Document:

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                                                                  Exhibit 10.23

                                  June 20, 2003

INTEGRATED ALARM SERVICES GROUP, INC.
One Capital Center
99 Pine Street
3rd Floor
Albany, NY   12207

         Re: Proposed Terms and Conditions to Secured Line of Credit

Dear Tim:

We are pleased to advise you that, subject to the terms and conditions more
specifically described below, LASALLE BANK NATIONAL ASSOCIATION ("LaSalle" and,
in such capacity, the "Agent") has approved the request of INTEGRATED ALARM
SERVICES GROUP, INC. (hereinafter the "Borrower") for a revolving loan facility
of up to Eighty Million Dollars ($80,000,000.00) for the purposes set forth
below. Said revolving loan facility will be subject to the following terms and
conditions:

Borrower:         Integrated Alarm Services Group, Inc. (the "Company" or the
                  "Borrower").

Agent:            LaSalle Bank N.A. ("LaSalle" and, in such capacity, the
                  "Agent").

Banks:            The Agent and a syndicate of banks, financial institutions and
                  other accredited investors arranged by LaSalle in consultation
                  with the Borrower (the "Banks").

Facility:         $80 million senior secured revolving credit facility (the
                  "Facility") which will be a syndicated facility with LaSalle
                  as Agent.

                  LaSalle, as Agent, has committed to $25 million of the
                  above-mentioned credit facility and will attempt to arrange
                  the remainder on a best efforts basis.

Purpose:          The Facility will be made available to the Borrower to provide
                  financing:

                  (i)      For acquisitions of security alarm companies and
                           pools of security alarm contracts and the related
                           subscribers,

                  (ii)     Funding loans to security alarm dealers secured by
                           the dealers' subscriber alarm contracts,

                  (iii)    For acquisitions of wholesale security alarm
                           companies and the related subscribers,

                  (iv)     To refinance existing debt, and

                  (v)      For general corporate purposes.

<PAGE>

Availability:     The Maximum Availability ("Maximum Availability") shall be
                  based on Eligible RMR. During the Pre Systems Conversion
                  Period, Maximum Availability will be the lesser of $20.0
                  million or 15x Eligible RMR.

                  Note: All references in this letter to Pre Systems Conversion,
                  Pre Systems Conversion Period, Post Systems Conversion or Post
                  Systems Conversion Period shall have the meanings ascribed to
                  such terms in the Credit Agreement.

                  Upon completion of a successful systems conversion and a
                  satisfactory field exam, the advance rate on Eligible RMR will
                  increase as detailed below and will be determined by the Net
                  Attrition Rate based on a rolling annualized six-month
                  calculation.

                  --------------------------------------------------------------
                    Net Attrition                       Maximum Advance Multiple
                  --------------------------------------------------------------
                   (less than) 8.0%                                20x
                  --------------------------------------------------------------
                   (greater than or equal to) 8.0% 10.0%           19x
                  --------------------------------------------------------------
                   (greater than or equal to) 10.0% 12.0%          19x
                  --------------------------------------------------------------

                  Eligible RMR will exclude the following:

                  o    RMR with Beacon Scores below 625 or RMR with less
                       than 12 months of payment history

                  o    Accounts not monitored with the Borrower

                  o    Wholesale accounts

                  o    Stand alone service agreements

                  o    Accounts with balances more than 90 days past invoice
                       date

Interest
Rates and
Calculations:     At the option of the Borrower, interest on all loans under the
                  Facility shall accrue at the following rates:

                        Pre System Conversion
                        ---------------------
                        LIBOR + 4.00%
                        Prime + 2.50%

                        Post System Conversion*
                        -----------------------
                        LIBOR + 3.50%
                        Prime + 2.00%

                  *     Post system conversion pricing will commence upon the
                        successful system conversion, a satisfactory field exam
                        and full compliance with the credit agreement.

                  LIBOR: The London Interbank Offered Rate ("LIBOR") as set
                  forth on the Dow Jones Market Page 3750 (or any successor
                  page) for deposits in dollars for one, two, or three month
                  periods ("Interest Periods") as offered at 11:00 a.m. London
                  time three (3) business days prior to the borrowing date,
                  adjusted for statutory reserve requirements.

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                  Base Rate: The higher of (a) the rate publicly announced from
                  time to time by LaSalle as its "prime rate" and (b) the
                  Federal Funds Rate plus 0.5% per annum.

                  Calculations: All calculations of interest and fees shall be
                  made on the basis of a 360-day year and actual days elapsed.
                  Interest shall be payable monthly in arrears on Base Rate
                  loans and on the last day of each Interest Period in the case
                  of LIBOR loans.

Minimum Draws:    Minimum drawdown amounts of $100,000 for Base Rate
                  advances and $1.0 million for LIBOR advances. No more than
                  seven (7) LIBOR contracts may be outstanding at any one time.

Unused Fee:       An unused fee of 50 basis points per annum payable on the
                  daily unutilized portion of the Facility. Such fee will be
                  payable quarterly in arrears on the last business day of each
                  fiscal quarter.

Agent, Arranger,
Upfront and
Annual Agency
Fees:             Such additional fees payable to Agent and the Arrangers as
                  specified in the Fee Letter.

Default Rate:     At the request of the Required Banks at any time when
                  the Borrower is in default, all loans shall bear interest at
                  3% above the rate otherwise applicable thereto. Overdue
                  interest, fees and other amounts shall (to the extent
                  permitted by applicable law) bear interest at 3% above the
                  rate applicable to Base Rate loans.

Repayment:        Loans outstanding under the Facility shall be repaid in full
                  on the fifth anniversary of the closing date. Interest only
                  for three years. At the end of the third year, availability
                  and correspondingly outstandings under the facility shall
                  decline by 1x RMR per quarter until maturity outstandings
                  under the Facility.

Voluntary
Prepayments
and Commitment
Reductions:       The Borrower may prepay amounts outstanding under the Facility
                  in whole or in part (in minimum amounts to be agreed upon),
                  with prior notice but without premium or penalty but subject
                  to payment of costs associated with breakfunding on LIBOR
                  loans. The Borrower may reduce commitments under the Facility
                  upon advance notice and in minimum amounts to be agreed upon.

Permitted
Acquisitions:     The Borrower may use the Facility for acquisitions, after
                  written notice to but without the consent of the Banks, under
                  the following limited circumstances:

                  o        Acquisitions of assets that consist of subscriber
                           contracts made in the ordinary course of business.

                  o        Acquisitions by the borrower of assets that consist
                           of customer contracts made in the ordinary course of
                           business as long as the purchase price for any one
                           transaction is less than $5.0 million and the total
                           of such transactions is less than $15.0 million per
                           fiscal year.

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                  o        All acquisitions will be subject to Borrowing Base
                           availability with the Borrowing Base calculated on a
                           pro forma basis, giving effect for the acquired RMR.

                  o        Upon completion of the acquisition, the Borrower will
                           be in pro forma compliance with all Loan Covenants.

                  Any acquisition which satisfies the forgoing conditions shall
                  be referred to as a "Permitted Acquisition". Approval of the
                  Agent will be required for any acquisition that does not
                  satisfy the above conditions and such approval shall not be
                  unreasonably withheld.

Security:         The Facility shall be secured by a first priority perfected
                  security interest in substantially all of the tangible and
                  intangible property (real, personal, or otherwise) of the
                  Borrower and any existing or future subsidiaries, including,
                  but not limited to, leasehold mortgage interests on the
                  existing and future central station locations and an
                  assignment of Borrower's interest in the subscriber monitoring
                  accounts. In addition, the Facility shall be secured by a
                  pledge of 100% of each of its subsidiaries or the subsidiaries
                  of any parent of Borrower.

