Document:

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                              EMPLOYMENT AGREEMENT

     This Employment Agreement (this "Agreement") is entered into by and between
Symons International Group, Inc. (the "Company") and Mark A. Paul ("You",
"Your"or "Executive") with reference to the following:

     WHEREAS, the Company considers it essential to its best interests and the
best interests of its stockholders to employ Mark A. Paul, upon the terms and
conditions hereinafter set forth; and

     WHEREAS, the Executive desires to be employed by the Company upon the terms
and conditions contained herein.

     NOW, THEREFORE, in consideration of the covenants and agreements set forth
below, the parties agree as follows:

1.   EMPLOYMENT

     1.1    TERM OF AGREEMENT. The Company agrees to employ Executive as Vice
President, Chief Financial Officer and Treasurer, effective as of July 30, 2001
and continuing until such employment is terminated pursuant to Section 3 below
PROVIDED, HOWEVER, that the term of this Agreement shall automatically be
extended without further action of either party for additional one (1) year
periods thereafter unless, not later than one hundred twenty (120) days prior to
the end of the then effective term, either the Company or the Executive shall
have given written notice that such party does not intend to extend this
Agreement ("Notice of Non-Renewal"). If Company gives Executive such a Notice of
Non-Renewal, Executive's employment shall be deemed to be a termination without
cause and Executive's employment shall terminate as of the expiration date of
this Agreement. It is expressly understood and agreed that a Notice of
Non-Renewal issued by the Company shall not extinguish the Executive's
obligations pursuant to Section 4 herein, nor shall such Notice of Non-Renewal
extinguish Executive's right to severance pay pursuant to Section 3 herein.

     1.2    TERMS OF EMPLOYMENT. During the term of this Agreement, You agree to
be a full-time employee of the Company serving in the position of Vice
President, Chief Financial Officer and Treasurer of the Company and further
agree to devote substantially all of Your working time and attention to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities associated with Your position as Vice President, Chief
Financial Officer and Treasurer of the Company, to use Your best efforts to
perform faithfully and efficiently such responsibilities. Executive shall
perform such duties and responsibilities as may be determined from time to time
by the Vice Chairman, Chief Executive Officer or Executive Vice President of the
Company and the Board of Directors of the Company, which duties shall be
consistent with the position of Vice President, Chief Financial Officer and
Treasurer of the Company, which shall grant Executive authority, responsibility,
title and standing comparable to that of the Vice President, Chief Financial
Officer and Treasurer of a stock insurance holding company of similar standing.
Nothing herein shall prohibit You from devoting Your time to civic and community
activities or managing personal investments, as long as the foregoing do not
interfere with the performance of Your duties hereunder.

     1.3    APPOINTMENT AND RESPONSIBILITY. The Board of Directors of the
            Company shall, following the effective date of this Agreement, elect
            and appoint Executive as Vice President, Chief Financial Officer and
            Treasurer.

2.   COMPENSATION, BENEFITS AND PERQUISITES

     2.1    SALARY. Company shall pay Executive a salary, in equal bi-weekly
installments, equal to an annualized salary rate of One Hundred Twenty Thousand
Dollars ($120,000). Executive's salary payable pursuant to this Agreement may be
increased from time to time as mutually agreed upon by Executive and the
Company. The Company shall pay Executive the salary applicable in twenty-six
(26) bi-weekly installments. Notwithstanding any other provision of this
Agreement, Executive's salary paid by Company for any year covered by this
Agreement shall not be less than such salary paid to Executive for the
immediately preceding calendar year. All salary and bonus amounts paid to
Executive

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pursuant to this Agreement shall be in U.S. dollars.

     2.2    BONUS. The Company and Executive understand and agree that the
Company expects to achieve significant growth during the term of this Agreement
and that Executive will make a material contribution to that growth which will
require certain personal and familial sacrifices on the part of Executive.
Accordingly, it is the desire and intention of the Company to reward Executive
for the attainment of that growth through bonus and other means (including, but
not limited to, stock options, stock appreciation rights and other forms of
incentive compensation). Therefore, the Company may, in its discretion, pay
Executive an annual bonus of up to an additional thirty percent (30%) of
Executive's salary based upon goals established by Executive and the Vice
Chairman, Chief Executive Officer or Executive Vice President of SIG.

     2.3    EMPLOYEE BENEFITS. Executive shall be entitled to receive health
plan benefits which are provided to other executive employees of Company under
the applicable Company plans and policies, and to future benefits and health
plan benefits made generally available to executive employees of the Company
with duties and compensation comparable to that of Executive upon the same terms
and conditions as other Company participants in such plans.

