No. 3154-0016














                              PROPERTY AND CASUALTY
                      EXCESS OF LOSS REINSURANCE AGREEMENT

                                     between

                         PENN-AMERICA INSURANCE COMPANY
                           PENN-STAR INSURANCE COMPANY

                                       and

                          AMERICAN RE-INSURANCE COMPANY


<PAGE>




                       TABLE OF CONTENTS
                       -----------------

      ARTICLE                                                       PAGE
      -------                                                       ----
         I                 EXHIBITS COVERED                            1
         II                TERRITORY                                   1

         III               ULTIMATE NET LOSS                           2

         IV                EXTRA CONTRACTUAL
                           OBLIGATIONS                                 2

         V                 EXCESS JUDGMENTS                            3

         VI                EXCLUSIONS                                  4

         VII               DEFINITIONS                                17

         VIII              CLAIMS                                     21

         IX                SUBROGATION AND SALVAGE                    22

         X                 TAXES                                      22

         XI                ACCESS TO RECORDS                          22

         XII               INSOLVENCY                                 23

         XIII              OFFSET AND SECURITY                        23

         XIV               ERRORS AND OMISSIONS                       24

         XV                FEDERAL EXCESS RECOVERY                    24

         XVI               COMMENCEMENT AND
                           TERMINATION                                25

<PAGE>





                                                            No. 3154-0016



                              PROPERTY AND CASUALTY
                      EXCESS OF LOSS REINSURANCE AGREEMENT
                      ------------------------------------

THIS  AGREEMENT  made and  entered  into by and between  PENN-AMERICA  INSURANCE
COMPANY, PENN-STAR INSURANCE COMPANY, both of Hatboro, Pennsylvania (hereinafter
referred to as the  "Company")  and AMERICAN  RE-INSURANCE  COMPANY,  a Delaware
Corporation with  Administrative  Offices in Princeton,  New Jersey (hereinafter
referred to as the "Reinsurer").

WITNESSETH:

The  Reinsurer  hereby  reinsures the Company to the extent and on the terms and
conditions and subject to the exceptions, exclusions and limitations hereinafter
set forth and nothing  hereinafter shall in any manner create any obligations or
establish any rights  against the Reinsurer in favor of any third parties or any
persons not parties to this  Agreement.  Performance of the  obligations of each
party under this Agreement shall be rendered solely to the other party.

                                    ARTICLE I
                                    ---------

EXHIBITS COVERED
----------------

The Company will  reinsure  with the  Reinsurer  and the  Reinsurer  will accept
reinsurance from the Company as set forth in Exhibits A and B which are attached
hereto and made a part of this  Agreement,  such  Exhibits  being  entitled  for
purposes of identification as:

         EXHIBIT A - PROPERTY EXCESS OF LOSS

         EXHIBIT B -CASUALTY EXCESS OF LOSS

                                   ARTICLE II
                                   ----------
TERRITORY
---------
A.       As respects  Property  business of the Company,  this  Agreement  shall
         cover  policies  issued for risks  located  within the United States of
         America, its territories and possessions, and Canada.

B.       As respects  Casualty  business of the Company,  this  Agreement  shall
         follow the original policies of the Company.

                                      -1-

<PAGE>


                                   ARTICLE III
                                   -----------

ULTIMATE NET LOSS
-----------------

      A.    The term  "Ultimate Net Loss" shall mean the sum or sums paid by the
            Company for which it is liable,  under policies reinsured hereunder,
            including any Loss  Adjustment  Expenses,  as  hereinafter  defined.
            Ultimate  Net Loss shall also  include 90% of any Extra  Contractual
            Obligations,   as  provided  in  ARTICLE   IV,   EXTRA   CONTRACTUAL
            OBLIGATIONS;  and 90% of any Excess Judgment, as provided in ARTICLE
            V, EXCESS  JUDGMENTS.  All sums hereunder shall be subject to proper
            deductions for all salvages,  recoveries and all other  reinsurances
            or insurances  that inure to the benefit of the Reinsurer under this
            Agreement,  whether  collectible or not. The  Reinsurer's  liability
            hereunder  shall not  increase  by reason  of the  inability  of the
            Company to collect  from any other  reinsurer  or  insurer,  for any
            reason, any amount that may be due from such reinsurer or insurer.

      B.    Except as specifically  provided for or excluded under this Article,
            the term "Loss  Adjustment  Expenses"  shall mean all expenses which
            have  been paid by the  Company  in the  investigation,  adjustment,
            settlement  or defense of specific  claims  covered  under  original
            policies  of  the  Company  reinsured  hereunder,   (also  including
            prejudgment and post-judgment interests and salaries and expenses of
            salaried adjusters associated therewith),  but not including office,
            administrative  or overhead  expenses of the Company or salaries and
            expenses of its officials and employees.

      C.    In the event of the  insolvency of the Company,  "Ultimate Net Loss"
            shall be as otherwise defined herein except it shall include the sum
            or sums  which  the  Company  has  incurred  for  which it is liable
            instead  of the sum or sums  paid by the  Company  for  which  it is
            liable,   and  payment  by  the  Reinsurer  shall  be  made  to  the
            liquidator,  receiver  or  statutory  successor  of the  Company  in
            accordance with the INSOLVENCY Article.

                                   ARTICLE IV
                                   ----------

EXTRA CONTRACTUAL OBLIGATIONS
-----------------------------

      A.    As reinsured  under this  Agreement,  the Company shall be protected
            for any Extra Contractual Obligation awarded by a court of competent
            jurisdiction against the Company. (Such Extra Contractual Obligation
            shall be added to the amount of the award or  settlement  within the
            Company's  policy limit and the sum thereof shall be considered  one
            loss subject to the  exclusions  and  limitations  set forth in this
            Agreement.)

      B.    "Extra Contractual Obligation" shall be defined as those liabilities
            not covered  under any other  provision of this  Agreement,  and any
            legal costs and expenses  incurred in  connection  therewith,  which
            arise from the Company's  handling of




                                      -2-
<PAGE>

             any claim on business covered hereunder,  including but not limited
             to, the failure by the Company to settle  within the policy  limit,
             or by reason of alleged or actual negligence,  fraud, or bad faith,
             in  rejecting an offer of  settlement,  in the  preparation  of the
             defense,  in the trial of any action  against its insured or in the
             preparation  or  prosecution  of an  appeal  consequent  upon  such
             action.

      C.    For the  purpose  of the  application  of this  Agreement,  an Extra
            Contractual  Obligation  shall be deemed to have  arisen on the same
            date as the  original  loss that gave rise to the Extra  Contractual
            Obligation.

      D.    This Article shall not apply where the Extra Contractual  Obligation
            has been  incurred  due to the fraud or criminal  act of a member of
            the Board of Directors,  an officer, an agent, or an employee of the
            Company  or  any  other  person  or  organization  involved  in  the
            presentation,  defense or settlement of any claim covered hereunder,
            whether acting individually or collectively or in collusion with any
            person or organization.

      E.    Recoveries  from  any  form of  insurance  or  reinsurance,  whether
            separately   purchased  from  another   insurance  carrier  or  self
            insurance  issued by the  Company  to  itself,  which  protects  the
            Company against claims which are the subject matter of this Article,
            will  inure  to the  benefit  of the  Reinsurer  and  shall be first
            deducted to arrive at the amount of any Extra Contractual Obligation
            covered hereunder, whether collectible or not.

      F.    If any  provision  of this  Article  shall be  rendered  illegal  or
            unenforceable  by the  laws,  regulations  or  public  policy of any
            state,  such provision shall be considered  void in such state,  but
            this shall not affect the  validity or  enforceability  of any other
            provision of this Agreement or the  enforceability of such provision
            in any other jurisdiction.

                                    ARTICLE V
                                    ---------

EXCESS JUDGMENTS
-----------------

      A.    As reinsured  under this  Agreement,  the Company shall be protected
            for any Excess Judgment awarded by a court of competent jurisdiction
            against the  Company.  (Such Excess  Judgment  shall be added to the
            amount of the award or settlement  within the Company's policy limit
            and the sum  thereof  shall be  considered  one loss  subject to the
            exclusions and limitations set forth in this Agreement.)

      B.    "Excess  Judgment"  shall mean any amount in excess of the Company's
            original policy limits,  but otherwise  within the coverage terms of
            the policy,  that is paid by the  Company,  together  with any legal
            costs and expenses incurred in connection therewith,  resulting from
            the failure by the Company to settle within the policy limit,  or by
            reason of  alleged or actual  negligence,  fraud,  or bad faith,  in
            discharging  its duty to  defend,  in  preparing  the  defense in an
            action against its


                                      -3-
<PAGE>

             insured  or in  discharging  its duty to prepare  or  prosecute  an
             appeal consequent upon such action.

      C.    This  Article  shall not apply  where the Excess  Judgment  has been
            incurred  due to the fraud or criminal  act of a member of the Board
            of Directors, an officer, an agent or an employee of the Company, or
            any  other  person or  organization  involved  in the  presentation,
            defense or settlement of any claim covered hereunder, whether acting
            individually  or  collectively  or in  collusion  with any person or
            organization.

      D.    Recoveries  from  any  form of  insurance  or  reinsurance,  whether
            separately   purchased  from  another   insurance  carrier  or  self
            insurance  issued by the  Company  to  itself,  which  protects  the
            Company against claims which are the subject matter of this Article,
            will  inure  to the  benefit  of the  Reinsurer  and  shall be first
            deducted to arrive at the amount of any Excess  Judgment  hereunder,
            whether collectible or not.

      D.    If any  provision  of this  Article  shall be  rendered  illegal  or
            unenforceable  by the  laws,  regulations  or  public  policy of any
            state,  such provision shall be considered  void in such state,  but
            this shall not affect the  validity or  enforceability  of any other
            provision of this Agreement or the  enforceability of such provision
            in any other jurisdiction.


                                   ARTICLE VI
                                   ----------

EXCLUSIONS
----------

      A.    The  reinsurance  provided  under this  Agreement  is subject to the
            exclusions  set  forth  below  and  shall  not  cover  the  excluded
            coverages,  risks or exposures unless individually  submitted by the
            Company to the Reinsurer for inclusion  hereunder,  and if specially
            accepted in writing by the  Reinsurer,  such business  shall then be
            covered under the terms of this Agreement,  except to the extent the
            terms of this Agreement are modified by the special acceptance.

      B.    The reinsurance provided under this Agreement shall not apply to the
            following:

            1.    Business derived from any Pool,  Association  (including Joint
                  Underwriting Associations), Syndicate, Exchange, Plan, Fund or
                  other   facility   directly   as  a  member,   subscriber   or
                  participant,   or   indirectly  by  way  of   reinsurance   or
                  assessments.  This  exclusion  shall not  apply to  automobile
                  assigned risks or workers'  compensation  assigned risks which
                  may be currently or  subsequently  covered  hereunder,  except
                  such   assigned   risks  arising  from  property  or  umbrella
                  coverages.

            2.    Liability  of the Company  arising from its  participation  or
                  membership,   whether   voluntary  or   involuntary,   in  any
                  insolvency  fund,  including any guarantee fund,  association,
                  pool, plan or other facility which provides for the assessment
                  of,  payment by, or assumption by the Company of a part or


                                      -4-
<PAGE>

                  the whole of any claim, debt, charge, fee or other obligations
                  of an insurer,  or its  successors or assigns,  which has been
                  declared insolvent by any authority having jurisdiction.

            3.    Except as respects Workers'  Compensation  business hereunder,
                  liability  excluded by the provisions of the following Nuclear
                  clauses  attached  hereto.  The word  "Reassured" used therein
                  means "Company."

                  USA:
                    - Liability - Reinsurance No. 1B
                    - Physical Damage - Reinsurance No. 2
                    - Physical Damage and Liability
                      (Boiler and Machinery) - Reinsurance    No. 3.

                  Canada:
                    - Liability - Reinsurance  Canada Pre 1985
                    - Physical Damage - Reinsurance Canada Pre 1985
                    - Liability  -  Reinsurance Canada Post 1985
                    - Physical Damage - Reinsurance Canada Post 1985
                    - Physical Damage and Liability Canada -Reinsurance (Boiler
                      and Machinery)

                  As   respects   Workers   Compensation   business   hereunder,
                  operations  employing the process of nuclear fission or fusion
                  or handling of radioactive material,  which operations include
                  but are not limited to:

                  1.    the  use of  nuclear  reactors  such  as  atomic  piles,
                        particle accelerators or generators, or

                  2.    the  use,  handling  or  transportation  of  radioactive
                        materials, or

                  3.    the use, handling or transportation of any weapon of war
                        or explosive device employing nuclear fission or fusion

                  The preceding exclusions a., b., and c. do not apply to:

                  a.    the exclusive use of particle accelerators incidental to
                        ordinary industrial or educational research pursuits, or

                  b.    the exclusive use,  handling or  transportation of radio
                        isotopes for medical or industrial use;

                  c.    radium or radium compounds.

            4.    Coverage provided by the Company to insurance,  or reinsurance
                  companies,  captives,  brokers or risk retention  groups (each
                  hereinafter  referred  to as  "insured"  for  purposes of this
                  exclusion) which provide  insurance  against  liability of the
                  insured  for any  damages  resulting  from  alleged  or actual
                  tortious  conduct  by the  insured in the  handling  of claims
                  brought  against  any  policyholders  of the insured or in the
                  handling of any other  business  matters  with or on behalf of
                  any policyholders.


                                      -5-
<PAGE>


            5.    The following coverages:

                  a.    Financial Guarantees;
                  b.    Credit and Fidelity Coverage;
                  c.    Surety Bonds;
                  d.    Warranty Coverage;
                  e.    Political Risk Coverage;
                  f.    Currency Exchange Coverage;
                  g.    Forgery Coverage; or
                  h.    Kidnap, Extortion or Ransom Coverage.

            6.    Aggregate Excess of Loss or Stop Loss Coverages.

            7.    Retroactive  Coverage,   except  in  connection  with  unknown
                  incidents, covered under a claims made coverage.

            8.    Coverage  provided  on  a  co-indemnity   basis  with  another
                  insurer,  reinsurer or other entity including an insured under
                  the Company's policy;  however,  this exclusion does not apply
                  to  the  standard  co-insurance  provisions  of a  policy  and
                  facultative   reinsurance  inuring  to  the  benefit  of  this
                  Agreement.

            9.    Coverage  underwritten  or accepted by any third party  except
                  the  binding  authority  granted  by the  Company  to its duly
                  authorized agents.

            10.   Coverage written  specifically to insure or reinsure  punitive
                  damages.

            11.   Entertainment   business,   including   but  not  limited  to,
                  Commercial   Negative   Film   Coverage,   Cast  Coverage  and
                  Completion Bond Coverage.

            12.   The  Company's  liability  and any  related  expenses,  beyond
                  circumscribed policy provisions, including but not limited to,
                  punitive,  exemplary,  consequential or compensatory  damages,
                  resulting from a claim of an insured or an insured's  assignee
                  against  the  Company  its  agents  or  employees,  except  as
                  provided for in the Extra  Contractual  Obligations and Excess
                  Judgments Articles.

            13.   All reinsurance assumed by the Company,  except  intra-Company
                  pooling arrangements.

            14.   All loss,  cost or  expense  arising  out of,  resulting  as a
                  consequence of or related to War. "War",  as utilized  herein,
                  shall mean war  whether or not  declared,  civil war,  martial
                  law, insurrection,  revolution,  invasion,  bombardment or any
                  use  of  military  force,   usurped  power  or   confiscation,
                  nationalization  or  damage  of  property  by any  government,
                  military or other authority.



                                      -6-
<PAGE>


                  To the  extent  there is no  Insurance  Service  Office,  Inc.
                  current  standard   coverage  form  for  a  type  of  coverage
                  reinsured under this agreement, "War" as utilized herein shall
                  mean war  whether or not  declared,  civil war,  martial  law,
                  insurrection,  revolution, invasion, bombardment or any use of
                  military force, usurped power or confiscation, nationalization
                  or damage of  property  by any  government,  military or other
                  authority.

            15.   All loss, cost or expense  directly or indirectly  arising out
                  of,  resulting  as a  consequence  of or related to  Pollution
                  whether or not there is  another  cause of loss which may have
                  contributed concurrently or in any sequence to a loss.

                  "Pollution"  means  any  solid,  liquid,  gaseous  or  thermal
                  irritant or contaminant,  including smoke, vapor, soot, fumes,
                  acids, alkalis,  chemicals and waste. Waste includes materials
                  to be recycled, reconditioned or reclaimed.

                  This  exclusion  shall  not  apply  to the  extent  that  such
                  liabilities  would  be  covered  under  the  current  standard
                  unendorsed coverage forms issued by Insurance Services Office,
                  Inc. for each type of coverage reinsured under this Agreement.

            16.   Space or  space-related  risks  such as, but not  limited  to,
                  satellites,  spacecraft,  launch  sites  and  launch  vehicles
                  including cargo and freight carried therein,  in all phases of
                  operation.