Guarantors:       The Facility will be guaranteed, on a joint and several basis,
                  by any parent company of Borrower and by all existing and
                  future direct and indirect subsidiaries of the Borrower or its
                  parent. Each such guarantee shall be unlimited in nature.

Initial
Conditions:       The availability of the Facility shall be
                  conditioned upon the completion and/or
                  satisfaction of the following conditions:

                  (a)      A successful initial public offering of Borrower's
                           common stock with minimum net proceeds of $115
                           million.

                  (b)      Repayment of existing debt as set forth in the S-1
                           dated June 20, 2003 with net proceeds from the IPO.

                  (c)      The successful consolidation of financing trusts.

                  (d)      Successful negotiation and documentation of an
                           Intercreditor Agreement.

                  (e)      The Agent shall have received all fees required to be
                           paid, and all expenses for which invoices have been
                           presented, on or before the closing date.

                  (f)      All governmental and third party approvals necessary
                           in connection with the Acquisition, the financing
                           contemplated hereby and the continuing operations of
                           the Borrower and its subsidiaries shall have been
                           obtained on terms reasonably satisfactory to the
                           Agent and shall be in full force and effect, and all
                           applicable waiting periods shall have expired without
                           any action being taken or threatened by any competent
                           authority which would restrain, prevent or otherwise
                           impose adverse conditions on the acquisitions or the
                           financing thereof, except for such governmental and
                           third party approvals the failure to obtain which
                           could not, individually or in the aggregate,
                           reasonably be expected to have a material adverse
                           effect on the condition (financial or otherwise),
                           business, assets, liabilities, properties, results of
                           operations or prospects of the Borrower and its
                           subsidiaries taken as a whole.

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                  (g)      The Agent shall have received the results of a recent
                           lien search in each relevant jurisdiction with
                           respect to the Borrower and its subsidiaries, and
                           such search shall reveal no liens on any of the
                           assets of the Borrower and its subsidiaries except
                           for liens arising from security interests granted in
                           connection with loans described in any existing
                           credit agreements which must be terminated at close.

                  (h)      All documents and instruments required to perfect the
                           Agent's security interest in the collateral under the
                           Facility shall have been executed and be in proper
                           form for filing, and, in connection with real estate
                           collateral, the Agent shall have received title
                           insurance policies, surveys, permits and other
                           customary documentation, including leasehold
                           mortgages and landlord waivers related to current and
                           future central stations, to the extent reasonably
                           determined to be required by the Agent.

                  (i)      The Agent shall be reasonably satisfied with the
                           insurance program to be maintained by the Borrower
                           and its subsidiaries.

                  (j)      The Borrower shall not be in breach or violation of
                           any of its obligations.

                  (k)      The Agent shall have received such legal opinions
                           (including opinions from counsel to the Borrower and
                           its subsidiaries), and documents and other
                           instruments as are customary for transactions of this
                           type or as the Agent may reasonably request.

                  (l)      The receipt by the Agent and the Banks of five years
                           of projected income statements, balance sheets and
                           cash flow statements prepared by the Borrower and
                           giving effect to the Facility and the use of proceeds
                           therefrom, in form and substance satisfactory to the
                           Banks.

                  (m)      The Establishment of Key Man insurance on Tim McGinn
                           and Tom Few for a minimum of $2.0 million each
                           throughout the term of the Facility and the
                           assignment of each such Key Man insurance policy to
                           the Banks.

                  (n)      Establishment of non-compete/non-solicitation
                           agreement with Key Management satisfactory to the
                           Agent.

                  (o)      All legal (including tax implications) and regulatory
                           matters shall be satisfactory to the Agent and the
                           Banks.

<PAGE>

                  (p)      No default or unmatured default shall exist on the
                           funding date, and there shall not have occurred as of
                           the funding date any material adverse change in the
                           business, condition (financial or otherwise),
                           operations, performance, properties or prospects of
                           the Borrower.

                  (q)      The Agent shall have determined that there is an
                           absence of any material adverse change or disruption
                           in primary or secondary loan syndication markets,
                           financial markets, or capital markets generally.

On-Going
Conditions:       The making of each extension of credit shall be conditioned
                  upon (1) the accuracy of all representations and warranties in
                  the credit agreement and the other loan documents (including,
                  without limitation, the material adverse change and litigation
                  representations) and (2) there being no default or event of
                  default in existence at the time of, or after giving effect to
                  the making of, such extension of credit. As used herein,
                  "material adverse change" shall have the meaning ascribed to
                  such term in the credit agreement.

Representations
& Warranties:     Those representations and warranties customarily
                  found in credit agreements for transactions of this nature,
                  including without limitation financial statements, absence of
                  undisclosed liabilities, enforceability of loan documents,
                  investment company act, accuracy of disclosure, due
                  organization and authorization, no conflict, required
                  approvals, ownership of properties, no material adverse
                  change, no violation of Regulation T, U or X, payment of
                  taxes, pension and welfare plans, solvency, no material
                  litigation, intellectual property, absence of default, labor
                  matters and environmental matters.

Affirmative
Covenants:        Those affirmative covenants customarily found in credit
                  agreements for transactions of this nature, including without
                  limitation financial information (audited annual financial
                  statements with unqualified opinion, monthly financial
                  statements, monthly compliance certificates, monthly borrowing
                  base certificates (and with each acquisition), management
                  reports, and SEC filings), corporate existence, employee
                  plans, notice of default, environmental matters, litigation,
                  payment of taxes and obligations, financial projections,
                  compliance with laws, modification of agreements, maintenance
                  of property, insurance, inspection and further assurances.

                  o        Successful system conversion within six months of the
                           IPO;
                  o        Monthly Financial Statements;
                  o        Monthly Compliance Certificate;
                  o        Monthly Borrowing Base Certificate if the excess
                           availability exceeds 2.5% of total outstanding loans;
                           Monthly Borrowing Base Certificate is required with
                           each acquisition; Borrowing base is required per draw
                           if excess availability falls below 2.5%;
                  o        Monthly Attrition Report;
                  o        Monthly RMR Rollforward
                  o        Monthly Accounts Receivable Aging Summary Report;
                  o        Monthly cash collections report, detailing service
                           and monitoring revenue collected during the period;
                  o        Annual Audited Financial Statements

<PAGE>

                  o        Field Exams six months from the date of the IPO and
                           at least annually thereafter, or more frequently at
                           the Bank's discretion. All reasonable expenses
                           relating to such Field Audits shall be paid by the
                           Borrower.

Negative
Covenants:        Those negative covenants customarily found in credit
                  agreements for transactions of this nature, including without
                  limitation lines of business, additional indebtedness, liens,
                  encumbrances, guarantees, investments, cancellation of
                  indebtedness, restricted payments, modification of
                  subordinated debt instruments, capital expenditures, leases,
                  consolidations, mergers and acquisitions, sale of assets,
                  subsidiary dividends, transactions with affiliates and
                  management fees.

Interest Rate
Protection:       Within 60 days from the funding date, the Borrower shall have
                  entered into interest rate hedging agreements with LaSalle on
                  at least 50% of the outstanding amount of the Facility for a
                  term expiring no earlier than three years after the closing
                  date in a manner satisfactory to the Agent. The Borrower shall
                  maintain with LaSalle interest rate hedging on 50% of its debt
                  for the term of the Facility .

