Document:

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                                 EXHIBIT (10.28)

                       SERVICE BUREAU PROCESSING AGREEMENT

                                 BY AND BETWEEN

                        ALLTEL INFORMATION SERVICES, INC.

                                       AND

                               HERITAGE OAKS BANK

                                 AUGUST 1, 1999

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This is a Service Bureau Agreement (the "Agreement"), dated as of the 1st day of
August, 1999, (the "Effective Date"), by and between ALLTEL INFORMATION
SERVICES, INC., an Arkansas corporation having its principal place of business
at 4001 Rodney Parham Road, Little Rock, Arkansas 72212-2496 ("ALLTEL
Information"), and HERITAGE OAKS BANK, a (State of California) corporation,
having its principal place of business at 545 Twelfth Street, Paso Robles, CA
93446 ("Client").

         WHEREAS, ALLTEL Information provides data processing services to
multiple clients, and Client desires to obtain such data processing services
from ALLTEL Information;

         NOW, THEREFORE, in consideration of the payments to be made and
services to be performed hereunder, the parties agree as follows:

1. SERVICES. ALLTEL Information shall provide the data processing software and
services ("Services") outlined throughout this Agreement, and such additional
services as may be added by the parties from time to time pursuant to a written
amendment to this Agreement. Services shall be provided in accordance with
applicable ALLTEL Information user and operation manuals, bulletins, guidelines,
procedures, policies and similar materials, as established and revised from time
to time. ALLTEL will provide the software maintenance required to cause the
HORIZON BANKING SYSTEM software to operate according to ALLTEL's most current
documentation. ALLTEL Information shall process MICR Data, Statistical Data,
records, and all other input furnished to ALLTEL Information (collectively,
"Data") and shall prepare and make available for pick-up by Client, in
accordance with such procedures and schedules established by ALLTEL Information
documents, reports, customer statements and other output (collectively,
"Output"). The method of delivery of reports is specified in Exhibit A, and a
request from Client to change such method must be received by ALLTEL Information
at least sixty (60) days prior to the requested change date. Any fees or charges
resulting from such change shall be in accordance with ALLTEL Information's then
prevailing fee schedule.

For purposes of this Agreement, it is understood that any times that are listed
are for Pacific Standard Time (PST).

2.       DATA.

         2.1 FORM. Data shall be delivered by messenger or electronic
transmission to ALLTEL Information at its facility as designated by ALLTEL
Information, or such other agreed delivery location, at the times and in the
form prescribed by ALLTEL Information. ALLTEL Information shall not be liable
for the accuracy, completeness and authenticity of Data furnished to ALLTEL
Information by Client, a Federal Reserve Bank, an Automated Clearing House, or
any other third party, and shall have no obligation or responsibility to audit,
check or verify the

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Data. Client shall be solely responsible for determining the correctness of
magnetic ink encoding on items submitted for Client's payment, including but
not limited to checks and drafts ("Items"); for verifying dates, signatures,
amounts, endorsements, authorizations, payment notices, collection times,
fees and charges to Client's customers and all other similar matters on Data
submitted for processing, including Items; and for placing stop payments and
holds on accounts.

         2.2 MICR DATA. MICR Data as used in this Agreement refers to the
magnetically encoded information on Items, or if Client captures its own MICR
Data, to the Data submitted to ALLTEL Information from Client which is derived
from magnetically encoded information on Items. If Client captures its own MICR
Data, Client shall electronically transmit MICR Data to ALLTEL Information, and
shall identify MICR Data as to description and amounts with verification as to
the total of all amounts set forth. In the event of an emergency, ALLTEL
Information may, in its sole discretion, accept MICR Data on magnetic tape. MICR
Data shall be delivered to ALLTEL Information each ALLTEL Information business
day. The method of delivery of MICR Data to ALLTEL Information is specified in
Exhibit A. If the method of delivery is one of Electronic Data Transmission
(EDT), then Exhibit D (Electronic Data Transmission Addendum) shall be
applicable.

                  MICR Data delivered by messenger must be received by ALLTEL
Information at its facility, or other agreed delivery location, no later than
8:00 p.m. on Mondays through Thursdays and 10:00 p.m. on Fridays; MICR Data
transmitted electronically must be received by ALLTEL Information at its
facility no later than 10:00 p.m. on Mondays through Thursdays and 11:00 p.m. on
Fridays. Client's request to change the method of delivery of MICR Data must be
received by ALLTEL Information at least sixty (60) days prior to the requested
change date. Any fees or charges due to such request shall be in accordance with
ALLTEL Information's then prevailing fee schedule.

         2.3 STATISTICAL DATA. All Statistical Data, including but not limited
to changes to customer accounts, shall be transmitted electronically from
Client's administrative terminal to ALLTEL Information's facility. All
Statistical Data must be received by ALLTEL Information at its facility no later
than 6:00 p.m. on Mondays through Thursdays and 7:00 p.m. on Fridays.

         2.4 EFT DATA. EFT Data as used in this Agreement refers to any Data
(input or output) that goes through the Automated Clearing House (ACH). All EFT
Data must be received by ALLTEL Information at its facility no later than 6:00
p.m. on Mondays through Thursdays and 7:00 p.m. on Fridays. If EFT Data is one
of the inputs/outputs used by the Client then Exhibit E (Electronic Funds
Transfer Addendum) shall be applicable.

3. PROCESSING. ALLTEL Information shall follow such procedures and time
schedules as it may deem appropriate in processing Data and posting entries on
behalf of Client. ALLTEL Information is authorized to create and process such
entries, including but not limited to adjusting or correcting entries, as it
deems necessary or appropriate to process the Data. It shall be Client's sole
responsibility to effect a timely return of any Item, or to pursue any claim or

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right of action in a timely manner against any third party arising from such
Item. If Data is received by ALLTEL Information prior to the time limits
required by this Agreement, ALLTEL Information may process such Data
immediately. If ALLTEL Information receives Data after the time limits
required by this Agreement, or Data is delivered by any method other than
that indicated in this Agreement or agreed to in writing by the parties,
ALLTEL Information may delay the processing of such Data. However, if ALLTEL
Information does process such Data, Client shall pay any additional fees and
charges required by ALLTEL Information.

4. CONVERSION AND COMMENCEMENT. ALLTEL Information shall provide reasonable
assistance to Client during its conversion to ALLTEL Information's electronic
data processing system used in connection with the Services. Initial training of
Client's Trainers as well as one set of Manuals for the Services will be
provided to Client at no additional charge. Any additional training or Manuals
requested by Client will be charged at ALLTEL Information's then prevailing
rates. The Commencement Date for Services is the earliest date that conversion
to ALLTEL Information's electronic data processing system is completed for any
one of the Services.

