Document:

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                                                                   EXHIBIT 10.11

                                ESCROW AGREEMENT

            This ESCROW AGREEMENT (this "Agreement"), dated as of September 30,
2003, is made by and among Wells Fargo Bank Minnesota, National Association
(together with any successor escrow agent hereunder, the "Escrow Agent"),
SeaBright Insurance Holdings, Inc., a Delaware corporation ("Buyer"), and Kemper
Employers Group, Inc., a Washington corporation ("KEG"). Buyer, KEG and the
Escrow Agent are sometimes collectively referred to herein as the "Parties" and
individually as a "Party." In the event that KEG assigns its rights under this
Agreement pursuant to Section 13 below in connection with a dividend or
distribution of assets to its stockholder(s) or otherwise, such assignee(s)
shall thereafter be considered "KEG" and a "Party" hereunder. Except as
otherwise indicated herein, capitalized terms used herein are defined in the
Purchase Agreement.

            WHEREAS, pursuant to that certain Purchase Agreement, dated as of
July 14, 2003 (the "Purchase Agreement"), Buyer is acquiring certain capital
stock and other assets from KEG and the other Sellers;

            WHEREAS, the execution and delivery of this Escrow Agreement is a
condition to the obligations of Buyer to consummate the transactions
contemplated by the Purchase Agreement;

            WHEREAS, capitalized terms used and not otherwise defined in this
Agreement shall have the respective meanings ascribed to such terms in the
Purchase Agreement;

            WHEREAS, pursuant to the Purchase Agreement, the Sellers have agreed
to provide indemnification to Buyer and its Affiliates for matters described
more fully in the Purchase Agreement;

            WHEREAS, it is the intent of Buyer and KEG that the interest of KEG
in the Escrow Account and the assets therein is merely a contingent right to
receive payment from the accounts holding the Escrow Funds (as defined below)
pursuant to the express terms hereof and that neither a voluntary nor
involuntary case under any applicable insolvency, bankruptcy or similar law or
the appointment of a receiver, rehabilitator, conservator, liquidator or similar
official in respect of any Seller shall affect, modify, convert or otherwise
change the contingent nature of its respective right to payment of amounts
contained in the Escrow Account in accordance with the express terms of this
Agreement;

            WHEREAS, pursuant to the terms of the Purchase Agreement and as part
of the transactions contemplated thereby, the Parties agreed to enter into this
Agreement and deposit $4,000,000 with the Escrow Agent for the purposes set
forth herein;

            WHEREAS, Section 11.1 of the Purchase Agreement provides
indemnification in favor of Buyer (and each Buyer Group Member, together, the
"Buyer Parties") for Losses incurred by such persons and entities;

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            WHEREAS, pursuant to the terms of the Purchase Agreement, the
Parties agreed that the Escrow Funds (as defined below) shall serve as a source
of funds available to be recovered by any of the Buyer Parties (including KEIC)
(collectively, the "Indemnified Persons") to the extent that there is an
adjustment in Purchase Price pursuant to Sections 4.4 or 11.1 of the Purchase
Agreement or the Indemnified Persons otherwise have a claim under Section 11.1
of the Purchase Agreement;

            WHEREAS, the Parties also desire that the Escrow Funds (as defined
below) provide an additional source of funds for satisfaction of amounts owing
by Lumbermens Mutual Casualty Company, an Illinois domiciled mutual insurance
company ("LMC") under the Adverse Development Excess of Loss Reinsurance
Agreement (the "ADELR Agreement"), by and between LMC and Kemper Employers
Insurance Company, an Illinois domiciled insurance company and a wholly-owned
subsidiary of Buyer ("KEIC") and the Reinsurance Trust Agreement, by and between
LMC and KEIC (the "Reinsurance Agreement" and, together with the ADELR
Agreement, the "Ancillary Agreements"), to the extent Buyer has made a claim
pursuant to the terms of both the Ancillary Agreements and has been unable to
promptly collect all or any portion of such amount from LMC for any reason
(collectively, the "Ancillary Agreement Claims");

            WHEREAS, the Parties further desire that in the unlikely and
unanticipated event that the transactions under the Commutation Agreement, by
and between LMC and KEIC (the "Commutation Agreement") either become null and
void in full or in part or otherwise avoided to any extent, then the Escrow
Funds (as defined below) shall serve as a source of funds available to be
recovered by KEIC and its Affiliates for satisfaction of any or all amounts
owing under the Commutation Agreement (the "Commutation Claims");

            WHEREAS, the parties hereto desire to more specifically set forth
their rights and obligations with respect to the Escrow Funds (as defined below)
and the distribution and release thereof;

            NOW, THEREFORE, in consideration of the foregoing and the mutual
promises made herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby covenant and agree as follows:

            1.    Escrow Deposit. Simultaneously with the execution of this
Agreement, Buyer has deposited with the Escrow Agent $4,000,000 in accordance
with Section 3.1 of the Purchase Agreement (the "Escrow Amount"). The Escrow
Agent hereby acknowledges receipt of the Escrow Amount and agrees to hold the
Escrow Amount, together with all products and proceeds thereof (including all
interest, dividends, gains and other income earned with respect thereto)
(collectively, the "Escrow Funds"), in a separate and distinct account (the
"Escrow Account"), subject to the terms and conditions of this Agreement. The
Escrow Agent shall not distribute or release all or any portion of the Escrow
Funds except in accordance with the express terms and conditions of this
Agreement.

            2.    Permitted Investments. The Escrow Agent shall follow the joint
written instructions of Buyer and KEG concerning any investment or reinvestment
("Written Direction")

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from time to time of the Escrow Funds held in the Escrow Account; provided that
the Escrow Agent shall not accept any such investment instructions more than
once per 90-day period; and further provided that permissible investments shall
be limited to (a) treasury bills, treasury notes or any other direct obligations
issued by or guaranteed in full as to principal and interest by the full faith
and credit of the United States of America (b) certificates of deposit issued by
a commercial bank having capital, surplus and undivided profits of not less than
$1,000,000,000 (including the Escrow Agent and its affiliates); provided that
any such certificates of deposit that mature more than one year from the date of
acquisition must have a National Association of Insurance Commissioners
designation of 1 or 2 and (c) corporate obligations or U.S. government agency
securities with a National Association of Insurance Commissioners designation of
1 or 2 and a maturity no longer than 2 years, and (d) money market funds
reported by the NAIC SVO on either the U.S. Direct Obligations/Full Faith and
Credit Exempt List or on the Class 1 List (the "Permitted Investments"). The
initial Escrow Funds shall be invested in the Wells Fargo Prime Investment Money
Market Fund and shall so remain unless the Escrow Agent is otherwise instructed
by a Written Direction. Neither any Party nor the Escrow Agent shall be liable
or responsible in any manner for any loss or depreciation resulting from any
such Permitted Investment or any liquidation thereof, or for any costs in
connection therewith, and all of said losses and costs shall be borne by the
Escrow Account. The Escrow Agent shall have no power or authority to invest or
reinvest any Escrow Funds except in Permitted Investments as instructed by a
Written Direction no more than once in each 90-day period in accordance with the
first sentence of this Section 2.