Financial
Covenants:        The Borrower shall observe, according to generally accepted
                  accounting principles and on a consolidated basis, the
                  following financial covenants, calculated monthly:

                        o       Minimum Fixed Charge Ratio of 2.0x

                        o       Maximum Net Attrition Rate as follows:

                                    Month        Calculation Period       Level
                                    -----        ------------------       -----
                                      3         3 months annualized        15%
                                      4         4 months annualized        14%
                                      5         5 months annualized        13%
                                  Thereafter    6 months annualized        12%

                        o       Maximum Leverage
                                    Pre Conversion Period 15x
                                    Post Conversion Period based on Maximum
                                    Availability Grid

                        o       Minimum Net Worth based on IPO proceeds

Cash Management:  All subscriber payments shall be collected through
                  lockbox. Lockbox and operating accounts to be held at LaSalle.

Events of
Default:          Those events of default customarily found in credit agreements
                  for transactions of this nature, including without limitation
                  failure to make payment when due, defaults under other
                  agreements or indebtedness, noncompliance with covenants,
                  breach of representation or warranty, bankruptcy, judgments in
                  excess of specific amounts, pension plan defaults, impairment
                  of security interests, invalidity of any guarantee, security
                  interest or subordination provision, change of control,
                  material adverse change.

<PAGE>

Participations
& Assignments:    Each Bank may at any time sell assignments in the
                  Facility to eligible financial institutions or commercial
                  banks (to be eligible, the potential participant or assignee
                  must have a minimum of $1.0 billion in assets) in minimum
                  amounts of $5 million subject to the consent of the Agent, the
                  assignor Bank and (so long as no event of default has occurred
                  and is continuing) the Borrower (which shall not be
                  unreasonably withheld or delayed). Each Bank may sell
                  participations in all or any part of the Facility, provided
                  such participants shall only have voting rights with respect
                  to certain specific terms such as (1) a decrease in fees,
                  interest rate spreads or principal, (2) an increase in
                  commitments if the participant's commitment is increased, (3)
                  an extension of the date of final maturity or (4) any release
                  of a guarantor (except as permitted by the credit agreement)
                  or of all or substantially all of the collateral. Upon the
                  consummation of an assignment, the assigning Bank shall pay an
                  administrative fee of $3,500 to the Agent.

Expenses and
Arrangement
Fee               The Borrower shall pay all reasonable costs and expenses of
                  the Agent associated with the Facilities, including without
                  limitation the reasonable fees and expenses of attorneys
                  engaged by the Agent regardless of whether the Facility is
                  consummated. The Borrower shall pay all costs and expenses,
                  including without limitation attorney's fees and expenses,
                  incurred at any time by the Agent and/or any Bank in enforcing
                  the credit agreement or any loan document. In addition, the
                  Borrower shall pay to Agent an Arrangement Fee pursuant to the
                  terms and conditions of the Fee Letter.

Indemnification:  The Borrower shall indemnify the Agent, the Banks and their
                  respective directors, officers, employees from and against all
                  losses, liabilities, claims, damages or expenses relating to
                  the Facility and the Borrower's use of the Facility, including
                  without limitation reasonable attorney's fees and settlement
                  costs, except to the extent that such losses, liabilities,
                  claims, damages or expenses are incurred by reason of the
                  gross negligence or willful misconduct of the applicable
                  indemnified person. Further, Borrower hereby agrees to assert
                  no claim against the Agent, the Banks and their respective
                  directors, officers and employees on any theory of liability,
                  for special, indirect, consequential or punitive damages.

Governing Law &
Jurisdiction:     The credit agreement and other loan documents will be governed
                  by Illinois law. The Borrower will submit to the non-exclusive
                  jurisdiction and venue of the federal and state courts of the
                  State of Illinois and will waive any right to trial by jury.

<PAGE>

This letter does not constitute a commitment by the Agent to provide (itself or
through any of its respective affiliates) any part of the Facility in excess of
$25 million, and the Agent hereby advises Borrower that it cannot represent that
a commitment by another lender or lenders can be or will be delivered.
Notwithstanding the foregoing, we look forward to successfully completing, with
your help, on a timely basis, placing the entire facility. The Borrower will
only show this letter to or discuss its contents with the Borrower's employees
and agents who have a need to know this information. Officers, directors,
employees and agents of each of the Banks, the Agent and their respective
affiliates shall at all times have the right to share information received from
the Borrower and its affiliates and their respective officers, directors,
employees and agents.

The Borrower shall make available to the Banks all information concerning the
business, assets, operations and financial condition of the Borrower which the
Banks reasonably request in connection with the performance of their obligations
hereunder; and the Borrower shall actively participate in, and cause the
management of the Borrower to actively participate in, both the preparation of
an information package regarding the operations and prospects of the Borrower as
well as the presentation thereof to prospective lenders.

This letter may not be amended or modified except in writing and shall be
governed by, and construed in accordance with, the internal laws (and not the
law of conflicts) of the State of Illinois. The Banks' and the Agent's
obligations under this letter are enforceable solely by the party signing this
letter and may not be relied upon by any other person.

Please indicate the Borrower's acceptance of this offer of engagement in the
space indicated below and return a copy of this letter so executed to the Agent.
This offer will expire at 5 p.m. on September 30, 2003.

Thank you for the opportunity to arrange this financing, and we look forward to
a timely and successful closing of this transaction.

                                             LASALLE BANK NATIONAL ASSOCIATION,
                                             as a Bank and as Agent

                                             -----------------------------------
                                             Name:
                                                   -----------------------------
                                             Its:
                                                 -------------------------------

THIS COMMITMENT IS HEREBY
ACCEPTED THIS _____ DAY OF JUNE, 2003

INTEGRATED ALARM SERVICES, GROUP, INC.,
as Borrower

-----------------------------------
Name:
     ------------------------------
Its:
    -------------------------------<PAGE>

                                                                    Exhibit 10.1

                              SETTLEMENT AGREEMENT

                  This Settlement Agreement (the "Agreement") is entered into on
the 1st day of April, 2003, by and among M. Diane Koken, and any successor
thereto, in her, or his capacity as the statutory Liquidator (the "Liquidator")
of Reliance Insurance Company ("Reliance"), and the Official Unsecured Bank
Committee (the "Bank Committee") and the Official Unsecured Creditors' Committee
(collectively with the Bank Committee, the "Committees") of Reliance Group
Holdings, Inc. ("RGH") and Reliance Financial Services Corp. ("RFSC" and,
together with RGH, the "Debtors").

                                    RECITALS

                  WHEREAS, the parties hereto have been involved in various
disputes with respect to: (A) the ownership interests of the Debtors' estates,
on the one hand, and the Liquidator's Reliance estate, on the other hand,
relating to: (i) directors and officers insurance policies and the proceeds
thereof; (ii) cash now or hereafter held by the Debtors; (iii) the NOLs (as
defined below); and (iv) the ss. 847 Refunds (as defined below); and (B) the
amount of the Liquidator's allowed claim in the Debtors' bankruptcy proceedings;
and

                  WHEREAS, the parties do not concede or admit the merits of any
of the foregoing disputes; and

                  WHEREAS, in the interest of avoiding the cost of further
litigation and conserving the assets of the liquidation estate of Reliance and
the bankruptcy estates of RGH and RFSC, the parties wish to settle and resolve
all their differences on the terms and conditions set forth in this Agreement;

                  NOW THEREFORE, in consideration of the foregoing, and for
other good and valuable consideration, the receipt and sufficiency of which are
acknowledged, the parties hereto agree as follows:

 1. Effectiveness of Settlement. The terms of this Agreement effectuating the
settlement as set forth herein shall be effective upon the satisfaction of each
of the following conditions on or prior to August 31, 2003:

 a. the United States Bankruptcy Court for the Southern District of New York
(the "Bankruptcy Court") shall have entered an order pursuant to the Rule 9019
Motion (as defined in Section 7(d) hereof) approving this Agreement and
containing all provisions specifically required in this Agreement to be included
therein, and such order shall otherwise be consistent in all material respects
with this Agreement; and

 b. the Commonwealth Court of Pennsylvania (the "Commonwealth Court") shall have
entered an order approving this Agreement and containing all provisions
specifically required in this Agreement to be included therein, and such order
shall otherwise be consistent in all material respects with this Agreement;

                  provided that, in the event such conditions are not so
satisfied, this Agreement shall terminate without any obligation or liability of
any kind by any party to another party or to RGH or RFSC, except for any breach
of any party's obligations under Section 7(b), 7(c), 7(d), 7(f), 7(g) or 7(h) of
this Agreement.