     2.4    ADDITIONAL PERQUISITES. During the term of this Agreement, Company
shall provide Executive with not less than three (3) weeks paid vacation during
each calendar year. In addition, Executive shall receive the use of a Volvo S80
and the Company will reimburse Executive for all operational expenses. At the
expiration of the lease of the Volvo S80 in May, 2002, Executive will be
provided a motor vehicle allowance of $600 per month.

     2.5    EXPENSES. During the period of his employment hereunder, Executive
shall be entitled to receive reimbursement from the Company (in accordance with
the policies and procedures in effect for the Company's employees) for all
reasonable travel, entertainment and other business expenses incurred by him in
connection with his services hereunder.

3.   TERMINATION OF EXECUTIVE'S EMPLOYMENT

     3.1.1  TERMINATION OF EMPLOYMENT AND SEVERANCE PAY. Executive's employment
under this Agreement may be terminated by either party at any time for any
reason; PROVIDED, HOWEVER, that if Executive's employment is terminated by the
Company for any reason other than for cause, he shall receive, as severance pay,
up to six (6) month's then current salary paid in regular bi-weekly payments
(the "Salary Continuation"), subject to reduction as provided in Section 3.1.2.
Further, if Executive shall be terminated without cause, receipt of severance
payments described in the preceding sentence is conditioned upon execution by
Executive and the Company of that mutual Waiver and Release attached hereto as
Exhibit A. Further, Executive shall receive severance pay in accordance with
this Section 3.1 if Executive shall terminate this Agreement due to a breach
thereof by the Company or if Executive is directed by the Company (including, if
applicable, any successor) to engage in any act or action constituting fraud or
any unlawful conduct relating to the Company or its business as may be
determined by application of applicable law. For purposes of this Section 3.1,
termination of employment shall include a change of employment such that
Executive shall no longer be employed by the Company as a Vice President or as
its senior executive responsible for the accounting and finance function of the
Company or at a salary less than Executive's current salary.

     3.1.2  REDUCTION OF SALARY CONTINUATION. It is expressly understood and
agreed that the amount of any payment to Executive required pursuant to Section
3.1.1 shall be reduced (but not below zero) by the amount of any compensation
received by Executive or attributable to services performed by Executive during
the Salary Continuation period. During the Salary Continuation, Executive shall
provide the Company with a bi-weekly report which shall specify all services
performed by Executive for third parties, the identity of the person or entity
for which services were performed and any compensation paid or expected to be
paid to or for the benefit of Executive. Executive shall use his reasonable best
efforts during the Salary Continuation period to obtain employment comparable to
that with the Company.

     3.2    CAUSE. For purposes of this Section 3, "cause" shall mean:

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     (a)    the Executive being convicted in the United States of America, any
            State therein, or the District of Columbia, or in Canada or any
            Province therein (each, a "Relevant Jurisdiction"), of a crime for
            which the maximum penalty may include imprisonment for one year or
            longer (a "felony") or the Executive having entered against him or
            consenting to any judgment, decree or order (whether criminal or
            otherwise) based upon fraudulent conduct or violation of securities
            laws;

     (b)    the Executive's being indicted for, charged with or otherwise the
            subject of any formal proceeding (criminal or otherwise) in
            connection with any felony, fraudulent conduct or violation of
            securities laws, in a case brought by a law enforcement or
            securities regulatory official, agency or authority in a Relevant
            Jurisdiction;

     (c)    the Executive engaging in fraud, or engaging in any unlawful conduct
            relating to the Company or its business, in either case as
            determined under the laws of any Relevant Jurisdiction;

     (d)    the Executive breaching any provision of this Agreement; or

     (e)    the Executive "Grossly Neglects" his duty to the Company.
            For purposes of this Agreement, "Gross Neglect" means the failure to
            perform the functions of the Executive's job or the failure by
            Executive to carry out reasonable directions with respect to
            material duties after the Executive has been notified in writing
            that the Executive is failing to perform these functions or failing
            to carry out reasonable directions. Such notice shall specify the
            functions or directions that the Executive is failing to perform and
            what steps need to be taken to cure and shall set forth the
            reasonable time frame, which shall be at a minimum forty-five (45)
            days, within which to cure. If Executive fails to cure within the
            time frame, the Company may terminate Executive's employment for
            cause by giving him thirty (30) days notice or pay in lieu thereof.