            17.   a.       Any  coverage  written  specifically  to apply to
                           Internet exposures; or

                  b.       Any loss,  cost or expense  arising out of or related
                           to the Internet, except if covered under any coverage
                           not  written  or  endorsed  specifically  to apply to
                           Internet   exposures.   Notwithstanding   the   above
                           referenced exception,  the reinsurance provided under
                           this  agreement  shall  not  apply  to the  following
                           persons,  entities or exposures,  except for in force
                           policies  with  effective  dates  prior to 9/1/01 and
                           covered under this Agreement:

                        (1)   Internet Service Providers,  meaning any person or
                              entity providing  access to the Internet,  content
                              over the Internet or  connection  to the Internet;
                              or

                        (2)   Application Service Providers,  meaning any person
                              or entity that  provides  software and  associated
                              services  to a  subscriber  base  across  an  area
                              network; or

                        (3)   Internet Backbone Providers, meaning any person or
                              entity  that  routes  or  provides   channels  for
                              packets that transport data from point to point on
                              the Internet; or


                                      -7-
<PAGE>


                        (4)   Any person or entity that derives  ninety  percent
                              or more of gross  revenue or  conducts or executes
                              ninety percent or more of business transactions on
                              or through the Internet; or

                        (5)   Any person or entity that provides electronic mail
                              services; or

                        (6)   Any  person or  entity  that  develops,  supplies,
                              and/or installs encryption software for use on the
                              Internet.

                  "Internet"  as utilized  in this  exclusion  shall  mean,  the
                  international   computer  network  of   interoperable   packet
                  switched  data  networks,  also known as the  worldwide web or
                  worldwide network of computers.

            18.   All  Workers'  Compensation  business,  except for  Employers'
                  Liability Stop Gap coverage.

            19.   All automobile Liability business when written as such.

            20.   As  respects  Property  business,  all loss,  cost or  expense
                  arising out of or related to, either  directly or  indirectly,
                  any "Terrorist  Activity," as defined DEFINITIONS Article, and
                  any action taken to hinder,  defend  against or respond to any
                  such activity.  This exclusion applies regardless of any other
                  cause or event that in any way contributes  concurrently or in
                  any  sequence  to the  loss,  cost  or  expense  and  for  the
                  following:

                  a)    Any one risk at any one  location  where the risk  Total
                        Insured  Value  (hereinafter  TIV),   inclusive  of  all
                        coverages is greater than $50,000,000; or

                  b)    The  aggregate  TIV for all risks insured by the company
                        at any  one  location,  inclusive  of all  coverages  is
                        greater than $50,000,000,; or

                  c)    Locations written on a subscription basis where the 100%
                        TIV,   inclusive  of  all   coverages  is  greater  than
                        $50,000,000; and

                  d)    Any of the following risks (i.e., owners of, not tenants
                        in):

                        1.    Airlines or Airports
                        2.    Apartments,  Condos, or Co-Operatives (i.e., Urban
                              Only and greater than 25 stories)
                        3.    Bridges (i.e., greater than 300 feet in length)
                        4.    Casinos of Las Vegas and Atlantic City only
                        5.    Chemical  Manufacturing or Distributing  Companies
                              except for liability  arising from the retail sale
                              or wholesale  distribution of household  chemicals
                              by insureds not engaged in their manufacture
                        6.    Convention  or  Exhibition  Centers  (i.e.,  Urban
                              only) with an expected capacity,  at any one time,
                              of 25,000 or more
                        7.    Dams  (i.e.,  greater  than 300 feet in length) 8.
                              Defense or Aerospace Industries
                        9.    Department  Stores  that are  part of  malls  over
                              1,000,000 sq. feet


                                      -8-
<PAGE>


                        10.   Financial  Institutions (i.e.,  Building. and Time
                              Element  coverages  or multiple  locations  (i.e.,
                              Office  Schedules  of greater than 10,000 sq. feet
                              per location))
                        11.   Government  buildings (i.e., Federal or State) and
                              National Landmarks
                        12.   High    Tech    Manufacturing     Companies    and
                              Telecommunication  Companies  with  Total  Insured
                              Values greater than $5,000,000.
                        13.   Hospitals (i.e., Urban only)
                        14.   Hotels  (i.e.,  Urban  only  and  greater  than 25
                              stories)
                        15.   Internet  Companies and Major Media Companies with
                              Total Insured Values greater than $5,000,000.
                        16.   Office  Buildings  (i.e.,  Urban only and  greater
                              than 25 stories)
                        17.   Oil  and   Gas   Manufacturing   or   Distributing
                              Companies
                        18.   Public School Districts (i.e., Urban only)
                        19.   Port or Transit Authorities
                        20.   Railroads
                        21.   Shopping Malls over 1,000,000 sq. feet
                        22.   Stadiums (i.e., all pro sports)
                        23.   Tunnels (i.e., greater than 300 feet in length)
                        24.   Universities (i.e., Urban only)
                        25.   Utilities electric, gas, water & sewer

            C.    The  reinsurance  provided  under this Agreement for Liability
                  business,  other than  Workers  Compensation,  and  Automobile
                  Liability business, shall not apply to the following:

                  1.    Professional  Liability or Errors and Omissions Coverage
                        other than for the following:

                        a.    "Beau-T-Pak";
                        b.    Barbers;
                        c.    Opticians;
                        d.    Veterinarians that treat household pets;
                        e.    Morticians;
                        f.    Clergy;
                        g.    Employee Benefits Liability (E&O Coverage);
                        h.    Druggists;
                        i.    "Day Care Pak";
                        j.    "Adult Day Care;
                        k.    "Health Club Pak";
                        l.    "Instructor Pak";
                        m.    In-Home Day Care;
                        n.    "Pet Pak";  or
                        o.    "Wellness Pak".

                  2.    Directors' and Officers' Liability Coverage,  except for
                        Condominiums and Homeowners Associations.


                                      -9-
<PAGE>


                  3.    The following coverages:

                        a.    Product recall;
                        b.    Product tampering;
                        c.    Product integrity impairment;   or
                        d.    Product guarantee.

                  4.    Coverage  provided  under or for liability  arising from
                        any federal law,  including  but not limited to;  USL&H,
                        Jones  Act,   Defense  Base  Act,   Federal   Employers'
                        Liability  Act, Outer  Continental  Shelf Lands Act, the
                        Federal  Coal Mine  Health and  Safety Act of 1969,  the
                        Non-appropriated Fund  Instrumentality's  Act, any other
                        federal law awarding damages for violation of those laws
                        or regulations  issued there under and any amendments to
                        any of the aforementioned laws or regulations.

                  5.    Securities Act Liability Coverage (S.E.C. Liability).

                  6.    Commercial Umbrella or Excess Liability Coverage.

                  7.    Personal Umbrella Liability Coverage.

                  8.    Environmental Impairment Liability Coverage.

                  9.    Products  Liability  Coverage  written without an annual
                        aggregate limit.

                  10.   Employer's  liability  and/or  common law  liability  of
                        employer's to their  employees when coverage is provided
                        under Worker's Compensation Coverage.

                  11.   Protection and Indemnity Liability Coverage.

                  12.   Primary coverage written on a deductible basis or excess
                        of a  self-insured  retention  when such  deductible  or
                        retained amounts are greater than $50,000.

                  13.   Uninsured or Underinsured Motorists Coverage.

                  14.   Advertising or Personal  Injury  Liability  Coverage for
                        any  person or entity  whose  business  is  advertising,
                        broadcasting, publishing or telecasting.

                  15.   Aircraft  and  airports  as  respects  coverage  for all
                        liability  arising out of the ownership,  maintenance or
                        use of aircraft and/or flight or ground operations.

                  16.   Blanket or all-risk  type  coverage,  commonly  known as
                        Organizational   Liability,    Organization   Liability,
                        Operational Liability,  Integrated Risk, Enterprise Risk
                        or under  similar  names,  written in, or endorsed to, a
                        policy  covering  all  types of losses  incurred  by, or
                        claims against, an entity;


                                      -10-
<PAGE>


                        provided, however, that this exclusion shall not include
                        any  named-peril  grant of coverage  which  contemplates
                        specifically enumerated types of claims or losses.

                  17.   Liability,  including any related  expenses  directly or
                        indirectly  arising out of,  resulting as a  consequence
                        of,  or   related   to   employment-related   practices,
                        including,  but not  limited  to  liability  related  to
                        harassment,   wrongful  termination  or  discrimination,
                        whether under coverage written as such or otherwise.

                  18.   Liability including any related expenses, arising out of
                        the Employee  Retirement Income Security Act of 1974 and
                        amendments thereto.

                  19.   Liability  including any related  expenses,  directly or
                        indirectly arising out of, resulting as a consequence of
                        or related to Sexual Misconduct, whether or not there is
                        another  cause  of  loss  which  may  have   contributed
                        concurrently  or in  any  sequence  to a  loss  for  the
                        Company's  Day Care  Pak,  In Home Day Care Pak or Adult
                        Day Care  policies,  except for in force  policies  with
                        effective  dates prior to 9/1/01,  and for Day Care Pak,
                        In Home Day Care Pak or Adult Day Care  policies  of the
                        Company  where  the  insured   purchases  the  Company's
                        buy-back coverage.

                        "Sexual  Misconduct"  as utilized  herein shall include,
                        sexual molestation, sexual harassment, sexual abuse, any
                        verbal or nonverbal communication,  behavior, or conduct
                        with sexual  connotations or the infliction of physical,
                        emotional or psychological injury whether for purpose of
                        sexual  gratification,   discrimination,   intimidation,
                        coercion or other sexual purpose,  regardless of whether
                        such  action  or  resulting  injury  is  alleged  to  be
                        intentionally or negligently caused.

                  20.   All  loss,  cost  or  expense  directly  or  indirectly,
                        arising  out  of,  resulting  as a  consequence  of,  or
                        related  to  the  manufacture,   distribution,  testing,
                        remediation, removal, storage, disposal, sale, use of or
                        exposure  to the  following,  whether  or not  there  is
                        another  cause  of  loss  which  may  have   contributed
                        concurrently  or in any sequence to a loss:

                        a.    Asbestos  or  materials  or  products   containing
                              asbestos;
                        b.    2.4,5  Trichloroacetic acid ("2,4,5-1") or 2.3,7,8
                              -  TCDD;
                        c.    Diethylstilbestrol  ("DES")  in any dosage or form
                              Any intrauterine device ("IUD");
                        d.    Any product containing  silicone,  which is in any
                              form injected or implanted into the body;
                        e.    Phen-fen;
                        f.    Dioxin;
                        g.    Polychlorinated biphenyls;
                        h.    Lead or materials or products containing lead;
                        i.    Latex gloves;
                        j.    Polybutylene piping
                              (acrylonitrile-butadine-styrene); or



                                      -11-
<PAGE>

                        k.    Bio-engineered   products,   including   any  food
                              products    or     therapeutic    or    diagnostic
                              pharmaceutical  products which are developed using
                              some form of bioengineering.

                  21.   All  loss,  cost or  expense  directly  arising  out of,
                        resulting   as  a   consequence   of,  or   related   to
                        Electromagnetic  Radiation related to the manufacture or
                        generation of:


                        a.    Electric power and/or power lines;
                        b.    Cellular phones;
                        c.    Radio and TV broadcasting and/or towers except for
                              insured's with total sales less than $500,000;
                        d.    Computers;
                        e.    Electric blankets;
                        f.    Military radar or weapons;
                        g.    Police or weather radar;
                        h.    Satellite stations;
                        i.    Magnetic resonance imaging equipment;
                        j.    X-ray equipment, except sales that are 10% or less
                              of insured's total sales; or
                        k.    Microwave ovens;

                  "Electromagnetic  Radiation"  as used  herein,  shall  include
                  magnetic energy waves,  fields or forces generated,  produced,
                  distributed,  transmitted or maintained by charges,  currents,
                  frequencies, forces of energy or electricity."

                  22.   Products  Liability  or Completed  Operations  Liability
                        related to:



                        a.    Drugs,  except  for  liability  arising  from  the
                              retail sale or wholesale  distribution of drugs by
                              insureds not engaged in their manufacture;
                        b.    Chemicals,  except for liability  arising from the
                              retail sale or wholesale distribution of household
                              chemicals   by  insureds   not  engaged  in  their
                              manufacture;
                        c.    Insecticides and pesticides, except sales that are
                              20% or less of insured's total sales;
                        d.    Aircraft or aircraft parts;
                        e.    Animal  feed,  other  than  custom-blended  grains
                              without  chemical  or  pharmacological  additives,
                              except  sales  that  are 20% or less of  insured's
                              total sales;
                        f.    Cosmetics    manufacturing,    except    for   the
                              manufacture   of  soaps  or  shampoos   where  the
                              insured's  receipts  are  less  than  10% of total
                              sales or skin and hair care  products  prepared at
                              beauty salons or similar establishments,
                        g.    Tobacco and tobacco  products,  but this exclusion
                              shall  not  apply to  liability  arising  from the
                              retail sale or wholesale  distribution  of tobacco
                              products   by   insureds   not  engaged  in  their
                              manufacture;
                        h.    Automobiles,  trucks,  motorcycles and all-terrain
                              vehicles  or  component   parts  critical  to  the
                              operation  of the  foregoing,

                                      -12-
<PAGE>


                              but  this   exclusion   shall  not  apply  to  the
                              liability   arising   from  the  retail   sale  or
                              wholesale distribution of component parts critical
                              or  non-critical to the operation of the foregoing
                              not engaged in their manufacture;

                        i.    Fiberglass,  but this exclusion shall not apply to
                              liability   arising   from  the  retail   sale  or
                              wholesale  distribution of fiberglass  products by
                              insureds not engaged in their manufacture;

                        j.    Firearms,  except  sales  that  are 20% or less of
                              insured's total sales;

                        k.    Medical equipment;

                        l.    Elevator  or  hoist  manufacturing,  installation,
                              inspection,  service or repair;

                        m.    Security   and   alarm    system    manufacturing,
                              installation,   inspection,   service  or  repair,
                              except  for   coverage  as  provided  for  in  the
                              Company's guidelines as of 9/01/01; or

                        n.    Fire     suppression     system     manufacturing,
                              installation,   inspection,   service  or  repair,
                              except  for   coverage  as  provided  for  in  the
                              Company's guidelines as of 9/01/01.

                  23.   Wrecking  or  demolition   of   buildings,   structures,
                        watercraft  or  aircraft,  except  for  buildings  three
                        stories or less.

                  24.   Railroad,   subway  and  street  railway   construction,
                        operation   or    maintenance,    excepting    sidetrack
                        agreements.

                  25.   Bridge,  tunnel, dam or reservoir design,  construction,
                        operation or maintenance.

                  26.   Mining,   except  insureds  with  receipts  from  quarry
                        operations of less than 5% of total sales.

                  27.   Onshore  or  offshore  gas or oil  drilling  operations,
                        pipelines, or wells.

                  28.   Mill or grain elevator operation.

                  29.   Manufacture,  assembly,  packing, handling,  processing,
                        transportation,   sale,   storage   or   detonation   of
                        fireworks,  fuses,  nitroglycerine,   ammonium  nitrate,
                        magnesium, celluloid, pyroxylin, ammunition,  explosives
                        or any  product in which an  explosive  substance  is an
                        ingredient, or component part.

                        The term "explosive  substance," as used herein,  is any
                        substance   manufactured  for  the  express  purpose  of
                        exploding  as  differentiated  from  those  commodities,
                        other  than   those   commodities   specified   in  this
                        exclusion,  which are only fortuitously explosive,  such
                        as gasoline, fuel oil, or dyestuffs.

                  30.   Manufacture,   production,   refining,   storage,  sale,
                        distribution or  transportation of natural or artificial
                        fuel, gas,  butane,  methane,  propane,

                                      -13-
<PAGE>



                        other liquefied  petroleum  gases,  gasoline or gases or
                        air under pressure, except this exclusion does not apply
                        to gasoline at hardware stores,  convenience  stores and
                        automobile service stations storing gasoline on premises
                        for retail sale,  fuel oil  dealers,  and LPG sales that
                        are 20% or less of the insured's total sales.

                  31.   Stevedoring.

                  32.   Ski lodges, lifts, cable cars and tows.

                  33.   Shipbuilding,  ship repair, ship breaking, dry dock, and
                        quays or wharf  operations,  except  boat slips or docks
                        that are  incidental to  restaurants,  condominiums,  or
                        similar operations or risks.

                  34.   Watercraft over 50 feet in length.

                  35.   Amusement  parks,  amusement  devices  (other  than coin
                        operated  devices),   fairs,   exhibitions,   carnivals,
                        circuses and zoos (other than petting zoos), except when
                        written  within the  guidelines  of the of the Company's
                        Special Events Program.

                  36.   Sports or other  entertainment  events  with an expected
                        capacity, at any one time, of 25,000 or more people.

                  37.   Arenas, grandstands,  stadiums,  theatres, halls and any
                        other indoor venue with an expected capacity, at any one
                        time, of 25,000 or more.

                  38.   Electric  and  gas  utilities  and  the  municipalities,
                        authorities  and all  boards,  commissions,  or entities
                        responsible  for   administering  or  controlling  these
                        utilities.

                  39.   Governmental    agencies,    entities,    or   political
                        subdivisions  of  a  state  or  municipalities   with  a
                        population  of  50,000  or  more,  except  for  insureds
                        required  to  name  the  local  municipality  as a named
                        insured for special events.