<PAGE>

                  2. ss. 847 Refunds. Reliance, RGH and RFSC are members of a
consolidated group for federal income tax purposes (the "RGH Tax Group"). A new
consolidated federal income tax group with RFSC as the common parent and with
Reliance as a member will be formed (the "RFSC Tax Group"). Reliance and any of
its subsidiaries which are currently members of the RGH Tax Group hereby agree
to join in the filing and will execute and deliver the necessary consents to
file a consolidated federal income tax return as part of the RFSC Tax Group and
RFSC hereby agrees to and will file a consolidated return with Reliance and any
such subsidiaries. The members of such RFSC Tax Group hereby further agree not
to take any actions that would cause a disaffiliation of Reliance from the RFSC
Tax Group. The RGH Tax Group has amended or will amend certain past tax returns
(including, but not necessarily limited to, the 1988-1992 tax years) in order to
designate certain tax payments as "special estimated tax payments" under ss. 847
of the Internal Revenue Code of 1986, as amended (the "IRC"). Such payments may
become available for refund pursuant to IRC ss. 847 (the "New ss. 847 Refunds").
In addition to the New ss. 847 Refunds created by amending those certain tax
returns, Reliance, through the RGH Tax Group, has made significant other
"special estimated tax payments" under IRC ss. 847 (the "Original 847 Refunds"
and together with the New ss. 847 Refunds, the "ss. 847 Refunds"). The RGH Tax
Group will be terminated as part of a plan or plans of reorganization of RGH and
RFSC (the "Plan(s) of Reorganization"). Each of the RGH Tax Group (until its
termination), the RFSC Tax Group (upon its formation) and the Committees will
take all steps necessary to maximize the receipt of ss. 847 Refunds. The
recipient of the ss. 847 Refunds shall be deemed to hold: (i) fifty percent
(50%) of each of such ss. 847 Refunds in trust for the sole benefit of the
Liquidator and the Liquidator will promptly be paid such fifty percent (50%)
share of the amount of each of such ss. 847 Refunds actually received, without
set-off or offset; and (ii) fifty percent (50%) of each of such ss. 847 Refunds
in trust for the sole benefit of a liquidating trustee to be appointed under the
Plan(s) of Reorganization (the "Liquidating Trustee"), and the Liquidating
Trustee will promptly be paid such fifty percent (50%) share of the amount of
each of such ss. 847 Refunds actually received, without set-off or offset.

                  3. NOLs. The RGH Tax Group has substantial net operating
losses for federal income tax purposes and may generate additional such losses
prior to its termination. The RFSC Tax Group will inherit substantial portions
of such losses from the RGH Tax Group and may generate additional net operating
losses in the future (together, all such RGH Tax Group losses inherited by the
RFSC Tax Group and all subsequent losses generated by the RFSC Tax Group, the
"NOLs"). The Liquidator has informed the Committees that the NOLs attributable
to the operations of Reliance are estimated to exceed $2 billion through the end
of 2001. RGH, RFSC and Reliance (to cover the period during which the RGH Tax
Group remains in existence and Reliance remains a member) and RFSC and Reliance
(to cover the period beginning when the RFSC Tax Group is created) will enter
into certain Tax Sharing Agreements to govern the sharing of the respective
group's consolidated tax liability and various other tax matters. The Tax
Sharing Agreements will provide, and the parties to this Agreement also agree,
that: (i) NOLs attributable to the operations of Reliance of not less than $1.25
billion will be made available for RGH and RFSC (the "Base NOLs"); (ii) NOLs
attributable to the operations of Reliance, whether now existing or hereafter
created, in excess of the Base NOLs, shall remain available for the use of
Reliance in offsetting income generated in connection with the liquidation of
Reliance, including its ongoing insurance operations (the "Reliance NOLs");
(iii) in the event that Reliance, in its reasonable sole discretion, determines
that it no longer requires all or a portion of the Reliance NOLs, Reliance shall

                                      -2-
<PAGE>

make such excess NOLs (the "Excess NOLs") available to RGH or RFSC; (iv) if and
to the extent that RGH creditors or RFSC creditors, through the utilization of
Base NOLs and/or Excess NOLs (after reduction of such NOLs by any cancellation
of indebtedness income realized in connection with the implementation of the
Plan(s) of Reorganization), receive any distribution other than the ss. 847
Refunds, or any distribution is received for their benefit by, inter alia, a
Liquidating Trustee, the Liquidator shall receive an amount equal to such
distribution (it being agreed and understood that, other than for the payments
provided under this subsection (iv), RGH and RFSC shall not be required to make
any payments to Reliance under the Tax Sharing Agreements, nor shall the amount
of income taxes otherwise payable by Reliance under the Tax Sharing Agreements
be reduced, on account of the Base NOLs and/or Excess NOLs); and (v) to the
extent that Reliance utilizes any of the Base NOLs (other than for offsetting
the Base NOLs against any taxable income resulting from the ss. 847 Refunds), or
to the extent that Reliance utilizes any of the Excess NOLs, Reliance shall pay
the Liquidating Trustee in cash $0.35 for every $1.00 of such NOLs utilized by
Reliance, and fifty percent (50%) of such payment shall be returned to the
Liquidator consistent with subsection (iv) of this Section, except and to the
extent that: (a) Reliance utilizes any Base NOLs or Excess NOLs that would
otherwise have been utilizable to offset either any taxable income resulting
from the ss. 847 Refunds or the cancellation of indebtedness income realized in
connection with implementation of the Plan(s) of Reorganization (both with
respect to the taxable year that the NOLs are utilized by Reliance and with
respect to future taxable years); or (b) the utilization of the Base NOLs or the
Excess NOLs by Reliance actually results in tax liability to the RFSC Tax Group
(with respect to the taxable year that the NOLs are utilized by Reliance and/or
future taxable years) that would otherwise not have been due had such Base NOLs
or Excess NOLs not been utilized by Reliance, but only where Reliance has
received or it is reasonably anticipated that Reliance will receive payment
regarding such Base NOLs or Excess NOLs under subsection (iv) of this Section.
It is understood that the actual use of the Base NOLs and Excess NOLs shall be
determined by RGH and RFSC in consultation with Reliance. For purposes of
calculating the amount of "any distribution" as used in paragraph (iv) above,
such calculations shall be made without regard to expenses incurred by any of
the parties hereto, the estates of RGH, RFSC, and any Liquidating Trustee. In
particular, to the extent the amount of "any distribution" has been reduced by
reason of an administrative expense of RGH, RFSC, or the Liquidating Trustee,
the amount payable to the Liquidator shall be increased to eliminate the effect
of such administrative expense. The parties further acknowledge that it is their
intent under this Agreement and the Tax Sharing Agreements that: (i) any taxable
income resulting from generation of the ss. 847 Refunds and cancellation of
indebtedness income realized in connection with implementation of the Plan(s) of
Reorganization (other than cancellation of indebtedness income realized by RGH
to the extent such income does not offset NOLs) shall be offset with Base NOLs
for purposes of this Agreement; and (ii) RGH and RFSC, and their successors and
assigns, shall not manage, operate, or structure the affairs of RGH, RFSC, or
any successor entity, including by consolidation, merger, partnership, or other
association, in such a way that will result in the utilization of the Reliance
NOLs; and RGH, RFSC and Reliance and their successors and assigns shall not
manage, operate or structure the affairs of RGH, RFSC, Reliance or any successor
entity, including by consolidation, merger, partnership or other association, in
such a way that will impair in any way the ability of the parties to utilize the
Base NOLs to offset income generated in connection with the ss. 847 Refunds.