            3.    Interest. All interest, dividends, gains or other income
earned or received on the Escrow Funds that is accrued during the term of this
Agreement (the "Interest"), to the extent not paid out to Buyer or KEG pursuant
to Section 4 of this Agreement prior to such time, shall be distributed to KEG
at the later to occur of: (a) the Final Distribution Date (as defined below), or
(b) the date on which all Unresolved Claims are finally determined pursuant to
Section 4 below, together with the remainder of the Escrow Funds not being paid
out to Buyer in connection with such final determination (provided that to the
extent any portion of the Interest would not be necessary to satisfy any
Unresolved Claims outstanding as of the Final Distribution Date if such
Unresolved Claims were determined in favor of Buyer, such portion of the
Interest shall be distributed to KEG as of the Final Distribution Date).

            4.    Release of Escrow Funds. The Escrow Amount is intended to
provide a source of funds for the payment of any amounts which may become
payable to the Indemnified Persons pursuant to Sections 4.4 or 11.1 of the
Purchase Agreement or for any Ancillary Agreement Claim or Commutation Claim.
The Escrow Funds shall only be distributed and released as follows:

            (a)   Indemnification Claims. At any time and from time to time
prior to the Final Distribution Date, if Buyer or any other Indemnified Person
makes a claim pursuant to any of Sections 4.4 or 11.1 of the Purchase Agreement
or for any Ancillary Agreement Claim or Commutation Claim, Buyer shall deliver
to the Escrow Agent a written notice (an "Indemnification Notice") describing in
reasonable detail the known facts giving rise to the claim for indemnification
hereunder and shall include in such Indemnification Notice (if then known) the
amount or the method of computation of the amount of such claim, and a reference
to the

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provision of the Purchase Agreement or any other agreement, document or
instrument executed thereunder or in connection therewith upon which such claim
is based (an "Indemnification Claim"). Buyer shall also deliver to KEG a copy of
such Indemnification Notice at the same time it is delivered to the Escrow
Agent. If the Escrow Agent has not received a written objection to such
Indemnification Claim from KEG within 10 business days following the Escrow
Agent's receipt of such Indemnification Notice, then on the second business day
following the expiration of the 10 business day period immediately following
such receipt the Escrow Agent shall release by wire transfer to an account or
accounts designated by Buyer in the Indemnification Notice an amount of the then
remaining Escrow Amount from the Escrow Account equal to the amount of such
Indemnification Claim.

            (b)   Disputes. If KEG deliver to the Escrow Agent and Buyer a
written objection (a "Dispute Notice") to any Indemnification Claim or portion
thereof within 10 business days following the Escrow Agent's receipt of such
Indemnification Notice, then, except as otherwise provided in Section 4(c)
below, the Escrow Agent shall not distribute to Buyer or any such other
Indemnified Person any Escrow Funds that are the subject of the Dispute Notice
until the Escrow Agent receives written instructions signed by Buyer and KEG
authorizing and setting forth the amount of the release to such Indemnified
Person of the portion of the Escrow Amount that is the subject of the Dispute
Notice. Upon receipt of such written instructions the Escrow Agent shall release
to Buyer or any such other Indemnified Person, as the case may be, the portion
of the Escrow Amount subject to dispute in accordance with such written
instructions. In the event that KEG is the prevailing party in whole or in part
in connection with any such dispute, the portion of the Escrow Amount that was
the subject of such Dispute Notice and that are not released to Buyer or the
other Indemnified Persons as provided in the immediately preceding sentence
shall remain in the Escrow Account and shall be available to satisfy subsequent
Indemnification Claims until released as provided in Section 4(d) below. Any
Dispute Notice shall describe in reasonable detail the basis for any objection
to the matters set forth in the Indemnification Notice and the portion of such
Indemnification Notice (if less than all) which is the subject of such Dispute
Notice. The Parties agree to negotiate in good faith to resolve as promptly as
practicable any Indemnification Claim or portion thereof that is the subject of
a Dispute Notice; provided that if at any time the Escrow Agent receives a final
non-appealable judgment of a court of competent jurisdiction determining that
(i) a monetary amount is owing to any Buyer Party pursuant to this Agreement,
the Purchase Agreement or the Ancillary Agreements, then promptly following
written notice thereof (accompanied by a copy of such judgment) the Escrow Agent
shall promptly deliver to Buyer part or all, as the case may be, of the Escrow
Funds in an amount equal to such judgment or (ii) an Indemnification Claim is
not subject to indemnification under this Agreement, the Purchase Agreement or
the Ancillary Agreements, then the amount subject to such claim shall remain in
the Escrow Account and shall be available to satisfy subsequent Indemnification
Claims until released as provided in Section 4(d) below.

            (c)   Partial Release. If any Dispute Notice includes an objection
to only a portion of an Indemnification Claim, the Escrow Agent shall promptly
release to the Indemnified Person or Persons on whose behalf the Indemnification
Claim was made an amount of the Escrow Amount equal to the portion of the
Indemnification Claim for which there is no objection; provided that no such
partial release by the Escrow Agent shall terminate or otherwise

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prejudice such Indemnified Person's or Persons' rights with respect to amounts
claimed in any Indemnification Notice which are in excess of the amounts so
released.

            (d)   Release of Remaining Escrow Funds.

                  (i)   On the second business day following the second
anniversary of the Closing Date (the "Final Distribution Date"), the Escrow
Agent shall release to KEG the remaining balance of the Escrow Amount in the
Escrow Funds as of the Final Distribution Date, less the amount of all
Unresolved Claims.