                  40.   Insurance companies,  agents, brokers, or risk retention
                        groups,  inspection services, claims services and rating
                        bureaus,  unless  coverage  for errors and  omissions is
                        excluded under the policy reinsured.

                  41.   School boards or school districts.

                  42.   Nursing  homes and nursing  home care,  except for adult
                        day care  centers or the Family Home Care  Program  when
                        written within the Company guidelines as of 9/01/01.


                                      -14-
<PAGE>


                  43.   Banks  and  other  financial   institutions  unless  the
                        Company's  coverage  contains  a  financial  institution
                        endorsement agreed to by the Reinsurer.

                  44.   Contractors  engaged in the  construction,  erection  or
                        exterior  maintenance  of  structures in excess of three
                        stories,  except  for window  washers  or power  washing
                        operations.

                  45.   Crop-dusting.

                  46.   Insureds  in  the  business  of  Scaffold   manufacture,
                        installation, repair, removal or rental.

                  47.   Inverse condemnation liability.

                  48.   All loss, cost or expense arising out of, resulting as a
                        consequence   of  or  related   to   poultry   products,
                        operations or  exposures,  including but not limited to;
                        poultry  houses,  poultry  processing  operations,  live
                        birds,  processed  birds,  egg  laying  operations,  egg
                        processing operations or eggs.

                  49.   Contractors,  except as  provided  for by the  Company's
                        Penn  Amerigram  dated November 7, 2001, and attached to
                        this Agreement as APPENDIX B.

            D.    In  the  event  the  Company  is  inadvertently  bound  on any
                  exclusion   enumerated  under  paragraph  D,  the  reinsurance
                  provided under this Agreement  shall apply until  discovery by
                  the Company of the  existence of the  inadvertent  binding and
                  for 30 days  thereafter,  and shall then cease unless,  within
                  the 30-day period, the Company has received from the Reinsurer
                  written notice of its approval of such binding.

            E.    The  reinsurance  provided  under this  Agreement for Property
                  business shall not apply to the following:

                  1.    Difference in Conditions Coverage.

                  2.    Ocean Marine Coverage.

                  3.    Mortgage  impairment  insurance  and  similar  kinds  of
                        insurance, however styled.

                  4.    Mining including mining equipment.

                  5.    Aviation business.

                  6.    The following coverages:

                        a.    Product recall;
                        b.    Product tampering;

                                      -15-
<PAGE>

                        c.    Product integrity impairment; or

                        d.    Product guarantee.

                  7.    Excess  Coverage,  meaning  coverage  written  to  apply
                        specifically in excess over underlying insurance.

                  8.    Boiler and Machinery Coverage.

                  9.    Livestock Mortality or Fertility Coverage.

                  10.   Furriers' and Jewelers Block Coverage.

                  11.   Contingency business interruption risks of any kind.

                  12.   Transmission  and  distribution  lines  other than those
                        within  500  feet  of  an  insured's  premises.   It  is
                        understood  and agreed that public  utilities  extension
                        and/or suppliers  extension and/or  contingent  business
                        interruption  coverage are not subject to this exclusion
                        provided that these are not part of a  transmitter's  or
                        distributor's policies.

                  13.   All onshore or offshore:
                        a.    gas and oil drilling risks;
                        b.    petrochemical risks;
                        c.    pipeline risks; or
                        d.    well risks.

                  14.   Flood, surface water, waves, tidal water or tidal waves,
                        overflow  of streams  or other  bodies of water or spray
                        from any of the foregoing, all whether driven by wind or
                        not; provided,  however,  this exclusion shall not apply
                        to  losses  covered  under  automobile  physical  damage
                        policies or Inland Marine Policies.

                  15.   Earthquake, landslide and other earth movement provided,
                        however,  this  exclusion  shall not apply to automobile
                        physical damage coverage or Inland Marine Policies.

                  16.   Railroad property, rolling stock, tracks or roadbeds.

                  17.   Fine  arts  collections  exceeding  $5,000,000  in total
                        value.

                  18.   Mobile  homes,  except  mobile  home parks  written on a
                        commercial  lines basis with less than 25% of the mobile
                        homes being owned by the insured.

                  19.   Risks  having  total   insurable   value  of  more  than
                        $50,000,000.

                  20.   Growing, standing or drying crops and timber.



                                      -16-
<PAGE>


                  21.   Watercraft  except  watercraft  insured  under  personal
                        property floaters.

                  22.   Bridges, dams and tunnels.

                  23.   All loss, cost or expense arising out of, resulting as a
                        consequence   of  or  related   to   poultry   products,
                        operations or  exposures,  including but not limited to;
                        poultry  houses,  poultry  processing  operations,  live
                        birds,  processed  birds,  egg  laying  operations,  egg
                        processing operations or eggs.

                                   ARTICLE VII
                                   -----------

DEFINITIONS
-----------

            A.    The  following  Definitions  apply as  respects  all  Property
                  business:

            I.    Property Occurrence:
                  A.    The  term  "Occurrence"   shall  mean  the  sum  of  all
                        individual   losses  directly   occasioned  by  any  one
                        disaster,  accident  or loss  or  series  of  disasters,
                        accidents  or  losses  arising  out of one  event  which
                        occurs within the area of one state of the United States
                        or province of Canada and states or provinces contiguous
                        thereto and to one  another.  However,  the duration and
                        extent of any one  "Occurrence"  shall be limited to all
                        individual  losses  sustained  by the Company  occurring
                        during any period of 168  consecutive  hours arising out
                        of and directly occasioned by the same event except that
                        the  term  "Occurrence"  shall  be  further  defined  as
                        follows:

                        1.    As regards windstorm,  hail,  tornado,  hurricane,
                              cyclone,  including  ensuing  collapse  and  water
                              damage,  all  individual  losses  sustained by the
                              Company   occurring   during   any  period  of  72
                              consecutive  hours  arising  out of  and  directly
                              occasioned by the same event.  However,  the event
                              need not be  limited to one state or  province  or
                              states or provinces contiguous thereto.

                        2.    As regards riot,  riot  attending a strike,  civil
                              commotion,  vandalism and malicious mischief,  all
                              individual   losses   sustained   by  the  Company
                              occurring  during  any  period  of 72  consecutive
                              hours  within  the  area  of one  municipality  or
                              county   and  the   municipalities   or   counties
                              contiguous  thereto  arising  out of and  directly
                              occasioned by the same event. The maximum duration
                              of 72 consecutive hours may be extended in respect
                              of  individual  losses  which occur beyond such 72
                              consecutive hours during the continued  occupation
                              of an  assured's  premises by  strikers,  provided
                              such  occupation  commenced  during the  aforesaid
                              period.

                        3.    As regards earthquake (the epicenter of which need
                              not necessarily be within the territorial confines
                              referred  to in  the  opening  paragraph  of  this
                              Article)  and  volcanic   eruption,   all  of  the


                                      -17-
<PAGE>


                              Company's individual losses (including losses from
                              other  perils  covered  hereunder  which  directly
                              arise from earthquake and volcanic eruption) which
                              occur  during a period  of 168  consecutive  hours
                              shall be  considered  one  "Occurrence".  The term
                              "earthquake"    means   one   or   more    seismic
                              disturbances  emanating  from the same or adjacent
                              geological  faults.  The term "volcanic  eruption"
                              means all activity arising from a single volcano.

                        4.    As  regards  flood,  being  the  overflowing  of a
                              natural  body of water caused by  torrential  rain
                              and the resulting inundation of the adjacent land,
                              all  individual  losses  sustained  by the Company
                              which  occur  during  a period  of 168  hours in a
                              territory   forming   one  river  basin  shall  be
                              considered  one   "Occurrence."  The  term  "river
                              basin"  shall  mean the land  drained  by a river,
                              including all the tributaries of such river, which
                              flows directly into an ocean,  sound, bay gulf, or
                              into one of the Great Lakes.

                        5.    As  regards   "Freeze,"  only  individual   losses
                              directly   caused  by  falling   trees  or  limbs,
                              collapse,  breakage  of glass,  power  outage (off
                              premises),      automobile     physical     damage
                              (comprehensive  only) and water damage  (caused by
                              ice  damming or by  bursting  of frozen  pipes and
                              tanks)   may  be   included   in   the   Company's
                              "Occurrence".

                  B.    For all  "Occurrences"  the  Company may choose the date
                        and time  when  any such  period  of  consecutive  hours
                        commences  provided that it is not earlier than the date
                        and  time  of  the  occurrence  of  the  first  recorded
                        individual  loss sustained by the Company arising out of
                        that  disaster,  accident or loss and provided that only
                        one such  period of 168  consecutive  hours  shall apply
                        with   respect   to  one   event,   except   for   those
                        "Occurrences"  referred  to in  subparagraphs  1. and 2.
                        above where only one such period of 72 consecutive hours
                        shall apply with respect to one event, regardless of the
                        duration of the event.

                  C.    No individual  losses  occasioned by an event that would
                        be covered by 72 hours  clauses  may be  included in any
                        "Occurrence" claimed under the 168 hours provisions.

II.      Property Definition of Risk
         ---------------------------

      A.    The  Company  shall be the sole judge of what  constitutes  one risk
            provided:

            1.    One risk shall be defined from the  standpoint of the peril of
                  fire,  however,  except as  otherwise  provided  hereunder,  a
                  building and its contents for a single  insured shall never be
                  considered as constituting  more than one risk, nor shall time
                  element coverages


                                      -18-
<PAGE>

                  be  considered a separate risk apart from the building and its
                  contents, and

            2.    One risk, with respect to the peril of wind, including but not
                  limited to: tornado, cyclone,  hurricane,  windstorm and hail,
                  shall  mean all  insured  locations  listed  on an  individual
                  policy  that are  within a legal  property  boundary  which is
                  owned,  occupied or operated by the insured as one  continuous
                  property  site,  including  a  site  that  contains  roadways,
                  streams or rights-of-way intersecting the site.

            3.    The  term  "building"   shall  mean  each  separately   roofed
                  structure enclosed within exterior walls.

            4.    As respects Dealer Open Lot risks, all insured property at any
                  one location shall be considered one risk.

III. Casualty Occurrence:
------------------------

            A.    The term  "occurrence"  as used herein means each  accident or
                  occurrence or series of accidents or occurrences,  arising out
                  of one event, provided that, as respects:

                  1.       Products   Liability   (bodily  injury  and  property
                           damage),  the term "occurrence" shall mean the sum of
                           all  damages  arising  from the  consumption,  use or
                           exposure to the insured's product(s) occurring during
                           each  original  policy  period,  in  respect  to each
                           insured, each policy,  emanating from or traceable to
                           the same causative agency.

                  2.       Third  Party   Bodily   Injury  or  Property   Damage
                           Liability,   other  than   Automobile  and  Products,
                           arising  or   emanating   from  or   traceable  to  a
                           continuous or repeated exposure to the same causative
                           agency,  the term "occurrence"  shall mean the sum of
                           all damages  sustained by each insured,  each policy,
                           during each original policy period.

            B.    The term "each  original  policy  period" as used herein means
                  each  annual  period the  original  policy  (i.e.,  the policy
                  reinsured  hereunder)  is in effect.  Policies in effect for a
                  period  greater than one year shall be deemed to have separate
                  annual policy periods.

            C.    If  the  date  of  loss,  accident  or  occurrence  cannot  be
                  specifically  determined,   the  date  of  loss,  accident  or
                  occurrence shall be the inception date of the original policy;
                  such policy  period  shall be deemed not to exceed 12 calendar
                  months.


                                      -19-
<PAGE>


IV.      Terrorist Activity
         ------------------
            A.    "Terrorist  Activity" shall mean any deliberate,  unlawful act
                  that:

              1.    is declared by any authorized governmental official to be or
                    to  involve   terrorism,   terrorist  activity  or  acts  of
                    terrorism; or

              2.    includes,  involves,  or  is  associated  with  the  use  or
                    threatened  use of  force,  violence  or  harm  against  any
                    person, tangible or intangible property, the environment, or
                    any natural  resources,  where the act or threatened  act is
                    intended,  in whole or in part,  to

                  (a)   promote, further or express opposition to any political,
                        ideological,  philosophical,  racial,  ethnic, social or
                        religious cause or objective; or
                  (b)   influence,  disrupt  or  interfere  with any  government
                        related operations, activities or policies; or
                  (c)   intimidate, coerce or frighten the general public or any
                        segment of the general public; or
                  (d)   disrupt  or  interfere  with a  national  economy or any
                        segment of a national economy; or


              3.    includes,  involves,  or is associated  with, in whole or in
                    part,  any  of  the  following  activities,  or  the  threat
                    thereof:

                  (a)   hijacking or sabotage of any form of  transportation  or
                        conveyance,  including  but not  limited to  spacecraft,
                        satellite, aircraft, train, vessel, or motor vehicle;
                  (b)   hostage taking or kidnapping;
                  (c)   the use or  threatened  use of, or release or threatened
                        release  of  any   nuclear,   biological,   chemical  or
                        radioactive agent, material, device or weapon;
                  (d)   the use of any bomb,  incendiary  device,  explosive  or
                        firearm;
                  (e)   the  interference  with or disruption of basic public or
                        commercial  services  and  systems,  including  but  not
                        limited   to  the   following   services   or   systems:
                        electricity, natural gas, power, postal, communications,
                        telecommunications,  information, public transportation,
                        water, fuel, sewer or waste disposal;
                  (f)   the  injuring  or   assassination   of  any  elected  or
                        appointed   government   official   or  any   government
                        employee;
                  (g)   the seizure, blockage, interference with, disruption of,
                        or damage  to any  government  buildings,  institutions,
                        functions,  events,  tangible or intangible  property or
                        other assets; or
                  (h)   the seizure, blockage, interference with, disruption of,
                        or damage to tunnels, roads, streets, highways, or other
                        places of public transportation or conveyance.

            B.    Any of the  activities  listed in section  A(3) above shall be
                  considered  Terrorist  Activity  except  where the Company can
                  demonstrate to the Reinsurer that the foregoing  activities or
                  threats thereof were motivated  solely by personal  objectives
                  of the perpetrator that are unrelated, in whole or in part, to
                  any intention to

                  1.    promote, further or express opposition to any political,
                        ideological,  philosophical,  racial,  ethnic, social or
                        religious cause or objective; or



                                      -20-
<PAGE>

                  2.    influence,  disrupt  or  interfere  with any  government
                        related operations, activities or policies; or
                  3.    intimidate, coerce or frighten the general public or any
                        segment of the general public; or
                  4.    disrupt  or  interfere  with a  national  economy or any
                        segment of a national economy.

                                  ARTICLE VIII
                                  ------------

CLAIMS
------

            A.    As a condition  precedent to the  Reinsurer's  liability under
                  this  Agreement,  the Company shall give timely written notice
                  to the  Reinsurer  of all claims which may develop into losses
                  involving reinsurance hereunder.

            B.    In  addition,  the  following  categories  of claims  shall be
                  reported  to  the  Reinsurer  immediately,  regardless  of any
                  questions of  liability  of the insured or coverage  under the
                  policy:

                  1.    Fatality;

                  2.    Partial or Total Paralysis;

                  3.    Severe brain injury or brain damage prognosis;

                  4.    Severe burns;

                  5.    Amputation of one or more limbs;

                  6.    Loss of sight or hearing to a substantial degree;

                  7.    Any  injury  where  there is, or  appears  probable,  an
                        alleged loss of earnings for one year or more; and,

                  8.    Any claim with a loss  reserve  that  exceeds 50% of the
                        Company's net retention,  provided that such claim might
                        involve the Reinsurer.

            C.    The Company has the obligation to  investigate  and defend any
                  claim  affecting  this  reinsurance,  to advise the  Reinsurer
                  promptly of subsequent  developments pertaining thereto and to
                  pursue such claim to final determination.

            D.    It is  understood  that when so  requested  the  Company  will
                  afford the Reinsurer an opportunity to be associated  with the
                  Company at the  expense  of the  Reinsurer  in the  defense or
                  control  of  any  claim  or  suit  proceeding  involving  this
                  reinsurance; and the Company and the Reinsurer shall cooperate
                  in  every  respect  in the  defense  of such  suit or claim or
                  proceeding.


                                      -21-
<PAGE>


                                   ARTICLE IX
                                   ----------

SUBROGATION AND SALVAGE
-----------------------

            A.    The Reinsurer  shall be  subrogated,  as respects any loss for
                  which the Reinsurer  shall actually pay or become liable,  but
                  only to the  extent of the  amount of payment by or the amount
                  of  liability  to the  Reinsurer,  to all  the  rights  of the
                  Company  against any person or other entity who may be legally
                  responsible  in damages  for said  loss.  The  Company  hereby
                  agrees to enforce such rights,  but in case the Company  shall
                  refuse or neglect to do so the Reinsurer is hereby  authorized
                  and empowered to bring any  appropriate  action in the name of
                  the Company or its policyholders, or otherwise to enforce such
                  rights.

