EMPLOYMENT AGREEMENT



                                 by and between



                      ENHANCE FINANCIAL SERVICES GROUP INC.


                                       and


                                 ARTHUR DUBROFF



                                  July 16, 1996
<PAGE>

                              EMPLOYMENT AGREEMENT

      THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into this
July 16, 1996, by and between ENHANCE FINANCIAL SERVICES GROUP INC., a New York
corporation (the "Company"), and ARTHUR DUBROFF ("Executive"). Certain
capitalized terms are defined in Section 6.1 of this Agreement.

      It is hereby agreed as follows:

                                    ARTICLE I

                                 DUTIES AND TERM

      1.1 Employment. In consideration of their mutual covenants and other good
and valuable consideration, the receipt, adequacy and sufficiency of which is
hereby acknowledged, the Company shall employ Executive, and Executive shall
enter and remain in the employ of the Company, upon the terms and subject to the
conditions set forth in this Agreement for the period beginning on the date
hereof and ending as provided in Section 1.3 hereof (the "Employment Period").

      1.2 Position and Responsibilities.

            (a) During the Employment Period, Executive shall serve as Executive
Vice President and Chief Financial Officer of the Company (or in a capacity of
substantially equivalent stature and responsibility), reporting directly to the
Chief Executive Officer of the Company, and shall have the normal duties,
responsibilities and authority of a person occupying such a position in a public
company of comparable size, subject to the authority of the board of directors
of the Company (the "Board"). Executive agrees to perform services commensurate
with his position as shall from time to time be assigned to him by the Chief
Executive Officer or the Board.

            (b) During the Employment Period, Executive shall devote
substantially all of his business time, attention, skill and efforts to the
faithful performance of his duties hereunder; provided that Executive shall be
entitled to (i) become a board member of one or more for profit organizations so
long as such memberships do not breach Section 5.2 below, or, in the aggregate,
materially interfere with Executive's performance of his duties hereunder and is
approved by the Board in its sole discretion; (ii) maintain or increase his
involvement in charitable organizations (so long as such involvement does not
materially interfere with Executive's performance of his duties hereunder); and
(iii) make passive investments in other entities.
<PAGE>

      1.3 Term. The term of Executive's employment under this Agreement shall
commence on July 22, 1996 and shall continue until December 31, 1999 (the
"Original Term"), unless renewed by the mutual written agreement of the Company
and Executive (each such additional period, a "Renewal Term") or unless
terminated earlier as provided in Article III hereof in which case the
Employment Period shall be deemed terminated.

      1.4 Location. During the Employment Period, Executive shall not be
required, except with his prior written consent, to relocate his principal place
of employment outside of the New York City metropolitan area.

                                   ARTICLE II

                                  COMPENSATION

      In full consideration for all services rendered by Executive in any
capacity during the Employment Period, including, without limitation, services
as a director, officer or member of any committee of the Board or of the board
of directors of any subsidiary or affiliate of the Company, the Company shall
compensate Executive as follows:

      2.1 Base Salary. The Company shall pay to Executive an annual base salary
at the rate of not less that $275,000 (the "Base Salary"), which salary shall be
payable in regular installments in accordance with the Company's customary
payroll practices. The Base Salary shall be reviewed annually by the Board or a
committee designated by the Board, and the Board or such committee may, in its
sole discretion, increase (but not decrease) the Base Salary.

      2.2 Bonus Payments. Not later than the commencement of the Original Term,
Executive shall receive an immediate signing bonus equal to $100,000. In
addition, during the Employment Period, Executive shall be eligible to receive
an annual target bonus of not less than 45 percent of Base Salary, the actual
amount of which shall be determined in accordance with the criteria and
procedures of the Company applicable to other Senior Executives (as such term is
defined in Section 6.1 hereof). If Executive is not employed by the Company for
the entire fiscal year he shall be eligible to receive a pro-rated portion of
the annual bonus for such fiscal year, based on the number of days employed or
such other basis as is reasonably determined by the Board. Executive shall be
eligible to receive the bonus payable for the 1999 fiscal year or for the last
year of any Renewal Term even if such Original Term or Renewal Term is not
renewed.

