of Control, absent any further
impact on Executive, be deemed to constitute Good Reason.

     (e)  NOTICE OF TERMINATION.  Any termination by the Company for Cause or by
          ---------------------                                                 
Executive for Good Reason shall be communicated by Notice of Termination to the
other party hereto given in accordance with Section 12(d).  For purposes of this
Agreement, a "Notice of Termination" means a written notice given, in the case
of a termination for Cause, within 10 business days of the Company's having
actual knowledge of the events giving rise to such termination, and in the case
of a termination 

                                       7
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for Good Reason, within 180 days of Executive's having actual knowledge of the
events giving rise to such termination, and which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so indicated, and
(iii) if the termination date is other than the date of receipt of such notice,
specifies the termination date of this Agreement (which date shall be not more
than 15 days after the giving of such notice). The failure by Executive to set
forth in the Notice of Termination any fact or circumstance which contributes to
a showing of Good Reason shall not waive any right of Executive hereunder or
preclude Executive from asserting such fact or circumstance in enforcing his
rights hereunder.

     (f)  DATE OF TERMINATION.  For the purpose of this Agreement, the term 
          -------------------     
     "Date of Termination" means

          (i)  in the case of a termination for which a Notice of Termination is
               required, the date of receipt of such Notice of Termination or,
               if later, the date specified therein, as the case may be, and

          (ii) in all other cases, the actual date on which Executive's
               employment terminates during the Employment Period.

7.   OBLIGATION OF THE COMPANY UPON TERMINATION
     ------------------------------------------

     (a)  DEATH OR DISABILITY.  If Executive's employment is terminated during
          -------------------                                                 
the term hereof by reason of Executive's death or Disability, this Agreement
shall terminate without further obligations accrued hereunder to the Date of
Termination, and the Company shall pay to Executive (or his beneficiary or
estate) (i) Executive's full Base Salary through the Date of Termination (the
"Earned Salary"), (ii) any vested amounts or benefits owing to Executive under
the Company's otherwise applicable employee benefit plans and programs,
including any compensation previously deferred by Executive (together with any
accrued earnings thereon) and not yet paid by the Company and any accrued
vacation pay not yet paid by the company (the "Accrued Obligations"), and (iii)
any other benefits payable due to Executive's death or Disability under the
Company's plans, policies or programs (the "Additional Benefits").

                                       8
<PAGE>
 
          Any Earned Salary shall be paid in cash in a single lump sum, as soon
as practicable but in no event more than 10 business days (or at such earlier
date required by law) following the Date of Termination, or as otherwise
directed by Executive or his estate.  Accrued Obligations and Additional
Benefits shall be paid in accordance with the terms of the applicable plan,
program or arrangement.

     (b)  CAUSE AND VOLUNTARY TERMINATION.  If, during the Employment Period,
          -------------------------------                                    
Executive's employment shall be terminated for cause or voluntarily terminated
by Executive in accordance with Section 6(b) other than during the 90 day period
described in Section 7(c)(i) below, the Company shall pay Executive (i) the
Earned Salary in cash in a single lump sum, or otherwise directed by Executive,
as soon as practicable, but in no event more than 10 days following the Date of
Termination, and (ii) the Accrued Obligations in accordance with the terms of
the applicable plan, program or arrangement.

     (c)  TERMINATION BY THE COMPANY WITHOUT CAUSE.
          ---------------------------------------- 
     
          (i)  LUMP SUM PAYMENTS.  If (x) the Company terminates Executive's
               -----------------                                            
               employment other than for Cause, (y) Executive terminates his
               employment at any time for Good Reason or (z) Executive
               voluntarily terminates his employment without Good Reason during
               the one year period beginning on the Change of Control Date, then
               the Company shall pay to Executive the following amounts:

               a)   Executive's Earned Salary;

               b)   a cash amount, without offset for other amounts payable in
                    conjunction with a Change of Control, (the "Severance
                    Amount") equal to three times the sum of

                    1)  Executive's annual Base Salary; and

                    2)  the greater of (x) the highest bonus amount paid to or
                        deferred by Executive in respect of any of the last
                        three fiscal years of the Company ending immediately
                        prior to the Change of Control Date or (y) the amount
                        that would have been payable to 

                                       9
<PAGE>
 
                        Executive as a target bonus for the year in which the
                        Change of Control occurs; and

               c)   the Accrued Obligations.