                                      -3-
<PAGE>

                  4. D&O Litigation.

                  a. The Actions. On June 24, 2002, the Liquidator commenced an
action against certain former officers and directors ("Defendants") of Reliance
(the "Reliance D&O Action") in the Commonwealth Court. So long as this Agreement
is in full force and effect, the Committees, RGH, RFSC, the Liquidating Trustee
or any other estate representative agree that they will not commence any action
against the Defendants (except for a preference action as hereinafter defined)
without the prior written consent of the Liquidator, which shall include the
Liquidator's consent as to the venue of such action.

                  b. Division of Proceeds. (i) Unless altered by the conditions
set forth in subsection (ii) of this Section 4(b), the gross proceeds (i.e.
before payment of any costs, contingent or other attorneys fees, etc.) realized
by the Liquidator, the Committees, RGH, RFSC, the Liquidating Trustee, or other
estate representative arising out of any litigation, claims, or causes of action
against any director or officer of RGH, RFSC, or Reliance under any of the
insurance policies listed on Exhibit A to this Agreement or from such directors
or officers, including any Defendant in the Reliance D&O Action (the
"Proceeds"), will be divided forty percent (40%) to the Liquidating Trustee (or
other appropriate representative of the Debtors' estates) and sixty percent
(60%) to the Liquidator; it being understood that the division of the Proceeds
shall be without any deduction, reduction, or diminution with respect to any
expenses, legal or otherwise, in connection with such litigation, provided,
however, that, it is specifically agreed that proceeds derived from or allocable
to claims of receipt of preferential payments, fraudulent transfers, or similar
causes of action ("preference actions"), so long as they are not derived from or
received through or under the insurance policies listed on Exhibit A to this
Agreement, brought in any forum against one or more Defendants, either in their
capacity as officers and directors of RGH, RFSC, or Reliance, or as individuals
or otherwise, are specifically excluded from division or allocation under this
Agreement and will be retained by the party who brings such a preference action.
(ii) In the event that an action or actions is initiated against one or more
Defendants or other directors or officers of the Debtors by the Committees, RGH,
RFSC, any Liquidating Trustee, or other RGH or RFSC estate representative
consistent with Section 4(a) of this Agreement, the Liquidator shall be given
the option to pay all expenses of such action or actions. If the Liquidator
exercises that option, all Proceeds (consistent with the definition above)
recovered from such action or actions shall be divided in accordance with
subsection (i) of this Section 4(b). If the Liquidator declines the option to
pay these expenses, the net Proceeds recovered from such action or actions (i.e.
after payment of any costs, contingent or other attorneys fees, etc.) shall be
divided fifty percent (50%) to the Liquidating Trustee (or other appropriate
representative of the Debtors' estates) and fifty percent (50%) to the
Liquidator.

                  c. Distribution of Proceeds. Proceeds shall be promptly
distributed in accordance with the terms of this Agreement.

                  d. D&O Settlement. In the event the Liquidator wishes to
settle the Reliance D&O Action, she shall first seek the consent of the
Committees or, upon confirmation of the Plan(s) of Reorganization, the
Liquidating Trustee, which consent shall not be unreasonably withheld.
Individual members of the Committees shall have no right to consent or withhold
consent under this Section. The Liquidator shall provide to the Committees or

                                      -4-
<PAGE>

the Liquidating Trustee notice in writing setting forth the material terms of
the proposed settlement, and the Committees or the Liquidating Trustee shall
respond with consent or refusal to consent in writing within 48 hours of receipt
of the notice, which, in the event of a refusal to consent, shall set forth: (i)
each reason for the refusal to consent; and (ii) alternative terms to which
consent would be given. The Liquidator may either abandon such settlement or
submit the reasonableness of the settlement to the dispute resolution process
set forth in Section 7(h) herein, provided that all parties agree that the
dispute resolution proceeding on this issue shall be expedited and shall be
commenced and concluded in no more than 48 hours. In any such proceeding under
Section 7(h), the Committees or the Liquidating Trustee shall bear the burden of
proving, by clear and convincing evidence, that the settlement is, when taken as
a whole, unreasonable and inadequate, and if that burden is met, and the refusal
to consent is sustained by the arbitrator, the arbitrator shall determine what
monetary or other terms would be reasonable and adequate. The Liquidator, the
Committees, and the Liquidating Trustee will be bound by the determination of
the Section 7(h) proceeding. Upon any settlement, all parties bound by this
Agreement (including but not limited to, upon effectiveness of the settlement as
provided in Section 1, RGH and RFSC) agree to be bound by the settlement and to
take all actions necessary to effectuate such settlement, including by using all
commercially reasonable efforts to obtain any requisite court approval, signing
all necessary documents, and implementing the division of proceeds as agreed to
hereunder.

                  e. The Standstill Agreement. There is currently in effect a
standstill agreement, originally dated March 12, 2002 and as amended from time
to time, among the Liquidator, the Debtors, and the Committees (the "Standstill
Agreement"), applicable to certain litigation pending between the Liquidator and
the Debtors, including that certain litigation filed in the Commonwealth Court
and subsequently removed to the United States District Court for the Eastern
District of Pennsylvania (the "PA Litigation") and the litigation concerning an
order to show cause pending in the Bankruptcy Court (the "NY Litigation"). The
Standstill Agreement, as extended from time to time by the parties thereto,
shall remain in effect until the effectiveness of the settlement as provided in
Section 1, at which time the Standstill Agreement shall by joint stipulation
terminate and the PA Litigation and the NY Litigation shall be dismissed with
prejudice upon joint motion or stipulation of the parties. Notwithstanding the
foregoing, the parties agree that the Emergency Petition for Preservation of
Insurance Policy Assets of Estate (the "Emergency Petition"), filed by the
Liquidator in the Commonwealth Court within matter No. 269 M.D. 2001, removed to
the United States District Court for the Eastern District of Pennsylvania (the
"EDPa Court"), and transferred to the Bankruptcy Court (which transfer was
appealed to the EDPa Court), shall not be dismissed, but shall remain pending in
the Bankruptcy Court (and the appeal shall remain pending in the EDPa Court),
and the parties agree that no party shall file any further brief, motion,
application, complaint, or proceeding, or take any other action, in any court or
other tribunal, that seeks any ruling or order of any kind with respect to the
subject matter of the Emergency Petition until such time as the parties agree to
a dismissal or other resolution of the matter. Nothing in this Section shall be
construed to prohibit any party from making any appropriate response or filing
in any action or proceeding commenced by nonparties to this Agreement regarding
the subject matter of the Emergency Petition, including the matter captioned
George E. Bello, et al. v. Syndicate 1212 at Lloyd's, London, et al, pending in
the Bankruptcy Court at No. 01-03572, or to prohibit any party from commencing a
new action or proceeding to prevent the payment of proceeds from the insurance

                                      -5-
<PAGE>

policies that are the subject of the Emergency Petition, or to prohibit any
party from opposing or otherwise responding to or proceeding in any such new
action or proceeding. In the event that either the Bankruptcy Court or the EDPa
Court takes any action inconsistent with the foregoing, the parties shall use
their best efforts to reach agreement regarding a disposition of the Emergency
Petition that will not be unduly prejudicial to the estate of either Reliance or
the Debtors. Nothing in this Section shall be construed to alter the
distribution of the Proceeds set forth in Sections 4(b) and 4(c) of this
Agreement, or the dispute resolution procedure set forth in Section 7(h) of this
Agreement.

                  f. Records of the Debtors. The Committees agree to use their
best efforts to ensure that any order entered by the Bankruptcy Court approving
this Agreement include a provision substantially in the following form: "The
automatic stay extant pursuant to Section 362 of the Bankruptcy Code is hereby
modified for the limited purpose of permitting the Liquidator to serve and
enforce any request for the production of documents and things under Rules 34
and 45 of the Federal Rules of Civil Procedure and Rules 7034 and 9016 of the
Federal Rules of Bankruptcy Procedure."