         4.1 TRAVEL AND EXPENSES. Client shall reimburse ALLTEL Information for
all reasonable travel and expenses related to the performance of any conversion
or special project requested by the Client. This would include the initial
conversion to the ALLTEL Information's electronic data processing system as well
as any other special project that would result in extra travel and expenses
being incurred.

5.       FEES

         5.1 FEES TO ALLTEL Client shall pay to ALLTEL Information for the
Services provided hereunder, and for any additional services which are added to
this Agreement, the fees specified on the Schedules of Fees For Contracted
Services which are designated in Attachment 1. Method of payment is specified in
Exhibit A. Any amount not received within fifteen (15) days after the payment
due date by ALLTEL Information shall bear interest at the rate of eighteen
percent (18%) per annum until paid. However, if any amount is not paid when due,
ALLTEL Information may, at its option, immediately suspend performance hereunder
until payment is made, in addition to any other rights or remedies provided to
ALLTEL Information by this Agreement or applicable law.

         5.2 ADJUSTMENT OF FEES. The fees payable each year shall be adjusted
annually during the month in which the anniversary of the Commencement Date for
Services ("Adjustment Date") falls, as follows. Fees shall be increased, but not
decreased, by the amount of the increase in the Consumer Price Index for All
Urban Consumers Other Goods and Services (the "CPI-U") as published by the U.S.
Department of Labor, Bureau of Labor Statistics for the month of December
preceding the Adjustment Date over the Index for the month of December in the
immediately preceding year. If additional Services are added to the Agreement,
the fees shall be adjusted on such Adjustment Date in accordance with this
Section. In no event shall the adjusted fee for any Service be less than the fee
for that Service before

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such adjustment. In the event the Index is unavailable in time to allow the
adjustment to be made on the Adjustment Date, Client shall continue to pay
the then current fees for the Services until the Index is made public, at
which time the adjustment shall be calculated retroactively to the Adjustment
Date, and Client shall immediately pay to ALLTEL Information any difference
between the fees actually paid and adjusted fees. The adjustments shall be
compounded and cumulative. In the event the CPI-U is discontinued or revised
during the term of this Agreement and any extensions hereof, ALLTEL
Information shall select another governmental index or computation as a
substitute CPI-U in order to obtain substantially the same result as if the
Index had not been discontinued or revised.

         5.3 PAYMENT OF ONE-TIME FEES. Client shall pay to ALLTEL Information
any one-time fees specified on the Schedules of Fees For Contracted Services
which are designated in Attachment 1 of this Agreement, and for any additional
services which are added to this Agreement. Method of payment is specified in
Exhibit A. The one-time fees shall be due in the following manner. Fifty percent
(50%) due upon signing of this Agreement. The remaining fifty percent (50%) will
be due upon implementation of the initial conversion or the completion of the
contracted service.

6. TAXES. Client shall pay to ALLTEL Information an amount equal to any
applicable taxes or other governmental charges of any kind, however designated,
levied or based upon or relating to the transactions contemplated by this
Agreement, including any taxes that may be imposed on the use of any hardware,
software, programs, supplies or operating systems utilized under this Agreement,
except taxes based on ALLTEL Information's net income.

7. REPROCESSING. If any Data submitted to ALLTEL Information is incorrect,
incomplete or not in the format required, ALLTEL Information, may require Client
to resubmit the Data or ALLTEL Information may correct and complete the Data
itself, and Client agrees to pay additional fees and charges for any additional
work incurred by ALLTEL Information in connection therewith. In addition, any
reprocessing required because of incorrect or incomplete Data shall be at
Client's expense, in accordance with the fee for such Service then in effect.
ALLTEL Information shall attempt to notify Client prior to incurring any
expenses for which Client would be liable under this Article.

8.       RISK OF LOSS DURING TRANSIT OR TRANSMISSION

         8.1 ELECTRONIC TRANSMISSION. Client shall obtain, maintain and operate
at its own expense, all necessary devices, software and services required for
the electronic transmission of Data and, if applicable, the electronic reception
of Output, including but not limited to hardware, software, installation,
maintenance and telephone lines. Notwithstanding the foregoing, any
communication devices (modems) must meet the requirements of ALLTEL Information.
Exhibit D (Electronic Data Transmission Addendum) shall apply to all aspects of
electronic transmissions.

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         8.2 MESSENGER. Client shall be solely responsible for and shall bear
all costs associated with having a messenger service transport Data, Output or
any other information relating to Client or the Services to or from ALLTEL
Information's facility or other delivery location. The messenger of all such
material shall be deemed to be the agent of Client. For purposes of this
Agreement, unless noted otherwise, the delivery location will be ALLTEL
Information Services, Inc., 5933 West Century Blvd. Suite 310, Los Angeles,
California 90045.

         8.3 LIMITATION. ALLTEL INFORMATION SHALL NOT BE LIABLE OR RESPONSIBLE
FOR ANY LOSS OR DELAY OF DATA, OUTPUT OR ANY OTHER INFORMATION WHICH PERTAINS TO
CLIENT OR THE SERVICES DURING ANY PERIOD OF TRANSIT OR ELECTRONIC TRANSMISSION
TO OR FROM ALLTEL INFORMATION'S FACILITY OR OTHER AGREED DELIVERY LOCATION,
REGARDLESS OF THE CAUSE OF SUCH DELAY OR LOSS.

9. PRINTING. Client shall be responsible to receive electronically all output
for print. ALLTEL Information will provide such output in a hard copy, micro
fiche, or optical form for the then current fees associated with such services.
Client will furnish, at its own expense, all forms/paper for printing.

10. CLIENT REVIEW. It shall be Client's responsibility to review, verify
and make a final audit of all Output.

11.      TERM, TERMINATION AND RENEWAL.

         11.1 TERM. This Agreement shall commence on the effective date
hereof and shall expire four (4) years after the Commencement Date for
Services ("Term"), unless terminated pursuant to Paragraph 11.2. The
Commencement Date for Services for a renewal Term shall be the day
immediately following the last day of the preceding Term. Not less than two
hundred seventy (270) days prior to the expiration of the then current Term,
ALLTEL Information may provide to Client a renewal agreement for the
continuation of processing services hereunder and, if such renewal agreement
is provided by ALLTEL Information, Client will promptly review such agreement
and commence negotiations with ALLTEL Information, if necessary, and accept
or reject the agreement within one hundred eighty (180) days prior to
expiration of the then current Term.