               The Earned Salary and Severance Amount shall be paid in cash, or
               as otherwise reasonably directed by the Executive, based on a
               calculation of 24 equal installments, the first such installment
               to be paid as soon as practicable but in no event more than 10
               business days following the Date of Termination (or at such
               earlier date as may be required by law), each of the subsequent
               10 installments to be paid on the same date of each calendar
               month following the first payment and the final 13 installments
               to be paid as a lump sum on the same date of the calendar month
               following the 11th payment; provided that any unpaid installments
                                           --------------   
               shall be immediately paid as a lump sum in the event of the death
               or disability of the Executive or a second Change of Control of
               the Company or its successor which occurs following an initial
               Change of Control. Accrued Obligations shall be paid in
               accordance with the terms of the applicable plan, program or
               arrangement.

          (ii) CONTINUATION OF BENEFITS.  If Executive is entitled to receive
               ------------------------                                      
               the Severance Amount, Executive (and, to the extent applicable,
               his dependents) shall be entitled, after the Date of Termination
               until the earlier of (1) the third anniversary of the Date of
               Termination (the "End Date") or (2) the date Executive becomes
               eligible for comparable benefits under a similar plan, policy or
               program of a subsequent employer, to continue participation in
               all of the Company's Executive and executive welfare and fringe
               benefit plans (the "Benefit Plans") and to receive such
               perquisites as were generally provided to Executive in accordance
               with the Company's policies and practices immediately prior to
               the Change of Control Date.  To the extent any such benefits or
               perquisites cannot be 

                                       10
<PAGE>
 
               proved under the terms of the applicable plan, policy or program,
               the Company shall provide a comparable benefit under another plan
               or from the Company's general assets. Executive's participation
               in the Benefit plans and eligibility for perquisites will be on
               the same terms and conditions that would have applied had
               Executive continued to be employed by the Company through the End
               Date.

     (d)  DISCHARGE OF THE COMPANY'S OBLIGATIONS.  Except as expressly provided
          --------------------------------------                               
in the last sentence of this Section 7(d), the amounts payable to Executive
pursuant to this Section 7 following termination of his employment shall be in
full and complete satisfaction of Executive's rights under this Agreement and
any other claims he may have in respect of his employment by the Company or any
of its subsidiaries.  Such amounts shall constitute liquidated damages with
respect to any and all such rights and claims and, upon Executive's receipt of
such amounts, the Company shall be released and discharged from any and all
liability to Executive in connection with this Agreement or otherwise in
connection with Executive's employment with the Company and its subsidiaries.
Nothing in this Section 7(d) shall be construed to release the Company from its
commitment to indemnify Executive and hold Executive harmless from and against
any claim, loss or cause of action arising from or out of Executive's
performance as an officer, director or Executive of the Company or any of its
subsidiaries or in any other capacity, including any fiduciary capacity, in
which Executive served at the request of the Company to the maximum extent
permitted by applicable law.

     (e)  CERTAIN FURTHER PAYMENTS BY THE COMPANY.
          --------------------------------------- 

          (i)  In the event that any amount or benefit paid or distributed to
               Executive pursuant to this Agreement, taken together with any
               amounts or benefits otherwise paid or distributed to Executive by
               the Company or any affiliated company (collectively, the "Covered
               Payments"), are or become subject to the tax (the "Excise Tax")
               imposed under Section 4999 of the Internal Revenue Code of 1986,
               as amended (the "Code)), or any similar tax that the Company
               shall 

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<PAGE>
 
               pay to Executive at the time specified in Section 7(e)(v) below
               an additional amount (the "Tax Reimbursement Payment") such that
               the net amount retained by Executive with respect to such Covered
               Payments, after deduction of any Excise Tax on the Covered
               Payments and any Federal, state and local income or employment
               tax and Excise Tax on the Tax Reimbursement Payment provided for
               by this Section 7(e), but before deduction for any Federal, state
               or local income or employment tax withholding on such Covered
               Payments, shall be equal to the amount of the Covered Payments.
               