      2.3 Stock Options. Executive shall be entitled to an immediate grant of
"incentive stock options" (within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended) for 55,000 shares of Common Stock pursuant to
the Company's Long-Term Incentive Plan for Key Employees (the "Incentive Plan"),
which grant shall, except as specifically provided herein, be on terms required
by the Incentive Plan and otherwise


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<PAGE>

substantially identical to those governing stock options hitherto granted by the
Company to other Senior Executives. In addition, Executive shall be entitled, at
the Company's election, to either (i) an annual grant under the Incentive Plan
(or successor plan) of stock options for not less than 20,000 shares of Common
Stock in each of the calendar years 1996, 1997, and 1998, which grants shall,
except as specifically provided herein, be on terms identical to those granted
to other Senior Executives or, if no such stock options are granted to such
Senior Executives, then on terms identical to those governing the stock options
granted to Executive upon the commencement of his employment with the Company,
as described above in this paragraph, or (ii) if and to the extent stock options
for fewer than 20,000 shares of Common Stock are granted to Executive during any
of calendar years 1996, 1997, or 1998, then cash or other compensation having
value equal to the difference between the value of stock options for 20,000
shares of Common Stock and the value of any stock options actually granted in
such fiscal year, if any, as determined as of the time of grant (or when stock
option grants would normally be made if none are made in such fiscal year) by
the Compensation and Nominating Committee of the Board (the "Compensation
Committee") in good faith. The Compensation Committee shall promptly notify
Executive of its determination and the basis therefore in writing, and if the
Executive disagrees with such determination, the Executive shall notify (in
writing) the Compensation Committee thereof within 30 days of receipt of the
Compensation Committee notice. Any stock options granted to Executive which
remain outstanding after the Original Term and any Renewal Term will continue to
provide for accelerated vesting and post-employment exercise periods on the same
basis as provided herein.

      If Executive timely notifies the Company of his disagreement with the
value of the applicable award as determined by the Compensation Committee
pursuant to the second preceding sentence, the matter shall be submitted for
resolution to a independent third party valuator experienced in valuing stock
options of similarly situated companies whose selection shall be made by the
Executive from a list of 5 recognized independent valuators, none of whom bave
performed any services for the Company for the immediately preceding 24 months
provided by the Compensation Committee. The determination of such valuator shall
be binding on all parties. The Company shall pay the costs of the valuator,
except that Executive shall pay for up to the first $10,000 of cost of the
valuator in the event the Valuator's valuation is not at least five percent (5%)
higher than that determined initially by the Compensation Committee.

      2.4 Additional Benefits. Executive shall be entitled to participate in all
employee benefit and welfare programs, plans and arrangements (including,
without limitation, pension, profit-sharing, supplemental pension and other
retirement plans, insurance, hospitalization, medical and group disability
benefits, travel or accident insurance plans) and to receive other benefits,
such as dues and fees of professional organizations and associations, which are
from time to time available to the Company's executive personnel; provided,
however, there shall be no duplication of termination or severance benefits and
to the extent that such benefits are specifically provided by the Company to
Executive under other provisions of this Agreement, the benefits available under
the foregoing plans and


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<PAGE>

programs shall be reduced by any benefit amounts paid under such other
provisions.

      2.5 Reimbursement of Business Expenses. The Company shall pay, or
reimburse Executive for, all reasonable ordinary and necessary business expenses
incurred by Executive in performing his obligations under this Agreement which
are consistent with the Company's policies in effect from time to time with
respect to travel, entertainment and other business expenses, subject to the
Company's requirements with respect to reporting and documentation of such
expenses.

      2.6 Vacations. Executive shall be entitled to the number of business days,
excluding Company holidays, of paid vacation during each year of employment
hereunder commensurate with the vacation benefits accorded to other Senior
Executives of the Company.

                                   ARTICLE III

                            TERMINATION OF EMPLOYMENT

      3.1 Death of Executive. The Employment Period shall automatically
terminate upon the death of Executive.

      3.2 By Executive. Executive shall be entitled to terminate the Employment
Period by giving Notice of Termination to the Company at any time with or
without Good Reason.

      3.3 By the Company. The Company shall be entitled in its sole discretion
to terminate the Employment Period under this Agreement by giving Notice of
Termination to Executive:

            (a)   in the event of Executive's Total Disability;

            (b)   for Cause; and

            (c)   at any time without Cause.

                                   ARTICLE IV

               COMPENSATION UPON TERMINATION OF EMPLOYMENT PERIOD

      If the Employment Period is terminated in accordance with the provisions
of Article III hereof, except for any other rights or benefits specifically
provided for herein following the Employment Period, the Company shall be
obligated to provide compensation and benefits to Executive only as follows,
subject to the provisions of Section 5.4 hereof:


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<PAGE>

      4.1 Upon Termination for Death. If the Employment Period is terminated by
reason of Executive's death, the Company shall:

            (a) pay Executive's Representative any Base Salary which has accrued
but not been paid as of the Termination Date (as defined in Section 4.6) (the
"Accrued Base Salary");

            (b) pay Executive's Representative for unused vacation days accrued
as of the Termination Date (the "Accrued Vacation Payment");

            (c) reimburse Executive's Representative for expenses incurred by
him prior to the Termination Date which are subject to reimbursement pursuant to
this Agreement (the "Accrued Reimbursable Expenses");

            (d) provide to Executive's Representative any accrued and vested
benefits required to be provided by the terms of any Company-sponsored benefit
plans or programs (the "Accrued Benefits"), together with any benefits required
to be paid or provided in the event of Executive's death under applicable law;