         11.2 TERMINATION. Either party may terminate this Agreement at any time
during the Term or any renewal Term upon one hundred eighty (180) days prior
written notice. If this Agreement is terminated by Client effective prior to the
then current Term, Client shall pay to ALLTEL Information, in addition to any
accrued fees and charges, a termination fee which is equal to fifty percent
(50%) of the remaining contract value. Contract value being calculated as
follows: Average monthly amount of last six (6) months of service multiplied by
the number of months remaining in the Term of this Agreement. The parties
acknowledge and agree that such fee is reasonable in light of the harm caused by
such termination; that the loss suffered by ALLTEL Information would be
difficult to prove; and that it would be inconvenient or

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unfeasible for ALLTEL Information to obtain an adequate remedy otherwise.
This termination fee is due and payable within sixty (60) days of notice of
termination. The described termination fee is exclusive of any fees
associated with deconversion activities. The deconversion fees are outlined
in Exhibit C of this Agreement.

         11.3 EXTENDED SERVICES. Any Services that are provided to Client after
the expiration or termination of this Agreement, for which a written agreement
has not been entered into by the parties, shall be provided on a month-to-month
basis, and are subject to the terms and conditions of this Agreement, except
that the fees for such Services shall be one hundred twenty five percent (125%)
of the current prevailing ALLTEL Information fee schedule.

12. RETENTION OF DATA. With respect to any other Data, unless directed by Client
to the contrary, ALLTEL Information may destroy the Data and other materials of
Client at any time after the final use by ALLTEL Information of such Data and
materials for processing. Pursuant to Client's written request, which must be
received by ALLTEL Information within thirty (30) days after the termination or
expiration of this Agreement, ALLTEL Information will furnish to Client, at
ALLTEL's then current charges, copies of Client's data files and layouts as may
be maintained by ALLTEL Information from time to time. In the absence of such
notice by Client, ALLTEL Information may dispose of or destroy such material at
ALLTEL Information's discretion. However, notwithstanding any other provision in
this Agreement, ALLTEL Information may retain any materials of Client, including
but not limited to Data, Reports and data files, until all fees, interest and
other charges payable hereunder have been paid in full.

13.      FORCE MAJEURE AND LIMITATION OF LIABILITY.
         13.1 FORCE MAJEURE. ALLTEL Information shall not be liable for any
loss, expense, error or delay, including but not limited to delays in processing
of Data or delivery of Output or Items to Client, or any inability to provide
Services hereunder, caused by accidents, strikes, fire, electrical or mechanical
failures, non-ALLTEL software defects, acts or omissions of third parties
(including but not limited to acts or omissions of any third party service
provider or equipment vendor, messenger service or telephone carrier), acts of
God or any other causes or conditions which are beyond ALLTEL Information's
reasonable control.

         13.2 LIMITATION OF LIABILITY. As a condition precedent to any liability
of ALLTEL Information, Client must notify ALLTEL Information in writing of any
alleged negligence or breach of this Agreement as promptly as reasonably
possible, but in no event later than five (5) business days following the day on
which such alleged negligence or breach was, or could reasonably have been,
discovered by Client. ALLTEL INFORMATION'S LIABILITY, IF ANY, ARISING OUT OF OR
IN ANY WAY RELATED TO ITS PERFORMANCE UNDER THIS AGREEMENT INCLUDING BUT NOT
LIMITED TO LIABILITY FOR PROCESSING ERRORS OR NEGLIGENCE, SHALL NOT EXCEED ITS
CHARGES DURING THE SIX-MONTH PERIOD PRECEDING THE DATE OF THE ALLEGED NEGLIGENCE
OR BREACH FOR THE PARTICULAR SERVICE TO WHICH CLIENT'S CLAIM PERTAINS. SUCH
MONEY DAMAGES SHALL BE CLIENT'S EXCLUSIVE REMEDY, AND IN NO

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EVENT MAY SPECIAL, GENERAL, CONSEQUENTIAL, INCIDENTAL OR EXEMPLARY DAMAGES BE
RECOVERED, EVEN IF ALLTEL INFORMATION HAS BEEN ADVISED OF THE POSSIBILITY
THEREOF. This Paragraph also limits the liability of any agent, employee or
affiliate of ALLTEL Information.

14. DISCLAIMER OF WARRANTIES. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT,
ALLTEL INFORMATION MAKES NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT
LIMITED TO WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

15. INDEMNIFICATION. Client agrees to indemnify ALLTEL Information and hold it
harmless from and against any and all losses, liability, damages, claims,
demands, expenses, and attorney's fees (including an allocable share of the cost
of in-house counsel) which may be directly or indirectly caused by Client's
determination to pay or return any Item; (ii) Client's failure to return any
unpaid Items, or to provide notification thereof, to the Federal Reserve Bank
and/or other sources, in the manner and within the time limits specified by
applicable law; (iii) Client's failure to comply with any provision of this
Agreement; (iv) any error or omission in any data, information or instruction
furnished by Client; (v) ALLTEL Information's delay in providing, or failure to
provide, any Services hereunder if due to causes or conditions beyond ALLTEL
Information's reasonable control; or (vi) any unauthorized person gaining access
to, or any improper use of, information pertaining to Client or its customers,
including but not limited to account and loan data, which is made available to
Client or its customers pursuant to the Services, except if such unauthorized
access or improper use is caused solely by ALLTEL Information's negligence or
breach of its obligations hereunder.

16. CONTINGENCY PLAN. ALLTEL Information shall maintain contingency plans to be
used in the event ALLTEL Information's equipment or software used for the
Services is partially or completely disabled. Such plans include recovery
procedures and backup arrangements for equipment as determined solely by ALLTEL
Information. In any necessary recovery efforts, the Services shall receive the
same degree of priority as similar services performed for ALLTEL Information's
own operations. Client, however, shall remain solely responsible for its
contingency plan and maintaining adequate duplicate records of Data should file
reconstruction become necessary.

17.      CONFIDENTIAL INFORMATION
         17.1 OWNERSHIP. Subject to Article 12 of this Agreement, all Data,
Items, and Output are and shall remain the sole property of Client. All
Specifications, manuals, tapes, programs, user documentation and other materials
("Materials") developed by ALLTEL Information and furnished to Client by ALLTEL
Information in connection with this Agreement are and shall remain the sole
property of ALLTEL Information, unless agreed to otherwise in writing by the
parties.

         17.2 CONFIDENTIALITY. ALLTEL Information acknowledges that the Data and
Output are the confidential information of Client, and Client acknowledges that
the Materials are the

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confidential information of ALLTEL Information. Each party agrees to use the
same standard of care for the other's confidential information that it would
use for its own similar confidential information, and Client agrees to use
the materials only for the functions and in the manner authorized by ALLTEL
Information. Confidential information shall not include information that is
in the public domain at the time of disclosure or is lawfully obtained from a
third party.