     3.3.1  CHANGE OF CONTROL. Notwithstanding any other provision of this
Agreement, if (i) a Change of Control (as defined below) shall occur; and (ii)
within six (6) months of any such Change of Control, Executive (a) terminates
his employment with the Company; (b) is terminated by the Company for any reason
other than for cause; or (c) the Company (including its successors, if any) is
in breach of this Agreement, then Executive shall continue to receive his
current salary (in bi-weekly payments) until the expiration of six (6) months
from the date of Executive's termination of employment. For purposes of this
Section 3.3, termination of employment shall include a change of employment such
that Executive shall no longer be employed by the Company as a Vice President or
as its senior executive responsible for the accounting and finance function of
the Company or at a salary less than Executive's current salary.

     3.3.2  CONDITION OR REDUCTION OF SALARY CONTINUATION. The receipt by
Executive of payments pursuant to Section 3.3.1 is specifically conditioned
upon, and no payments pursuant to Section 3.3.1 shall be made to Executive if he
is, at the time of his termination of employment, in breach of any provision
(specifically including, but not limited to the provisions of this Agreement
pertaining to non-competition, nonsolicitation and confidentiality) of this
Agreement and, further, if such payments have already begun the continuation of
payments to Executive pursuant to Section 3.3.1 shall cease at the time
Executive shall fail to comply with the non-competition, nonsolicitation and
confidentiality provisions of Article 4. It is expressly understood and agreed
that the amount of any payment to Executive required pursuant to Section 3.3.1
shall be reduced (but not below zero) by any employment compensation received by
Executive during the period called for in Section 3.3.1. Executive shall use his
reasonable best efforts during the salary continuation period set forth in
Section 3.3.1 to obtain employment comparable to that with the Company.

     3.3.3  CHANGE OF CONTROL. A "Change of Control" shall mean (i) a change of
ownership of Goran Capital Inc. ("Goran") such that the Symons family
collectively owns, including indirect and beneficial ownership, less than
thirty-five percent (35%) of the stock of Goran; (ii) the inability of the
Symons family to cause the election of a majority of the members of the Board of
Directors of either Goran, the Company, or their respective successors; or (iii)
a change in the ability of the Symons family to direct the management of the day
to day operations of Goran, the Company or their respective successors.

     3.4    DISABILITY. So long as otherwise permitted by law, if Executive has
become permanently disabled from

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performing his duties under this Agreement, the Company's Chairman of the Board,
may, in his discretion, determine that Executive will not return to work and
terminate his employment as provided below. Upon any such termination for
disability, Executive shall be entitled to such disability, medical, life
insurance, and other benefits as may be provided generally for disabled
employees of Company during the period he remains disabled. Permanent disability
shall be determined pursuant to the terms of Executive's long term disability
insurance policy provided by the Company. If Company elects to terminate this
Agreement based on such permanent disability, such termination shall be for
cause.

     3.5    INDEMNIFICATION. Executive shall be indemnified by Company (and,
where applicable, its subsidiaries) to the maximum extent permitted by
applicable law for actions undertaken for, or on behalf of, the Company and its
subsidiaries.

4.   NON-COMPETITION, NON-SOLICITATION, CONFIDENTIALITY AND TRADE SECRETS

     4.1    NONCOMPETITION. In consideration of the Company's entering into this
Agreement and the compensation and benefits to be provided by the Company to You
hereunder, and further in consideration of Your exposure to proprietary
information of the Company, You agree that until the date of termination or
expiration of this Agreement for any reason (the "Date of Termination") not to
enter into competitive endeavors and not to undertake any commercial activity
which is contrary to the best interests of the Company or its affiliates,
including, directly or indirectly, becoming an employee, consultant, owner
(except for passive investments of not more than one percent (1%) of the
outstanding shares of, or any other equity interest in, any company or entity
listed or traded on a national securities exchange or in an over-the-counter
securities market), officer, agent or director of, or otherwise participating in
the management, operation, control or profits of (a) any firm or person engaged
in the operation of a business engaged in the acquisition of insurance
businesses or (b) any firm or person which either directly competes with a line
or lines of business of the Company accounting for five percent (5%) or more of
the Company's gross sales, revenues or earnings before taxes or derives five
percent (5%) or more of such firm's or person's gross sales, revenues or
earnings before taxes from a line or lines of business which directly compete
with the Company.

     Notwithstanding any provision of this Agreement to the contrary, You
            agree that Your breach of the provisions of this Section 4.1 shall
            permit the Company to terminate Your employment for cause.

     4.2    CONFIDENTIALITY. You shall not knowingly disclose or reveal to any
unauthorized person, during or after the Term, any trade secret or other
confidential information (as outlined in the Indiana Uniform Trade Secrets Act)
relating to the Company or any of its affiliates, or any of their respective
businesses or principals, and You confirm that such information is the exclusive
property of the Company and its affiliates. You agree to hold as the Company's
property all memoranda, books, papers, letters and other data, and all copies
thereof or therefrom, in any way relating to the business of the Company and its
affiliates, whether made by You or otherwise coming into Your possession and, on
termination of Your employment, or on demand of the Company at any time, to
deliver the same to the Company.