            (e) pay Executive's Representative any annual bonus with respect to
a prior fiscal year which has accrued but has not been paid, if any, and a
pro-rated annual bonus based on the current fiscal year's target bonus,
determined as described in Section 2.2 and adjusted for the period of time from
the beginning of the then current fiscal year to the Termination Date;

            (f) permit Executive's Representative to exercise all stock options
previously granted (whether or not exercisable as of the Termination Date) at
any time for the remainder of the original terms of the options as set forth in
the applicable stock option agreements, and provide Executive's Representative
with equivalent value pursuant to Section 2.3(ii) for any of the ungranted
options referred to therein at the Termination Date (such ungranted options
shall be deemed to have the same terms as the options most recently granted to
Executive, provided, however, that the exercise price of such ungranted options
shall be deemed to be the fair market value of the Common Stock on the
Termination Date); and

            (g) permit Executive's dependents to elect continuation medical
coverage in accordance with the requirements of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), and for a period of twelve
(12) months from the Termination Date pay the applicable premium for such
coverage. In the event the period of COBRA coverage paid by the Company under
this Section 4.1(g) shall be less than the period mandated under applicable
provisions of COBRA, Executive's dependents shall be entitled to elect to
continue coverage at his or her own expense for the remainder of the COBRA
continuation period.


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<PAGE>

      4.2 Upon Termination for Disability. If the Employment Period is
terminated by reason of Executive's Total Disability, the Company shall:

            (a)   pay Executive the Accrued Base Salary;

            (b)   pay Executive the Accrued Vacation Payment;

            (c)   pay Executive the Accrued Reimbursable Expenses;

            (d) pay Executive the Accrued Benefits, together with any benefits
required to be paid under applicable law, in the event of Executive's Total
Disability;

            (e) pay Executive any annual bonus with respect to a prior fiscal
year which has accrued but has not been paid, if any;

            (f) pay Executive for a period of twelve (12) months from his
Termination Date, his Base Salary, provided however, that such amounts shall be
offset by any amounts payable under the Company's short-term or long-term
disability plans;

            (g) pay Executive a pro-rated annual bonus based on the current
fiscal year's target bonus determined as described in Section 2.2 and adjusted
for the period of time from the beginning of the then current fiscal year to the
Termination Date;

            (h) permit Executive to elect continuation medical coverage in
accordance with the requirements of COBRA for him and his dependents, and for a
period of 12 months from the Termination Date pay the applicable premium for
such coverage, except that Executive shall continue to pay the applicable
premium Executive would pay if he continued as an active employee of the
Company. In the event the period of COBRA coverage paid by the Company under
this Section 4.2(h) shall be less than the period mandated under applicable
provisions of COBRA, Executive and his dependents shall be entitled to elect to
continue coverage at his or her own expense for the remainder of the COBRA
continuation period; and

            (i) permit Executive to exercise all stock options previously
granted (whether or not exercisable as of the Termination Date) at any time for
the remainder of the original terms of the options as set forth in the stock
option agreements, and provide Executive with equivalent value pursuant to
Section 2.3(ii) for any of the ungranted options referred to therein at the
Termination Date (such ungranted options shall be deemed to have the same terms
as the options most recently granted to Executive, provided, however, that the
exercise price of such ungranted options shall be deemed to be the fair market
value of the Common Stock on the Termination Date).

      4.3 Upon Termination by the Company for Cause or by Executive Without Good
Reason. If the Employment Period is terminated by the Company for Cause (other
than


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<PAGE>

circumstances where Section 4.5 is applicable) or by Executive other than (i)
upon Executive's death or Total Disability, or (ii) with Good Reason, the
Company shall:

            (a)   pay Executive the Accrued Base Salary;

            (b)   pay Executive the Accrued Vacation Payment;

            (c)   pay Executive the Accrued Reimbursable Expenses; and

            (d) pay Executive the Accrued Benefits, together with any additional
benefits required to be paid or provided under applicable law.

      4.4 Upon Termination by the Company Without Cause or by Executive With
Good Reason. If the Employment Period is terminated by the Company without Cause
or by Executive with Good Reason, the Company shall:

            (a)   pay Executive the Accrued Base Salary;

            (b)   pay Executive the Accrued Vacation Payment;

            (c)   pay Executive the Accrued Reimbursable Expenses;

            (d) pay Executive the Accrued Benefits, together with any additional
benefits required to be paid or provided under applicable law;

            (e) pay Executive any annual bonus payments which have accrued but
not been paid as of the Termination Date;

            (f) pay Executive the Base Salary (as in effect on the Termination
Date) for the greater of (i) the period commencing on the Termination Date and
ending at the conclusion of the Original Term or Renewal Term during which the
Termination Date shall have occurred, or (ii) twelve (12) months from the
Termination Date, which salary shall be payable in the sole discretion of the
Company either in regular installments as determined by the Company (but not
less often than monthly) or in one lump sum;