         17.3 NON-DISCLOSURE OF TERMS OF CONTRACT. Client agrees to treat all
terms of this Agreement, including but not limited to all pricing terms, as
strictly confidential and shall not disclose or describe the terms hereof to any
other person or entity including but not limited to independent contractors and
agents of Client.

         17.4 REMEDIES. Client agrees that the remedy at law for the breach of
any provision of this Article 17 may be inadequate and that ALLTEL Information
shall be entitled to injunctive relief without bond, in addition to any rights
or remedies which ALLTEL Information may have for such breach. The obligations
of Client and the rights of ALLTEL Information under any provision of this
Article 17 shall survive any termination of this Agreement.

18. AUDIT RECORDS Client shall be responsible for maintaining all necessary
audit records required by law or any regulatory authority having jurisdiction
over Client.

19. REGULATORY COMPLIANCE. To comply with the requests of applicable regulatory
authorities, ALLTEL Information agrees that Client's processing will have
priority over processing of ALLTEL Information's non-financial customers, if
any. ALLTEL Information will provide, at the prescribed times, all required
letters of assurance to the appropriate regulatory authorities. During the term
of this Agreement, ALLTEL Information agrees that ALLTEL Information's programs
will comply with the mandatory federal data processing output requirements
specified by the federal authorities applicable to Client. Client will make
ALLTEL aware of any applicable local or state regulatory requirements which have
requirements different than those of federal regulatory authorities. Any changes
required by such state or local requirements which ALLTEL Information agrees to
make shall be paid for by Client, and to the extent possible, ALLTEL Information
shall endeavor to obtain consents to share the costs of such charges required by
such state and local requirements among the ALLTEL Information clients affected.

20. MODIFICATIONS TO SYSTEM. ALLTEL Information may, from time to time, modify
any system utilized in providing the Services, with accompanying changes to the
applicable Documentation, to the extent deemed necessary by ALLTEL Information.
ALLTEL Information shall notify Client within a reasonable time (Not less than
30 days prior) of any such modification that affects Client's use of the
Services.

21. INSURANCE. A schedule of ALLTEL Information's current insurance
coverage has been furnished in Exhibit B.

22. AUDITOR'S REVIEW. A certified public accounting firm shall perform an
annual

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review of ALLTEL Information's computer facility. Client agrees that such
firm shall have sole authority and responsibility for such review. ALLTEL
Information will provide Client with a copy of the report for the fee set
forth in Attachment 1.

23. SECURITY. Client shall implement all necessary security procedures,
including but not limited to any security procedures required by ALLTEL
Information, with regards to the Services. Client acknowledges that Client is
fully responsible for security at its facilities, and that ALLTEL Information
has NO control over the security of the terminals located at Client's facilities
or those individuals accessing information through those terminals. Client
assumes full responsibility for any unauthorized persons utilizing such
terminals or for the unauthorized use of any information obtained therefrom.
Client hereby expressly waives any claim against ALLTEL Information arising out
of a breach of those terminals.

24. GOVERNMENTAL EXAMINATIONS. If required by a regulatory authority, agency or
commission, ALLTEL Information is hereby authorized to furnish Data and/or
Output thereto at Client's expense. Client authorizes ALLTEL Information to
comply with all applicable provisions of any statute, law, regulation or
ordinance of any governmental authority having jurisdiction, including but not
limited to any laws pertaining to governmental regulation and examination of
services.

25. SUBCONTRACTING. Client agrees that ALLTEL Information may, in its sole
discretion, subcontract all or any part of its obligations hereunder to one or
more subcontractors, but in no event shall Client be required, without prior
written consent, to look to any such subcontractor directly for performance of
any such obligation or to make any payment directly to any subcontractor.

26.      GENERAL.
         26.1 NOTICES. All notices required by this Agreement shall be in
writing; shall be mailed or personally delivered to the other party at the
address set forth below, or such other address as subsequently shall be given by
either party to the other in writing; and shall be deemed effective upon
personal delivery to the other party or three (3) days after mailing if mailed
with sufficient postage and properly addressed.

         26.2 HEADINGS AND CONSTRUCTION. The headings used in this Agreement are
for convenience only and shall not be used in constructing the provisions
hereof. All reference herein to ALLTEL Information shall be deemed to include
ALLTEL Information.

         26.3 SURVIVAL OF PARAGRAPHS.  Articles 12, 14, 15, 17 and 25,
and Paragraphs  13.1 and 13.2,  herein shall survive the termination or
expiration of this Agreement.

         26.4 ENTIRE AGREEMENT AND AMENDMENTS. This Agreement contains the
entire agreement of the parties hereto. No other agreement, statement or promise
made by any party hereto or by any employee, officer, or agent of any party
hereto that is not in writing and signed by the parties is binding; except that
ALLTEL Information may amend from time to time the

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terms and conditions of this Agreement, any Exhibits or any other Addenda
upon written notice to Client. Notwithstanding the foregoing, ALLTEL
Information shall not discontinue any Services hereunder without providing at
least 180 days prior written notice to Client. Such notice will contain a
reasonable alternative to the Services being discontinued. If this
discontinuance of Services causes the Client any one-time financial impact
ALLTEL Information agrees to reimburse Client for those one-time expenses on
an actual costs basis. It will be assumed that the referenced notice will be
considered delivered on the date the notice is post marked for delivery,
faxed or couriered to the Client.

         26.5 ASSIGNMENT. This Agreement shall inure to the benefit of and be
binding upon the parties hereto, their successors and assigns. No assignment
hereof may be made by Client without the prior written consent of ALLTEL
Information. Nothing in this Agreement is to be construed to limit or restrict
the right of ALLTEL Information to effect any assignment of this Agreement by
merger, reorganization, sale of corporate assets or other corporate change as
long as the Services outlined in this Agreement continue.

         26.6 GOVERNING LAW. This Agreement is governed by the laws of the State
of California. Both parties agree that any action brought as a result, directly
or indirectly, of this Agreement shall be brought in a court of appropriate
jurisdiction in Los Angeles, California. The successful party in any such action
shall be entitled to recover from the unsuccessful party, in addition to any
other relief to which it may be entitled, reasonable attorney's fees (including
an allocable share of the cost of in house counsel) and costs incurred by it in
prosecuting or defending such action.

THIS AGREEMENT IS EFFECTIVE AUGUST 1, 1999 AND HAS BEEN EXECUTED BY THE DULY
AUTHORIZED OFFICERS OF THE PARTIES HERETO.