                  5. Cash.

                  a. Allocation and Distribution of Current Cash. The Committees
represent that they have been advised by the Debtors that cash on hand/current
assets (the "Current Cash") in the Debtors' estates as of February 28, 2003 is
ninety-two million, three-hundred and twenty-seven thousand dollars
($92,327,000). From this amount, the fixed sum of $45 million shall be held by
RGH for the benefit of the Liquidator, shall be invested at the direction of the
Liquidator, and shall be distributed, along with accumulated interest thereon,
but less any tax withholding or losses from the investment thereof, to the
Liquidator upon the occurrence of the earliest of the following:

                  (A)      The effective date of the Plan of Reorganization of
                           RGH;

                  (B)      Any interim distribution to creditors of RGH estate;

                  (C)      March 31, 2004;

                  (D)      The appointment of a trustee or examiner with powers
                           of a trustee for either RGH or RFSC (other than upon
                           motion by the Liquidator), but not an examiner
                           appointed upon motion of any government agency or a
                           trustee or examiner appointed for the limited purpose
                           of evaluating whether to bring or initiate litigation
                           against third parties; or

                  (E)      Conversion of Chapter 11 case of either RGH or RFSC
                           to Chapter 7 case, or dismissal of either of such
                           cases (other than upon motion by the Liquidator).

                  The order of the Bankruptcy Court approving the Rule 9019
Motion shall provide, inter alia, that RGH shall not distribute any such moneys
held for the Liquidator without the Liquidator's prior written consent and that
such moneys shall be held in investments as directed by the Liquidator, subject
to the approval of the Bankruptcy Court.

                  b. Definition of New Cash. "New Cash" means all cash and other
assets that are equivalent to or readily convertible into cash ("cash
equivalents") received after the execution of this Agreement into either the RGH

                                      -6-
<PAGE>

or the RFSC estate before final confirmation of the Plan of Reorganization
applicable to that estate and all cash and cash equivalents received by the
Reorganized Debtors after final confirmation of the Plan(s) of Reorganization on
account of assets that were property of either of the Debtors' estates on June
12, 2001 (the "Petition Date"), but not including: (i) the assets described in
Sections 2, 3, 4 and 5(a) herein; (ii) any cash or cash equivalents received
into the RGH or RFSC estates as a result of any litigation, claims, rights of
set-off or causes of action; (iii) to the extent the Reorganized Debtors
generate income from business operations conducted after the confirmation of the
Plan(s) of Reorganization, any such net after-tax income; or (iv) any cash
transferred between RGH and RFSC. It is expected that RGH will receive certain
cash representing the net aggregate tax refund resulting from the final
resolution of all outstanding tax liabilities of RGH and RFSC (whether federal,
state or local), which may be attributable to claims under Sections 507(a)(8) or
503(b) of the Bankruptcy Code or otherwise. New Cash shall include any such net
aggregate tax refund received by the Debtors' estates, but only after giving
effect to such netting. New Cash shall also include cash and cash equivalents
if, rather than being received into the Debtors' estates, such cash or cash
equivalents are paid directly to a creditor or other person to satisfy an estate
obligation.

                  c. Distribution of New Cash. Any New Cash that is received
(which, with respect to assets in form other than cash, means the receipt of the
cash proceeds upon conversion of such assets to cash) shall be distributed in
the following order:

                  first, to the extent that the final resolution of all
outstanding tax claims against RGH and RFSC (whether federal, state or local)
does not result in a net aggregate tax refund, but instead results in net
aggregate tax liabilities attributable to claims under Section 507(a)(8) or
503(b) of the Bankruptcy Code, to the payment of such net aggregate tax
liabilities;

                  second, to RGH or its designee under the Plan(s) of
Reorganization until RGH or such designee has received an amount equal to $12
million; and

                  third, on a pro rata basis: (a) 50% of the remaining New Cash
to RGH or its designee under the Plan(s) of Reorganization; and (b) 50% of the
remaining New Cash to the Liquidator.

                  Distributions of New Cash under this Agreement shall continue
regardless of the total amount of New Cash received and regardless of the total
amount of money already paid to the Liquidator. It shall not be a defense to
payment to the Liquidator of her share of New Cash that she shall have been
allegedly "paid in full" for the Liquidator's claim against the Debtors existing
as of the Petition Date. The parties to this Agreement acknowledge that while
there is an agreed allowed claim by the Liquidator of $288 million, the
Liquidator will continue to be entitled to and continue to receive distributions
of New Cash regardless of the total amount of her recoveries under this
Agreement and from any other source.

                  6. Effect of Prior Order. The order of the Commonwealth Court
approving the Petition (as defined in Section 7(f) below) shall provide, among
other things, that the prior order of the Commonwealth Court, dated October 3,
2001, requiring property of Reliance held by other parties to be turned over to
Reliance, shall not have any effect on, or be applicable to, any property of the
Debtors or the Liquidating Trustee, except as otherwise specifically provided in
this Agreement.

                                      -7-
<PAGE>

                  7. Miscellaneous.

                  a. No Impact On Claims or Debts of Third Parties. Consistent
with the terms of ss. 524(e) of the Bankruptcy Code, this Agreement and the
Plan(s) of Reorganization are not intended to have and shall not have any direct
or indirect effect upon or directly or indirectly waive any claims against
persons not actually parties to this Agreement. Neither this Agreement nor the
Plan(s) of Reorganization shall directly or indirectly release, discharge,
reduce the liability of, or reduce the damages attributable to, the current or
former officers and directors of RGH or RFSC, the former officers and directors
of Reliance, or any other party for any debts or liabilities or causes of action
or claims existing against them, including any such debts owed simultaneously by
the Debtors and such non-released third parties, except as specifically stated
in this Agreement. Notwithstanding the foregoing, it is understood that the
Plan(s) of Reorganization may contain customary exculpation provisions
releasing: (i) the Committees, their representatives, and their counsel for all
actions taken prior to and since the Petition Date in respect of the prosecution
of and preparation for the Debtors' restructurings and Chapter 11 cases; and
(ii) the Debtors, their officers and directors, their representatives, and their
counsel for all actions taken since the Petition Date in respect of the Debtors'
restructurings and Chapter 11 cases.

                  b. Court Approval. Each of the parties hereto agree to use
appropriate and commercially reasonable efforts to obtain court approval in
accordance with the provisions of Section 1 hereto, but no party guarantees or
warrants that such approval will be obtained.