                  (ii)  Promptly upon the Escrow Agent's receipt of the final
determination of Buyer and KEG or the final determination of a court of
competent jurisdiction or the arbitrator, as the case may be (which final
determination shall be accompanied by a legal opinion by counsel for the
presenting party reasonably satisfactory to Escrow Agent to the effect that the
decision or order is final and non-appealable), of any Unresolved Claims that
are the subject of a Dispute Notice or upon the expiration of the 10-business
day objection period for any Unresolved Claims for which no Dispute Notice has
been delivered, the Escrow Agent shall release by wire transfer to an account or
accounts designated by Buyer an amount of Escrow Amount equal to the amount of
Escrow Amount to be released to the Indemnified Persons pursuant to such final
determination or the amount of such Unresolved Claim for which no Dispute Notice
has been delivered, as the case may be. If the Final Distribution Date has
passed, after the resolution of all Unresolved Claims, any remaining Escrow
Funds not distributed to the Indemnified Persons pursuant to the immediately
preceding sentence shall be released promptly thereafter by the Escrow Agent to
KEG. For purposes of this Agreement, the term "Unresolved Claims" shall mean, as
of the First Distribution Date or the Final Distribution Date, as the case may
be, the aggregate amount of all Indemnification Claims that are the subject of a
Dispute Notice or that are otherwise unsatisfied as of such Distribution Date,
including any Indemnification Claims for which an Indemnification Notice has
been delivered but for which the 10-business day objection period has not
expired as of such Distribution Date.

            (e)   Termination. This Agreement shall terminate when all of the
Escrow Funds in the Escrow Account have been released and distributed in
accordance with this Section 4. Upon such termination this Agreement shall have
no further force and effect, except that the provisions of this Section 4(e) and
Sections 5, 6 and 7 and Sections 9 through 21, inclusive, below shall survive
such termination.

            5.    Conditions to Escrow. The Escrow Agent agrees to hold the
Escrow Funds and to perform in accordance with the terms and provisions of this
Agreement. The Parties agree that the Escrow Agent shall not assume any
responsibility for the failure of the Parties to perform in accordance with the
Purchase Agreement or this Agreement. The acceptance by the Escrow Agent of its
responsibilities hereunder is subject to the following terms and conditions
which the parties hereto agree shall govern and control with respect to the
Escrow Agent's rights, duties and liabilities hereunder:

            (a)   Liability. The Escrow Agent shall not be liable for anything
which it may do or refrain from doing in connection herewith, except for its own
negligence, bad faith or

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willful misconduct. None of the provisions contained in this Agreement shall
require the Escrow Agent to use or advance its own funds in the performance of
any of its duties or the exercise of any of its rights or powers hereunder.
Anything in this Agreement to the contrary notwithstanding, in no event shall
the Escrow Agent be liable for special, indirect or consequential loss or damage
or any kind whatsoever (including lost profits), even if the Escrow Agent has
been advised of the likelihood of such loss or damage and regardless of the form
of action. In the event the Escrow Agent shall be uncertain as to its duties or
rights hereunder or shall receive instructions, claims or demands from any Party
which, in its opinion, conflict with any of the provisions of this Agreement, it
shall be entitled to refrain from taking any action and its sole obligation
shall be to keep safely all property held in escrow until it shall be directed
otherwise in writing by the Parties or by a final order or judgment of a court
of competent jurisdiction or arbitrator (which final decision shall be
accompanied by a legal opinion by counsel for the presenting party satisfactory
to Escrow Agent to the effect that the decision or order is final and
non-appealable).

            (b)   Limitation of Duties. The Escrow Agent shall have no duties
except those which are expressly set forth herein and it shall not be bound by
any agreement of the other parties hereto (whether or not it has any knowledge
thereof).

            (c)   Resignation, Termination or Succession of Escrow Agent. The
Escrow Agent shall have the right to resign at any time by giving not less than
90 days prior written notice of such resignation to the Parties and the Parties
shall have the right to terminate the services of the Escrow Agent hereunder at
any time by giving written notice (with such written notice being signed by
Buyer and KEG) of such termination to the Escrow Agent, in each case specifying
the effective date of such resignation or termination. Within 30 days after
receiving or delivering the aforesaid notice, as the case may be, the Parties
agree to appoint a successor Escrow Agent to which the Escrow Agent shall
distribute the property then held hereunder, less the amount of any fees owing
to the Escrow Agent hereunder as of such date. If a successor Escrow Agent has
not been appointed and has not accepted such appointment by the end of such
30-day period, the Escrow Agent may apply to a court of competent jurisdiction
for the appointment of a successor Escrow Agent, and the costs, expenses and
reasonable attorneys' fees which are incurred in connection with any such
proceeding shall be paid by Buyer. Except as otherwise agreed to in writing by
the Parties, no Escrow Funds shall be released from the Escrow Account unless
and until a successor Escrow Agent has been appointed in accordance with this
Section 5(c). Any corporation, association or other entity into which the Escrow
Agent may be merged with or with which it may be consolidated, or any
corporation, association or other entity resulting from any such merger or
consolidation to which it is a party, ipso facto, shall be and become a
successor Escrow Agent hereunder, as applicable, vested with all other matters
as was its predecessor, without the execution or filing of any instrument or any
further act on the part of the parties hereto, notwithstanding anything to the
contrary.

            (d)   Discharge of Escrow Agent. Upon delivery of all of the Escrow
Funds pursuant to the terms of Section 4 above or to a successor Escrow Agent
appointed pursuant to the terms of Section 5(c) above, the Escrow Agent shall
thereafter be discharged from any further obligations hereunder. The Escrow
Agent is hereby authorized, in any and all events, to comply with and obey any
and all final judgments, orders and decrees of any court of competent

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jurisdiction which may be filed, entered or issued, and all final arbitration
awards (if applicable) and, if it shall so comply or obey, it shall not be
liable to any other person by reason of such compliance or obedience.

            6.    Indemnification. Each of KEG and Buyer shall indemnify the
Escrow Agent and its officers, directors and employees (collectively, the
"Indemnitees") for and to hold them harmless against one-half of any and all
losses, liabilities, claims, damages, fines, penalties or reasonable expenses
(including reasonable attorneys' fees and expenses) ("Losses") incurred without
willful misconduct or bad faith on the part of the Escrow Agent arising out of
or in connection with its performance under this Agreement; provided that, if,
and then only to the extent, any portion of such Losses has resulted directly
from either KEG's or Buyer's willful misconduct or bad faith, then KEG or Buyer,
respectively, shall indemnify and hold the Indemnitees harmless against 100% of
such portion of the Losses.