          (ii) For purposes of determining whether any of the Covered Payments
               will be subject to the Excise Tax and the amount of such Excise
               Tax:

               a)   such Covered Payments will be treated as "parachute
                    payments" within the meaning of Section 280G of the Code,
                    and all "parachute payments" in excess of the "base amount"
                    (as defined under Section 280G(b)(3) of the Code) shall be
                    treated as subject to the Excise Tax, unless, and except to
                    the extent that, in the good faith judgment of the Company's
                    independent certified public accountants appointed prior to
                    the Change of Control Date or tax counsel selected by such
                    accountants (the "Accountants"), the Company has a
                    reasonable basis to conclude that such Covered Payments (in
                    whole or in part) either do not constitute "parachute
                    payments" or represent reasonable compensation for personal
                    services actually rendered (within the meaning of Section
                    280G(b)(4)(B) of the code) in excess of the "base amount,"
                    or such "parachute payments" are otherwise not subject to
                    such Excise Tax, and

                                       12
<PAGE>
 
                 b)  the value of any non-cash benefits or any deferred payment
                     accordance with the principles of Section 280G of the Code.

          (iii)  For purposes of determining the amount of the Tax Reimbursement
                 Payment, Executive shall be deemed to pay:

                 a)  Federal income taxed at the highest applicable marginal
                     rate of Federal income taxation for the calendar year in
                     which the Tax Reimbursement Payment is to be made, and

                 b)  any applicable state and local income taxes at the highest
                     applicable marginal rate of taxation for the calendar year
                     in which the Tax Reimbursement Payment is to be made, net
                     of the maximum reduction in Federal income taxes which
                     could be obtained from the deduction of such state or local
                     taxes if paid in such year.

          (iv)   In the event that the Excise Tax is subsequently determined by
                 the Accountants or pursuant to any proceeding or negotiations
                 with the Internal Revenue Service to be less than the amount
                 taken into account hereunder in calculating the Tax
                 Reimbursement Payment made, Executive shall repay to the
                 Company, at the time that the amount of such reduction in the
                 Excise Tax is finally determined, the portion of such prior Tax
                 Reimbursement Payment that would not have been paid if such
                 Excise Tax had been applied in initially calculating such Tax
                 Reimbursement Payment, plus interest on the amount of such
                 repayment at the rate provided in Section 1274(b)(2)(B) of the
                 Code. Notwithstanding the foregoing, in the event any portion
                 of the Tax Reimbursement Payment to be refunded to the Company
                 has been paid to any Federal, state or local tax authority,
                 repayment thereof shall not be required until actual refund or
                 credit of such portion has been made to Executive, and interest
                 payable to the Company shall not exceed interest

                                       13
<PAGE>
 
               received or credited to Executive by such tax authority for the
               period it held such portion. Executive and the Company shall
               mutually agree upon the course of action to be pursued (and the
               method of allocating the expenses thereof) if Executive's good
               faith claim for refund or credit is denied.

               In the event that the Excise Tax is later determined by the
               Accountants or pursuant to any proceeding or negotiations with
               the Internal Revenue Service to exceed the amount taken into
               account hereunder at the time the Tax Reimbursement Payment is
               made (including, but not limited to, by reason of any payment the
               existence or amount of which cannot be determined at the time of
               the Tax Reimbursement Payment), the Company shall make an
               additional Tax Reimbursement Payment in respect of such excess
               (plus any interest or penalty payable with respect to such
               excess) at the time that the amount of such excess is finally
               determined.

          (v)  The Tax Reimbursement Payment (or portion thereof) provided for
               in Section 7(e)(i) above shall be paid to Executive not later
               than 10 business days following the payment of the Covered
               Payments' provided, however, that if the amount of such Tax
               Reimbursement Payment (or portion thereof) cannot be finally
               determined on or before the date on which payment is due, the
               Company shall pay to Executive by such date an amount estimated
               in good faith by the Accountants to be the minimum amount of such
               Tax Reimbursement Payment and shall pay the remainder of such Tax
               Reimbursement Payment (together with interest at the rate
               provided in Section 1274(b)(2)(B) of the Code) as soon as the
               amount thereof can be determined, but in no event later than 45
               calendar days after payment of the related Covered Payment.  In
               the event that the amount of the estimated Tax Reimbursement
               payment exceeds the amount subsequently determined to have

                                       14
<PAGE>
 
               been due, such excess shall constitute a loan by the Company to
               Executive, payable on the fifth business day after written demand
               by the Company for payment (together with interest at the rate
               provided in Section 1274(b)(2)(B) of the Code).