     Any ideas, processes, characters, productions, schemes, titles, names,
formats, policies, adaptations, plots, slogans, catchwords, incidents,
treatment, and dialogue which You may conceive, create, organize, prepare or
produce during the period of Your employment and which ideas, processes, etc.
relate to any of the businesses of the Company, shall be owned by the Company
and its affiliates whether or not You should in fact execute an assignment
thereof to the Company, but You agree to execute any assignment thereof or other
instrument or document which may be reasonably necessary to protect and secure
such rights to the Company.

     4.3    NONSOLICITATION. During Executive's employment with the Company and
for one (1) year following termination of Executive's employment, Executive will
not directly or indirectly solicit, divert or interfere with the relationship
between Company or its affiliates and any employee of Company or its affiliates.

5.   MISCELLANEOUS

     5.1    AMENDMENT. This Agreement may be amended only in writing, signed by
both parties.

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     5.2    ENTIRE AGREEMENT. This Agreement contains the entire understanding
of the parties with regard to all matters contained herein. There are no other
agreements, conditions or representations, oral or written, expressed or
implied, with regard to the employment of Executive or the obligations of the
Company or the Executive. This Agreement supersedes all prior employment
contracts and non-competition agreements between the parties.

     5.3    NOTICES. Any notice required to be given under this Agreement shall
be in writing and shall be delivered either in person or by certified or
registered mail, return receipt requested. Any notice by mail shall be addressed
as follows:

     If to the Company, to:

     Symons International Group, Inc.
     4720 Kingsway Drive
     Indianapolis, Indiana  46205
     Attention: Chief Executive Officer

     If to Executive, to:

     Mark A. Paul
     112 West 44th Street
     Indianapolis, IN 46208

or to such other addresses as one party may designate in writing to the other
party from time to time

     5.4    WAIVER OF BREACH. Any waiver by either party of compliance with any
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any other provision of this Agreement, or of any subsequent
breach by such party of a provision of this Agreement.

     5.5    VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.

     5.6    GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Indiana, without giving effect to
conflict of law principles.

     5.7    HEADINGS. The headings of articles and sections herein are included
solely for convenience and reference and shall not control the meaning or
interpretation of any of the provisions of this Agreement.

     5.8    COUNTERPARTS. This Agreement may be executed by either of the
parties in counterparts, each of which shall be deemed to be an original, but
all such counterparts shall constitute a single instrument.

     5.9    SURVIVAL. Company's obligations under Section 3.1 and Executive's
obligations under Section 4 shall survive the termination and expiration of this
Agreement in accordance with the specific provisions of those Paragraphs and
Sections and this Agreement in its entirety shall be binding upon, and inure to
the benefit of, the successors and assigns of the parties hereto.

     5.10   MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by You and such officer as may be specifically designated
by the Board. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior
subsequent time.

     IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date set forth above.

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                                      SYMONS INTERNATIONAL GROUP,  INC.

                                      By:
                                          -------

                                      ----------------------------
                                      Douglas H. Symons, Chief Executive Officer

                                      Mark A. Paul

                                       80<PAGE>

                   AGGREGATE LOSS RATIO REINSURANCE AGREEMENT

                                     BETWEEN

                    NATIONAL UNION FIRE INSURANCE COMPANY OF
                                 PITTSBURGH, PA.
                      (HEREAFTER CALLED THE "RETROCEDENT")

                                       AND

                        GRANITE REINSURANCE COMPANY, LTD.
                   (HEREINAFTER CALLED THE "RETROCESSIONAIRE")

                                      INDEX

         ARTICLE                    SUBJECT                               PAGE

                  I     BUSINESS COVERED........................             1.
                 II     TERM AND TERMINATION....................             1.
                III     TERRITORY...............................             1.
                 IV     COVERAGE................................             1.
                  V     LIMIT OF LIABILITY .....................             1.
                 VI     PREMIUM.................................             2.
                VII     DEFINITIONS.............................             2.
               VIII     REPORTS AND ACCOUNTING  ................             2.
                 IX     TRUST FUND..............................             2.
                  X     COVENANTS...............................             2.
                 XI     SERVICE OF SUIT.........................             3.
                XII     ACCESS TO RECORDS.......................             3.
               XIII     ARBITRATION.............................             3.
                XIV     CONFIDENTIALITY.........................             4.
                 XV     ERRORS AND OMISSIONS  ..................             4.
                XVI     FEDERAL EXCISE TAX......................             4.
               XVII     FOLLOW THE FORTUNES.....................             4.
              XVIII     GOVERNING LAW...........................             5.
                XIX     INSOLVENCY..............................             5.
                 XX     OFFSET..................................             5.
                XXI     SEVERABILITY............................             6.
               XXII     SPECIAL TERMINATION OR SETTLEMENT.......             6.
              XXIII     CURRENCY REVALUATION....................             7.