                  c. Approval of the Agreement and the Plan(s) of
Reorganization. The Liquidator and the Committees agree to do everything
reasonably necessary to implement the terms of this Agreement. The terms of this
Agreement will be implemented on the part of the Committees and the Liquidator
through the Rule 9019 Motion, the Petition (as defined in Section 7(f) below),
the confirmed Plan(s) of Reorganization, and any plan of rehabilitation or
liquidation for Reliance. The Committees agree that they or the Debtors shall
provide the Liquidator in advance with a draft of the Plan(s) of Reorganization.
The Plan(s) submitted to the Bankruptcy Court for approval, and the Order
confirming such Plan(s) of Reorganization shall be consistent with the terms of
this Agreement. In the event of any dispute as to whether the Plan(s) of
Reorganization are consistent with this Agreement, the Plan(s) shall not be
filed for approval and the parties agree to resolve the dispute through the
dispute resolution procedure set forth in Section 7(h) hereto. Assuming that the
Plan(s) of Reorganization are consistent with the terms of this Agreement, as
determined by the Liquidator or in a final and binding arbitration award, the
Liquidator agrees, for consideration as set forth in this Agreement, that she
will support such Plan(s) of Reorganization. Each party hereto agrees to use its
commercially reasonable efforts to consummate the transactions contemplated
herein as of the earliest practicable dates and to maximize the benefits of this
Agreement to all parties.

                  d. Approval by the Bankruptcy Court. A copy of the motion
seeking approval by the Bankruptcy Court of the settlement set forth in this
Agreement (the "Rule 9019 Motion") of certain disputes (including without
limitation the NY Litigation and the PA Litigation) with respect to the
ownership interest of the Debtors' estates relating to: (i) any directors and
officers insurance policies and the proceeds thereof; (ii) the Current Cash and
the New Cash; (iii) the NOLs; and (iv) the ss. 847 Refunds, and fixing the
Liquidator's allowed claim at $288 million, shall be provided to the Liquidator

                                      -8-
<PAGE>

for her review and written approval prior to the filing of such motion with the
Bankruptcy Court. The parties shall use their commercially reasonable efforts to
obtain an order approving the Rule 9019 Motion by the Bankruptcy Court on or
before August 31, 2003, although no party guarantees, warrants, or represents
such order will be entered by said date. The effectiveness of the settlement
pursuant to Section 1 shall constitute a settlement of the NY Litigation and the
PA Litigation and a termination of the Standstill Agreement under Section 4(e),
except as otherwise provided in this Agreement.

                  e. Priority. Any claim resulting from a breach of any
obligation under this Agreement, including without limitation any payment
obligation, by the Liquidator or Reliance, if upheld, shall be treated as a
first priority administrative claim with respect to the Liquidator or Reliance
in the liquidation proceedings in the Commonwealth Court. A provision requiring
that all payments or payment obligations of the Liquidator or Reliance to the
Debtors or the Liquidating Trustee under this Agreement shall be given first
priority administrative status shall be included in the final order of the
Commonwealth Court approving the Petition (as defined in Section 7(f) below) and
in any plan of rehabilitation or liquidation for Reliance entered in, or
approved by, the Commonwealth Court. Likewise, any claim resulting from a breach
of any obligation under this Agreement, including without limitation any payment
obligation, by the Committees, the Debtors, or the Liquidating Trustee, if
upheld, shall be treated as a first priority administrative claim with respect
to the Debtors' bankruptcy proceeding. A provision requiring that all payments
or payment obligations of the Debtors, the Liquidating Trustee, or the
Committees to the Liquidator or Reliance under this Agreement shall be given
first priority administrative status shall be included in the final Plan(s) of
Reorganization and the order approving this Agreement by the Bankruptcy Court.

                  f. Commonwealth Court Petition. A copy of the petition seeking
approval of this Agreement by the Commonwealth Court (the "Petition") shall be
provided to the Debtors and the Committees for their review prior to filing the
Petition with the Commonwealth Court. The parties shall use their commercially
reasonable efforts to obtain an order approving the Petition by the Commonwealth
Court on or before August 31, 2003, although no party guaranties, warrants or
represents that such order will be entered by said date.

                  g. Jurisdiction of the Commonwealth Court. The Liquidator
hereby agrees to submit to the jurisdiction of the Bankruptcy Court solely for
the purpose of any proceedings to implement and enforce the Rule 9019 Motion or
Plan(s) of Reorganization, to the extent such submission does not conflict with
the jurisdiction of the Commonwealth Court.

                  h. Dispute Resolution. In the event a dispute should arise in
respect of any provision of this Agreement or in respect of any party's
compliance with any provision of this Agreement, the parties agree that they
will use their best efforts to resolve such dispute in a consensual manner. In
the event they cannot resolve any such dispute consensually, the parties agree
that any and all such disputes shall be submitted to final and binding
arbitration in accordance with the Rules of the American Arbitration Association
("AAA") and the Federal Arbitration Act, before one arbitrator from outside the
Second and Third Circuits (unless otherwise agreed by the parties). In selecting
an arbitrator, the Liquidator and the Committees or, upon confirmation of the
Plan(s) of Reorganization, the Liquidating Trustee, may elect one neutral

                                      -9-
<PAGE>

arbitrator that is acceptable to both parties. In the event an agreement on one
neutral arbitrator cannot be reached, each party shall select one arbitrator and
both arbitrators shall select a third neutral arbitrator. This provision
constitutes consent to arbitration by each of the parties hereto and a waiver of
its respective rights to seek relief in any forum other than that specified in
this Section 7(h). In the event any party hereto or any of their respective
successors or assigns should seek relief in any court or administrative tribunal
or commences any proceeding other than one specified herein, this provision
constitutes such party's consent to stay or dismissal of such action or, as may
be appropriate, to have such dispute transferred to an arbitration to be
conducted in accordance with the Commercial Rules of the AAA and the provisions
of this Section 7(h).

                  i. Limitation on Recoveries. No signatory to this Agreement,
nor the Debtors, shall pursue a claim against another signatory to this
Agreement or the Debtors with respect to any matter which is inconsistent with
this Agreement and with respect to the claims between Reliance and the
Liquidator on the one hand and the other parties to this Agreement on the other
hand, and each party agrees that, with respect to the matters specifically dealt
with herein, they shall be limited to the recoveries specified under this
Agreement, except that the parties may pursue claims to enforce or secure
performance under this Agreement.

                  j. Assertion of Claims. Pursuant to the Plan(s) of
Reorganization, and upon confirmation of such Plan(s) of Reorganization, RGH,
RFSC, and RGH's and RFSC's subsidiaries, and the Liquidator and Reliance and its
subsidiaries shall be permanently enjoined from pursuing claims against each
other, except for their rights under this Agreement and the Plan(s) of
Reorganization.

                  k. No Proof of Claim. There will be no requirement for the
Liquidator to file a proof of claim in order to effectuate this Agreement.

                  l. Claims of the Liquidator. The parties agree that the claims
of the Liquidator shall be separately classified in the Plan(s) of
Reorganization. For purposes of receiving the agreed allocations to the parties
hereto, the parties further agree to an allowed claim by the Liquidator in the
amount of $288 million and that distribution on that allowed claim shall be as
provided in this Agreement. The parties hereto acknowledge that the Liquidator
contends that her claims are or may be far in excess of $288 million, but the
Liquidator agrees not to further assert other claims against the Debtors or
their respective subsidiaries, the Committees or the Committees' representatives
and the Committees' counsel; it being agreed, however, that such claims shall
nevertheless survive and may be asserted by the Liquidator against any other
parties who may be liable with respect thereto.

                  m. No Attorney-Client Relationship. Other than as expressly
set forth in this Agreement, nothing contained herein shall be construed in any
way to create any duties, legal, equitable, ethical, or otherwise, running from
the Liquidator or Reliance, or their counsel, to the RGH creditors, the RFSC
creditors, the Committees, RGH, RFSC, or Reorganized RGH or Reorganized RFSC. By
way of example, and without excluding any other type of duty, nothing contained
in this Agreement, in the Plan(s) of Reorganization, or in the Disclosure
Statement(s) shall be deemed to create an attorney-client relationship between
the Liquidator's counsel on one hand and the RGH creditors, the RFSC creditors,
the Committees, RGH, RFSC, or Reorganized RGH or Reorganized RFSC, on the other
hand. No parties, other than the signatories to this Agreement, the Debtors