            B.    Any recoveries,  salvages or reimbursements  applying to risks
                  covered under this Agreement shall always be used to reimburse
                  the excess  carriers  (from the last to the  first,  beginning
                  with the  carrier  of the  last  excess),  according  to their
                  participation,  before being used in any way to reimburse  the
                  Company for its primary loss.

            C.    All salvages, recoveries or reimbursements, after deduction of
                  expenses applicable thereto,  recovered or received subsequent
                  to a loss settlement  under this Agreement shall be applied as
                  if recovered or received prior to the aforesaid settlement and
                  all necessary adjustments shall be made by the parties hereto,
                  provided  always,   that  nothing  in  this  clause  shall  be
                  construed  to mean that losses  under this  Agreement  are not
                  recoverable  until the  Company's  ultimate  net loss has been
                  ascertained.  Expenses  hereunder  shall  exclude  all  office
                  expenses of the Company and all  salaries  and expenses of its
                  officials and employees except those of salaried adjusters.

                                    ARTICLE X
                                   -----------

TAXES
-----

The Company will be liable for all taxes on premiums  reported to the  Reinsurer
hereunder and will reimburse the Reinsurer for such taxes where the Reinsurer is
required to pay the same.

                                   ARTICLE XI
                                   -----------

ACCESS TO RECORDS
-----------------

The Company shall place at the disposal of the Reinsurer and the Reinsurer shall
have the  right to  inspect,  through  its  authorized  representatives,  at all
reasonable  times  during the currency of this  Agreement  and  thereafter,  the
books,  records and papers of the Company pertaining to the reinsurance provided
hereunder and all claims made in connection therewith.


                                      -22-
<PAGE>


                                   ARTICLE XII
                                   -----------

INSOLVENCY
----------

The  reinsurance  provided by this  Agreement  shall be payable by the Reinsurer
directly to the Company or to its liquidator, receiver or statutory successor on
the basis of the  liability  of the  Company  under the  contract  or  contracts
reinsured.  Subject to the right of offset and the verification of coverage, the
Reinsurer  shall pay its share of the loss  without  diminution  because  of the
insolvency of the Company.  In the event of the  insolvency of the Company,  the
liquidator,  receiver or statutory  successor of the Company  shall give written
notice of the  pendency  of each claim  against  the Company on a policy or bond
reinsured  within a reasonable  time after such claim is filed in the insolvency
proceeding.  During the pendency of such claim,  the  Reinsurer  may, at its own
expense, investigate such claim and interpose in the proceeding where such claim
is to be adjudicated  any defense or defenses which it may deem available to the
Company,  its  liquidator or receiver or statutory  successor.  Subject to court
approval, any expense thus incurred by the Reinsurer shall be chargeable against
the  Company  as  part of the  expense  of  liquidation  to the  extent  of such
proportionate  share of the benefit as shall  accrue to the Company  solely as a
result of the defense  undertaken by the  Reinsurer.  The  reinsurance  shall be
payable as set forth above except where this Agreement specifically provides for
the  payment  of  reinsurance  proceeds  to  another  party in the  event of the
insolvency of the Company.

                                  ARTICLE XIII
                                  ------------

OFFSET AND SECURITY
------------------

      A.    Each party hereto has the right, which may be exercised at any time,
            to offset any  amounts,  whether on account of premiums or losses or
            otherwise, due from such party to another party under this Agreement
            or any other reinsurance  agreement  heretofore or hereafter entered
            into  between  them,  against  any  amounts,  whether  on account of
            premiums  or losses or  otherwise  due from the latter  party to the
            former party.  The party  asserting the right of offset may exercise
            this right,  whether as assuming or ceding  insurer or in both roles
            in the relevant agreement or agreements.

      B.    Each party hereby assigns and pledges to the other party (or to each
            other  party,  if  more  than  one)  all of its  rights  under  this
            Agreement to receive  premium or loss payments at any time from such
            other   party   ("Collateral"),   to  secure  its  premium  or  loss
            obligations to such other party at any time under this Agreement and
            any other reinsurance  agreement  heretofore or hereinafter  entered
            into by and between them ("Secured  Obligations").  If at any time a
            party is in default under any Secured Obligation or shall be subject
            to any liquidation,  rehabilitation,  reorganization or conservation
            proceeding, each other party shall be entitled in its discretion, to
            apply, or to withhold for the purpose of applying in due course, any
            Collateral  assigned  and  pledged  to it by the  former  party  and
            otherwise  to realize  upon such  Collateral  as  security  for such
            Secured Obligations.


                                      -23-
<PAGE>


      C.    The security interest  described herein,  and the term "Collateral,"
            shall  apply to all  payments  and other  proceeds in respect of the
            rights  assigned  and  pledged.   A  party's  security  interest  in
            Collateral shall be deemed evidenced only by the counterpart of this
            Agreement delivered to such party.

      D.    Each right under this Article is a separate and  independent  right,
            exercisable,  without notice or demand, alone or together with other
            rights, in the sole election of the party entitled  thereto,  and no
            waiver,  delay,  or  failure to  exercise,  in respect of any right,
            shall constitute a waiver of any other right. The provisions of this
            Article shall survive any cancellation or other  termination of this
            Agreement.

                                   ARTICLE XIV
                                   -----------

ERRORS AND OMISSIONS
--------------------

The  Reinsurer  shall  not be  relieved  of  liability  because  of an  error or
accidental  omission  by the  Company  in  reporting  any  claim  or loss or any
business reinsured under this Agreement,  provided that the error or omission is
rectified  promptly after  discovery.  The Reinsurer shall be obligated only for
the return of the premium paid for business  reported  but not  reinsured  under
this Agreement.

                                   ARTICLE XV
                                   ----------

FEDERAL EXCESS RECOVERY
-----------------------

As respects  the Insured  Losses of the Insurer  for each  Program  Year,  it is
hereby agreed that to the extent the Insurer's  total  reinsurance  recoverables
for Insured  Losses,  whether  collected  or not,  combined  with the  financial
assistance  available to the Insurer under the Act exceeds the aggregate  amount
of  Insured  Losses  paid  by  the  Insurer,   less  any  other   recoveries  or
reimbursements,  such excess amounts (the "Excess  Recovery") shall be allocated
to the Company.  The  allocation  to the Company shall be deemed to be an amount
equal to the proportion that the Company's  Insured Losses bear to the Insurer's
total Insured Losses for each Program Year. The Company shall then reimburse the
Reinsurer  for its share of the Excess  Recovery  allocated to the Company.  The
Reinsurer's  share of the Excess  Recovery shall be deemed to be an amount equal
to the  proportion  that the  Reinsurer's  payment of Insured  Losses under this
Agreement bears to the Company's total collected  reinsurance  recoverables  for
Insured  Losses.  The  Company  also agrees to provide  the  Reinsurer  with all
necessary data respecting the transactions covered under this Clause.

"Act" as utilized herein shall mean the Terrorism Risk Insurance Act of 2002 and
any subsequent  amendment  thereof or any regulations  promulgated  there under.
"Insurer",  "Insured Losses", and "Program Year" as utilized herein shall follow
the definitions as provided in the Act."


                                      -24-
<PAGE>


                                   ARTICLE XVI
                                   -----------

COMMENCEMENT AND TERMINATION
----------------------------

      A.    This Agreement shall take effect as of 12:01 a.m.,  Eastern Standard
            Time,  January 1, 2003,  and shall,  except as otherwise  stipulated
            herein or in any Exhibit hereto or any Endorsement hereof,  continue
            in full force and effect until terminated as hereinafter provided.

      B.    This Agreement may be canceled at any December 31, unless  otherwise
            mutually  agreed by either  party,  giving 90 days notice in writing
            prior to such date,  stating to the other its desire to effect  such
            cancellation.

      C.    In the event of  cancellation,  the Company shall have the option to
            terminate this Agreement on a cut-off or run-off basis as follows:

            1.    In the  event  the  Company  elects  to  cancel  cut-off,  the
                  Reinsurer  shall remain liable for losses  occurring  prior to
                  such  cancellation  date,  but all liability  shall  terminate
                  hereunder   as  to   losses   occurring   subsequent   to  the
                  cancellation date.

            2.    In the  event  the  Company  elects  to  cancel  run-off,  the
                  Reinsurer  shall remain liable for losses  occurring  prior to
                  such cancellation  date, and any risk covered hereunder and in
                  effect as of said cancellation date shall remain in full force
                  until policy  cancellation or natural  expiration for a period
                  of time not to exceed twelve months.

      D.    Should this Agreement  terminate  while a covered loss occurrence is
            in  progress,  the entire loss  arising out of such loss  occurrence
            shall be subject to this Agreement.

      E.    Every  notice  of  termination  shall be given by  certified  letter
            addressed to the intended  recipient at such recipient's  address as
            hereinabove set forth. In determining  whether the requisite  number
            of days' notice has been given in any case,  the date of termination
            shall be counted but the date of mailing shall not.

      F.    Notwithstanding  the  termination  of this  Agreement as hereinabove
            provided,  the provisions of this Agreement  shall continue to apply
            to all unfinished business hereunder to the end that all obligations
            and  liabilities  incurred  by each  party  hereunder  prior to such
            termination shall be fully performed and discharged.


                                      -25-
<PAGE>



IN WITNESS  WHEREOF the parties hereto have caused this Agreement to be executed
in duplicate in Hatboro, Pennsylvania, this day of    , 2003;


ACCEPTED:
PENN-AMERICA INSURANCE COMPANY
PENN-STAR INSURANCE COMPANY



_______________________


and in Princeton, New Jersey, this day of 2003.


                                          AMERICAN RE-INSURANCE COMPANY



                                          _______________________
                                          Vice President

DATED:  March 18, 2003


                                      -26-
<PAGE>




                                                                 No. 3154-0016
                                                                     EXHIBIT A

                                    EXHIBIT A
                                   -----------

                             PROPERTY EXCESS OF LOSS
                             -----------------------

                                    Section 1
                                    ---------

      A.    BUSINESS COVERED
            ----------------

         The  Reinsurer  agrees to reimburse  the Company,  on an excess of loss
         basis,  for the amounts of ultimate  net loss which the Company may pay
         as a result of  losses  occurring  on and after  January  1,  2003,  as
         respects the Company's new and renewal policies  becoming  effective on
         and after said date, covering the Classes of Insurance set forth below,
         except as  excluded  under the  EXCLUSIONS  Article of this  Agreement,
         subject to the limitations set forth herein.

                              CLASSES OF INSURANCE
                              ---------------------

                                    Property
                                    --------

                                      Fire
                        Commercial Multi Peril Section I
                            Businessowners Section I
                                  Allied Lines
                                  Inland Marine
                           Automobile Physical Damage,
                           including Dealer's Open Lot

      B.    The term  "policies"  as used  herein  means each of the  Company' s
            binders,  policies and contracts providing insurance and reinsurance
            on the Classes of Insurance covered hereunder.

                                    Section 2
                                    ---------

LIMITS OF COVER
---------------

      A.    As  respects  one or more  than one of the  classes  under  Property
            Classes of Insurance as stated in Section 1, the Reinsurer shall not
            be liable for any loss  until the  Company's  ultimate  net loss for
            each and every risk exceeds $300,000 and then the Reinsurer shall be
            liable for the amount of the  Company' s ultimate  net loss for each
            and every risk in excess of $300,000 but the  Reinsurer's  liability
            shall not  exceed  100% of  $1,700,000  for each and  every  risk or
            exceed $3,000,000 in any one occurrence.

      B.    As respects  Terrorist  Activity as defined  within the  DEFINITIONS
            Article,  involving  one or  more  than  one of  the  classes  under
            Property  Classes of Insurance as stated in Section 1, the Reinsurer
            shall not be liable for any loss until the  Company's  ultimate  net
            loss for each and every risk exceeds $300,000 and then

                                      -1-
<PAGE>


             the  Reinsurer  shall be liable  for the  amount of the  Company' s
             ultimate net loss for each and every risk in excess of $300,000 but
             the  Reinsurer's  liability shall not exceed 100% of $1,700,000 for
             each and every  risk or exceed  $3,000,000  in any one  occurrence,
             subject  further  to  an  annual  aggregate  limit  of  $3,000,000.
             However,  paragraph  3(c) of the Terrorist  Activity  definition as
             defined in the DEFINITIONS Article, shall be excluded from recovery
             hereunder for the following PROPERTY KEY URBAN CENTERS:

                           PROPERTY KEY URBAN CENTERS
 ----------------------------------- --------------------------------------
 1. Atlanta, GA                                  2. Baltimore, MD
 ----------------------------------- --------------------------------------
 3. Boston, MA                                   4. Charlotte, NC
 ----------------------------------- --------------------------------------
 5. Chicago, IL                                  6. Cincinnati, OH
 ----------------------------------- --------------------------------------
 7. Cleveland, OH                                8. Columbus, OH
 ----------------------------------- --------------------------------------
 9. Dallas, TX                                   10. Denver, CO
 ----------------------------------- --------------------------------------
 11. Detroit, MI                                 12. Fort Worth, TX
 ----------------------------------- --------------------------------------
 13. Honolulu, HI                                14. Houston, TX
 ----------------------------------- --------------------------------------
 15. Kansas City MO or KS                        16. Las Vegas, NV
 ----------------------------------- --------------------------------------
 17. Long Beach, CA                              18. Los Angeles, CA
 ----------------------------------- --------------------------------------
 19. Memphis, TN                                 20. Miami, FL
 ----------------------------------- --------------------------------------
 21. Milwaukee, WI                               22. Minneapolis, MN
 ----------------------------------- --------------------------------------
 23. New Orleans, LA                             24. New York, NY
 ----------------------------------- --------------------------------------
 25. Oakland, CA                                 26. Philadelphia, PA
 ----------------------------------- --------------------------------------
 27. Phoenix, AZ                                 28. Pittsburgh, PA
 ----------------------------------- --------------------------------------
 29. Sacramento, CA                              30. San Antonio, TX
 ----------------------------------- --------------------------------------
 31. San Diego, CA                               32. San Francisco, CA
 ----------------------------------- --------------------------------------
 33. San Jose, CA                                34. Seattle, WA
 ----------------------------------- --------------------------------------
 35. St Louis, MO                                36. Tuscon, AZ
 ----------------------------------- --------------------------------------
 37. Washington, DC
 ----------------------------------- --------------------------------------

      C.    In the event of a combination  loss  involving a property risk and a
            casualty  occurrence  loss from Exhibit B, the  Company's  retention
            shall be the greater  retention  of the Line of Business  applicable
            but not to exceed to $500,000.

                                    Section 3
                                   -----------

REINSURANCE PREMIUM
-------------------

      A.    The premium for the reinsurance provided under this Exhibit shall be
            computed at the rate of 14.64% of the Company's net written  premium
            for the new and renewal  Property  business covered as of January 1,
            2003.

      B.    "Net written  premium"  shall mean the total of the Company's  gross
            premium  written during the agreement year for the lines of business
            covered hereunder,  less expense constants on admitted policies, and
            less return  premiums and  premiums  paid for  reinsurance,  if any,
            inuring to the benefit of the Agreement.

                                      -2-
<PAGE>


                                    Section 4
                                   -----------
COMMISSION
----------
The Reinsurer shall make a commission  allowance of 37.50% to the Company on the
premiums ceded to this Agreement.

                                    Section 5
                                   -----------
REPORTS AND REMITTANCES
-----------------------

      A.    The Company  will  provide the  Reinsurer  with all  necessary  data
            respecting  premiums and forward it to the Reinsurer  within 45 days
            after the close of each quarter, on forms mutually acceptable.

      B.    Any balance due the Reinsurer, shall be remitted by the Company with
            the Account  Current.  The Reinsurer shall remit any balance due the
            Company  promptly  upon  the  Reinsurer's  receipt  of  the  Account
            Current.

      C.    Payment by the  Reinsurer  of its portion of loss and loss  expenses
            paid by the  Company  will be made by the  Reinsurer  to the Company
            within 5 days after  proof of payment by the  Company is received by
            the Reinsurer.


This  Exhibit A is  attached  to and forms  part of  Reinsurance  Agreement  No.
3154-0016 issued to PENN-AMERICA INSURANCE COMPANY, PENN-STAR INSURANCE COMPANY

DATED:  March 18, 2003



                                      -3-
<PAGE>




                                                                 No. 3154-0016
                                                                  EXHIBIT B
                                    EXHIBIT B
                                    ---------

                             CASUALTY EXCESS OF LOSS
                             -----------------------

                                    Section 1
                                    ----------

      A.    BUSINESS COVERED
            ----------------

         The  Reinsurer  agrees to reimburse  the Company,  on an excess of loss
         basis,  for the amounts of ultimate  net loss which the Company may pay
         as a result of  losses  occurring  on and after  January  1,  2003,  as
         respects the Company's new and renewal policies  becoming  effective on
         and after said date, covering the Classes of Insurance set forth below,
         except as  excluded  under the  EXCLUSIONS  Article of this  Agreement,
         subject to the limitations set forth herein.

                              CLASSES OF INSURANCE
                              --------------------
                                    Casualty
                                    --------
                                General Liability
                        Commercial Multi Peril Section II
                            Businessowners Section II
                     Employer's Liability Stop Gap coverage

                  Non-owned and Hired Automobile Liability when
                written as part of Commercial Multi Peril Section
                        II or General Liability policies.