            (g) pay Executive a pro-rated annual bonus based on the current
fiscal year's target bonus determined as described in Section 2.2 and adjusted
for the period of time from the beginning of the then current fiscal year to the
Termination Date;

            (h) permit Executive to elect continuation medical coverage for him
and his dependents in accordance with the requirements of COBRA, and for a
period beginning on the Termination Date and ending on the earliest of (i)
eighteen (18) months thereafter, (ii) such time as Executive becomes covered
under another group medical plan, or (iii) the later of (x) the end of the
Original Term or the Renewal Term in which the Termination Date


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<PAGE>

occurs, or (y) twelve (12) months from the Termination Date, pay the applicable
premium for such coverage, except that Executive shall continue to pay the
applicable premium Executive would pay if he continued as an active employee of
the Company. In the event the period of COBRA coverage paid by the Company under
this Section 4.4(h) shall be less than the period mandated under applicable
provisions of COBRA, Executive and his dependents shall be entitled to elect to
continue coverage at Executive's own expense for the remainder of the COBRA
continuation period; and

            (i) permit Executive to exercise all stock options previously
granted (whether or not exercisable as of the Termination Date) at any time for
the remainder of the original terms of the options as set forth in the stock
option agreements, and provide Executive with equivalent value pursuant to
Section 2.3(ii) for any of the ungranted options referred to therein at the
Termination Date (such ungranted options shall be deemed to have the same terms
as the options most recently granted to Executive, provided, however, that the
exercise price of such ungranted options shall be deemed to be the fair market
value of the Common Stock on the Termination Date).

      The foregoing provisions notwithstanding, Executive shall not be entitled
to any amounts payable under Sections 4.4(f), (g) and (h) after a material
breach of the provisions of Sections 5.1 or 5.2 hereof; provided, however, that
no breach shall be deemed to exist unless the Company shall have given prior
notice to Executive specifying the breach and, within ten (10) days after such
notice, Executive shall not have cured or eliminated the breach, and provided
further that the Company shall be entitled to suspend all payments during such
ten (10) day (or lesser) period but shall promptly pay all withheld amounts in
the event of and upon the timely cure or elimination of the breach.

      Except as provided in the preceding paragraph in the event of a
termination of the Employment Period pursuant to this Section 4.4 or Section
4.5, the Company shall not have the right to set-off and apply any amount then
due and payable to Executive under Section 4.4 against any other amount then due
and owing by Executive to the Company and Executive shall not be required to
mitigate the amount of any such payment by seeking employment or otherwise, nor
shall any such payment be off-set by any amounts paid to Executive in connection
with any future employment of Executive.

      4.5 Upon Termination by the Company Following a Change of Control. If
within a twelve (12) month period following a Change of Control the Employment
Period is terminated by the Company with or without Cause, the Company shall
make the payments and provide to Executive the benefits under Section 4.4.
Nothing contained in this Section 4.5 shall limit Executive's rights under
Sections 4.1, 4.2, and 4.4 herein before or after a Change of Control.

      4.6 Notice of Termination. Any termination of the Employment Period by the
Company for Cause or by Executive for Good Reason shall be communicated by
Notice of Termination to the other party hereto. Executive's date of termination
(the "Termination


                                       -8-
<PAGE>

Date") shall be the date specified in the Notice of Termination or in any other
case the date upon which Executive ceases to perform services for the Company.
It is understood that a notice that the Employment Period will not be extended
shall not constitute termination of the Employment Period under Article III
hereof.

                                    ARTICLE V

                              RESTRICTIVE COVENANTS

      5.1 Confidentiality.

            (a) Executive shall hold in strictest confidence, and not disclose
to any Person or use without the prior written consent of the Company, any and
all of the Company's "Proprietary Information," as defined in subparagraph (c)
below, except to the extent Executive acting in good faith deems such disclosure
advisable in connection with his employment hereunder or such disclosure is
required pursuant to legal process, provided, however, that in the case of legal
process, Executive shall give the Company prompt written notice thereof so that
the Company, if it desires, can seek a protective order. This covenant and
agreement shall survive the Employment Period, so long as such information and
data shall remain "Proprietary Information."

            (b) Upon expiration or termination of the Employment Period for any
reason, Executive shall immediately deliver to the Company any "Proprietary
Information." Executive shall have no right to retain any copies of any material
qualifying as "Proprietary Information" for any reason whatsoever after
expiration or termination of the Employment Period without the prior written
consent of the Company.