                                      -10-
<PAGE>

(upon effectiveness of the settlement pursuant to Section 1), and the
Liquidating Trustee, and their successors and assigns, shall have any rights
under this Agreement. There are no intended or other third party beneficiaries
to this Agreement.

                  n. Distributions. To the extent funds are received by either
party and such funds cannot be distributed pursuant to the terms of this
Agreement because: (i) the Commonwealth Court has not approved this Agreement;
or (ii) the Plan(s) of Reorganization of RFSC and RGH have not become effective,
all such funds shall be held in interest bearing accounts (in investments
acceptable to the party to which such funds are owed) pending distribution as
set forth in this Agreement.

                  o. Recovery of Distributed Funds. Once funds have been
distributed by the Liquidator, RGH or RFSC, each party shall limit its remedies
in respect of such distributed funds to an adjustment to future distributions.
In no event shall any party hereto or any person that they may distribute funds
to be required to disgorge any payments which have been made pursuant to this
Agreement.

                  p. Members of Committees. The Committees shall provide to the
Liquidator a current list of their members within five (5) business days of the
date hereof and the Committees warrant and represent that the list is accurate
and complete as of the date provided. The Committees further warrant and
represent that, subject only to the approval of the Bankruptcy Court in the form
of an order approving the Rule 9019 Motion, they have authority to enter into
this Agreement.

                  q. Power and Authority. Each of the parties to this Agreement
hereby represents and warrants to the other that, subject to the approval of
this Agreement by the Commonwealth Court and the confirmation of the Plan(s) of
Reorganization by the Bankruptcy Court, such party has the power and authority
to enter into this Agreement and, in the case of the Committees, to propose the
Plan(s) of Reorganization and to perform all obligations and fulfill all
covenants required of such party as set forth herein and therein.

                  r. Severability. The provisions of this Agreement are not
severable.

                  s. Notices. All notices, consents, or other communications
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been duly given when delivered personally or one
business day after being sent by a nationally recognized overnight delivery
service, postage or delivery charges prepaid, or five business days after being
sent by registered or certified mail, return receipt requested, postage charges
prepaid. Notices also may be given by facsimile and shall be effective on the
date transmitted if a copy is sent within 48 hours thereafter by one of the
means provided in the preceding sentence. Notices to the Liquidator shall be
sent to Liquidator, Reliance Insurance Company, 1326 Strawberry Square,
Harrisburg, PA, 17120, with copies sent simultaneously to Barry Genkin, Blank
Rome LLP, One Logan Square, Philadelphia, PA, 19103, and to Chief Counsel,
Pennsylvania Insurance Department, 1341 Strawberry Square, Harrisburg, PA,
17120. Notices to the Official Unsecured Bank Committee shall be sent to Thomas
M. Dinneen, Managing Director, JP Morgan Chase Bank, 270 Park Ave., 20th Floor,
New York, NY, 10017, with a copy to Andrew DeNatale, White & Case LLP, 1155
Avenue of the Americas, New York, NY, 10036. Notices to the Official Unsecured

                                      -11-
<PAGE>

Creditors' Committee shall be sent to the Liquidating Trustee, c/o Arnold
Gulkowitz, Orrick Herrington & Sutcliffe LLP, 666 Fifth Ave., New York, NY,
10103. Any party may change its address for notice and the address to which
copies must be sent by giving notice of the new addresses to the other parties
in accordance with this Section 7, provided that any such change of address
notice shall not be effective unless and until received.

                  t. Entire Agreement; Amendments. This Agreement, together with
the Exhibit hereto, states the entire understanding among the parties with
respect to the subject matter hereof, and supersedes all prior oral and written
communications and agreements, and all contemporaneous oral communications and
agreements, with respect to the subject matter hereof including all
confidentiality agreements and letters of intent previously entered into among
some or all of the parties hereto. No amendment or modification of this
Agreement shall be effective unless in writing and signed by the party against
whom enforcement is sought.

                  u. Successors and Assigns. This Agreement shall bind, benefit,
and be enforceable by and against the Liquidator, the Committees, and, after
effectiveness of this Agreement pursuant to Section 1, the Debtors and Debtors'
estates, their respective successors and assigns, any Liquidating Trustee, and
any successor trustee in a proceeding under Chapter 7 of the Bankruptcy Code. No
party shall in any manner assign any of its rights or obligations under this
Agreement without the express prior written consent of the other parties.

                  v. Waivers. Except as otherwise expressly provided herein, no
waiver with respect to any provision of this Agreement shall be enforceable
unless in writing and signed by the party against whom enforcement is sought.
Except as otherwise expressly provided herein, no failure to exercise, delay in
exercising, or single or partial exercise of any right, power or remedy by any
party, and no course of dealing between or among any of the parties, shall
constitute a waiver of, or shall preclude any other or further exercise of, any
right, power or remedy.

                  w. Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed and delivered shall be an
original hereof, and it shall not be necessary in making proof of this Agreement
to produce or account for more than one counterpart hereof. Delivery of an
executed counterpart hereof by facsimile or other electronic means shall be
equally effective as delivery of an originally executed counterpart.

                  x. Governing Law. THIS AGREEMENT IS MADE UNDER, AND EXCEPT TO
THE EXTENT THAT FEDERAL BANKRUPTCY LAW APPLIES, SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED SOLELY THEREIN, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.

                  y. Neutral Construction. In view of the fact that each of the
parties hereto have been represented by their own counsel and this Agreement has
been fully negotiated by all parties, the legal principle that ambiguities in a
document are construed against the draftsperson of that document shall not apply
to this Agreement.

                                      -12-
<PAGE>

                  z. Binding Effect of Court Approval. Upon effectiveness of
this settlement pursuant to Section 1, this Agreement shall also be binding upon
the Debtors and the Debtors' estates. The Order approving this Agreement
pursuant to the Rule 9019 Motion shall specifically state its binding effect
upon the parties hereto and the Debtors and the Debtors' estates.

                  aa. Service of Motion and Petition. The Rule 9019 Motion and
the Petition to approve this Agreement filed in the Bankruptcy Court and the
Commonwealth Court, respectively, shall be served consistent with the
requirements of each Court.

                                      -13-
<PAGE>

          IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have executed this Agreement on the day and year first written above.

RELIANCE INSURANCE COMPANY
(IN LIQUIDATION)

By: /s/ William S. Taylor                     Date:  4-1-03
   ---------------------------------------         ----------------------------
   William S. Taylor
   Authorized signatory for
   and on behalf of M. Diane
   Koken, Insurance
   Commissioner of The
   Commonwealth of
   Pennsylvania, in her
   capacity as Liquidator of
   Reliance Insurance Company

                                      -14-
<PAGE>

/s/ Thomas Dineen                               Date:  4/1/03
------------------------------------------             ------------------------
    Thomas Dineen

----------------, on behalf of the Official
Unsecured Bank Committee

/s/ Eric Johnson                                Date:  4/1/03
------------------------------------------             ------------------------
    Eric Johnson

---------------, on behalf of the Official
Unsecured Creditors' Committee

/s/ Mohan V. Pharmalker                         Date:  April 1, 2003
------------------------------------------             ------------------------
    Mohan V. Pharmalker

---------------, on behalf of the Official
Unsecured Creditors' Committee

                                      -15-
<PAGE>

                                    EXHIBIT A

                           List of Insurance Policies

Lloyd's Policy Nos.

         823/FD9701593
         542/F01201D96
         823/F01307D97
         823/FD9798178
         823/FD9900896

Greenwich Insurance Company Policy Nos.

         ELU 82236-01
         ELU 82237-01

Clarendon National Insurance Company Policy No.

         MAG 14 400579 50000

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