ALLTEL Information                                   Client

ALLTEL Information Services, Inc.           Heritage Oaks Bank
HORIZON Technology Center - West            545 Twelfth Street
5933 West Century Blvd, Suite 310           Paso Robles, CA  93446
Los Angeles, California 90045

Signature:   _____________________________  Signature:   ____________________

Date:         _____________________________ Date:          __________________

Print Name: GARY NORCROSS            Print Name: ____________________________
            -------------

Title:        SVP AND GENERAL MANAGER                Title:  ________________
              -----------------------

                                       11<PAGE>

                                                                EXHIBIT 10(a)

                                   $35,000,000

                  SECOND AMENDED AND RESTATED CREDIT AGREEMENT

                                      AMONG

                    FUND AMERICAN ENTERPRISES HOLDINGS, INC.,
                                  AS BORROWER,

                            THE LENDERS NAMED HEREIN,
                                   AS LENDERS,

                       THE FIRST NATIONAL BANK OF CHICAGO,
                                    AS AGENT,

                              FLEET NATIONAL BANK,
                             AS DOCUMENTATION AGENT,

                           FIRST UNION NATIONAL BANK,
                             AS DOCUMENTATION AGENT,

                                       AND

                                DEUTSCHE BANK AG,
                                  AS CO-AGENT,

                                   DATED AS OF
                                FEBRUARY 24, 1999

                          LEAD ARRANGER AND BOOK RUNNER

                       FIRST CHICAGO CAPITAL MARKETS, INC.

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                                TABLE OF CONTENTS

<TABLE>

<S>                                                                          <C>
ARTICLE I.....................................................................9
ARTICLE II...................................................................22
ARTICLE III..................................................................28
ARTICLE IV...................................................................30
ARTICLE V....................................................................33
ARTICLE VI...................................................................38
   6.20.     FINANCIAL COVENANTS.............................................45
   6.22.     ERISA COMPLIANCE................................................47
ARTICLE VII..................................................................48
ARTICLE VIII.................................................................49
ARTICLE IX...................................................................50
   9.17.     TREATMENT OF CERTAIN INFORMATION: CONFIDENTIALITY...............53
ARTICLE X....................................................................53
ARTICLE XI...................................................................56
ARTICLE XII..................................................................57
   12.2.     PARTICIPATIONS..................................................57
   12.3.     ASSIGNMENTS.....................................................58
ARTICLE XIII.................................................................59
</TABLE>
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                                    EXHIBITS

<TABLE>

<S>                                         <C>
Exhibit A (Article 1)                       Form of Note
Exhibit B (Section 6.1(c))                  Form of Compliance Certificate
Exhibit C (Section 12.3.1)                  Form of Assignment Agreement
</TABLE>

                                    SCHEDULES
<TABLE>

<S>                   <C>
Pricing Schedule
Schedule 1.1   -      Senior Management
Schedule 5.3   -      Approvals and Consents
Schedule 5.8   -      Material Contingent Obligations
Schedule 5.9   -      Capitalization and Subsidiaries
Schedule 5.10  -      ERISA
Schedule 5.16  -      Indebtedness
Schedule 5.17  -      Material Restrictions
Schedule 6.14  -      Liens
Schedule 6.15  -      Investment Commitments
</TABLE>

                                     -4-
<PAGE>

                  SECOND AMENDED AND RESTATED CREDIT AGREEMENT

         This Second Amended and Restated Credit Agreement, dated as of
February 24, 1999, is among FUND AMERICAN ENTERPRISES HOLDINGS, INC., a
Delaware corporation, the Lenders and THE FIRST NATIONAL BANK OF CHICAGO,
individually and as Agent.

                                R E C I T A L S:

     A. The Borrower, the lenders named therein and the Agent are party to
that certain $35,000,000 amended and restated credit agreement, dated as of
August 14, 1998 (as amended through but not including the date hereof, the
"Existing Credit Agreement").

     B. The Borrower has requested that the Existing Credit Agreement be
amended and restated in order to extend the maturity and to make certain
other amendments to the Existing Credit Agreement.

     C. The Borrower, the Lenders and the Agent desire to amend and restate
the Existing Credit Agreement on the terms and conditions set forth below to
accomplish such amendments.

     NOW, THEREFORE, in consideration of the mutual covenants and
undertakings herein contained, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Borrower,
the Lenders and the Agent hereby agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

     As used in this Agreement:

     "ABR Advance" means an Advance which bears interest at the Alternate
Base Rate.

     "Acceptable Exchange" means any of (a) the New York Stock Exchange, (b)
the American Stock Exchange, (c) NASDAQ or (d) the London Stock Exchange.

     "Advance" means a borrowing pursuant to SECTION 2.1 consisting of the
aggregate amount of the several Loans made on the same Borrowing Date by the
Lenders to the Borrower of the same Type and, in the case of Eurodollar
Advances, for the same Interest Period.

     "Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person owns 20%
or more of any class of voting securities (or other ownership interests) of
the controlled Person or possesses, directly or indirectly, the power to
direct or cause the direction of the management or policies of the controlled
Person, whether through ownership of stock, by contract or otherwise.

                                     -9-
<PAGE>

     "Agent" means First Chicago in its capacity for administrative purposes
as contractual representative of the Lenders pursuant to ARTICLE X, and not
in its individual capacity as a Lender, and any successor Agent appointed
pursuant to ARTICLE X.

     "Aggregate Commitment" means the aggregate of the Commitments of all the
Lenders hereunder. The initial Aggregate Commitment is $35,000,000.

     "Agreement" means this Second Amended and Restated Credit Agreement, as
it may be amended, modified or restated and in effect from time to time.

     "Agreement Accounting Principles" means generally accepted accounting
principles as in effect from time to time; PROVIDED, HOWEVER, that if any
changes in accounting principles from those in effect on the date of this
Agreement are adopted which result in a material change in the method of
calculation of any of the financial covenants, standards or terms in this
Agreement, the parties agree to enter into negotiations to determine whether
such provisions require amendment and, if so, the terms of such amendment so
as to equitably reflect such changes. Until a resolution thereof is reached,
all calculations made for the purposes of determining compliance with the
terms of this Agreement shall be made by application of generally accepted
accounting principles in effect on the date of this Agreement applied, to the
extent applicable, on a basis consistent with that used in the preparation of
the Financial Statements furnished to the Lenders pursuant to SECTION 5.5
hereof.

     "Alternate Base Rate" means, for any day, a rate of interest per annum
equal to the higher of (a) the Corporate Base Rate for such day, and (b) the
sum of the Federal Funds Effective Rate for such day PLUS 1/2% per annum, in
each case changing when and as the Corporate Base Rate and the Federal Funds
Effective Rate, as the case may be, changes.