            (c) For purposes of this Agreement, "Proprietary Information" means
the information, observations, know-how and data obtained by Executive during
his service as a director of the Company or during the Employment Period
concerning the business or affairs of the Company or any subsidiary, including,
but not limited to, the following: the type of services being provided or
offered by the Company to clients or customers or potential clients or customers
of the Company or its affiliates; the identity of the clients or customers of
the Company or its affiliates; any financial or other information supplied by
clients or customers of the Company or its affiliates; any and all data or
information involving the Company, its affiliates, programs, methods, or
contacts employed by the Company or its affiliates in the conduct of their
business; any lists, documents, manuals, records, forms, or other materials used
by the Company or its affiliates in the conduct of their business; any
descriptive materials describing the methods and procedures employed by the
Company or its affiliates in the conduct of their business; and any other secret
or confidential information concerning the Company's or its affiliates' business
or affairs. The terms "list," "document" or their equivalents, as used in this
subparagraph (c), are not limited to a physical writing or compilation but also
include any and all information whatsoever regarding the subject matter


                                       -9-
<PAGE>

of the "list" or "document," whether or not such compilation is for computer-use
format or has been reduced to writing. The foregoing notwithstanding,
"Proprietary Information" shall not include any information which (i) is or
becomes publicly available through no act or omission of Executive in violation
of this Agreement or any other duty which Executive owes to the Company or (ii)
becomes independently available to Executive as a matter of right from a third
party. If only a portion of the "Proprietary Information" is or becomes publicly
available, then only that portion shall not be "Proprietary Information"
hereunder.

      5.2 Competition.

            (a) Executive acknowledges that (i) he is being engaged to serve as
Executive Vice President and Chief Financial Officer of the Company and in such
capacity he will be a representative of the Company with respect to clients and
potential clients of the Company; (ii) he has had and will continue to have
access to confidential information about the Company, its affiliates, and their
clients and that "Proprietary Information" acquired by him at the expense of the
Company is for use in its business; and (iii) he has substantial experience in
the financial products and services industry and possesses special, unique,
extraordinary skills, and knowledge in this field. Accordingly, during the
Employment Period and the Non-Competition Period, Executive shall not:

                  (i) directly or materially indirectly, be employed in, consult
      to, have an interest in or otherwise be involved with any business
      competing with any Business of the Company, provided the foregoing shall
      not prevent Executive from (x) having passive investments in companies
      representing not in excess of two percent (2%) of the outstanding equity
      securities of each such company (including without limitation under
      compensatory equity programs of employing entities), (y) being employed
      by, consulting to or otherwise being involved with any portion of an
      entity that is not the portion competing with the Business of the Company,
      or (z) providing banking or investment banking services to any entity
      whatsoever; or

                  (ii) directly or indirectly solicit any business of a nature
      that is competitive with any Business from any Person that obtained
      products or services from the Company or any subsidiary or affiliate of
      the Company at any time during the last three (3) years of his employment
      with the Company, or in any way interfere with the relationship between
      any such Person and the Company or any subsidiary or affiliate thereof; or

                  (iii) directly or indirectly employ or offer to employ,
      directly or indirectly solicit, or cause the solicitation of, any
      employees of the Company or any subsidiary or affiliate thereof who are in
      the employ of the Company or any subsidiary or affiliate thereof on the
      Termination Date of his employment hereunder for employment by others, or
      in any way interfere with the relationship of the Company or any
      subsidiary or affiliate thereof, provided the foregoing shall not prevent
      Executive from providing references upon request so long as he is not


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<PAGE>

      associated with the entity to which he is providing the reference.

            (b) Executive expressly agrees and acknowledges that:

                  (i) the Company has protected business interests and that
      competition with and against such business interests would be harmful to
      the Company;

                  (ii) this covenant not to compete is reasonable as to time and
      geographical area and does not place any unreasonable burden upon him;

                  (iii) the general public will not be harmed as a result of
      enforcement of this covenant not to compete;

                  (iv) his personal legal counsel has reviewed this covenant not
      to compete;

                  (v) he understands and hereby agrees to each and every term
      and condition of this covenant not to compete (including, without
      limitation, the provisions of Section 5.3); and

                  (vi) the covenant not to compete shall be in addition to, and
      not in substitution for, any obligations created or imposed by common or
      statutory law.

      5.3 Remedies. Executive expressly agrees and acknowledges that this
covenant not to compete is necessary for the protection of the Company and its
subsidiaries and affiliates because of the nature and scope of their business
and his position with the Company. Further, Executive acknowledges that any
breach of this covenant not to compete would result in irreparable damage to the
Company, and in the event of a breach or threatened breach of this covenant not
to compete, money damages will not sufficiently compensate the Company for its
injury caused thereby, and that the remedy at law for any breach or threatened
breach of Sections 5.1 or 5.2 will be inadequate and, accordingly agrees, that
(i) the Company may, in addition and supplementary to all other available rights
and remedies (including, without limitation, seeking such damages as it can show
it has sustained by reason of such breach), apply to any court of law or equity
of competent jurisdiction for specific performance, a temporary, preliminary and
final injunction or other relief in order to enforce or prevent any violation of
this covenant not to compete, and (ii) in addition to such money damages,
Executive may be restrained and enjoined from any continuing breach of this
covenant not to compete without any bond or other security being required of any
court.