            7.    Escrow Costs. The Escrow Agent shall be entitled to be paid a
fee for its services pursuant to the attached Fee Schedule and to be reimbursed
for its reasonable out-of-pocket costs and expenses incurred in connection with
maintaining the Escrow Account hereunder or complying with the terms of this
Agreement, which fees, costs and expenses shall be paid to the Escrow Agent by
Buyer.

            8.    Sellers' Interest in Escrow Account. Neither KEG nor any of
its successors or assigns shall have any legal or equitable right, title or
interest, either actual or contingent, in or to all or any portion of the Escrow
Account or any assets therein, and no part of the Escrow Account or any assets
therein shall constitute the legal or equitable property of KEG or any of its
successors or assigns or KEG's or any such successor's or assign's bankruptcy,
receiver, rehabilitator, conservator, liquidator or similar official estate (as
the case may be) unless and until KEG or any such successor or assign has become
entitled to receive an immediate distribution of any portion of the Escrow
Account pursuant to the terms and conditions of this Agreement, in which case
KEG or any such successor or assign shall thereafter possess right, title and
interest in and to such portion of the Escrow Account. Neither KEG nor any of
its successors or assigns shall have the right or ability to withdraw, transfer,
pledge, convey, hypothecate or grant, either outright or as security, any
portion of the Escrow Account or any assets therein. In the event of the
commencement of a bankruptcy, receiver, rehabilitator, conservator, liquidator
or similar case or cases wherein KEG or any of its successors or assigns is the
debtor, no portion of the Escrow Account or any of the assets therein shall
constitute property of the debtor's estate within the meaning of 11 U.S.C.
Section 541. No creditor of KEG or any of its successors or assigns shall have
any right to have or to hold any part of the Escrow Account or any of the assets
therein in satisfaction of any claim or as collateral for any obligation, and
shall not be able to obtain a security interest in all or any portion of the
Escrow Account or any of the assets therein. The Escrow Agent shall be in sole
possession of the Escrow Account and all of the assets therein and shall not act
as an agent for any of KEG or any of its successors or assigns.

            9.    Security Interest. Without in any manner limiting the
generality of the provisions of Section 8 above or implying that any Seller has
any legal or equitable right, title or interest to the Escrow Account or any of
the assets therein and out of an abundance of caution in

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the unlikely event it is determined that any Seller has any such right, title or
interest, the Seller hereby grant to Buyer a continuing first priority lien and
security interest under the Uniform Commercial Code of the State of Illinois and
all other applicable laws in and to the Escrow Account and all of the assets
therein, together with any and all proceeds, replacements and substitutions
thereof, effective on the date hereof. For such purpose, the Parties agree that
the Escrow Account shall constitute "deposit accounts" and this Agreement shall
constitute a "control agreement" (in each case as contemplated under and
pursuant to the Uniform Commercial Code in effect in the State of Illinois) in
connection therewith and in furtherance thereof. The Sellers shall do all such
other acts and things and shall execute and deliver all such other instruments
and documents (including further security agreements, pledge agreements, deposit
or control agreements, pledges, endorsements, assignments and notices) as Buyer
may reasonably request from time to time (and as are not inconsistent with the
other terms and conditions of this Agreement) in order to perfect and preserve
the priority of Buyer's security interest in the Escrow Account and all of the
assets therein, as a perfected security interest in the Escrow Account and all
of the assets therein, prior to the rights of any other secured party or lien
creditor or other Person.

            10.   Amendment and Waiver. This Agreement may be amended, or any
provision of this Agreement may be waived; provided that any such amendment or
waiver shall be binding upon KEG only if set forth in a writing executed by KEG
and referring specifically to the provision alleged to have been amended or
waived, and any such amendment or waiver shall be binding upon the Buyer only if
set forth in a writing executed by Buyer and referring specifically to the
provision alleged to have been amended or waived; and provided further that if
any such amendment or waiver would have the effect of increasing or expanding
the Escrow Agent's obligations or duties under this Agreement, the written
consent of the Escrow Agent shall be required. No course of dealing between or
among the parties shall be deemed effective to modify, amend or discharge any
part of this Agreement or any rights or obligations of any party under or by
reason of this Agreement.

            11.   Notices. All notices, demands and other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given (a) when personally
delivered, sent by telex, cable or telecopy (with hard copy to follow) or sent
by reputable overnight express courier (charges prepaid), or (b) three days
following mailing by certified or registered mail, postage prepaid and return
receipt requested. Unless another address is specified in writing in accordance
with a notice delivered pursuant to this Section 11, notices, demands and
communications to KEG, Buyer and the Escrow Agent shall be sent to the addresses
indicated below:

      Buyer:

      2101 4th Avenue, Suite 1600
      Seattle, Washington 98121
      Attn: Chief Financial Officer
      Telephone: (206) 770-8300
      Facsimile: (206) 448-4442

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      with a copy to:
      (which shall not constitute notice to Buyer)

      Kirkland & Ellis
      200 East Randolph Drive
      Chicago, Illinois 60601
      Attn: Ted H. Zook, P.C.
            Stephen D. Oetgen
      Telephone: (415) 439-1414
      Facsimile: (415) 439-1314

      KEG:

      c/o Lumbermens Mutual Casualty Company
      1 Kemper Drive
      Long Grove, IL 60049
      Attn: General Counsel
      Telephone:
      Facsimile: (847) 320-4202

      with a copy to:
      (which shall not constitute notice to KEG)

      Sidley Austin Brown & Wood
      10 South Dearborn Street
      Bank One Plaza
      Chicago, IL 60603
      Telephone: (312) 853-4348
      Facsimile: (312) 853-7036

      The Escrow Agent:

      Wells Fargo Bank Minnesota, National Association
      Corporate Trust Services
      6th and Marquette, MAC N9303-110
      Minneapolis, MN 55479
      Attn: Bonnie Anderson Rons
      phone:     (612) 667-4553
      facsimile: (612) 667-2160

            12.   Entire Agreement. This Agreement and the Purchase Agreement
and the agreements and documents referred to herein and therein contain the
entire agreement and understanding between the parties hereto with respect to
the subject matter hereof and supersede all prior agreements and understandings,
whether written or oral, relating to such subject matter in any way.

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            13.   Assigns and Assignment. This Agreement and all actions taken
hereunder shall inure to the benefit of and shall be binding upon all of the
Parties hereto and upon all of their respective successors and assigns; provided
that the Escrow Agent shall not be permitted to assign its obligations hereunder
except as provided in Section 5(c) above. As a condition to any assignment
hereunder, the assignee must first execute and deliver to the other Parties a
counterpart to this Agreement agreeing to be bound by all of the terms and
conditions hereunder. Notwithstanding the foregoing, in no event shall an
assignment relieve the assigning party of its obligations hereunder.