      B.    The term  "policies"  as used  herein  means each of the  Company' s
            binders,  policies and contracts providing insurance and reinsurance
            on the Classes of Insurance covered hereunder.

                                    Section 2
                                    ---------

LIMITS OF COVER
---------------

      A.    As  respects  one or more  than one of the  classes  under  Casualty
            Classes of Insurance as stated in Section 1, the Reinsurer shall not
            be liable for any loss until the Company's ultimate net loss in each
            occurrence  exceeds  $500,000 and then the Reinsurer shall be liable
            for  the  amount  of the  Company'  s  ultimate  net  loss  in  each
            occurrence in excess of $500,000 but the Reinsurer's liability shall
            not exceed 100% of $2,500,000 in any one occurrence.

      B.    As respects  Terrorist  Activity as defined  within the  DEFINITIONS
            Article,  involving  one or  more  than  one of  the  classes  under
            Casualty  Classes of Insurance as stated in Section 1, the Reinsurer
            shall not be liable for any loss until the  Company's  ultimate  net
            loss in each  occurrence  exceeds  $500,000  and then the  Reinsurer
            shall be liable for the amount of the  Company' s ultimate  net loss
            in


                                      -1-
<PAGE>


            each occurrence in excess of $500,000 but the Reinsurer's liability
            shall not exceed 100% of $2,500,000 in any one occurrence,  subject
            further to an annual aggregate limit of $2,500,000.

      C.    In the event of a  combination  loss  involving a property risk from
            Exhibit A and a casualty  occurrence,  the Company's retention shall
            be the greater retention of the Line of Business  applicable but not
            to exceed to $500,000.

                                    Section 3
                                    ---------

REINSURANCE PREMIUM
--------------------

      A.    The premium for the reinsurance provided under this Exhibit shall be
            computed at the rate of 12.29% of the Company's net written  premium
            for the new and reneal  Casualty  business  covered as of January 1,
            2003.

      B.    "Net written  premium"  shall mean the total of the Company's  gross
            premium  written during the agreement year for the lines of business
            covered hereunder,  less expense constants on admitted policies, and
            less return  premiums and  premiums  paid for  reinsurance,  if any,
            inuring to the benefit of the Agreement.

                                    Section 4
                                   -----------
COMMISSION
----------

  The  Reinsurer  shall make a commission  allowance of 37.50% to the Company on
  the premiums ceded to this Agreement.

                                    Section 5
                                   -----------
REPORTS AND REMITTANCES
-----------------------

      A.    The Company  will  provide the  Reinsurer  with all  necessary  data
            respecting  premiums and forward it to the Reinsurer  within 45 days
            after the close of each quarter, on forms mutually acceptable.

      B.    Any balance due the Reinsurer, shall be remitted by the Company with
            the Account  Current.  The Reinsurer shall remit any balance due the
            Company  promptly  upon  the  Reinsurer's  receipt  of  the  Account
            Current.

      C.    Payment by the  Reinsurer  of its portion of loss and loss  expenses
            paid by the  Company  will be made by the  Reinsurer  to the Company
            within 5 days after  proof of payment by the  Company is received by
            the Reinsurer.

                                      -2-
<PAGE>


                                    Section 6
                                   -----------

WARRANTY
--------

The  maximum  limits of  liability  for any one policy of the  Company  shall be
deemed not to exceed the following:

1.   General  Liability - $1,000,000  each  occurrence  and  $2,000,000  general
     aggregate. a) As respects Products and Completed Operations - $1,000,000 in
     the aggregate.

2.   Liquor  Liability  Coverage - $1,000,000  each  occurrence  (i.e.,  new and
     renewal Restaurant policies,  excluding Bars and Taverns, for the A, B, and
     C states as per attached  Appendix A, having liquor receipts of 40% or less
     of  total  sales,  effective  on  or  after  the  effective  date  of  this
     Agreement).

This  Exhibit B is  attached  to and forms  part of  Reinsurance  Agreement  No.
3154-0116 issued to PENN-AMERICA INSURANCE COMPANY, PENN-STAR INSURANCE COMPANY

DATED:  March 18, 2003



                                      -3-
<PAGE>


                                   APPENDIX A
                                   ----------

Class A                     Class B                    Class C
-------                     --------                   --------
Delaware                    Arkansas                   Arizona
Kansas                      California                 Georgia
Maryland                    Colorado                   Idaho
Nebraska                    Connecticut                Indiana
Nevada                      Florida                    Iowa
South Carolina              Illinois                   Maine
Virgina                     Kentucky                   Michigan
                            Louisiana                  Mississippi
                            South Dakota               Montana
                            Tennessee                  New Mexico
                            Utah                       North Dakota
                            Wisconsin                  Ohio
                                                       Oklahoma
                                                       Oregon
                                                       Washington
                                                       Wyoming


                                      -1-


<PAGE>


                       NUCLEAR INCIDENT EXCLUSION CLAUSE--
                       PHYSICAL DAMAGE--REINSURANCE--NO. 2

     (1) This Reinsurance  does not cover any loss or liability  accruing to the
         Reassured,  directly or indirectly and whether as Insurer or Reinsurer,
         from any Pool of  Insurers  or  Reinsurers  formed  for the  purpose of
         covering Atomic or Nuclear Energy risks.

     (2) Without in any way  restricting  the operation of paragraph (1) of this
         Clause,  this Reinsurance does not cover any loss or liability accruing
         to the  Reassured,  directly  or  indirectly  and whether as Insurer or
         Reinsurer,  from  any  insurance  against  Physical  Damage  (including
         business  interruption  or  consequential  loss  arising  out  of  such
         Physical Damage) to:

            I.    Nuclear reactor power plants including all auxiliary  property
                  on the site, or

            II.   Any other nuclear reactor installation, including laboratories
                  handling  radioactive  materials  in  connection  with reactor
                  installations, and "critical facilities" as such, or

            III.  Installations for fabricating  complete  fuel  elements or for
                  processing   substantial   quantities   of  "special   nuclear
                  material,"  and  for   reprocessing,   salvaging,   chemically
                  separating,  storing or disposing  of "spent"  nuclear fuel or
                  waste materials, or

            IV.   Installations  other than those  listed in  paragraph  (2) III
                  above using substantial  quantities of radioactive isotopes or
                  other products of nuclear fission.

     (3) Without in any way restricting the operations of paragraphs (1) and (2)
         hereof,  this  Reinsurance  does not  cover  any loss or  liability  by
         radioactive  contamination  accruing  to  the  Reassured,  directly  or
         indirectly,  and whether as Insurer or Reinsurer, from any insurance on
         property which is on the same site as a nuclear  reactor power plant or
         other  nuclear   installation  and  which  normally  would  be  insured
         therewith except that this paragraph (3) shall not operate:

         (a) where  Reassured  does not have  knowledge of such nuclear  reactor
         power plant or nuclear installation, or

         (b) where said insurance  contains a provision  excluding  coverage for
         damage  to   property   caused  by  or   resulting   from   radioactive
         contamination,  however  caused.  However on and after 1st January 1960
         this  sub-paragraph  (b) shall only apply provided the said radioactive
         contamination exclusion provision has been approved by the Governmental
         Authority having jurisdiction thereof.

     (4) Without in any way  restricting  the operations of paragraphs  (1), (2)
and (3)  hereof,  this  Reinsurance  does not  cover  any loss or  liability  by
radioactive contamination accruing to the Reassured, directly or indirectly, and
whether as Insurer or Reinsurer,  when such radioactive contamination is a named
hazard specifically insured against.

     (5) It is understood  and agreed that this Clause shall not extend to risks
using  radioactive  isotopes  in any form  where  the  nuclear  exposure  is not
considered by the Reassured to be the primary hazard.

     (6) The term "special nuclear  material" shall have the meaning given it in
the Atomic Energy Act of 1954 or by any law amendatory thereof.

     (7) Reassured to be sole judge of what constitutes:

         (a) substantial quantities, and

         (b) the extent of installation, plant or site.


                                      -1-
<PAGE>



     Note.--Without  in any way  restricting  the  operation  of  paragraph  (1)
hereof, it is understood and agreed that:


(a)   all policies issued by the Reassured on or before 31st December 1957 shall
      be free from the application of the other  provisions of this Clause until
      expiry date or 31st December 1960 whichever first occurs whereupon all the
      provisions of this Clause shall apply,

(b)   With  respect  to any  risk  located  in  Canada  policies  issued  by the
      Reassured  on or  before  31st  December  1958  shall  be  free  from  the
      application  of the other  provisions  of this Clause until expiry date or
      31st December 1960 whichever first occurs  whereupon all the provisions of
      this Clause shall apply.



                                      -2-
<PAGE>


       NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY - REINSURANCE -No. 1B

     (1) This reinsurance  does not cover any loss or liability  accruing to the
Reassured  as a member of, or  subscriber  to, any  association  of  insurers or
reinsurer formed for the purpose of covering nuclear energy risks or as a direct
or indirect reinsurer of any such member, subscriber or association.

     (2) Without in any way  restricting  the operation of paragraph (1) of this
Clause it is understood and agreed that for all purposes of this reinsurance all
the original  policies of the Reassured  (new,  renewal and  replacement) of the
classes  specified in Clause II of this paragraph (2) from the time specified in
Clause  III in this  paragraph  (2)  shall be deemed to  include  the  following
provision (specified as the Limited Exclusion Provision):

     Limited Exclusion Provision.*
       I. It is  agreed  that the  policy  does not apply  under  any  liability
          coverage,

           to       {  injury, sickness, disease, death or destruction
                       bodily injury or property damage
           with respect to which an insured  under the policy is also an insured
           under a nuclear  energy  liability  policy  issued by Nuclear  Energy
           Liability  Insurance  Association,  Mutual  Atomic  Energy  Liability
           Underwriters or Nuclear Insurance  Association of Canada, or would be
           an insured under any such policy for its termination  upon exhaustion
           of its limit of liability.

       II. Family  Automobile  Policies  (liability  only),  Special  Automobile
           Policies (private  passenger  automobiles,  liability only),  Farmers
           Comprehensive   Personal   Liability   Policies   (liability   only),
           Comprehensive   Personal  Liability  Policies   (liability  only)  or
           policies of similar nature;  and the liability portion of combination
           forms related to the four classes of policies  stated above,  such as
           the  Comprehensive  Dwelling  Policy  and  the  applicable  types  of
           Homeowners Policies.

       III.The  inception  dates and  thereafter  of all  original  policies  as
           described in II above,  whether new,  renewal or  replacement,  being
           policies which either

                (a) become effective on or after 1st May, 1960, or

                (b) become  effective  before  that date and contain the Limited
                    Exclusion Provision set out above;

           provided  this  paragraph  (2)  shall  not be  applicable  to  Family
           Automobile  Policies,  Special  Automobile  Policies,  or policies or
           combination policies of a similar nature,  issued by the Reassured on
           New York  risks,  until 90 days  following  approval  of the  Limited
           Exclusion Provision by the Governmental Authority having jurisdiction
           thereof.

     (3)  Except  for  those  classes  of  policies  specified  in  Clause II of
paragraph (2) and without in any way  restricting the operation of paragraph (1)
of this  Clause,  it is  understood  and agreed  that for all  purposes  of this
reinsurance the original  liability  policies of the Reassured (new, renewal and
replacement) affording the following coverages:
           Owners,  Landlords  and  Tenants  Liability,  Contractual  Liability,
           Elevator  Liability,   Owners  or  Contractors  (including  railroad)
           Protective  Liability,   Manufacturers  and  Contractors   Liability,
           Product   Liability,    Professional   and   Malpractice   Liability,
           Storekeepers  Liability,   Garage  Liability,   Automobile  Liability
           (including Massachusetts Motor Vehicle or Garage Liability)
shall be  deemed to  include,  with  respect  to such  coverages,  from the time
specified in Clause V of this paragraph (3), the following provision  (specified
as the Broad Exclusion Provision):

     Broad Exclusion Provision.*
     It is agreed that the policy does not apply:

       I. Under any Liability Coverage, { Injury,  sickness,  disease,  death or
                                          destruction to Bodily injury or
                                          property damage

                (a) with respect to which an insured under the policy is also an
                    insured under a nuclear  energy  liability  policy issued by
                    Nuclear  Energy  Liability  Insurance  Association,   Mutual
                    Atomic Energy  Liability  Underwriters or Nuclear  Insurance
                    Association of Canada, or would be an insured under any such
                    policy but for its termination  upon exhaustion of its limit
                    of liability; or


                                      -1-
<PAGE>


                (b) resulting from the hazardous  properties of nuclear material
                    and with respect to which (1) any person or  organization is
                    required to maintain  financial  protection  pursuant to the
                    Atomic Energy Act of 1954, or any law amendatory thereof, or
                    (2) the insured is, or had this policy not been issued would
                    be, entitled to indemnity from the United States of America,
                    or any agency thereof,  under any agreement  entered into by
                    the United States of America,  or any agency  thereof,  with
                    any person or organization.

     II.Under  any  Medical  Payments  Coverage,   or  under  any  Supplementary
        Payments  Provision relating


 to { immediate medical or surgical relief,  to expenses incurred with respect

      first aid,
 to   bodily injury, sickness, disease or death   resulting from the hazardous
                  of bodily injury                properties
nuclear material and arising out of the operation of nuclear facility by any
person or
organization.

      III.  Under any Liability Coverage, to { Injury, sickness,  disease, death
            or destruction Bodily injury or property damage

         resulting from the hazardous properties of nuclear material, if

                  (a)   the  nuclear  material  (1) is at any  nuclear  facility
                        owned by, or  operated by or on behalf of, an insured or
                        (2) has been discharged or dispersed therefrom;

                  (b)   the nuclear material is contained in spent fuel or waste
                        at any time possessed, handled, used, processed, stored,
                        transported  or  disposed  of  by  or  on  behalf  of an
                        insured; or

                  (c)   the { injury,  sickness,  disease,  death or destruction
                              bodily injury or property damage

                    arises out of the  furnishing  by an  insured  of  services,
                    materials,   parts  or  equipment  in  connection  with  the
                    planning, construction, maintenance, operation or use of any
                    nuclear facility, but if such facility is located within the
                    United States of America, its territories, or possessions or
                    Canada, this exclusion (c) applies only to

         {  injury to or destruction of property at such nuclear facility.
            property damage to such nuclear facility and any property thereat.

     IV. As used in this endorsement:

         "hazardous   properties"  include   radioactive,   toxic  or  explosive
         properties;  "nuclear materials" means source material, special nuclear
         material or byproduct  material;  "source  material,"  "special nuclear
         material,"  "byproduct  material"  have the meanings  given them in the
         Atomic  Energy  Act of 1954 or in any law  amendatory  thereof;  "spent
         fuel" means any fuel element or fuel component,  solid or liquid, which
         has been used or exposed to  radiation  in a nuclear  reactor;  "waste"
         means any waste material (1) containing  byproduct  material other than
         the tailings or wastes produced by the extraction or  concentration  of
         uranium  or thorium  from any ore  processed  primarily  for its source
         material  content and (2) resulting from the operation by any person or
         organization of any nuclear facility  included within the definition of
         nuclear facility under paragraph (a) or (b) thereof; "nuclear facility"
         means

                (a) any nuclear reactor,

                (b) any equipment or device  designed or used for (1) separating
                    the  isotopes of uranium or  plutonium,  (2)  processing  or
                    utilizing  spent  fuel,  or  (3)  handling,   processing  or
                    packaging waste,

                (c) any equipment or device used for the processing, fabricating
                    or alloying of special  nuclear  material if at any time the
                    total amount of such  material in the custody of the insured
                    at the  premises  where such  equipment or device is located
                    consists of or contains  more than 25 grams of  plutonium or
                    uranium  233 or any  combination  thereof,  or more than 250
                    grams of uranium 235,

                (d) any structure, basin, excavation, premises or place prepared
                    or used for the storage or disposal of waste,



                                      -2-
<PAGE>


         and  includes the site on which any of the  foregoing  is located,  all
         operations  conducted  on such  site  and all  premises  used  for such
         operations;  "nuclear reactor" means any apparatus  designed or used to
         sustain  nuclear  fission in a  self-supporting  chain  reaction  or to
         contain a critical mass of fissionable material; With respect to injury
         to or  destruction  of  property,  the word  "injury" or  "destruction"
         includes all forms of radioactive contamination of property.  "Property
         damage" includes all forms of radioactive contamination of property.

     V.  The inception dates and thereafter of all original  policies  affording
         coverages  specified in this  paragraph  (3),  whether new,  renewal or
         replacement, being policies which become effective on or after 1st May,
         1960, provided this paragraph (3) shall not be applicable to

                (i) Garage and  Automobile  Policies  issued by the Reassured on
                    New York risks, or

                (ii)statutory  liability  insurance  required  under Chapter 90,
                    General Laws of Massachusetts,
         until 90 days following  approval of the Broad  Exclusion  Provision by
         the Governmental Authority having jurisdiction thereof.