     "Applicable Eurodollar Margin" means the percentage rate per annum which
is applicable at such time with respect to Eurodollar Advances as set forth
in the Pricing Schedule.

     "Applicable Facility Fee Margin" means the percentage rate per annum
which is applicable at such time as set forth in the Pricing Schedule.

     "Article" means an article of this Agreement unless another document is
specifically referenced.

     "Authorized Officer" means, with respect to the Borrower, any of the
chief executive officer, president, chief financial officer, treasurer or
controller thereof, acting singly.

     "Bankruptcy Code" means Title 11, United States Code, sections 1 ET
SEQ., as the same may be amended from time to time, and any successor thereto
or replacement therefor which may be hereafter enacted.

     "Benefit Plan" means any deferred benefit plan for the benefit of
present, future or former employees, whether or not such benefit plan is a
Plan.

                                     -10-
<PAGE>

     "Borrower" means Fund American Enterprises Holdings, Inc., a Delaware
corporation, and its successors and assigns.

     "Borrowing Date" means a date on which an Advance is made hereunder.

     "Borrowing Notice" is defined in SECTION 2.7.

     "Business Day" means (a) with respect to any borrowing, payment or rate
selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on
which banks generally are open in Chicago for the conduct of substantially
all of their commercial lending activities and on which dealings in United
States dollars are carried on in the London interbank market, and (b) for all
other purposes, a day (other than a Saturday or Sunday) on which banks
generally are open in Chicago for the conduct of substantially all of their
commercial lending activities.

     "Capitalized Lease" of a Person means any lease of Property by such
Person as lessee which would be capitalized on a balance sheet of such Person
prepared in accordance with Agreement Accounting Principles.

     "Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with
Agreement Accounting Principles.

     "Cash Equivalents" means Investments maturing within one (1) year from
the date of investment (in the case of Investments referenced in CLAUSES (a)
through (e)) in (a) certificates of deposit, Eurodollar time deposits and
other interest bearing deposits or accounts with United States commercial
banks having a combined capital and surplus of at least $500,000,000 and
rated C or better by Keefe Bruyette and Associates or with any Lender, (b)
certificates of deposit, other interest bearing accounts or deposits and
demand deposits with other United States commercial banks, which deposits and
accounts are in amounts fully insured by the Federal Deposit Insurance
Corporation, (c) obligations issued or unconditionally guaranteed by the
United States government or issued by an agency thereof and backed by the
full faith and credit of the United States, (d) direct obligations issued by
any state of the United States or any political subdivision thereof which
have the highest rating obtainable from S&P on the date of investment, (e)
commercial paper rated A-1 or better by S&P and P-1 or better by Moody's, (f)
shares in an open-end management investment company with U.S. dollar
denominated investments in fixed income obligations, including repurchase
agreements, fixed time deposits and other obligations, with a credit quality
comparable to any of the Investments described in CLAUSES (a) through (e)
above and a dollar weighted average maturity of not more than one (1) year,
and for the calculation of this dollar weighted average maturity, certain
instruments which have a variable rate of interest readjusted no less
frequently than annually are deemed to have a maturity equal to the period
remaining until the next readjustment of the interest rate and (g) money
market mutual funds identified by the valuation office of the NAIC as
requiring no investment reserve.

     "Change" is defined in SECTION 3.2.

                                     -11-
<PAGE>

     "Change in Control" means (a) the acquisition by any "person" or "group"
(as such terms are used in Section 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended) (other than John J. Byrne), including
without limitation any acquisition effected by means of any transaction
contemplated by SECTION 6.12, of beneficial ownership (within the meaning of
Rule 13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended) of 25% or more of the outstanding shares of
voting stock of the Borrower, or (b) during any period of twelve (12)
consecutive calendar months, commencing on the date of the Agreement, the
ceasing of those individuals (the "CONTINUING DIRECTORS") who (i) were
directors of the Borrower on the first day of each such period or (ii)
subsequently became directors of the Borrower and whose initial election or
initial nomination for election subsequent to that date was approved by a
majority of the Continuing Directors then on the board of directors of the
Borrower to constitute a majority of the board of directors of the Borrower,
or (c) during any period of twelve (12) consecutive calendar months,
commencing on the date of this Agreement, the ceasing of individuals who hold
an office possessing the title Senior Vice President or such title that ranks
senior to a Senior Vice President of the Borrower and the individual who
holds the title of President of White Mountains (collectively, "Senior
Management") on the first day of each such period to constitute a majority of
the Senior Management of the Borrower. Senior Management on the date of this
Agreement are listed on SCHEDULE 1.1, hereto, such SCHEDULE 1.1 to be updated
by the Borrower and delivered to the Agent within three (3) Business Days of
any change in Senior Management.

     "Co-Agent" means Deutsche Bank AG, in its capacity as Co-Agent for the
Lenders pursuant to ARTICLE X, and not in its individual capacity as a Lender.

     "Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.

     "Commitment" means, for each Lender, the obligation of such Lender to
make Loans not exceeding the amount set forth opposite its signature below
and as set forth in any Notice of Assignment relating to any assignment which
has become effective pursuant to SECTION 12.3.2, as such amount may be
modified from time to time pursuant to the terms hereof.

     "Consolidated" or "consolidated", when used in connection with any
calculation, means a calculation to be determined on a consolidated basis for
a Person and its Subsidiaries in accordance with Agreement Accounting
Principles.

     "Consolidated Person" means, for the taxable year of reference, each
Person which is a member of the affiliated group of the Borrower if
Consolidated returns are or shall be filed for such affiliated group for
federal income tax purposes or any combined or unitary group of which the
Borrower is a member for state income tax purposes.

     "Contingent Obligation" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes
or is contingently liable upon, the obligation or liability of any other
Person, or agrees to maintain the net worth or working capital or other
financial condition of any other Person, or otherwise assures any creditor of
such other Person against loss, including, without limitation, any comfort
letter, operating agreement or take-or-pay

                                     -12-
<PAGE>

contract or application for a Letter of Credit, excluding however (a)
insurance policies and insurance contracts issued in the ordinary course of
business and (b) any financial guarantees issued by FSA.

     "Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower or any of its Subsidiaries,
are treated as a single employer under Section 414 of the Code.

     "Conversion/Continuation Notice" is defined in SECTION 2.8.

     "Corporate Base Rate" means a rate per annum equal to the corporate base
rate of interest publicly announced by First Chicago from time to time,
changing when and as said corporate base rate changes. The Corporate Base
Rate is a reference rate and does not necessarily represent the lowest or
best rate of interest actually charged to any customer. First Chicago may
make commercial loans or other loans at rates of interest at, above or below
the Corporate Base Rate.