            14.   Taxation of Interest Earned on Investment of Escrow Amount.
KEG hereby acknowledges that, for federal and state income tax purposes, the
Interest earned on the investment of the Escrow Amount shall be income of, and
any losses, costs and expenses borne by or paid from the Escrow Funds shall be
losses, costs or expenses of, KEG. The Escrow Agent shall be responsible for
reporting any interest earned to the Internal Revenue Service.

            15.   No Other Third Party Beneficiaries. Nothing herein expressed
or implied is intended or shall be construed to confer upon or to give any
person other than the Escrow Agent, the Parties and all Indemnified Persons, and
their permitted assigns, any rights or remedies under or by reason of this
Agreement.

            16.   Interpretation. The headings and captions used in this
Agreement and the table of contents to this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Any capitalized terms used in any Schedule or Exhibit attached hereto
and not otherwise defined therein shall have the meanings set forth in this
Agreement. The use of the word "including" herein shall mean "including without
limitation."

            17.   Other Remedies. The right of the Parties to receive all or a
portion of the Escrow Funds under the circumstances described in Section 4 above
is in addition to, and not in lieu of, any other remedies that any such party
may have against another Party pursuant to or as permitted by the Purchase
Agreement.

            18.   Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement or the application of any
such provision to any person or circumstance shall be held to be prohibited by
or invalid, illegal or unenforceable under applicable law in any respect by a
court of competent jurisdiction, such provision shall be ineffective only to the
extent of such prohibition or invalidity, illegality or unenforceability,
without invalidating the remainder of such provision or the remaining provisions
of this Agreement.

            19.   Specific Performance. Each of the Parties acknowledges and
agrees that the other Party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Party shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically

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this Agreement and the terms and provisions hereof in any action instituted in
any court of the United States or any state thereof having jurisdiction over the
parties and the matter (subject to the provisions set forth in Section 21
below), in addition to any other remedy to which they may be entitled, at law or
in equity.

            20.   Releases on Non-business Days. In the event that a release of
Escrow Funds or delivery of a notice hereunder is required to be made on a date
that is not a business day, such release may be made on the next succeeding
business day with the same force and effect as if made and such notice may be
delivered when required.

            21.   Governing Law. THE LAW OF THE STATE OF ILLINOIS SHALL GOVERN
ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, INTERPRETATION AND
ENFORCEABILITY OF THIS AGREEMENT AND THE EXHIBITS AND SCHEDULES ATTACHED HERETO,
AND THE PERFORMANCE OF THE OBLIGATIONS IMPOSED BY THIS AGREEMENT, WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF
THE STATE OF ILLINOIS OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE
APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF ILLINOIS.

            22.   Counterparts. This Agreement may be executed in one or more
counterparts (including by means of telecopied signature pages), all of which
shall be considered one and the same agreement, and shall become effective when
one or more such counterparts have been signed by each of the parties and
delivered to the other party.

                                    * * * * *

                                       11
<PAGE>

            IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement as of the date first written above.

                                     WELLS FARGO BANK MINNESOTA,
                                     NATIONAL ASSOCIATION

                                             /s/ Bonnie Anderson Rons
                                     -------------------------------------------
                                     By: Bonnie Anderson Rons
                                     Its: Assistant Vice President

                                     SEABRIGHT INSURANCE HOLDINGS, INC.

                                              /s/ John Pasqualetto
                                     -------------------------------------------
                                     By: John Pasqualetto
                                     Its: President

                                     KEMPER EMPLOYERS GROUP, INC.

                                              /s/ William A. Hickey
                                     -------------------------------------------
                                     By: William A. Hickey
                                     Its: Treasurer

                      [SIGNATURE PAGE TO ESCROW AGREEMENT]<PAGE>

                                                                   EXHIBIT 10.12

            ADVERSE DEVELOPMENT EXCESS OF LOSS REINSURANCE AGREEMENT
                  (HEREINAFTER REFERRED TO AS THE "AGREEMENT")

                                     between

                  LUMBERMENS MUTUAL CASUALTY COMPANY (ILLINOIS)

                  (hereinafter referred to as the "Reinsurer")

                                       and

                  KEMPER EMPLOYERS INSURANCE COMPANY (ILLINOIS)

                   (hereinafter referred to as the "Reinsured)

                                    RECITALS

      WHEREAS, Kemper Employers Group, Inc., Lumbermens Mutual Casualty Company,
Eagle Pacific Insurance Company, Pacific Eagle Insurance Company and Insurance
Holdings, Inc., a Delaware corporation ("Holdings"), have entered into a
Purchase Agreement dated July 14, 2003 (as amended, the "Purchase Agreement")
whereby, concurrently with the execution of this Agreement, Holdings will have
acquired 100% of the stock of the Reinsured from Kemper Employers Group, Inc.;

      WHEREAS, in connection with the acquisition of the Reinsured by Holdings,
the parties desire that the Reinsurer indemnify the Reinsured in the event of
adverse development of the reserves stated in the Reinsured's balance sheet as
of the Closing Date (as defined in the Purchase Agreement), or, in the
alternative, that the Reinsured will share with the Reinsurer any positive
development of those reserves; and

      WHEREAS, the execution and delivery of this Agreement is a condition to
the obligations of the parties to consummate the transactions contemplated by
the Purchase Agreement.

      NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:

                                    ARTICLE I
                                      TERM

      This Agreement shall commence and become effective as of 12:01 a.m.
Pacific Time on the Closing Date (the "Effective Time") and shall continue,
unless and until terminated in accordance with Article XIV hereof.

<PAGE>

                                   ARTICLE II
                                   DEFINITIONS

      In addition to the terms otherwise defined in this Agreement, the
following terms have the meanings set forth below:

"Actual Loss Result" shall have the meaning set forth in Article IV hereof.

"Aggregate Net Loss" means the amount, if any, by which the Actual Loss Result
exceeds the Initial Loss Reserves at December 31, 2011.

"Aggregate Net Gain" means the amount, if any, by which the Initial Loss
Reserves exceed the Actual Loss Result at December 31, 2011.

"Effective Time" shall have the meaning set forth in Article I hereof.