     (4) Without in any way  restricting  the operation of paragraph (1) of this
Clause,  it is understood  and agreed that  paragraphs (2) and (3) above are not
applicable  to original  liability  policies of the Reassured in Canada and that
with respect to such policies this Clause shall be deemed to include the Nuclear
Energy  Liability  Exclusion  Provisions  adopted by the Canadian  Underwriters'
Association or the Independent Insurance Conference of Canada.


--------------------------------------------------------------------------------

     * NOTE: The words printed in italics in the Limited Exclusion Provision and
in the Broad  Exclusion  Provision  shall  apply only in  relation  to  original
liability  policies  which  include a  Limited  Exclusion  Provision  or a Broad
Exclusion Provision containing those words.



                                      -3-
<PAGE>



        NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE AND LIABILITY
              (BOILER AND MACHINERY POLICIES) - REINSURANCE - No. 3

         (1) This reinsurance  does not cover any loss or liability  accruing to
the Reassured as a member of, or subscriber  to, any  association of insurers or
reinsurers  formed for the  purpose of  covering  nuclear  energy  risks or as a
direct or indirect reinsurer of any such member, subscriber or association.

         (2) Without in any way  restricting  the  operation of paragraph (1) of
this  Clause  it is  understood  and  agreed  that  for  all  purposes  of  this
reinsurance  all  original  Boiler  and  Machinery  Insurance  contracts  of the
Reassured  (new,  renewal  and  replacement)  shall be  deemed  to  include  the
following provisions of this paragraph.

                This  Policy  does not apply to "loss,"  whether it be direct or
                indirect, proximate or remote

                (a)   from an Accident  caused directly or indirectly by nuclear
                      reaction,  nuclear radiation or radioactive contamination,
                      all whether controlled or uncontrolled; or

                (b)   from nuclear  reaction,  nuclear  radiation or radioactive
                      contamination,  all whether  controlled  or  uncontrolled,
                      caused  directly  or  indirectly  by,  contributed  to  or
                      aggravated by an Accident.

         (3)  However,  it is  agreed  that  loss  arising  out  of  the  use of
Radioactive  Isotopes  in any  form  is not  hereby  excluded  from  reinsurance
protection.

         (4) Without in any way  restricting  the  operation  of  paragraph  (1)
hereof, it is understood and agreed that

                (a)   all policies  issued by the Reassured to become  effective
                      on or  before  30th  April,  1958,  shall be free from the
                      application  of the other  provisions of this Clause until
                      expiry date or 30th April,  1961,  whichever first occurs,
                      whereupon all the provisions of this Clause shall apply,

                (b)   with respect to any risk located in Canada policies issued
                      by the  Reassured  to become  effective  on or before 31st
                      December,  1958, shall be free from the application of the
                      other  provisions of this Clause until expiry date or 31st
                      December,  1960, whichever first occurs, whereupon all the
                      provisions of this Clause shall apply.







 No. 3154-0016

                 To get your agency production figures, visit www.penn-link.com
                                                              -----------------

Visit our website at www.penn-america.com
                     --------------------


PA-2001-26
November 7, 2001
TO OUR AGENTS

                             NEW CONTRACTOR CLASSES,
                           CONTRACTOR APPLICATION, AND
                            EXCLUSIONARY ENDORSEMENT

I.       Introduction
            We have  listened  to  your  ideas,  investigated  the  market,  and
            developed the following  guidelines for writing  contractors in your
            states:

II.      Contracting Guidelines

A.   Contractor  Classes:   While  construction  defect  claims  and  litigation
     continue  to  arise,  there  are  states  where we think  that this type of
     business can still be written  profitably - assuming the right mix of legal
     atmosphere in the state and careful underwriting and monitoring.

     (1)  Contractor Classes - See the attached "Contracting Risks: Underwriting
          Guidelines",  which  we ask that you  implement  immediately.  You can
          insert these guidelines in your  Penn-America  Agency Manual at either
          Section  3,   "Classification   Authority   Table",   or  Section  10,
          "Underwriting Position Papers - Contracting Risks".

     (2)  You can start  writing  these new classes in the surplus lines company
          in your state(s).

     (3)  In California  and  Pennsylvania,  you must write these new classes in
          Penn-America  Insurance Company as we have no surplus lines carrier in
          these states.

     (4)  In the "High Hazard"  states  (i.e.,  Arizona,  California,  Colorado,
          Nevada,  Oregon, Texas,  Washington,  and New York - as defined in the
          attached  Guidelines),  you can write the  following  three  classes -
          Fence  Erection  Contractors,  Painting  Contractors  and  Water  Main
          Connection  Construction.  The classes  available  in the "Low Hazard"
          states are listed in the attached Guidelines.

B. New Contractor Application - PA01-416 (11/01):

     (1)  The insured must complete and sign this application for all contractor
          risks authorized in your state(s).

     (2)  Please begin using this application immediately.

     (3)  See attached application.

     (4)  You  should  insert  this  form  in  numerical  order  in  your  Forms
          Portfolio, Section 6, "PA-Series Sample Forms".

<PAGE>




C.                New  Exclusionary  Endorsement - Condominium,  Townhouse,  Row
                  House or Tract Home  Construction  Project  Exclusion  - S2070
                  (11/01):

     (1) Attach to all contractor classes on a non-admitted basis.

     (2)  Please  begin  using  this  exclusionary  endorsement  immediately  on
          non-admitted  business.  We are commencing a filings campaign and will
          advise  you of the  approval  of  such  filings  for  use on  admitted
          business as approvals occur.  This exclusion should be attached to all
          contractor risks no later than January 1, 2002.

     (3)  See attached exclusion.

     (4)  You  should  insert  this  form  in  numerical  order  in  your  Forms
          Portfolio, Section 7, "S-Series Sample Forms".

III. EZ Rater - We are almost  finished with the loading and  publication  of EZ
     Raters for your use in rating new and renewal business.  The EZ Raters will
     include the new contractor  classes  attached to this  Penn-Amerigram.  You
     should  receive your copy of the EZ Raters on or about December 1st. In the
     meantime,  you can rate these  risks  using  current ISO loss costs and our
     loss cost multipliers published in your State.

IV.  Future  Developments  - We  will  add the new  Contractor  Guidelines,  the
     Contractor  Application  and the new  exclusionary  endorsement to the next
     Agency Manual change.

V.   Questions/Comments

     A.   If you have any underwriting,  coverage or product  questions,  please
          contact your underwriter.

     B.   To receive a block of pre-assigned PAC policy numbers, contact: Sheila
          McNamee by phone: (215) 443-3663,  fax: (800) --- 882-8569,  or email:
          mcnamee@penn-america.com.

     C.   For support in updating your electronic forms libraries (FormMaker and
          others),  contact your Senior  Analyst - Marketing and  Communications
          Technology:

 Linda Cameron      phone:  215-773-7761       cameron@penn-america.com
 Donna Siver        phone:  215-443-3610       siver@penn-america.com



         -------------------------------
         Thomas J. Cannon, Jr.
         Vice President - Underwriting


<PAGE>

   CONTRACTING RISKS - UNDERWRITING GUIDELINES


      A. LINE OF BUSINESS
         ----------------

General Liability

     o    Premises/Operations
     o    Products/Completed Operations

      B. STATE GRADES
         ------------

We have  assigned a grade of High  Hazard (HH) or Low Hazard (LH) to each state.
In those states where we know the legal  climate  promotes  construction  defect
claims, we have assigned a grade of HH.

The High Hazard states are:

-------------------------- ----------------------- ----------------------
Arizona                    Nevada                  Washington
-------------------------- ----------------------- ----------------------
California                 Oregon                  New York
-------------------------- ----------------------- ----------------------
Colorado                   Texas
-------------------------- ----------------------- ----------------------

All other states are "Low Hazard".  We will now write contractors subject to the
guidelines that follow.

      C. ELIGIBLE CLASSES
         ----------------

You may bind contractors as shown on the two tables attached:

     o    "Eligible E-Z Rater Artisan-Contractors Classes - `Low' Hazard States"

     o    "Eligible and Prohibited Contractors Classes - `High' Hazard States"

      D. LIMITS OF INSURANCE
         -------------------

Under  the  General  Liability  Program,  you  can  bind up to $1  million  each
occurrence, $2 million general aggregate and $2 million products aggregate.

Under the Umbrella  Program,  you can bind up to $2 million each occurrence,  $2
million general aggregate and $2 million products aggregate.

Under  the  Increased  Limits  Program,  you  can  bind  up to $3  million  each
occurrence, $3 million general aggregate and $3 million products aggregate.

Maximum   binding   authority   limits  of  all  coverage  layers  written  with
Penn-America - primary, excess (including our Increased General Liability Limits
Program)  and  umbrella - cannot  exceed $3 million  per  occurrence/$3  million
general aggregate.

        E. PROPERTY DAMAGE LIABILITY DEDUCTIBLE
            ------------------------------------

Minimum deductible is $500 per occurrence.


                                        1
<PAGE>


        F. UNDERWRITING ELIGIBILITY
            ------------------------

     o    For  contractors  who do framing:  no more than five homes per year. o
          Maximum sales cannot exceed $1 million per year. o Contractors  cannot
          subcontract out more than 25% of their work. o Contractors  performing
          commercial jobs.
     o    Contractors  performing  work on  custom-built  homes or "spec"  homes
          (built without a contracted  buyer).  o Contractor must have a minimum
          of three  years in business  or three  years  experience  in the trade
          being insured.

        G. SUBMIT TO BINDING UNIT
            ----------------------

     o    Contractors with sales over $1 million.
     o    Contractors  with annual  premium (at "manual") over $15,000 and up to
          $25,000.
     o    Contractors  with two or more losses in the last three  years,  or one
          loss over $5,000 in the last three years.
     o    New ventures with less than three years  experience in the trade being
          insured.
     o    Risks working on buildings over three stories.  o Any exception to the
          program guidelines.

        H. SUBMIT TO SUBMIT UNIT
            ---------------------

     o    All   contractor   classes   identified   as  "SS"  in   Section  3  -
          Classification Authority Table - of the Agency Manual (and also on the
          attached lists).
     o    Contractors with annual premium (at "manual") over $25,000.

      I. PROHIBITED
         ----------

     o    All contractor classes identified as "P" in Section 3 - Classification
          Authority  Table - of the  Agency  Manual  (and  also on the  attached
          lists).
     o    New ventures with no prior experience.
     o    Construction Managers,  Executive  Supervisors,  Paper Contractors and
          Real Estate Developers.
     o    Carpenters framing-up more than five homes per year.
     o    Contractors with sales in excess of $2.5 million.
     o    Contractors working on condominium, townhouse, row house or tract home
          projects.
     o    Contractors  who  subcontract  out  more  than 25% of  their  work.
     o    Requests to show a general contractor as additional insured,  when the
          project is a condominium,  townhouse, row house or tract home project.
     o    Requests for Blanket Additional Insured Endorsement.

                                        2

<PAGE>


      J. BINDING AUTHORITY - UNDERWRITING REQUIREMENTS
         ---------------------------------------------

     o    All new policies must be written in the Surplus  Lines  (non-admitted)
          carrier  approved in your state.  Check your State Exception Pages for
          the surplus lines company in your state.

     o    Use the same policy number on renewal.

     o    Premiums  are  "minimum  and  deposit"  with a 50%  minimum  earned on
          cancellation,   100%  earned  on  audit  (attach  S1003,  Minimum  and
          Deposit).

     o    Insured   must   complete   and  sign  a   Penn-America   Contractors'
          Application.   See  attached  Contractor  Application  Form  [PA01-416
          (11/01)].

     o    Order   inspection   reports  on  all  accounts  (except  for  one-man
          operations). We must receive them within 45 says of inception.

     o    We will  audit all  contractors  annually  to verify  sales,  payroll,
          classes and exposures.

     o    All  requests  for  "additional  insured"  (AI)  endorsements  must be
          documented,  defining the  relationship of the AI to the named insured
          and the particular job being performed.  Review all AI requests before
          adding them to the policy. Use Additional Insured - Owners, Lessees or
          Contractors - Scheduled  Person or  Organization,  CG 20 10 03 97 - do
          not use an earlier edition date.

     o    Any  amendment in the wording on an AI  endorsement  must be submitted
          and approved by us in advance.

     o    Submit  in  advance  any   requests   for   amendment  of  wording  on
          Certificates of Insurance.

     o    Get  certificates  of insurance  verifying  equal limits to our policy
          from all subcontractors.  Our insured should be added as an additional
          insured on any subcontractor's policy.

      K. PRICING
         -------

Use the rates  published in the Surplus Lines E-Z Rater as the minimum rate. For
those  contractors  classes  not listed in the E-Z Rater,  use  current ISO loss
costs and our published Loss Cost Multiplier for our Surplus Lines carrier.

If  otherwise  acceptable,  risks  with  prior  losses  (one  loss up to  $5,000
incurred) are to be surcharged a minimum of 10%.


                                        3

<PAGE>


      L. REQUIRED FORMS AND ENDORSEMENTS
         -------------------------------

CG0057    Amendment of Insuring Agreement - Known Injury or Damage

S2006     Independent Contractors Conditional Endorsement
S2041     Classification Limitation Endorsement

S2047     Exclusion - Property Damage Claims in Progress
S2066     Exclusion - Injury to Employee or Independent Contractor
S2067     Exclusion - EIFS Exclusion
S2068     Mold Exclusion
S2070     Exclusion - Tract Homes, Condominiums and Townhouses


      M. PROHIBITED ENDORSEMENTS
         -----------------------

CG2404   Waiver or Transfer of Rights of Recovery Against Others to Us
S2056    Blanket Additional Insured Endorsement
S2057    Additional Insured - Primary Coverage

                                        4

       ELIGIBLE AND PROHIBITED CONTRACTORS CLASSES - "HIGH" HAZARD STATES
            ( All Contractors Classes not listed are PROHIBITED also)

"High" Hazard States are:
--------------------------------------------------------------------------------
Arizona                              Nevada                    Texas
--------------------------------------------------------------------------------
California                           Oregon                    Washington
--------------------------------------------------------------------------------
Colorado                             New York
---------------------------------------------------------------
<TABLE>
<CAPTION>


 B=Binding Authority SB=Submit to Binding Authority Underwriter SS=Submit to edbmit Unit P=Prohibited
 11/01/01                                                                         + = Products Included
                                                                                      Binding Authority
                                                                                 --------------------------
ISO Class         CLASS DEFINITION                                                  Prem     Prods       Underwriting Comments
Code                                                                                Ops

===============================================================================================================================
<S>   <C>
      90089       ADVERTISING SIGN CO OUTDOOR                                          B        +
-------------------------------------------------------------------------------------------------------------------------------
      91111       AIR CONDITIONING INSTAL/SERV/REP                                     B        B      Yes
-------------------------------------------------------------------------------------------------------------------------------
      91127       ALARM/ALARM SYSTEM INST/SERV/REPAIR                                  B        B      Yes
-------------------------------------------------------------------------------------------------------------------------------
      91135       ANALYTICAL CHEMISTS                                                  SS       P
-------------------------------------------------------------------------------------------------------------------------------
      91150       APPLIANCE/ACCESS-INST/SERV/REPR/COMM                                 B       SS
-------------------------------------------------------------------------------------------------------------------------------
      91155       APPLIANCE/ACCESS INST/SERV/REPR HOUSE                                B        B      Yes
-------------------------------------------------------------------------------------------------------------------------------
      91175       AUCTIONEER -LIVESTOCK AWAY FROM PREMISES                             SS       +
-------------------------------------------------------------------------------------------------------------------------------
      91177       AUCTIONEER SALES AWAY FROM PREMISE                                   SS       +
-------------------------------------------------------------------------------------------------------------------------------
      91179       AUCTION-ON PREMISES OWN RENT INS                                     B        +
-------------------------------------------------------------------------------------------------------------------------------
      91190       AUTOMOBILE DISMANTLING                                               SS      SS
-------------------------------------------------------------------------------------------------------------------------------
      91200       BLACKSMITHING                                                        B        +
-------------------------------------------------------------------------------------------------------------------------------
      91315       CABLE/SUBSCRIPTION TV COMPANIES                                      B        +
-------------------------------------------------------------------------------------------------------------------------------
      91340       CARPENTRY - RESIDENTIAL                                              P        P
-------------------------------------------------------------------------------------------------------------------------------
      91341       CARPENTRY - INTERIOR                                                 P        P
-------------------------------------------------------------------------------------------------------------------------------
      91342       CARPENTRY, NOC                                                       P        P
-------------------------------------------------------------------------------------------------------------------------------
      91343       CARPENTRY - SHOP ONLY                                                P        P
-------------------------------------------------------------------------------------------------------------------------------
      91405       CARPET RUG FURNITURE UPHOLSTERY CLEAN                                B        +      Yes
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
      91436       CEILING OR WALL INSTALLATION - METAL                                 B        B      Yes
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
      91481       CHIMNEY CLEANING                                                     B        +      Yes
-------------------------------------------------------------------------------------------------------------------------------
      91523       CLEANING - OUTSIDE SURFACE BLDG                                      B        B      Yes
-------------------------------------------------------------------------------------------------------------------------------
      91547       COMMISSARY WORK                                                      B        +
-------------------------------------------------------------------------------------------------------------------------------