     "Default" means an event described in ARTICLE VII.

     "Documentation Agent" means each of Fleet National Bank and First Union
National Bank, each in its capacity as a Documentation Agent for the Lenders
pursuant to ARTICLE X, and not in its capacity as Lender.

     "Eligible FSA Securities" means equity securities of FSA traded on an
Acceptable Exchange or any security convertible into such equity security
owned by SOMSC, so long as (a) neither SOMSC nor any of its subsidiaries is
in default under any of its obligations (contingent or otherwise) as a
consequence of which the ability of SOMSC to sell any equity securities of
FSA or to distribute to SOMSC's shareholders the proceeds thereof is
restricted and (b) SOMSC is a Wholly-Owned Subsidiary of the Borrower.

     "Environmental Laws" is defined in SECTION 5.18.

     "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.

      "Eurodollar Advance" means an Advance which bears interest at the
Eurodollar Rate.

     "Eurodollar Base Rate" means, with respect to a Eurodollar Advance for
the relevant Interest Period, the rate determined by the Agent to be the rate
at which deposits in U.S. dollars are offered by First Chicago to first-class
banks in the London interbank market at approximately 11 a.m. (London time)
two (2) Business Days prior to the first day of such Interest Period, in the
approximate amount of First Chicago's relevant Eurodollar Advance and having
a maturity approximately equal to such Interest Period.

     "Eurodollar Rate" means, with respect to a Eurodollar Advance for the
relevant Interest Period, the sum of (a) the quotient of (i) the Eurodollar
Base Rate applicable to such Interest Period, divided by (ii) one minus the
Reserve Requirement (expressed as a decimal) applicable

                                     -13-
<PAGE>

to such Interest Period, plus (b) the Applicable Eurodollar Margin. The
Eurodollar Rate shall be rounded to the next higher multiple of 1/100 of 1%
if the rate is not such a multiple.

     "Existing Credit Agreement" is defined in the recitals to this Agreement.

     "Facility Fee" is defined in SECTION 2.4(a).

     "Federal Funds Effective Rate" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not
a Business Day, for the immediately preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day
which is a Business Day, the average of the quotations at approximately 10
a.m. (Chicago time) on such day on such transactions received by the Agent
from three Federal funds brokers of recognized standing selected by the Agent
in its sole discretion.

     "Finance Assets" means each of the following: (a) investments in
securities issued or fully guaranteed by the United States of America or any
agency or instrumentality thereof (PROVIDED that the full faith and credit of
the United States of America is pledged in support thereof), (b) investments
in equity securities traded on an Acceptable Exchange and securities
convertible into such equity securities, (c) investments in Investment Grade
Obligations, (d) investments in money market and mutual funds substantially
all the assets of which are comprised of securities of the types described in
CLAUSES (a) through (c) above and (e) Eligible FSA Securities; PROVIDED, that
Finance Assets shall not include any securities (i) pledged to secure any
obligation (contingent or otherwise) or (ii) restricted as to sale or
disposition by any agreement.

     "Finance Assets Ratio" means, at any time, the ratio of (a) Finance
Assets owned by the Borrower and its Subsidiaries (including the Eligible FSA
Securities, but excluding any other Finance Assets owned by any Insurance
Subsidiary, Folksamerica, Valley and SOMSC) at such time to (b) an amount
equal to the excess of (i) the aggregate outstanding principal amount of
Advances under the Facility at such time MINUS (ii) cash and Cash Equivalents
of the Borrower and its Subsidiaries (excluding any Insurance Subsidiary,
Folksamerica, Valley and SOMSC) at such time. For purposes of this
definition, Finance Assets shall be valued, without duplication, at fair
market value to the extent there exists a readily ascertainable fair market
value for such Finance Asset or, in the event there exists no such readily
ascertainable fair market value for such Finance Asset, at book value, as
calculated in accordance with Agreement Accounting Principles.

     "Financial Statements" is defined in SECTION 5.5.

     "First Chicago" means The First National Bank of Chicago in its
individual capacity, and its successors.

     "Fiscal Quarter" means one of the four three-month accounting periods
comprising a Fiscal Year.

                                     -14-
<PAGE>

     "Fiscal Year" means the twelve-month accounting period ending December
31 of each year.

     "Folksamerica" means Folksamerica Holding Company, Inc., a New York
corporation.

     "Folksamerica Credit Agreement" means the $100,000,000 credit agreement,
dated as of February 24, 1999, among Folksamerica, the lenders named therein
and First Chicago, as agent, as the same may be amended, supplemented or
otherwise modified from time to time (and, subsequent to the termination
thereof, as in effect on the date of such termination).

     "FSA" means Financial Security Assurance Holdings Ltd., a New York
corporation.

     "FSA Amount" means an amount equal to that which is ultimately utilized
by SOMSC on or before May 13, 1999 to exercise certain options, in existence
on the date hereof, on the capital stock of FSA, such amount not to exceed
$18,000,000.

     "Funded Indebtedness" means Indebtedness of the type described in
clauses (a), (d), (e) and (h) of the definition "Indebtedness".

     "Governmental Authority" means any government (foreign or domestic) or
any state or other political subdivision thereof or any governmental body,
agency, authority, department or commission (including without limitation any
board of insurance, insurance department or insurance commissioner and any
taxing authority or political subdivision) or any instrumentality or officer
thereof (including without limitation any court or tribunal) exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government and any corporation, partnership or other entity
directly or indirectly owned or controlled by or subject to the control of
any of the foregoing.

     "Hazardous Materials" is defined in SECTION 5.18.

     "Indebtedness" of a Person means such Person's (a) obligations for
borrowed money, (b) obligations representing the deferred purchase price of
Property or services (other than accounts payable arising in the ordinary
course of such Person's business payable on terms customary in the trade),
(c) obligations, whether or not assumed, secured by Liens or payable out of
the proceeds or production from Property now or hereafter owned or acquired
by such Person, (d) obligations which are evidenced by notes, acceptances, or
similar instruments, (e) Capitalized Lease Obligations, (f) Rate Hedging
Obligations, (g) Contingent Obligations, (h) obligations for which such
Person is obligated pursuant to or in respect of a Letter of Credit and (i)
repurchase obligations or liabilities of such Person with respect to accounts
or notes receivable sold by such Person.

     "Insurance Subsidiaries" means Subsidiaries which are engaged in the
insurance business as an issuer or underwriter of insurance policies and/or
insurance contracts.