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<PAGE>

      5.4 Representations and Warranties.

            (a) By Executive. Executive hereby represents and warrants to the
Company that (i) the execution, delivery and performance of this Agreement by
Executive does not and will not conflict with, breach, violate or cause a
default under any contract, agreement, instrument, order, judgment or decree to
which Executive is a party or by which he is bound; (ii) except as set forth in
the letter from Executive dated and delivered to the Company on or prior to the
date first set forth above (the "Letter"), Executive is not a party to or bound
by any employment agreement, noncompete agreement or confidentiality agreement;
and (iii) upon the execution and delivery of this Agreement by the Company, this
Agreement shall be the valid and binding obligation of Executive, enforceable in
accordance with its terms.

            (b) By the Company. The Company hereby represents and warrants to
Executive that (i) the execution, delivery and performance of this Agreement by
the Company does not and will not conflict with, breach, violate or cause a
default under any contract, agreement, instrument, order, judgment or decree to
which the Company is a party or by which it is bound; (ii) the Company will not
cause Executive to breach any employment agreement, noncompete agreement or
confidentiality agreement set forth in the Letter; (iii) upon the execution of
this Agreement by Executive, this Agreement shall be valid and binding
obligation of the Company, enforceable in accordance with its terms.

                                   ARTICLE VI

                                  MISCELLANEOUS

      6.1 Definitions. For purposes of this Agreement, the following terms shall
have the following meanings:

            (a)   "AAA" - as defined in Section 2.3;

            (b)   "Accrued Base Salary" - as defined in Section 4.1(a);

            (c)   "Accrued Benefits" - as defined in Section 4.1(d);

            (d)   "Accrued Reimbursable Expenses" - as defined in Section
                  4.1(c);

            (e)   "Accrued Vacation Payment" - as defined in Section 4.1(b);

            (f)   "Base Salary" - as defined in Section 2.1;

            (g)   "Board" shall mean the Board of Directors of the Company;


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<PAGE>

            (h) "Business" shall mean any line of business from which the
      Company and its subsidiaries taken as a whole (i) derived ten percent
      (10%) or more of consolidated revenues for the immediately preceding four
      fiscal quarters prior to the termination of the Employment Period or (ii)
      reasonably anticipate, based on significant prior effort and marketing
      analysis, deriving ten percent (10%) or more of consolidated revenues for
      the four fiscal quarters following the termination of the Employment
      Period, and of which, in the case of (ii), the Company gives Executive
      written notice within ten (10) days after such termination.
      Notwithstanding the foregoing, Business shall not include any Business of
      the Company and its subsidiaries which becomes part of the Company, a
      subsidiary or a new subsidiary primarily as a result of a Change of
      Control (other than in connection with the commencement of any new
      business).

            (i) "Cause" shall mean the occurrence of any of the following:

                  (i) Executive's gross negligence which is materially injurious
      to the Company and its subsidiaries taken as a whole or willful misconduct
      which is injurious to the Company or any of its subsidiaries;

                  (ii) Executive's commission of any act involving dishonesty,
      breach of fiduciary duty or fraud with respect to the Company or any of
      its subsidiaries; provided, however, that any disputes arising out of
      Section 2.5 of this Agreement resulting from actions taken by Executive in
      good faith shall not constitute Cause;

                  (iii) Executive's conviction for, or plea of nolo contendere
      to, a felony (other than a traffic violation not involving third-party
      personal injury); or

                  (iv) the material failure or refusal by Executive to perform
      the duties required of him by this Agreement which failure or refusal is
      not cured within twenty (20) days after written notice thereof from the
      Company is received by Executive.

            (j) "Change of Control" shall be deemed to have occurred if, (i) any
Person becomes the beneficial owner, directly or indirectly of fifty percent
(50%) or more of the combined voting power of the then outstanding securities of
the Company, (ii) there shall occur the sale or other transfer of all or
substantially all of the assets of the Company to a Person who is not an
affiliate of the Company as defined in Rule 12b-2 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), (iii) there occurs a merger,
consolidation, reorganization or other business combination of the Company in
which the Company is not the surviving entity other than one intended to
reincorporate the Company in another jurisdiction, and (iv) the persons who were
directors of the Company prior to any cash tender offer or exchange offer,
merger reorganization or other business combination, sale of assets, contested
or other election of directors of the Company, or any combination of the
foregoing transactions cease to constitute at least two-thirds of the Board
following any of such transactions.