<PAGE>

                   AGGREGATE LOSS RATIO REINSURANCE AGREEMENT

                                     BETWEEN

                    NATIONAL UNION FIRE INSURANCE COMPANY OF
                                 PITTSBURGH, PA.
                     (HEREINAFTER CALLED THE "RETROCEDENT")

                                       AND

                        GRANITE REINSURANCE COMPANY, LTD.
                   (HEREINAFTER CALLED THE "RETROCESSIONAIRE")

    ************************************************************************

ARTICLE I                           BUSINESS COVERED
---------                           ----------------

All liability assumed under Quota Share Reinsurance Agreements from Superior
Insurance Company and its wholly-owned insurance subsidiaries and Pafco General
Insurance Company effective January 1, 2000.

ARTICLE II                          TERM AND TERMINATION
----------                          --------------------

Effective from 12:01 a.m. Eastern Standard Time January 1, 2000 until all
liabilities are finalized.

ARTICLE III                         TERRITORY
-----------                         ---------

As per the Underlying Agreements.

ARTICLE IV                          COVERAGE
----------                          --------

The Retrocessionaire shall be liable separately for each Reinsurance Agreement,
for losses incurred (including all Loss Adjustment Expenses) in excess of a loss
ratio of 79%. All terms & conditions of the Underlying Agreements, copies
attached hereto, shall apply.

ARTICLE V                           LIMIT OF LIABILITY
---------                           ------------------

The Retrocessionaire shall be liable separately for each Reinsurance Agreement,
for 18% of earned premium on each Underlying Agreement, however, not in excess
of 6% of the combined earned premium on the Underlying Agreements.

ARTICLE VI                          PREMIUM
----------                          -------

The Retrocedent shall pay an initial deposit premium of $10,000 within 15 days
of receipt of the first cash premium payment received on any of the Underlying
Agreements. The final premium shall be 12.5% of the premium cash payments
received and the difference between that premium and the deposit premium shall
be paid upon the finalization of all liabilities in accordance with the
Underlying Agreements. In addition the Retrocedent shall pay 100% of the payment
received upon the finalization of the liabilities in accordance with the
Underlying Agreements. Such payment shall be made within 30 days of receipt of
the payment on the Underlying Agreements. However, no payment shall be made
after the deposit premium unless all conditions of this agreement have been
complied with.

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ARTICLE VII                         DEFINITIONS
-----------                         -----------

Loss Ratio, shall be in accordance with the Underlying Agreements.

ARTICLE VIII                        REPORTS AND ACCOUNTING
------------                        ----------------------

The Retrocedent shall forward to the Retrocessionaire a copy of all reports
received in accordance with the Underlying Agreements within 10 days of their
receipt. In the event the paid loss (including all loss adjustment expenses) are
in excess of 79% of the earned premium on any individual agreement, the
Retrocessionaire shall pay such excess within 5 days of receipt of the accounts
statement, however, not in excess of the limit of liability.

ARTICLE IX                          TRUST FUND
----------                          ----------

The Retrocessionaire shall establish a Trust Account acceptable to regulatory
authorities of the Retrocedent. The deposit shall be $1 million and shall be
made upon the execution of this agreement. In the event the Loss Ratio on any of
the Underlying Agreements is in excess of 79%, the Retrocessionaire shall
deposit additional securities to increase the Trust Account, if necessary, to
the amount calculated as follows: the combined results, calculated separately
for each agreement, of the difference between the Loss Ratio and 79%; plus, the
ratio of unallocated loss adjustment expenses times the earned premium on the
Underlying Agreements, however, not in excess of the limit of liability. Such
deposit shall be made within 10 days of request by the Retrocedent. All deposits
shall be released upon the finalization of all liabilities.

A letter of credit acceptable to regulatory authorities may be utilized in place
of a Trust Account. In the event the Retrocessionaire or the bank issuing the
letter of credit gives notice of their intent not to extend the Letter of Credit
at any anniversary date, without the approval of the Retrocedent, the full
amount of the Letter of Credit shall be considered due and payable immediately.

ARTICLE X                           COVENANTS
---------                           ---------

It is understood and agreed that the Retrocessionaire will not enter any new
reinsurance agreements without approval of Retrocedent.