<PAGE>

      91551       COMMUNICATION EQUIPMENT INSTALL                                      SS      SS
-------------------------------------------------------------------------------------------------------------------------------
      91555       COMPUTER SERVICE OR REPAIR                                           B        B      Yes
-------------------------------------------------------------------------------------------------------------------------------
      91560       CONCRETE CONSTRUCTION                                                P        P
-------------------------------------------------------------------------------------------------------------------------------
      91577       CONDUIT CONSTRUCTION FOR CABLE                                       B        B
-------------------------------------------------------------------------------------------------------------------------------
      94444       CONTRACTORS, NOC                                                     P        P
-------------------------------------------------------------------------------------------------------------------------------
      91580       CONTRACTORS, EXEC. SUPV. (GEN. CONTRS.)                              P        P
-------------------------------------------------------------------------------------------------------------------------------
      91583       CONTRACTORS - SUB-WORK, 1, 2 FAM DWGS                                B        B
-------------------------------------------------------------------------------------------------------------------------------
      91581       CONTRACTORS - SUB-WORK, NOT BLDGS                                    B        B
-------------------------------------------------------------------------------------------------------------------------------
      91584       CONTRACTORS - SUB-WORK, INDUSTRIAL                                   SS      SS
-------------------------------------------------------------------------------------------------------------------------------
      91585       CONTRACTORS - SUB-WORK, BUILDINGS                                    B        B      Yes
-------------------------------------------------------------------------------------------------------------------------------
      91589       CONTRACTORS STREET HWY CONSTRUCT                                     SS      SS
-------------------------------------------------------------------------------------------------------------------------------
      91590       CONTRACTORS PERMANENT YARDS                                          B        +
-------------------------------------------------------------------------------------------------------------------------------
      91629       DEBRIS REMOVAL, CONSTRUCTION SITE                                    B        B
-------------------------------------------------------------------------------------------------------------------------------
      52134       DOOR OR WINDOW MANUFACTURING                                         P        P
-------------------------------------------------------------------------------------------------------------------------------
      52315       DOOR OR WINDOW MFG - WOOD                                            P        P
-------------------------------------------------------------------------------------------------------------------------------
      91746       DOOR OR WINDOW INSTALLATION (METAL)                                  P        P
-------------------------------------------------------------------------------------------------------------------------------
      92102       DRILLING WATER                                                       SS      SS
-------------------------------------------------------------------------------------------------------------------------------
      92215       DRIVEWAY, PARKING LOT, SIDEWALK PAVING                               P        P
-------------------------------------------------------------------------------------------------------------------------------
      92338       DRY WALL OR WALL BOARD INSULATION                                    P        P
-------------------------------------------------------------------------------------------------------------------------------
      92451       ELECTRICAL APPARATUS INSTALL, SVC. REP.                              B       SS
-------------------------------------------------------------------------------------------------------------------------------
      92478       ELECTRICAL WORK WITHIN BUILDING                                      B        B      Yes
-------------------------------------------------------------------------------------------------------------------------------
      92663       ENGINEERS & ARCHITECTS                                               SS       +
-------------------------------------------------------------------------------------------------------------------------------
      94007       EXCAVATION                                                           P        P
-------------------------------------------------------------------------------------------------------------------------------
      94099       EXPRESS COMPANIES                                                    B        +
-------------------------------------------------------------------------------------------------------------------------------
      94276       FENCE ERECTION CONTRACTORS                                           B        B      Yes
-------------------------------------------------------------------------------------------------------------------------------
      94304       FIRE EXTINGUISHER SERV REFILL TESTING                                SS      SS
-------------------------------------------------------------------------------------------------------------------------------
      94381       FIRE SUPPRESSIONS SYSTEMS                                            SS      SS
-------------------------------------------------------------------------------------------------------------------------------
      94569       FLOOR COVER INSTALLATION, NOT CERAMIC                                B        B      Yes
-------------------------------------------------------------------------------------------------------------------------------
      94590       FLOOR WAXING                                                         B        +      Yes
-------------------------------------------------------------------------------------------------------------------------------
      94617       FREIGHT FORWARDER, HANDLER NOC                                       SS       +
-------------------------------------------------------------------------------------------------------------------------------
      95124       FURNITURE, FIXTURES INSTALL. (METAL, WOOD)                           B        B
-------------------------------------------------------------------------------------------------------------------------------
      95233       GARBAGE, ASH, REFUSE COLLECTING                                      SS       +
-------------------------------------------------------------------------------------------------------------------------------

<PAGE>


      13590       GLAZIERS & GLASS DEALERS                                             P        P
-------------------------------------------------------------------------------------------------------------------------------
      95410       GRADING OF LAND                                                      P        P
-------------------------------------------------------------------------------------------------------------------------------
      95487       GREENHOUSE ERECTION                                                  B        B
-------------------------------------------------------------------------------------------------------------------------------
      95505       GUNITING OR SHOT-CRETE                                               SS      SS
-------------------------------------------------------------------------------------------------------------------------------
      95625       HANDYMEN                                                             B        B      Yes
-------------------------------------------------------------------------------------------------------------------------------
      95647       HEATING AIR/COND SYS EQUIP (NO LP GAS)                               B        B      Yes
-------------------------------------------------------------------------------------------------------------------------------
      95648       HEATING AIR/CONDITIONING SYSTEM EQUIP                                SS      SS
-------------------------------------------------------------------------------------------------------------------------------
      96053       HOUSE FURNISHING INSTALLATION NOC                                    B        B      Yes
-------------------------------------------------------------------------------------------------------------------------------
      96317       INSPECTION APPRAISAL COS (VALUATION)                                 SS       +
-------------------------------------------------------------------------------------------------------------------------------
      96410       INSULATION WORK - MINERAL                                            SS      SS
-------------------------------------------------------------------------------------------------------------------------------
      96409       INSULATION WORK - PLASTIC OR ORGANIC (SOLID)                         SS      SS
-------------------------------------------------------------------------------------------------------------------------------
      96611       INTERIOR DECORATORS                                                  B        B      Yes
-------------------------------------------------------------------------------------------------------------------------------
      96816       JANITORIAL SERVICES                                                  B        +      Yes
-------------------------------------------------------------------------------------------------------------------------------
      97002       LABS, RESEARCH DEVELOP TEST PRF                                      SS      SS
-------------------------------------------------------------------------------------------------------------------------------
      97003       LABS, RESEARCH DEVELOP TEST N/PRF                                    SS      SS
-------------------------------------------------------------------------------------------------------------------------------
      97047       LANDSCAPE GARDENING                                                  B        +      Yes
-------------------------------------------------------------------------------------------------------------------------------
      97050       LAWN CARE                                                            B        +      Yes
-------------------------------------------------------------------------------------------------------------------------------
      97111       LOGGING AND LUMBERING                                                SS       +
-------------------------------------------------------------------------------------------------------------------------------
      97220       MACHINE SHOPS NOC                                                    B       SS
-------------------------------------------------------------------------------------------------------------------------------
      97221       MACHINE EQUIPMENT FARM INSTALL ETC                                   SS      SS
-------------------------------------------------------------------------------------------------------------------------------
      97222       MACHINE EQUIPMENT INDUSTRIAL                                         SS      SS
-------------------------------------------------------------------------------------------------------------------------------
      97223       MACHINE EQUIPMENT INSTALL NOC                                        SS      SS
-------------------------------------------------------------------------------------------------------------------------------
      97447       MASONRY                                                              P        P
-------------------------------------------------------------------------------------------------------------------------------
      97650       METAL ERECTION DECORATVE ARTIST                                      B        B      Yes
-------------------------------------------------------------------------------------------------------------------------------
      97651       METAL ERECTION - FRAME IRONWORK OUTSIDE                              P        P
-------------------------------------------------------------------------------------------------------------------------------
      97652       METAL ERECTION DWELLINGS UP TO 2 STYS.                               P        P
-------------------------------------------------------------------------------------------------------------------------------
      97653       METAL ERECTION - NON-STRUCTURAL                                      P        P
-------------------------------------------------------------------------------------------------------------------------------
      97655       METAL ERECTION - STRUCTURAL                                          P        P
-------------------------------------------------------------------------------------------------------------------------------
      98090       MOTION PICTURE DEVELOP PRINTING                                      B        +
-------------------------------------------------------------------------------------------------------------------------------
      98091       MOTION PICTURE DISTRIB EXCHANGE                                      B        +
-------------------------------------------------------------------------------------------------------------------------------
      98111       OFFICE MACHINE APPLIANCE REPAIR                                      B        +      Yes
-------------------------------------------------------------------------------------------------------------------------------
      98257       ORCHARD VINEYARD RUN BY CONTRACTOR                                   SS       +
-------------------------------------------------------------------------------------------------------------------------------


<PAGE>

      98303       PAINTING EXTERIOR >3 STORIES                                         SS      SS
-------------------------------------------------------------------------------------------------------------------------------
      98304       PAINTING EXTERIOR UP TO 3 STORIES                                    B        B      Yes
-------------------------------------------------------------------------------------------------------------------------------
      98305       PAINTING INTERIOR                                                    B        B      Yes
-------------------------------------------------------------------------------------------------------------------------------
      98308       PAINTING SHOP ONLY                                                   B        B      Yes
-------------------------------------------------------------------------------------------------------------------------------
      98344       PAPERHANGING                                                         B        B      Yes
-------------------------------------------------------------------------------------------------------------------------------
      98405       PIANO TUNING                                                         B        +      Yes
-------------------------------------------------------------------------------------------------------------------------------
      98449       PLASTERING OR STUCCO WORK                                            P        B
-------------------------------------------------------------------------------------------------------------------------------
      98482       PLUMBING COMMERCIAL, INDUSTRIAL                                      B        B      Yes
-------------------------------------------------------------------------------------------------------------------------------
      98483       PLUMBING RESIDENTIAL, DOMESTIC                                       P        P
-------------------------------------------------------------------------------------------------------------------------------
      98502       PREFAB BUILDING ERECTION                                             P        P
-------------------------------------------------------------------------------------------------------------------------------
      98597       RADIO OR TV BROADCASTING PROFIT                                      B        +
-------------------------------------------------------------------------------------------------------------------------------
      98598       RADIO TV BROADCASTING NOT PROF                                       B        +
-------------------------------------------------------------------------------------------------------------------------------
      98636       REFRIGERATION SYSTEM EQUIP INSTALL ETC                               B        B      Yes
-------------------------------------------------------------------------------------------------------------------------------
      98640       RENOVATING OUTSIDE SURFACES OF BLDGS                                 B        +      Yes
-------------------------------------------------------------------------------------------------------------------------------
      98658       RIGGING                                                              SS       +
-------------------------------------------------------------------------------------------------------------------------------
      98677       ROOFING - COMMERCIAL                                                 P        P
-------------------------------------------------------------------------------------------------------------------------------
      98678       ROOFING - RESIDENTIAL                                                P        P
-------------------------------------------------------------------------------------------------------------------------------
      98698       SALVAGE OPERATIONS NOC                                               SS      SS
-------------------------------------------------------------------------------------------------------------------------------
      98699       SALVAGE OPERATE REMOVAL ETC                                          SS      SS
-------------------------------------------------------------------------------------------------------------------------------
      98705       SANDBLASTING                                                         SS       +
-------------------------------------------------------------------------------------------------------------------------------
      98710       SAND OR GRAVEL DIGGING                                               SS       +
-------------------------------------------------------------------------------------------------------------------------------
      98805       SEPTIC TANK SYSTEMS CLEANING                                         B        B      Yes
-------------------------------------------------------------------------------------------------------------------------------
      98806       SEPTIC TANK SYSTEMS INSTAL, SVC. REP.                                B        B
-------------------------------------------------------------------------------------------------------------------------------
      98813       SEWER CLEANING                                                       SS      SS
-------------------------------------------------------------------------------------------------------------------------------
      98820       SEWER MAINS OR CONNECTIONS CONSTR.                                   B        B
-------------------------------------------------------------------------------------------------------------------------------
      98884       SHEET METAL WORK - OUTSIDE                                           P        P
-------------------------------------------------------------------------------------------------------------------------------
      98967       SIDING INSTALLATION                                                  P        P
-------------------------------------------------------------------------------------------------------------------------------
      98993       SIGN ERECTION INSTALL REPAIR                                         B        B      Yes
-------------------------------------------------------------------------------------------------------------------------------
      99003       SIGN PAINTING, LETTERING INSIDE BLDG                                 B        B      Yes
-------------------------------------------------------------------------------------------------------------------------------
      99004       SIGN PAINTING, LETTERING BLDG, STRUCTURE                             B        B      Yes
-------------------------------------------------------------------------------------------------------------------------------
      99303       SNOW REMOVAL, PARKING LOT & DRIVEWAY                                 B        B      Yes
-------------------------------------------------------------------------------------------------------------------------------
      99321       STREET, ROAD PAVING REPAVING ETC.                                    SS      SS
-------------------------------------------------------------------------------------------------------------------------------

<PAGE>


      99471       SURVEYING - LAND (NO CONSTRUCTION)                                   B        B
-------------------------------------------------------------------------------------------------------------------------------
      99505       SWIMMING POOL SERVICING                                              B        +      Yes
-------------------------------------------------------------------------------------------------------------------------------
      99506       SWIM POOL INSTALL SERV REPAIR                                        SS       +
-------------------------------------------------------------------------------------------------------------------------------
      99507       SWIM POOL INSTALL SERV BELOW GR                                      SS       +
-------------------------------------------------------------------------------------------------------------------------------
      99600       TELECOMMUNICATION SERVICE PROVIDER                                   SS       +
-------------------------------------------------------------------------------------------------------------------------------
      99613       TELEPHONE/ CABLE TV LINE CONSTRUCTION                                B        B
-------------------------------------------------------------------------------------------------------------------------------
      99620       TELEPRODUCTION STUDIOS                                               B        +
-------------------------------------------------------------------------------------------------------------------------------
      99650       TV RADIO RECEIVING SET INSTALLING                                    B        B      Yes
-------------------------------------------------------------------------------------------------------------------------------
      99709       TENT OR CANVAS GOODS-ERECTION                                        B        B
-------------------------------------------------------------------------------------------------------------------------------
      99718       THEATRICAL COMPANIES                                                 SS       +
-------------------------------------------------------------------------------------------------------------------------------
      99746       TILE, STONE, MARBLE, TERRAZO, MOSAIC WORK                            B        B      Yes
-------------------------------------------------------------------------------------------------------------------------------
      99777       TREE PRUNING, DUSTING, SPRAYING ETC                                  B        +      Yes
-------------------------------------------------------------------------------------------------------------------------------
      99793       TRUCKERS                                                             B        +
-------------------------------------------------------------------------------------------------------------------------------
      99826       UPHOLSTERING NOC                                                     B        B      Yes
-------------------------------------------------------------------------------------------------------------------------------
      99827       UPHOLSTERING SHOP ONLY                                               B        B      Yes
-------------------------------------------------------------------------------------------------------------------------------
      99851       VETERINARIAN VETERINARY HOSP                                         B        +
-------------------------------------------------------------------------------------------------------------------------------
      99917       WAREHOUSE COLD STORAGE PUBLIC                                        B        +
-------------------------------------------------------------------------------------------------------------------------------
      99938       WAREHOUSES NOC                                                       B        +
-------------------------------------------------------------------------------------------------------------------------------
      99946       WATER MAIN CONNECTION CONSTRUCTION                                   B        B
-------------------------------------------------------------------------------------------------------------------------------
      99948       WATER SOFTENING EQUIPMENT INSTALLING                                 B        B      Yes
-------------------------------------------------------------------------------------------------------------------------------
      99969       WELDING, CUTTING                                                     B       SS
-------------------------------------------------------------------------------------------------------------------------------
      99952       WATERPROOFING - PRESSURE APPARATUS                                   B        B
-------------------------------------------------------------------------------------------------------------------------------
      99953       WATERPROOFING - TROWEL, EXTERIOR                                     SS      SS
-------------------------------------------------------------------------------------------------------------------------------
      99954       WATERPROOFING - TROWEL, INTERIOR                                     SS      SS
-------------------------------------------------------------------------------------------------------------------------------
      99955       WATERPROOFING, NOC                                                   B        B
-------------------------------------------------------------------------------------------------------------------------------
      99975       WINDOW CLEANING                                                      B        +      Yes
-------------------------------------------------------------------------------------------------------------------------------
      91342       WINDOW INSTALLATION - WOOD (CARPENTRY)                               B        B
-------------------------------------------------------------------------------------------------------------------------------
      99986       WRECKING BLDG STRUCTURES NOC                                         B        +
-------------------------------------------------------------------------------------------------------------------------------
      99987       WRECKING NOT EXCEED 3 STORIES                                        B        +
-------------------------------------------------------------------------------------------------------------------------------