                                     -13-
<PAGE>

            (k) "Common Stock" shall mean shares of the common stock, par value
$.10 per share, of the Company;

            (l) "Compensation Committee" - as defined in Section 2.3;

            (m) "Employment Period" - as defined in Section 1.1;

            (n) "Expiration" shall mean the expiration of the Employment Period
in accordance with Section 1.3;

            (o) "Good Reason" shall mean the occurrence of any of the following:

                  (i) Executive's Base Salary is reduced by the Company or there
      is a material reduction in the benefits that are in effect for Executive
      in accordance with Section 2.4 (unless such reduction is pursuant to a
      uniform reduction in benefits for Senior Executives) or a material
      diminution of Executive's title, authority or management responsibilities;

                  (ii) Except with Executive's prior written consent, relocation
      of Executive's principal place of employment to a location outside of the
      New York City metropolitan area or to an office other than the Company's
      primary office; or

                  (iii) Other material breach of this Agreement by the Company
      which breach is not cured within twenty (20) days after written notice
      thereof from Executive is received by the Company.

            (p) "Incentive Plan" - as defined in Section 2.3.

            (q) "Letter" - as defined in Section 5.4(a).

            (r) "Non-Competition Period" shall mean that period which shall
commence on the termination of the Employment Period and shall expire at the end
of the Original Term or, if in a Renewal Term, the end of the Renewal Term,
provided that if the termination shall have occurred pursuant to Section 4.4 or
4.5, the "Non-Competition Period" shall continue to the end of the period for
which the Base Salary is paid pursuant to Section 4.4(f); provided that the
otherwise applicable date referred to in the preceding clause shall be
automatically extended by such number of days, if any, as Executive shall be in
breach of Section 5.2. In the event that the Original Term or any Renewal Term
expires while Executive is employed without being renewed, there shall
thereafter be no Non-Competition Period.

            (s) "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision of this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances, if any, claimed to
provide a basis for termination of the


                                    -14-
<PAGE>

Employment Period under the provision so indicated. Any Notice of Termination
shall be delivered at least three (3) days prior to the effective Termination
Date;

            (t) "Original Term" - as defined in Section 1.3;

            (u) "Person" shall mean an individual, corporation, partnership,
limited liability company, association, joint venture, joint stock company,
trust, unincorporated organization, governmental entity (or any department,
agency or political subdivision thereof) or other entity;

            (v) "Proprietary Information" - as defined in Section 5.1(c);

            (w) "Renewal Term" - as defined in Section 1.3;

            (x) "Representative" shall mean Executive's designated beneficiaries
as set forth by Executive in accordance with, or as provided under the terms of,
any applicable Company plan or arrangement (or, if there is no such provision in
a plan or arrangement, as designated by Executive in writing), or if no such
designation exists, Executive's estate.

            (y) "Senior Executives" shall mean the five most highly compensated
executive officers of the Company determined in accordance with the rules and
regulations of the Securities and Exchange Commission under the Exchange Act; 

            (z) "Termination" shall mean the termination of Executive's
employment hereunder other than upon expiration of the Original Term or a
Renewal Term;

            (aa) "Termination Date" - as defined in Section 4.5.

            (bb) "Total Disability" shall mean Executive's inability, due to
illness, accident, injury, physical or mental capacity or other disability, to
carry out effectively his duties and obligations to the Company hereunder or to
participate effectively and actively in the management of the Company for a
period of 90 consecutive days or 120 days within 240 consecutive days or he
shall be certified as permanently disabled (in a manner that he will not be able
to effectively perform his duties and obligations to the Company) by a qualified
physician jointly selected by Executive and the Company acting in good faith who
shall have conducted such examination of Executive as he deems necessary.

            (cc) "Valuator" - as defined in Section 2.3.

      6.2 Dispute Resolution.

            (a) Except in the event of a breach or threatened breach of Article
V hereof, the parties shall resolve through negotiation and then arbitration any
dispute arising under the terms of this Agreement.


                                      -15-
<PAGE>

            (b) Any dispute described in Section 6.2(a) which cannot be resolved
by Executive and the Company by negotiation conducted in good faith shall be
submitted to binding arbitration in New York City in accordance with New York
law and the rules and procedures of the American Arbitration Association, except
for an action for temporary, preliminary or final injunctive relief. The
determination of the arbitrator shall be conclusive and binding on the parties
and judgment shall be entered on the award as determined by the arbitrator in
any court of competent jurisdiction. The Arbitrator may include in this award an
order for injunctive relief; provided however, that the arbitrator may not
include in this award any punitive, exemplary, incidental, consequential or
special damages or fashion any remedy except as expressly provided in this
Agreement. The Company and Executive shall each bear their own costs and
expenses incurred in connection with any arbitration under this Agreement
(including but not limited to their own attorneys' fees and expenses), and the
parties shall split evenly the cost of the arbitrator; provided, however, that
if the arbitrator finds that the Company breached the Agreement by withholding
payments to Executive required thereunder in bad faith, Executive shall be
entitled to be reimbursed by the Company for the cost of the arbitrator and
reasonable attorney's fees and costs incurred by Executive.