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ARTICLE XI                        SERVICE OF SUIT
---------                         ----------------

A. It is agreed that in the event of the failure of the Retrocessionaire hereon
to pay any amount claimed to be due hereunder, the Retrocessionaire hereon, at
the request of the Retrocedent, will submit to the jurisdiction of a court of
competent jurisdiction within the United States. Nothing in this clause
constitutes or should be understood to constitute a waiver of Retrocessionaire's
rights to commence an action in any court of competent jurisdiction in the
United States, to remove an action to a United States District Court, or to seek
a transfer of a case to another court as permitted by the laws of the United
States or of any state in the United States. It is further agreed that service
of process in such suit may be made upon Mendes & Mount, 750 Seventh Avenue, New
York, New York 10019-6829, and that in any suit instituted against any one of
them upon this Agreement, Retrocessionaire will abide by the final decision of
such court or of any Appellate Court in the event of an appeal.
B. The above-named are authorized and directed to accept service of process on
behalf of Retrocessionaire in any such suit and/or upon the request of the
Retrocedent to give a written undertaking to the Retrocedent that they will
enter a general appearance upon Retrocessionaire's behalf in the event such a
suit shall be instituted.
C. Further, pursuant to any statute of any state, territory or district of the
United States which makes provision therefore, Retrocessionaire hereon hereby
designate the Superintendent, Commissioner or Director of Insurance or other
officer specified for that purpose in the statute, or his successor or
successors in office, as their true and lawful attorney upon whom may be served
any lawful process in any action, suit or proceeding instituted by or on behalf
of the Retrocedent or any beneficiary hereunder arising out of this contract of
reinsurance, and hereby designate the above-named Mendes & Mount as the person
to whom the said officer is authorized to mail such process or a true copy
thereof.

ARTICLE XII                       ACCESS TO RECORDS
---------                         -----------------

The Retrocessionaire, or its duly authorized representative, shall have free
access at all reasonable times during and after the currency of this agreement,
to books and records maintained by any of the division, department and branch
offices of the Retrocedent which are involved in the subject matter of this
Agreement and which pertain to the reinsurance provided hereunder and all claims
made in connection therewith. Notwithstanding the provisions of the preceding
sentence, if undisputed balances due from the Retrocessionaire under this
Agreement have not been paid for the two most recent reported calendar quarters,
the Retrocessionaire shall not have access to any of the Retrocedent's records
relating to this Agreement without the specific consent of the Retrocedent.

ARTICLE XIII                      ARBITRATION
---------                         -----------

A.    All disputes or differences arising out of the interpretation of this
      Agreement shall be submitted to the decision of two arbitrators, one to be
      chosen by each party, and in the event of the arbitrators failing to
      agree, to the decision of an umpire to be chosen by the arbitrators. The
      arbitrators and umpire shall be disinterested active or retired executive
      officials of fire or casualty insurance or reinsurance companies or
      Underwriters at Lloyd's, London. If either of the parties fails to appoint
      an arbitrator within one month after being required by the other party in
      writing to do so, or if the arbitrators fail to appoint an umpire within
      one month of a request in writing by either of them to do so, such
      arbitrator or umpire, as the case may be, shall at the request of either
      party be appointed by a Justice of the Supreme Court of the State of New
      York.

      B.The arbitration proceeding shall take place in New York, New York. The
        applicant shall submit its case within one month after the appointment
        of the court of arbitration, and the respondent shall submit its reply
        within one month after the receipt of the claim. The arbitrators and
        umpire are relieved from all judicial formality and may abstain from
        following the strict rules of law. Punitive damages shall not be awarded
        by the panel against either party which are apart from the punitive
        damages that may be in dispute. They shall settle any dispute under the
        Agreement according to an equitable rather than a strictly legal
        interpretation of its terms.

     C. Their written decision shall be provided to both parties and shall be
        final and not subject to appeal.

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     D. Each party shall bear the expenses of his arbitrator and shall jointly
        and equally share with the other the expenses of the umpire and of the
        arbitration.

     E. This Article shall survive the termination of this Agreement.

ARTICLE XIV                       CONFIDENTIALITY
-----------                       ---------------

All terms and conditions of this Agreement and any materials provided in the
course of inspection shall be kept confidential by the Retrocessionaire as
against third parties, unless the disclosure is required pursuant to process of
law or unless the disclosure is to retrocessionaire's, financial auditors or
governing regulatory bodies. Disclosing or using this information for any
purpose beyond the scope of this Agreement, or beyond the exceptions set forth
above, is expressly forbidden without the prior consent of the Retrocedent.

ARTICLE XV                        ERRORS AND OMISSIONS
----------                        --------------------

Any inadvertent delay, omission or error shall not relieve either party hereto
from any liability which would attach to it hereunder if such delay, omission or
error had not been made, provided such delay, omission or error is rectified
immediately upon discovery.