"Estimated Closing Date Financial Statements" means the Closing Date financial
statements prepared by Sellers pursuant to Section 4.1 of the Purchase Agreement
for purposes of calculating the Estimated Book Value (as defined in the Purchase
Agreement).

"Excess Policy Liabilities" means any amounts payable in excess of the policy
limit of the Policies as a result of alleged or actual negligence in failing to
settle or rejecting a settlement within the policy limit, in the preparation of
the defense, in the trial of any action against the insured or reinsured, or in
the preparation of or prosecution of an appeal consequent upon such action.

"Extra Contractual Obligations" means those liabilities and obligations that are
outside the provisions of the Policies, including punitive or exemplary damages,
fines, penalties, or any other liabilities, that arise from the handling of any
claim under the Policies.

"Final Adjustment Report" means the Adjustment Report and supporting work
papers, including the Closing Date financial statements of KEIC, contemplated by
Section 4.4 of the Purchase Agreement which have become final and conclusive as
provided in Section 4.4 of the Purchase Agreement.

"Initial Loss Reserves" means the amount of reserves recorded on the books of
the Reinsured as of Closing Date, as reflected in the Final Adjustment Report
(which, for the avoidance of doubt, shall give effect to all post-closing
adjustments contemplated by the Purchase Agreement and give effect to the
Commutation Agreement of even date herewith between the Reinsured and the
Reinsurer), on account of the Reinsured's actual or potential obligations under
the Policies for (i) Losses, including incurred but not yet reported; and (ii)
Loss Adjustment Expenses; net of (y) recoveries, salvages, and subrogations and
(z) valid and collectible inuring reinsurance with respect to the Policies;
provided, however, that until such time as the Final Adjustment Report has been
determined, "Initial Loss Reserves" shall be calculated based on the Estimated
Closing Date Financial Statements.

"Loss Adjustment Expenses" means all allocated and unallocated loss adjustment
expenses incurred with respect to the investigation, adjustment, negotiation,
settlement, or defense of a claim or loss under the Policies or the protection
of subrogation rights with respect thereto.

                                     - 2 -
<PAGE>

"Losses" means any and all amounts paid or payable, and any and all obligations
or liabilities incurred, under the terms of the Policies, including Excess
Policy Liabilities and Extra Contractual Obligation.

"Policies" means all policies, binders, certificates, cover notes, endorsements,
facilities, treaties and other contracts of insurance or reinsurance
underwritten, issued, or entered into by the Reinsured (as the issuing company)
at or prior to the Effective Time.

"Subsequent Loss Reserves" shall have the meaning set forth in Article IV
hereof.

                                   ARTICLE III
                                REINSURING CLAUSE

A.    Subject to the terms and conditions of this Agreement, the Reinsurer
hereby assumes and agrees to indemnify the Reinsured for 100% of any Aggregate
Net Loss. There shall be no limit to the liability assumed by the Reinsurer
hereunder.

B.    Subject to the terms and conditions of this Agreement, the Reinsured
hereby agrees to pay to the Reinsurer 100% of any Aggregate Net Gain.

                                   ARTICLE IV
                             AGGREGATE NET LOSS/GAIN

A.    The Aggregate Net Loss or Aggregate Net Gain is intended to represent the
difference between the Actual Loss Result and the Initial Reserve. The Actual
Loss Result shall be calculated as follows:

      (a) the total amount that the Reinsured has paid from the Closing Date to
      and including December 31, 2011 in connection with the Policies for any
      reason whatsoever, including (i) Losses and (ii) Loss Adjustment Expenses,
      net of (y) recoveries, salvages, and subrogations actually received prior
      to such date and (z) reinsurance with respect to the Policies actually
      collected or then required to be paid by the applicable reinsurer and
      deemed admissible on such date; plus

      (b) the amount recorded on the Reinsured's books as of December 31, 2011
      for the Reinsured's actual or potential loss obligation on the Policies
      (the "Subsequent Loss Reserves"), including reserves for (i) losses
      incurred but not yet reported and (ii) loss adjustment expenses and for
      future loss development calculated in accordance with statutory accounting
      principles and practices prescribed or permitted by the Illinois
      Department of Insurance, net of, without duplication, (y) recoveries,
      salvages, and subrogations recorded on the Reinsured's books as of
      December 31, 2011 and (z) reinsurance with respect to the Policies deemed
      admissible as of December 31, 2011; minus

      (c) the total amount of Interim Excess Loss paid by the Reinsurer pursuant
      to paragraph B of this Article IV.

For purposes of this Agreement, "deemed admissible" shall mean that the
applicable reinsurance amount is capable of being recorded on the Reinsured's
books in accordance with statutory

                                     - 3 -
<PAGE>

accounting principles for the State in which the Reinsured is domiciled. In the
event any reinsurance with respect to the Policies is excluded from the
calculations set forth above on the ground that it is not "deemed admissible,"
the Reinsured shall forward any applicable amounts that it subsequently collects
under such reinsurance to the Reinsurer.

B.    In the event that any of the quarterly loss reports submitted pursuant to
Article VI below shows that the amount that the Reinsured has paid after the
Closing Date for Losses and Loss Adjustment Expenses as of the end of the
quarter reported in such quarterly report, net of (x) amounts previously paid by
the Reinsurer pursuant to this paragraph, (y) recoveries, salvages, and
subrogations recorded on or prior to such date and (z) reinsurance with respect
to the Policies actually collected or then required to be paid by the applicable
reinsurer and deemed collectible on such date (the "Interim Actual Loss"),
exceeds the Initial Reserves, the Reinsurer shall, within thirty (30) days after
receipt of the quarterly loss report, pay to the Reinsured the amount by which
the Interim Actual Loss exceeds the Initial Reserves (the "Interim Excess Loss")
less the amount of any portion of the Interim Excess Loss previously paid to the
Reinsured pursuant to this paragraph B.

C.    Not later than March 31, 2012, the Reinsured shall furnish the Reinsurer a
final report showing the total Actual Loss Result incurred between the Closing
Date and December 31, 2011, the Subsequent Loss Reserves, the Aggregate Net Loss
or Aggregate Net Gain, as applicable, and the total amounts due under this
Agreement. The Reinsured or Reinsurer, as applicable, shall pay any amounts due
to the other party within sixty (60) days following delivery of the final
report. All payments between the Reinsured and the Reinsurer shall be made in
cash or its equivalent.