8.   NON-EXCLUSIVE OF RIGHTS.  Except as expressly provided herein, nothing in
     -----------------------                                                  
this Agreement shall prevent or limit Executive's continuing or future
participation in any benefit, bonus, incentive or other plan or program provided
by the Company or any of its affiliated companies and for which Executive may
qualify, nor shall anything herein limit or otherwise prejudice such rights as
Executive may have under any other agreement with the Company or any of its
affiliated companies, including employment agreements or stock option
agreements.  Amounts which are vested benefits or which Executive is otherwise
entitled to receive under any plan or program of the Company or any of its
affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan or program.

9.   FULL SETTLEMENT. Following a Change of Control, the Company's obligation to
     ---------------  
make the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances, including
without limitation, any set-off, counterclaim, recoupment, defense or other
right which the Company may have against Executive or others whether by reason
of the subsequent employment of Executive or otherwise.

10.  NON-COMPETITION AND CONFIDENTIALITY
     -----------------------------------

     (a)  NON-COMPETITION.  During the Employment Period and during the one year
          ---------------                                                       
period (the "Restriction Period") following any termination of Executive's
employment other than a Termination by the Company without Cause, Executive
shall not become associated with any entity, whether as a principal, partner,
employee, consultant or shareholder (other than as a holder of not in excess of
1% of the outstanding voting shares of any publicly traded company), that is
actively engaged in any geographic 

                                       15
<PAGE>
 
area in any business which is in competition with the business of the Company
without the prior written consent of the Company.

     (b)  CONFIDENTIALITY.  Without the prior written consent of the Company,
          ---------------                                                    
except to the extent required by an order of a court having competent
jurisdiction or under subpoena from an appropriate government agency, Executive
shall not disclose any trade secrets, customer lists, drawings, designs,
information regarding product development, marketing plans, sales plans,
manufacturing plans, management organization information (including data and
other information relating to members of the Board of Directors and management),
operating policies or manuals, business plans, financial records, packaging
design or other financial, commercial, business or technical information
relating to the Company or any of its subsidiaries or information designated as
confidential or proprietary that the Company or any of its subsidiaries may
receive belonging to suppliers, customers or others who do business with the
Company or any of its subsidiaries (collectively, "Confidential Information") to
any third person unless such Confidential Information has been previously
disclosed to the public by the Company or is in the public domain (other than by
reason of Executive's breach of this Section 9(b)).

     (c)  COMPANY PROPERTY.  Promptly following Executive's termination of
          ----------------                                                
employment, Executive shall return to the Company all property of the Company,
and all copies thereof in Executive's possession or under his control.

     (d)  NON-SOLICITATION OF EMPLOYEES.  During the Employment period and the
          -----------------------------                                       
Restriction Period, Executive shall not directly or indirectly induce any
employee of the Company or any of its subsidiaries to terminate employment with
such entity, and shall not directly or indirectly, either individually or as
owner, agent, employee, consultant or otherwise, employ or offer employment to
any person who is or was employed by the Company or a subsidiary thereof unless
such person shall have ceased to be employed by such entity for a period of at
least 6 months.

     (e)  INJUNCTIVE RELIEF WITH RESPECT TO COVENANTS.  Executive acknowledges
          -------------------------------------------                         
and agrees that the covenants and obligations of Executive with respect to
noncompetition, nonsolicitation, confidentiality and Company property relate to
special, unique and extraordinary matters and that a violation of any of the
terms of such 

                                       16
<PAGE>
 
convenants and obligations will cause the Company irreparable injury for which
adequate remedies are not available at law. Therefore, Executive agrees that the
Company shall be entitled to an injunction, restraining order or such other
equitable relief (without the requirement to post bond) restraining Executive
from committing any violation of the convenants and obligations contained in
this Section 10. These injunctive remedies are cumulative and are in addition to
any other rights and remedies the Company may have at law or in equity. In
connection with the foregoing provisions of this Section 10, Executive
represents that his economic means and circumstances are such that such
provisions will not prevent him from providing for himself and his family on a
basis satisfactory to him.