ARTICLE XVI                       FEDERAL EXCISE TAX
-----------                       ------------------

A. The Retrocessionaire has agreed to allow for the purpose of paying the
Federal Excise Tax 1% of the premium payable hereon to the extent such premium
is subject to Federal Excise Tax. B. In the event of any return of premium
becoming due hereunder the Retrocessionaire will deduct 1% from the amount of
the return and the Retrocedent or its agent should take steps to recover the Tax
from the United States Government.

ARTICLE XVII                      FOLLOW THE FORTUNES
------------                      -------------------

A.    The Retrocessionaire's liability shall attach simultaneously with that of
      the Retrocedent and shall be subject in all respects to the same risks,
      terms, conditions, interpretations, waivers, and to the same modification,
      alterations and cancellations as the respective insurances (or
      reinsurances) of the Retrocedent, the true intent of this Agreement being
      that the Retrocessionaire shall, in every case to which this Agreement
      applies, follow the underwriting fortunes of the Retrocedent.

B.    Nothing shall in any manner create any obligations or establish any rights
      against the Retrocessionaire in favor of any third parties or any persons
      not parties to this Agreement.

ARTICLE XVIII                     GOVERNING LAW
-------------                     -------------

This Agreement shall be governed by and construed in accordance with the laws of
the state of New York.

ARTICLE XIX                       INSOLVENCY
-----------                       ----------

A.    In the event of the insolvency of the Retrocedent, this reinsurance shall
      be payable directly to the Retrocedent, or to its liquidator, receiver,
      conservator or statutory successor immediately upon demand on the basis of
      the liability of the Retrocedent without diminution because of the
      insolvency of the Retrocedent or because the liquidator, receiver,
      conservator or statutory successor of the Retrocedent has failed to pay
      all or a portion of any

                                       85
<PAGE>

      claim. It is agreed, however, that the liquidator, receiver, conservator
      or statutory successor of the Retrocedent shall give written notice to the
      Retrocessionaire of the pendency of a claim against the Retrocedent which
      would involve a possible liability on the part of the Retrocessionaires,
      indicating the policy or bond reinsured, within a reasonable time after
      such claim is filed in the conservation or liquidation proceeding or in
      the receivership. It is further agreed that during the pendency of such
      claim the Retrocessionaire may investigate such claim and interpose, at
      their own expense, in the proceeding where such claim is to be
      adjudicated, any defense or defenses that they may deem available to the
      Retrocedent or its liquidator, receiver, conservator, or statutory
      successor. The expense thus incurred by the Retrocessionaire shall be
      chargeable, subject to the approval of the Court, against the Retrocedent
      as part of the expense of conservation or liquidation to the extent of a
      pro rata share of the benefit which may accrue to the Retrocedent solely
      as a result of the defense undertaken by the Retrocessionaire.

Retrocedent

ARTICLE XX                        OFFSET
----------                        -------

Each party hereto shall have, and may exercise at any time and from time to
time, the right to offset any undisputed balance or balances, whether on account
of premiums or on account of losses or otherwise, due from such party to the
other (or, if more than one, any other) party hereto under this Agreement or
under any other reinsurance agreement heretofore or hereafter entered into by
and between them, and may offset the same against any undisputed balance or
balances due to the former from the latter under the same or any other
reinsurance agreement between them, and the party asserting the right of offset
shall have and may exercise such right whether the undisputed balance or
balances due to such party from the other are on account of premiums or on
account of losses or otherwise and regardless of the capacity, whether as
assuming insurer or as ceding insurer, in which each party acted under the
agreement or, if more than one, the different agreements involved, provided,
however, that, in the event of the insolvency of a party hereto, offsets shall
only be allowed in accordance with the provisions of Section 7427 of the
Insurance Law of the State of New York. Where the Retrocedent is authorized
under the Insurance Companies Act (Canada) to insure in Canada risks, for the
purpose of this Article, the branch of a Retrocedent in Canada shall be
considered as a party separate and distinct from the Retrocedent and the right
of offset provided for in this Article shall belong to and be applied against
that branch as though it were a separate and distinct party.

ARTICLE XXI                       SEVERABILITY
-----------                       ------------

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

ARTICLE XXII                      SPECIAL TERMINATION OR SETTLEMENT
------------                      ---------------------------------

SECTION I (TERMINATION)

A. Either party may terminate this Agreement upon 45 days notice in the event
   that:
      1.    The other party should at any time become insolvent, or suffer any
            impairment of capital, or file a petition in bankruptcy, or go into
            liquidation, rehabilitation, or voluntary supervision, or have a
            receiver appointed, or be acquired or controlled by any other
            insurance Retrocedent or organization, or
      2.    There is a severance or obstruction of free and unfettered
            communication and/or normal commercial and/or financial intercourse
            between the United States of America and the country in which the
            Retrocessionaire is incorporated or has its principal office as a
            result of war, currency regulations, or any circumstances arising
            out of political, financial or economic emergency.