<PAGE>



        ELIGIBLE AND PROHIBITED CONTRACTORS CLASSES - "LOW" HAZARD STATES
            ( All Contractors Classes not listed are PROHIBITED also)
 B=Binding Authority SB=Submit to Binding Authority Underwriter SS=Submit to Submed Unit P=Prohibited
                         11/01/01 + = Products Included
                                                                                  Binding Authority
                                                                                  --------------------------
ISO Class       CLASS DEFINITION                                                  Prem     Prods      E-Z   Underwriting Comments
Code                                                                              Ops               Rater
====================================================================================================================================
     90089      ADVERTISING SIGN CO OUTDOOR                                          B        +
------------------------------------------------------------------------------------------------------------------------------------
     91111      AIR CONDITIONING INSTAL/SERV/REP                                     B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     91127      ALARM/ALARM SYSTEM INST/SERV/REPAIR                                  B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     91135      ANALYTICAL CHEMISTS                                                  SS       P
------------------------------------------------------------------------------------------------------------------------------------
     91150      APPLIANCE/ACCESS-INST/SERV/REPR/COMM                                 B        SS
------------------------------------------------------------------------------------------------------------------------------------
     91155      APPLIANCE/ACCESS INST/SERV/REPR HOUSE                                B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     91175      AUCTIONEER -LIVESTOCK AWAY FROM PREMISES                             SS       +
------------------------------------------------------------------------------------------------------------------------------------
     91177      AUCTIONEER SALES AWAY FROM PREMISE                                   SB       +
------------------------------------------------------------------------------------------------------------------------------------
     91179      AUCTION-ON PREMISES OWN RENT INS                                     B        +
------------------------------------------------------------------------------------------------------------------------------------
     91190      AUTOMOBILE DISMANTLING                                               SS       SS
------------------------------------------------------------------------------------------------------------------------------------
     91200      BLACKSMITHING                                                        B        +
------------------------------------------------------------------------------------------------------------------------------------
     91315      CABLE/SUBSCRIPTION TV COMPANIES                                      B        +
------------------------------------------------------------------------------------------------------------------------------------
     91340      CARPENTRY - RESIDENTIAL                                              B        B       Yes   Max # houses "framed":
                                                                                                                      5 per year
------------------------------------------------------------------------------------------------------------------------------------
     91341      CARPENTRY - INTERIOR                                                 B        B       Yes   Max # houses "framed":
                                                                                                                      5 per year
------------------------------------------------------------------------------------------------------------------------------------
     91342      CARPENTRY, NOC                                                       B        B       Yes   Max # houses "framed":
                                                                                                                      5 per year
------------------------------------------------------------------------------------------------------------------------------------
     91343      CARPENTRY - SHOP ONLY                                                B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     91405      CARPET RUG FURNITURE UPHOLSTERY CLEAN                                B        +       Yes
------------------------------------------------------------------------------------------------------------------------------------
     91436      CEILING OR WALL INSTALLATION - METAL                                 B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     91481      CHIMNEY CLEANING                                                     B        +       Yes
------------------------------------------------------------------------------------------------------------------------------------
     91523      CLEANING - OUTSIDE SURFACE BLDG                                      B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     91547      COMMISSARY WORK                                                      B        +
------------------------------------------------------------------------------------------------------------------------------------
     91551      COMMUNICATION EQUIPMENT INSTALL                                      SS       SS
------------------------------------------------------------------------------------------------------------------------------------
     91555      COMPUTER SERVICE OR REPAIR                                           B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     91560      CONCRETE CONSTRUCTION                                                B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     91577      CONDUIT CONSTRUCTION FOR CABLE                                       B        B
------------------------------------------------------------------------------------------------------------------------------------

<PAGE>


     94444      CONTRACTORS, NOC                                                     SS       SS
------------------------------------------------------------------------------------------------------------------------------------
     91580      CONTRACTORS, EXEC. SUPV. (GEN. CONTRS.)                              SS       SS            Residential Construction
                                                                                                                          Prohibited
------------------------------------------------------------------------------------------------------------------------------------
     91583      CONTRACTORS - SUB-WORK, 1, 2 FAM DWGS                                B        B
------------------------------------------------------------------------------------------------------------------------------------
     91581      CONTRACTORS - SUB-WORK, NOT BLDGS                                    B        B
------------------------------------------------------------------------------------------------------------------------------------
     91584      CONTRACTORS - SUB-WORK, INDUSTRIAL                                   SS       SS
------------------------------------------------------------------------------------------------------------------------------------
     91585      CONTRACTORS - SUB-WORK, BUILDINGS                                    B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     91589      CONTRACTORS STREET HWY CONSTRUCT                                     SS       SS
------------------------------------------------------------------------------------------------------------------------------------
     91590      CONTRACTORS PERMANENT YARDS                                          B        +
------------------------------------------------------------------------------------------------------------------------------------
     91629      DEBRIS REMOVAL, CONSTRUCTION SITE                                    B        B
------------------------------------------------------------------------------------------------------------------------------------
     52134      DOOR OR WINDOW MANUFACTURING                                         B        B
------------------------------------------------------------------------------------------------------------------------------------
     52315      DOOR OR WINDOW MFG - WOOD                                            B        B
------------------------------------------------------------------------------------------------------------------------------------
     91746      DOOR OR WINDOW INSTALLATION (METAL)                                  B        B
------------------------------------------------------------------------------------------------------------------------------------
     92102      DRILLING WATER                                                       SS       SS
------------------------------------------------------------------------------------------------------------------------------------
     92215      DRIVEWAY, PARKING LOT, SIDEWALK PAVING                               B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     92338      DRY WALL OR WALL BOARD INSULATION                                    B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     92451      ELECTRICAL APPARATUS INSTALL, SVC. REP.                              B        SS
------------------------------------------------------------------------------------------------------------------------------------
     92478      ELECTRICAL WORK WITHIN BUILDING                                      B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     92663      ENGINEERS & ARCHITECTS                                               SS       +
------------------------------------------------------------------------------------------------------------------------------------
     94007      EXCAVATION                                                           B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     94099      EXPRESS COMPANIES                                                    B        +
------------------------------------------------------------------------------------------------------------------------------------
     94276      FENCE ERECTION CONTRACTORS                                           B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     94304      FIRE EXTINGUISHER SERV REFILL TESTING                                SS       SS
------------------------------------------------------------------------------------------------------------------------------------
     94381      FIRE SUPPRESSIONS SYSTEMS                                            SS       SS
------------------------------------------------------------------------------------------------------------------------------------
     94569      FLOOR COVER INSTALLATION, NOT CERAMIC                                B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     94590      FLOOR WAXING                                                         B        +       Yes
------------------------------------------------------------------------------------------------------------------------------------
     94617      FREIGHT FORWARDER, HANDLER NOC                                       SB       +
------------------------------------------------------------------------------------------------------------------------------------
     95124      FURNITURE, FIXTURES INSTALL. (METAL, WOOD)                           B        B
------------------------------------------------------------------------------------------------------------------------------------
     95233      GARBAGE, ASH, REFUSE COLLECTING                                      SS       +
------------------------------------------------------------------------------------------------------------------------------------
     13590      GLAZIERS & GLASS DEALERS                                             B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     95410      GRADING OF LAND                                                      B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     95487      GREENHOUSE ERECTION                                                  B        B
------------------------------------------------------------------------------------------------------------------------------------
     95505      GUNITING OR SHOT-CRETE                                               SS       SS
------------------------------------------------------------------------------------------------------------------------------------

<PAGE>

     95625      HANDYMEN                                                             B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     95647      HEATING AIR/COND SYS EQUIP (NO LP GAS)                               B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     95648      HEATING AIR/CONDITIONING SYSTEM EQUIP                                SS       SS
------------------------------------------------------------------------------------------------------------------------------------
     96053      HOUSE FURNISHING INSTALLATION NOC                                    B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     96317      INSPECTION APPRAISAL COS (VALUATION)                                 SS       +
------------------------------------------------------------------------------------------------------------------------------------
     96410      INSULATION WORK - MINERAL                                            SS       SS
------------------------------------------------------------------------------------------------------------------------------------
     96409      INSULATION WORK - PLASTIC OR ORGANIC (SOLID)                         SS       SS
------------------------------------------------------------------------------------------------------------------------------------
     96611      INTERIOR DECORATORS                                                  B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     96816      JANITORIAL SERVICES                                                  B        +       Yes
------------------------------------------------------------------------------------------------------------------------------------
     97002      LABS, RESEARCH DEVELOP TEST PRF                                      SS       SS
------------------------------------------------------------------------------------------------------------------------------------
     97003      LABS, RESEARCH DEVELOP TEST N/PRF                                    SS       SS
------------------------------------------------------------------------------------------------------------------------------------
     97047      LANDSCAPE GARDENING                                                  B        +       Yes
------------------------------------------------------------------------------------------------------------------------------------
     97050      LAWN CARE                                                            B        +       Yes
------------------------------------------------------------------------------------------------------------------------------------
     97111      LOGGING AND LUMBERING                                                SS       +
------------------------------------------------------------------------------------------------------------------------------------
     97220      MACHINE SHOPS NOC                                                    B        SS
------------------------------------------------------------------------------------------------------------------------------------
     97221      MACHINE EQUIPMENT FARM INSTALL ETC                                   SS       SS
------------------------------------------------------------------------------------------------------------------------------------
     97222      MACHINE EQUIPMENT INDUSTRIAL                                         SS       SS
------------------------------------------------------------------------------------------------------------------------------------
     97223      MACHINE EQUIPMENT INSTALL NOC                                        SS       SS
------------------------------------------------------------------------------------------------------------------------------------
     97447      MASONRY                                                              B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     97650      METAL ERECTION DECORATVE ARTIST                                      B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     97651      METAL ERECTION - FRAME IRONWORK OUTSIDE                              SS       SS
------------------------------------------------------------------------------------------------------------------------------------
     97652      METAL ERECTION DWELLINGS UP TO 2 STYS.                               SS       SS
------------------------------------------------------------------------------------------------------------------------------------
     97653      METAL ERECTION - NON-STRUCTURAL                                      SS       SS
------------------------------------------------------------------------------------------------------------------------------------
     97655      METAL ERECTION - STRUCTURAL                                          SS       SS
------------------------------------------------------------------------------------------------------------------------------------
     98090      MOTION PICTURE DEVELOP PRINTING                                      B        +
------------------------------------------------------------------------------------------------------------------------------------
     98091      MOTION PICTURE DISTRIB EXCHANGE                                      B        +
------------------------------------------------------------------------------------------------------------------------------------
     98111      OFFICE MACHINE APPLIANCE REPAIR                                      B        +       Yes
------------------------------------------------------------------------------------------------------------------------------------
     98257      ORCHARD VINEYARD RUN BY CONTRACTOR                                   SS       +
------------------------------------------------------------------------------------------------------------------------------------
     98303      PAINTING EXTERIOR >3 STORIES                                         B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     98304      PAINTING EXTERIOR UP TO 3 STORIES                                    B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     98305      PAINTING INTERIOR                                                    B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     98308      PAINTING SHOP ONLY                                                   B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------

<PAGE>

     98344      PAPERHANGING                                                         B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     98405      PIANO TUNING                                                         B        +       Yes
------------------------------------------------------------------------------------------------------------------------------------
     98449      PLASTERING OR STUCCO WORK                                            B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     98482      PLUMBING COMMERCIAL, INDUSTRIAL                                      B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     98483      PLUMBING RESIDENTIAL, DOMESTIC                                       B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     98502      PREFAB BUILDING ERECTION                                             B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     98597      RADIO OR TV BROADCASTING PROFIT                                      B        +
------------------------------------------------------------------------------------------------------------------------------------
     98598      RADIO TV BROADCASTING NOT PROF                                       B        +
------------------------------------------------------------------------------------------------------------------------------------
     98636      REFRIGERATION SYSTEM EQUIP INSTALL ETC                               B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     47051      REAL ESTATE DEVELOPERS                                               P        P
------------------------------------------------------------------------------------------------------------------------------------
     98640      RENOVATING OUTSIDE SURFACES OF BLDGS                                 B        +       Yes
------------------------------------------------------------------------------------------------------------------------------------
     98658      RIGGING                                                              SS       +
------------------------------------------------------------------------------------------------------------------------------------
     98677      ROOFING - COMMERCIAL                                                 P        P
------------------------------------------------------------------------------------------------------------------------------------
     98678      ROOFING - RESIDENTIAL                                                P        P
------------------------------------------------------------------------------------------------------------------------------------
     98698      SALVAGE OPERATIONS NOC                                               SS       SS
------------------------------------------------------------------------------------------------------------------------------------
     98699      SALVAGE OPERATE REMOVAL ETC                                          SS       SS
------------------------------------------------------------------------------------------------------------------------------------
     98705      SANDBLASTING                                                         SB       +
------------------------------------------------------------------------------------------------------------------------------------
     98710      SAND OR GRAVEL DIGGING                                               SB       +
------------------------------------------------------------------------------------------------------------------------------------
     98805      SEPTIC TANK SYSTEMS CLEANING                                         B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     98806      SEPTIC TANK SYSTEMS INSTAL, SVC. REP.                                B        B
------------------------------------------------------------------------------------------------------------------------------------
     98813      SEWER CLEANING                                                       SS       SS
------------------------------------------------------------------------------------------------------------------------------------
     98820      SEWER MAINS OR CONNECTIONS CONSTR.                                   B        B
------------------------------------------------------------------------------------------------------------------------------------
     98884      SHEET METAL WORK - OUTSIDE                                           B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     98967      SIDING INSTALLATION                                                  B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     98993      SIGN ERECTION INSTALL REPAIR                                         B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     99003      SIGN PAINTING, LETTERING INSIDE BLDG                                 B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     99004      SIGN PAINTING, LETTERING BLDG, STRUCTURE                             B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     99303      SNOW REMOVAL, PARKING LOT & DRIVEWAY                                 B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     99321      STREET, ROAD PAVING REPAVING ETC.                                    SS       SS
------------------------------------------------------------------------------------------------------------------------------------
     99471      SURVEYING - LAND (NO CONSTRUCTION)                                   B        B
------------------------------------------------------------------------------------------------------------------------------------
     99505      SWIMMING POOL SERVICING                                              B        +       Yes
------------------------------------------------------------------------------------------------------------------------------------
     99506      SWIM POOL INSTALL SERV REPAIR                                        SS       +
------------------------------------------------------------------------------------------------------------------------------------

<PAGE>


     99507      SWIM POOL INSTALL SERV BELOW GR                                      SS       +
------------------------------------------------------------------------------------------------------------------------------------
     99600      TELECOMMUNICATION SERVICE PROVIDER                                   SS       +
------------------------------------------------------------------------------------------------------------------------------------
     99613      TELEPHONE/ CABLE TV LINE CONSTRUCTION                                B        B
------------------------------------------------------------------------------------------------------------------------------------
     99620      TELEPRODUCTION STUDIOS                                               B        +
------------------------------------------------------------------------------------------------------------------------------------
     99650      TV RADIO RECEIVING SET INSTALLING                                    B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     99709      TENT OR CANVAS GOODS-ERECTION                                        B        B
------------------------------------------------------------------------------------------------------------------------------------
     99718      THEATRICAL COMPANIES                                                 SB       +
------------------------------------------------------------------------------------------------------------------------------------
     99746      TILE, STONE, MARBLE, TERRAZO, MOSAIC WORK                            B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     99777      TREE PRUNING, DUSTING, SPRAYING ETC                                  B        +       Yes
------------------------------------------------------------------------------------------------------------------------------------
     99793      TRUCKERS                                                             B        +
------------------------------------------------------------------------------------------------------------------------------------
     99826      UPHOLSTERING NOC                                                     B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     99827      UPHOLSTERING SHOP ONLY                                               B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     99851      VETERINARIAN VETERINARY HOSP                                         B        +
------------------------------------------------------------------------------------------------------------------------------------
     99917      WAREHOUSE COLD STORAGE PUBLIC                                        B        +
------------------------------------------------------------------------------------------------------------------------------------
     99938      WAREHOUSES NOC                                                       B        +
------------------------------------------------------------------------------------------------------------------------------------
     99946      WATER MAIN CONNECTION CONSTRUCTION                                   B        B
------------------------------------------------------------------------------------------------------------------------------------
     99948      WATER SOFTENING EQUIPMENT INSTALLING                                 B        B       Yes
------------------------------------------------------------------------------------------------------------------------------------
     99969      WELDING, CUTTING                                                     B        SS
------------------------------------------------------------------------------------------------------------------------------------
     99952      WATERPROOFING - PRESSURE APPARATUS                                   B        B
------------------------------------------------------------------------------------------------------------------------------------
     99953      WATERPROOFING - TROWEL, EXTERIOR                                     SS       SS
------------------------------------------------------------------------------------------------------------------------------------
     99954      WATERPROOFING - TROWEL, INTERIOR                                     SS       SS
------------------------------------------------------------------------------------------------------------------------------------
     99955      WATERPROOFING, NOC                                                   B        B
------------------------------------------------------------------------------------------------------------------------------------
     99975      WINDOW CLEANING                                                      B        +       Yes
------------------------------------------------------------------------------------------------------------------------------------
     91342      WINDOW INSTALLATION - WOOD (CARPENTRY)                               B        B
------------------------------------------------------------------------------------------------------------------------------------
     99986      WRECKING BLDG STRUCTURES NOC                                         B        +
------------------------------------------------------------------------------------------------------------------------------------
     99987      WRECKING NOT EXCEED 3 STORIES                                        B        +
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>