D.    The Reinsurer shall have the right to review the Reinsured's determination
of the Subsequent Loss Reserves. If the Reinsurer does not agree with the
Reinsured's determination, and if the difference is irreconcilable between the
parties, the difference shall be referred to an independent actuarial firm to be
agreed upon by the parties. To the extent that the parties fail to agree on an
independent actuarial firm, they may agree to settle any difference by using a
panel of three actuaries, one to be chosen by each party and the third by the
two so chosen. Each actuary shall be required to provide its best estimate of
the Subsequent Loss Reserves, and the determinations of the three actuaries
shall be averaged and the result shall be final and binding on the parties
hereto. The cost of any independent actuarial firm or firms shall be shared
equally by the Reinsurer and the Reinsured.

                                    ARTICLE V
                           CLAIMS AND LOSS SETTLEMENTS

      Except as provided herein, the parties hereto agree that the Reinsured
shall have the sole right and responsibility to handle, adjust, settle, and
defend all claims arising with respect to the Polices. The Reinsured's good
faith determinations with respect to the Reinsured's obligation and liability
under any Policy and the settlement of any claim under any Policy shall be
binding on the Reinsurer. The Reinsurer shall, upon written request, be afforded
the opportunity to be associated with the Reinsured, at the Reinsurer's expense,
in the defense of any claim or suit or proceeding involving the reinsurance
provided hereunder, and the Reinsurer shall cooperate in every respect in the
defense of such claim, suit, or proceeding. The Reinsurer also acknowledges

                                     - 4 -
<PAGE>

and agrees that the Reinsured may, at the Reinsured's discretion, delegate all
or any portion of its claims handling and settlement duties to an affiliate or a
third party.

                                   ARTICLE VI
                                     REPORTS

A.    The Reinsured shall, within forty-five (45) days after the end of each
calendar quarter during the term of this Agreement, provide a quarterly loss
report to the Reinsurer in a format that is mutually acceptable to the Reinsured
and the Reinsurer, but in any event which shall contain all information as shall
be required to permit the Reinsurer to meet its statutory reporting obligations,
including the following information:

      (1)   The amount of Losses and Loss Adjustment Expenses paid by the
            Reinsured during that calendar quarter;

      (2)   The amount of the reserves of the Reinsured at the end of that
            calendar quarter on account of its obligations under the Policies
            for Losses and Loss Adjustment Expenses;

      (3)   The amount of the reinsurance then maintained by the Reinsured that
            is deemed admissible at the end of that calendar quarter; and

      (4)   All salvage, recoveries, payments, and reversals or reductions of
            verdicts in connection with the Policies, the cost of obtaining such
            salvage, recoveries, payments, and reversals or reductions of
            verdicts, and amounts actually recovered under inuring reinsurance.

B.    Not later than March 31 of each year up to and including 2012, the
Reinsured shall provide the Reinsurer with a report of the amount of the
reserves recorded on the Reinsured's books on account of its obligations under
the Policies for Losses and Loss Adjustment Expenses, as of December 31 of the
previous year.

                                   ARTICLE VII
                                      TRUST

A     The Reinsurer shall, on or before the Effective Date, place assets in an
amount equal to 10% of the Initial Loss Reserves into a separate trust for the
benefit of the Reinsured (the "Trust Account") pursuant to a trust agreement in
the form attached hereto as Exhibit A (the "Trust Agreement") with a trustee
acceptable to the Reinsured. The balance of the Trust Account shall thereafter
be increased within ten (10) business days following the delivery of each
quarterly report provided under Article VI, to an amount equal to one hundred
two percent (102%) of the Reinsurer's obligations under this Agreement
(calculated as of such date based on the applicable quarterly report provided to
the Reinsurer pursuant to Article VI of this Agreement), but in no event shall
the fair market value of the assets in the Trust Account be less than ten
percent (10%) of the Initial Loss Reserves.

                                     - 5 -
<PAGE>

B.    Before depositing assets into the Trust Account, the Reinsurer shall
execute assignments or endorsements in blank or transfer legal title to the
trustee of the Trust Account of all securities or other property standing in the
Reinsurer's name which are delivered to Trustee to form a part of the Trust
Account, so that, whenever necessary, the Reinsured, or the trustee of the Trust
Account upon the direction of the Reinsured, can renegotiate these assets
without consent or signature from the Reinsurer or any other entity .

C.    The Reinsurer agrees that the assets deposited in the Trust Account shall
be valued at their fair market value and shall consist only of cash,
certificates of deposit issued by a United States bank and payable in United
States legal tender, and investments of the types permitted by the Illinois
Insurance Code, provided that the investments may not be issued by an
institution that is the parent, subsidiary or affiliate of either the Reinsurer
or the Reinsured.

D.    The assets in the Trust Account may be withdrawn by the Reinsured at any
time, notwithstanding any other provisions in this Agreement, provided the
assets are withdrawn by the Reinsured and utilized and applied by the Reinsured
(or any successor of the Reinsured by operation of law, including any
liquidator, rehabilitator, receiver, or conservator of the Reinsured) only to
reimburse the Reinsured for the Reinsurer's obligation for Aggregate Net Loss or
Interim Excess Loss under this Agreement that has not otherwise been paid by the
Reinsurer when due;

E.    Commencing twenty-four (24) months after the Effective Time, the Reinsurer
may withdraw amounts held in the Trust Account to the extent the value of the
assets in the Trust Account exceeds one hundred two percent (102%) of the amount
required to fund the Reinsurer's obligations under Article IV.A. of this
Agreement, as calculated as of such date (assuming that such date were
substituted for December 31, 2011 throughout Article IV.A.) based on the
applicable quarterly report provided to the Reinsurer pursuant to Article VI of
this Agreement, provided, however, that in no event shall the fair market value
of the assets in the Trust Account be less than ten percent (10%) of the Initial
Loss Reserves.

                                  ARTICLE VIII
                          ERRORS, OMISSIONS, OR DELAYS

      Any inadvertent error, omission, or delay in complying with the terms and
conditions of this Agreement shall not be held to relieve either party hereto
from any liability which would attach to it hereunder if such delay, omission,
or error is rectified promptly upon discovery.

                                   ARTICLE IX
                                   INSPECTION

      The Reinsurer and Reinsured and their respective authorized
representatives shall have the right to inspect, at all reasonable times, all
books, records, and papers of the other party in connection with the reinsurance
hereunder or any claims in connection herewith.