B.    The Retrocedent may terminate this Agreement forthwith in the event that:

                                       86
<PAGE>

      5.    The Retrocessionaire ceases writing reinsurance and elects to
            run-off its existing business.
      6.    As respects domestic Retrocessionaires: Upon application of the NAIC
            Insurance Regulatory Information System (IRIS) tests to the
            Retrocessionaire's quarterly and annual statements (which the
            Retrocessionaire hereby agrees to furnish to the Retrocedent upon
            request) it is found that four (4) or more of the Retrocessionaire's
            IRIS financial ratio values are outside of the usual range
            established in the IRIS system.
      7.    As respects alien Retrocessionaires: Upon review of the Insurance
            Solvency International (ISI) Performance Tests as published with
            respect to the Retrocessionaire (or upon application of such
            Performance Tests to the Retrocessionaire's annual financial
            statements which the Retrocessionaire hereby agrees to furnish to
            the Retrocedent upon request) it is found that four (4) or more of
            the Retrocessionaire's ratios are outside of the normal range (as
            defined by the ISI standard).

Termination under A. or B. shall be effected by written notice of cancellation.
The Retrocedent will specify the mode of payment, i.e., a run-off basis or a
clean-cut basis with portfolio transfer, if applicable. In the event the
Retrocedent elects a run-off basis, the Retrocessionaire will fund all of the
outstanding ceded liabilities through a Trust Account or by providing a Letter
of Credit that meets the requirements of the New York State Insurance
Department.

SECTION II (SETTLEMENT)
After termination of this Agreement under this or any article, including the
natural expiry of the Agreement, if the Retrocessionaire has any residual
liability to the Retrocedent, the Retrocessionaire will, at the request of the
Retrocedent, furnish to the Retrocedent statements as specified in Section IB.,
above, and if four or more values are outside of the usual range established in
the IRIS or ISI system (as applicable in accordance with Section IB., above) the
Retrocedent shall have the option of an immediate settlement of all present and
future obligations under this Agreement-.in accordance with Section III, below,
or requiring the Retrocessionaire to fund all of the outstanding ceded
liabilities through a Trust Account or by providing a Letter of Credit that
meets the requirements of the New York State Insurance Department. In the event
the Retrocedent elects the funding option, it shall the notify the
Retrocessionaire in writing and the Retrocessionaire shall provide such funding
within 15 days of such notification; however, it is agreed that the Retrocedent
retains the right to require settlement in accordance with Section III at any
subsequent date.

SECTION III (PAYMENT)
A. Amounts due the Retrocedent or the Retrocessionaire under this Article shall
include all present and future obligations and shall include unearned premiums,
outstanding losses (including IBNR), and all other balances. B. In the event of
a clean-cut termination with portfolio transfer or an immediate settlement of
all present and future obligations the Retrocedent will, upon receipt of
payment, provide to the Retrocessionaires a full and final release of
Retrocessionaire's liability under the Agreement.
C. When requested by either party an appraisal of outstanding losses and IBNR
shall be made by an disinterested actuary.
D. Settlement shall take into account adjustment for net present value.
This Article shall survive the termination of this Agreement

ARTICLE XXIII                     CURRENCY REVALUATION
-------------                     --------------------

It is agreed that underwriting to contractual and/or understanding limits will
be done in terms of United States (U.S.) dollar equivalent on the basis of
exchange rates in effect at the time of inception of new or renewal business or
at the time an addition to an existing risk takes place. In the event there is a
reduction in parity value of the U.S. dollar from that existing at the time the
risk was written which results in the contractual and/or understanding limits
being exceeded, the RetrocedentRetrocedent shall be held covered for such excess
until next renewal of the risk, at which time underwriting will then conform to
the contractual and/or understanding U.S. dollar limits in effect at the time.

                                       87
<PAGE>

IN WITNESS WHEREOF: the parties hereto have caused this Agreement to be executed
by their authorized representatives.

IN:                               THIS              DAY OF              2000
    -----------------------------      -------------       -------------

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA

BY:
    ---------------------------

Title:
       -------------------------

And in:                                this            day of            2000
        ------------------------------      ----------        -----------

                        GRANITE REINSURANCE COMPANY, LTD.

BY:
    -------------------------

Title:
       -----------------------

                                       88

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