11.  LEGAL FEES AND EXPENSES.  If Executive asserts any claim in any content
     -----------------------                                                
(whether initiated by Executive or by the Company) as to the validity,
enforceability or interpretation of any provision of this Agreement, the Company
shall pay Executive's legal expenses (or cause such expenses to be paid)
including, without limitation, his reasonable attorney's fees, on a quarterly
basis, upon presentation of proof of such expenses, PROVIDED THAT Executive
                                                    -------------          
shall reimburse the Company for such amounts, plus simple interest thereon at
the 90-day United States Treasury Bill rate as in effect form time to time,
compounded annually, if Executive shall not prevail in whole or in part, as to
any material issue as to the validity, enforceability or interpretation of any
provision of this Agreement.

12.  SUCCESSORS
     ----------

     (a)  This Agreement is personal to Executive and without the prior written
consent of the Company, shall not be assignable by Executive otherwise than by
will or the laws of descent and distribution.  This Agreement shall inure to the
benefit of and be enforceable by Executive's legal representatives.

     (b)  This Agreement shall inure to the benefit of and be binding upon the
Company and its successors.  The Company shall require any successor to all or
substantially all of the business and/or assets of the Company, whether direct
or indirect, 

                                       17
<PAGE>
 
by purchase, merger, consolidation, acquisition of stock, or otherwise, by an
agreement in form and substance satisfactory to Executive, expressly to assume
and agree to perform this Agreement in the same manner and to the same extent as
the Company would be required to perform if no such succession had taken place.

13.  MISCELLANEOUS
     -------------

     (a)  APPLICABLE LAW.  This Agreement shall be governed by and construed in
          --------------                                                       
accordance with the laws of Bermuda, applied with reference to principles of
conflict of laws.

     (b)  EXPENSES.  During the term hereof, Executive shall be entitled to
          --------                                                         
receive prompt reimbursement for all reasonable expenses incurred by Executive
in accordance with its usual policies and procedures as in effect from time to
time.  Notwithstanding the foregoing, after the Change of Control Date, such
policies and procedures shall be no less favorable to Executive than those in
effect immediately prior to the Change of Control Date.

     (c)  ENTIRE AGREEMENT.  This Agreement constitutes the entire agreement
          ----------------                                                  
between the parties hereto with respect to the matters referred to herein.  No
other agreement relating to the terms of Executive's employment by the Company,
oral or otherwise, shall be binding between the parties unless it is in writing
and signed by the party against whom enforcement is sought.  There are no
promises, representations, inducements or statements between the parties other
than those that are expressly contained herein.  This Agreement may not be
amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.  In the
event any provision of this Agreement is invalid or unenforceable, the validity
and enforceability of the remaining provisions hereof shall not be affected.
Executive acknowledges that he is entering into this Agreement of his own free
will and accord, and with no duress, that he has read this Agreement and that he
understands it and its legal consequences.

                                       18
<PAGE>
 
     (d)  NOTICES.  All notices and other communications hereunder shall be in
          -------                                                             
writing and shall be given by hand-delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:

If to Executive:    Home address of Executive noted on the records of the
                    Company.
                    
If to the Company:  Terra Nova (Bermuda) Holdings Ltd.
                    Richmond House, 2/nd/ Floor
                    12 Par-La-Ville Road
                    Hamilton HM 08 Bermuda
                    Attention: Corporate Secretary
                    ------------------------------- 


Or to such other address as either party shall have furnished to the other in
writing in accordance herewith.  Notice and communications shall be effective
when actually received by the addressee.

          IN WITNESS WHEREOF, Executive has hereunto set his hand and the
Company has caused this Agreement to be executed in its name on its behalf, and
its corporate seal to be hereunto affixed and attested by its Secretary, all as
of the day and year first above written.


                                   TERRA NOVA (BERMUDA) HOLDINGS LTD.


                                   /s/ John J. Dwyer        
                                   ----------------------------  
                                   By: John J. Dwyer        
                                      -------------------------
                                   Title: Chairman

WITNESSED:


/s/ Pat Thomas      
--------------------

                                   JEAN M. WAGGETT

                                   /s/ Jean M. Waggett    
                                   ----------------------------
WITNESSED:

/s/ Gloria Gullon     
--------------------
                                       19