                                    ARTICLE X
                             CREDIT FOR REINSURANCE

      In the event that the Reinsured is at any time unable to receive credit
for the reinsurance provided hereunder pursuant to statutory accounting
principles and rules applicable to the

                                     - 6 -
<PAGE>

Reinsured by its domiciliary insurance regulator, the Reinsurer shall, upon the
request of the Reinsured, enter into one or more customary credit for
reinsurance arrangements. The Reinsurer shall have the right, in its sole
discretion, to choose the credit for reinsurance arrangement used, provided that
such arrangement or arrangements provide the Reinsured with full reinsurance
credit for the reinsurance being provided hereunder and such arrangement or
arrangements can be implemented promptly. Any such arrangement shall be in
accordance with customary terms and conditions, subject to the requirements of
applicable law.

                                   ARTICLE XI
                                   INSOLVENCY

      In the event of insolvency and the appointment of a conservator,
liquidator, or statutory successor of the Reinsured, the portion of any risk or
obligation assumed by the Reinsured shall be payable to the conservator,
liquidator, or statutory successor on the basis of claims allowed against the
insolvent company by any court of competent jurisdiction or by any conservator,
liquidator, or statutory successor of the Reinsured having authority to allow
such claims, without diminution because of that insolvency, or because the
conservator, liquidator, or statutory successor has failed to pay all or a
portion of any claims. The conservator, liquidator, or statutory successor of
the Reinsured shall provide written notice of the pendency of a claim against
the Reinsured, within a reasonable time after such claim is filed, indicating
the policy or bond reinsured, and the Reinsurer may interpose, at its own
expense in the proceeding where such claim is to be adjudicated, any defense or
defenses which it may deem available to the Reinsured or its conservator,
liquidator, or statutory successor. The expense thus incurred by the Reinsurer
shall be payable subject to court approval out of the estate of the insolvent
Reinsured as part of the expense of conservation or liquidation to the extent of
a proportionate share of the benefit which may accrue to the Reinsured in
conservation or liquidation, solely as a result of the defense undertaken by the
Reinsurer.

                                   ARTICLE XII
                                   TERMINATION

      This Agreement may be commuted or terminated, in whole or in part, only by
the mutual written agreement of both the Reinsured and the Reinsurer, except
that this Agreement shall terminate upon the final settlement of all payment
obligations between the parties pursuant to Article III.

                                  ARTICLE XIII
                                     NOTICE

      All notices, requests, consents, and other communications required or
permitted hereunder shall be in writing and shall be delivered in person or
delivered by facsimile transmission (with a copy also sent by another means
herein provided for) or a nationally recognized overnight carrier service or
mailed by first class registered or certified mail, postage prepaid, addressed
as follows:

                                     - 7 -
<PAGE>

      Lumbermens Mutual Casualty Company
      1 Kemper Drive
      Long Grove, Illinois 60049
      Attn: General Counsel
      Fax: (847) 320-4202

      Kemper Employers Insurance Company
      c/o SeaBright Insurance Holdings, Inc.
      2101 4th Avenue, Suite 1600
      Seattle, Washington 98121
      Attn: President
      Fax: (206) 448-4442

      All such notices, requests, consents, and other communications shall be
deemed to have been delivered (a) in the case of personal delivery or facsimile,
on the date of such delivery; (b) in the case of nationally recognized overnight
courier service, on the second (2nd) business day following the date of
dispatch; and (c) in the case of mailing, on the fifth (5th) business day
following such mailing.

                                   ARTICLE XIV
                                  INTERMEDIARY

      The parties to this Agreement represent and warrant to each other that no
broker or other reinsurance intermediary was involved in the procurement or
preparation of this Agreement.

                                   ARTICLE XV
                                  MISCELLANEOUS

A.    This Agreement shall not be deemed to provide any right or remedy to any
third party whatsoever unless said right or remedy is specifically granted to
such third party by the terms hereof. This Agreement may be assigned only by
mutual consent of the parties.

B.    Nothing contained in this Agreement shall be construed so as to require
the commission of any act contrary to law, and wherever there is any conflict
between any provision(s) of this Agreement and any statute, law, ordinance or
regulation, the latter shall prevail; provided, however, that in that event the
provision(s) of this Agreement so affected shall be curtailed and limited only
to the extent necessary to permit compliance with the minimum legal requirement,
and no other provisions of this Agreement shall be affected thereby, and all
other provisions of this Agreement shall continue in full force and effect.

C.    This Agreement, together with the Trust Agreement, contains the full and
complete understanding and agreement between the parties hereto with respect to
the subject matter hereof, and the parties acknowledge that neither is entering
into this Agreement in reliance upon any term, condition, representation, or
warranty not stated herein and that this Agreement replaces any and all prior
agreements whether oral or written pertaining to the subject matter hereof.

                                     - 8 -
<PAGE>

D.    Whenever the text hereof requires the use of a singular or plural term, it
shall include the appropriate plural term as the text of the instrument
requires. Wherever the word "including" is set forth herein, the word shall mean
including without any limitation whatsoever, unless expressly stated to the
contrary.

E.    No waiver of any provision of or right under this Agreement shall be
effective against a party unless it is in writing and signed by a duly
authorized officer of such party. The failure or delay by a party to enforce any
provision of this Agreement shall not constitute a waiver by the party of any
provision or any right hereunder. Any past waiver of a provision or right by a
party shall not constitute a course of conduct or a waiver in the future of that
same provision or right.

F.    The description in the headings of this Agreement are solely for
convenience, and form no part of the terms and conditions of coverage.

G.    Except as set forth in Paragraph B of this Article XV, no provision of
this Agreement shall be modified or amended without the prior written consent of
the Reinsured and the Reinsurer.

H.    Except as may be otherwise agreed to by the parties hereto, any payments
to be made pursuant to this Agreement shall be made in cash or immediately
available funds denominated in United States Dollars.

I.    This Agreement shall be governed by the laws of the State of Illinois and
the parties hereto irrevocably submit to the exclusive jurisdiction of the
courts in the State of Illinois and to the extent permitted by law the parties
expressly waive all rights to challenge or otherwise limit such jurisdiction.

                                    * * * * *

                                     - 9 -
<PAGE>

      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives this 30th day of September,
2003.

                                     KEMPER EMPLOYERS INSURANCE COMPANY

                                     By: /s/ John K. Conway
                                         ----------------------
                                         Name:  John K. Conway
                                         Title: Secretary

                                     LUMBERMENS MUTUAL CASUALTY COMPANY

                                     By: /s/ William A. Hickey
                                         ----------------------
                                         Name:  William A. Hickey
                                         Title: Chief Financial Officer
                                                and Executive Vice President

                                     - 10 -

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