      6.3 Assignment. Neither this Agreement nor any of the rights of the
parties hereunder may be assigned or transferred by either party hereto without
the prior written consent of the other party, except that if the Company shall
merge or consolidate with or into, or sell or otherwise transfer substantially
all of its assets to, another partnership, corporation or other Person which
assumes the Company's obligations under this Agreement, may assign its rights
and obligations hereunder to such transferee; provided, however, that such
assignment is in writing and a copy of such is delivered to Executive. Any
attempted assignment or transfer of this Agreement in violation of this Section
6.3 shall be void.

      6.4 Successors; Binding Ageement. Except as otherwise provided herein,
this Agreement shall be binding upon and shall inure to the benefit of and be
enforceable by Executive and his personal or legal representatives,
beneficiaries, designees, executors, administrators, heirs, distributees,
devisees and legatees and by the Company and its successors and assigns.

      6.5 Modification; No Waiver. This Agreement may not be modified or amended
except by an instrument in writing signed by the parties hereto. No course of
conduct or failure or delay in enforcing the provisions of this Agreement shall
affect the validity, binding effect or enforceability of this Agreement. No term
or condition of this Agreement shall be deemed to have been waived, nor shall
there be any estoppel against the enforcement of any provision of this
Agreement, except by written instrument by the party charged with such waiver or
estoppel. No such written waiver shall be deemed a continuing waiver unless
specifically stated therein, and each such waiver shall operate only as to the
specific term or condition waived and shall not constitute a waiver of such term
or condition for the future or as to any other term or condition.


                                      -16-
<PAGE>

      6.6 Complete Agreement. This Agreement (together with any exhibits or
schedules incorporated as a part hereof and any other documents expressly
referred to herein) constitutes the complete agreement and understanding between
the parties hereto, and no agreement, representation, warranty or covenant has
been made by either party except as expressly set forth herein.

      6.7 Severability. The covenants and agreements contained herein are
separate and severable and the invalidity or unenforceability of any one or more
of such covenants or agreements, if not material to the employment arrangement
that is the basis for this Agreement, shall not affect the validity or
enforceability of any other covenant or agreement contained herein. In addition,
if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, (i) this Agreement will be reformed, construed and enforced in
such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein and (ii) such invalidity, illegality or
unenforceability not affect any other provision or any other jurisdiction.

      6.8 Blue-Pencilling. If any court determines that any covenant contained
in this Agreement, including, without limitation, the non-compete covenants, or
any part thereof, is unenforceable because of the duration or geographical scope
of such provisions, the duration or scope of such provision, as the case may be,
shall be reduced so that such provision becomes enforceable and, in the reduced
form, such provision shall then be enforceable and shall be enforced.

      6.9 Withholding. This Company may withhold from any payments or benefits
payable under this Agreement all federal, state, city and other taxes as shall
be required pursuant to any applicable law or governmental rule or regulation.

      6.10 Counterparts. This Agreement may be executed in separate
counterparts, none of which needs to contain the signature of more than one
party, each of which is deemed to be an original and all of which taken together
constitute one and the same agreement.

      6.11 Indemnification. The Company shall, and it hereby does, indemnify
Executive and hold Executive free and harmless, to the maximum extent provided
for in the Company's By-Laws. Executive shall be entitled to be covered by any
liability insurance policy, in accordance with its terms, to the maximum extent
of coverage provided for any officer, director or employee which may be
maintained by the Company during the period of his employment and, thereafter,
with regard to matters occurring during his Employment Period.

      6.12 Governing Law. All questions concerning the construction, validity
and interpretation of this Agreement and the exhibits hereto will be governed by
the laws of the State of New York, without giving effect to conflict of laws.

      6.13 Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, sent by
registered or certified mail


                                    -17-
<PAGE>

(return receipt requested) or sent by reputable overnight courier service
(charges prepaid) to the recipient party thereof at the following addresses:

                    If to the Company, to it at;

                    Enhance Financial Services Group Inc.
                    335 Madison Avenue
                    25th Floor
                    New York, New York 10017-4605
                    Attn: Chief Executive Officer

                    If to Executive, to him at:

                    Arthur Dubroff
                    8 Devore Drive
                    West Orange, NJ 07052-3411

or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when personally
delivered or, if mailed, three (3) days after deposit in the U.S. mail or, if
sent by reputable overnight courier, one day after delivery to such overnight
courier.


                                           Company:

                                           ENHANCE FINANCIAL SERVICES GROUP
                                           INC.


                                           By: /s/ Daniel Gross
                                               --------------------------------
                                               Daniel Gross
                                               President and Chief Executive
                                                Officer



                                           Executive:

                                           ARTHUR DUBROFF


                                           /s/ Arthur Dubroff
                                           ------------------------------------


                                      -18-