     "Interest Period" means, with respect to a Eurodollar Advance, a period
of one, two, three or six months commencing on a Business Day selected by the
Borrower pursuant to this Agreement. Such Interest Period shall end on (but
exclude) the day which corresponds

                                     -15-

<PAGE>

numerically to such date one, two, three or six months thereafter; PROVIDED,
HOWEVER, that if there is no such numerically corresponding day in such next,
second, third or sixth succeeding month, such Interest Period shall end on
the last Business Day of such next, second, third or sixth succeeding month.
If an Interest Period would otherwise end on a day which is not a Business
Day, such Interest Period shall end on the next succeeding Business Day;
PROVIDED, HOWEVER, that if said next succeeding Business Day falls in a new
calendar month, such Interest Period shall end on the immediately preceding
Business Day.

     "Investment" of a Person means any loan, advance (other than commission,
travel and similar advances to officers and employees made in the ordinary
course of business), extension of credit (other than accounts receivable
arising in the ordinary course of business on terms customary in the trade)
or contribution of capital by such Person; stocks, bonds, mutual funds,
partnership interests, notes, debentures or other securities owned by such
Person; any deposit accounts and certificates of deposit owned by such
Person; and structured notes, derivative financial instruments (other than
agreements related to Rate Hedging Obligations entered into in the ordinary
course of business and not for speculative purposes) and other similar
instruments or contracts owned by such Person.

     "Investment Grade Obligations" means, as of any date, investments having
an NAIC investment rating of 1 or 2, or an S&P rating within the range of
ratings from AAA to BBB-, or a Moody's rating within the range of ratings
from Aaa to Baa3.

     "Lenders" means the lending institutions listed on the signature pages
of this Agreement and their respective successors and assigns.

     "Lending Installation" means, with respect to a Lender or the Agent, any
office, branch, subsidiary or affiliate of such Lender or the Agent.

     "Letter of Credit" of a Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon which
such Person is an account party or for which such Person is in any way liable.

     "Leverage Ratio" means, at any time, the ratio of (a) the consolidated
Funded Indebtedness of the Borrower and its Subsidiaries (excluding SOMSC) at
such time to (b) the sum of (i) the consolidated Funded Indebtedness of the
Borrower and its Subsidiaries (excluding SOMSC) at such time PLUS (ii) Net
Worth at such time. For purposes of computing the Leverage Ratio, (A)
Allowable Seller Paper (as defined in the Folksamerica Credit Agreement)
which has been Defeased (as defined in the Folksamerica Credit Agreement) and
Letters of Credit issued on behalf of Folksamerica in support of Allowable
Seller Paper, (B) Indebtedness of any Insurance Subsidiary of Folksamerica
permitted pursuant to Section 6.11(f) of the Folksamerica Credit Agreement
and (C) Indebtedness of Folksamerica permitted by Section 6.11(g) of the
Folksamerica Credit Agreement shall be excluded from Funded Indebtedness.

     "Lien" means any security interest, lien (statutory or other), mortgage,
pledge, hypothecation, assignment, deposit arrangement, encumbrance or
preference, priority or other security agreement or preferential arrangement
of any kind or nature whatsoever (including, without limitation, the interest
of a vendor or lessor under any conditional sale, Capitalized Lease

                                     -16-
<PAGE>

or other title retention agreement), save in respect of liabilities and
obligations arising out of the underwriting of insurance policies and
contracts of insurance.

     "Loan" means, with respect to a Lender, such Lender's portion of any
Advance and "Loans" means, with respect to the Lenders, the aggregate of all
Advances.

     "Loan Documents" means this Agreement, the Notes and the other documents
and agreements contemplated hereby and executed by the Borrower in favor of
the Agent or any Lender.

     "Margin Stock" has the meaning assigned to that term under Regulation U.

     "Material Adverse Effect" means a material adverse effect on (a) the
business, Property, condition (financial or other), performance, results of
operations, or prospects of the Borrower and its Subsidiaries taken as a
whole, (b) the ability of the Borrower or any Subsidiary to perform its
obligations under the Loan Documents, or (c) the validity or enforceability
of any of the Loan Documents or the rights or remedies of the Agent or the
Lenders thereunder.

     "Maturity Date" means August 23, 2000.

     "Moody's" means Moody's Investors Services, Inc., and any successor
thereto.

     "Multiemployer Plan" means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which the Borrower or any
member of the Controlled Group is a party to which more than one employer is
obligated to make contributions.

     "NAIC" means the National Association of Insurance Commissioners or any
successor thereto, or in lieu thereof, any other association, agency or other
organization performing advisory, coordination or other like functions among
insurance departments, insurance commissioners and similar Governmental
Authorities of the various states of the United States toward the promotion
of uniformity in the practices of such Governmental Authorities.

     "Net Worth" means, with respect to any Person, at any date the
consolidated shareholders' equity of such Person and its Consolidated
Subsidiaries determined in accordance with Agreement Accounting Principles
(but excluding the effect of Statement of Financial Accounting Standards No.
115).

     "Non-Excluded Taxes" is defined in SECTION 2.17(a).

     "Note" means a promissory note in substantially the form of EXHIBIT A
hereto, with appropriate insertions, duly executed and delivered to the Agent
by the Borrower and payable to the order of a Lender in the amount of its
Commitment, including any amendment, modification, renewal or replacement of
such promissory note.

     "Notice of Assignment" is defined in SECTION 12.3.2.

                                     -17-
<PAGE>

     "Obligations" means all unpaid principal of and accrued and unpaid
interest on the Notes, all accrued and unpaid fees and all expenses,
reimbursements, indemnities and other obligations of the Borrower to the
Lenders or to any Lender, the Agent or any indemnified party hereunder
arising under any of the Loan Documents.

     "Participants" is defined in SECTION 12.2.1.

     "Payment Date" means the last day of each March, June, September and
December.

     "PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.

     "Person" means any natural person, corporation, firm, joint venture,
partnership, limited liability company, association, enterprise, trust or
other entity or organization, or any government or political subdivision or
any agency, department or instrumentality thereof.

     "Plan" means an employee pension benefit plan, as defined in Section
3(2) of ERISA, as to which the Borrower or any member of the Controlled Group
may have any liability.

     "Pricing Schedule" means the Schedule attached hereto identified as such.

     "Proceeding" is defined in SECTION 5.18.

     "Property" of a Person means any and all property, whether real,
personal, tangible, intangible, or mixed, of such Person, or other assets
owned, leased or operated by such Person.

     "pro-rata" means, when used with respect to a Lender, and any described
aggregate or total amount, an amount equal to such Lender's pro-rata share or
portion based on its percentage of the Aggregate Commitment or if the
Aggregate Commitment has been terminated, its percentage of the aggregate
principal amount of outstanding Advances.

     "Purchase" means any transaction, or any series of related transactions,
consummated on or after the date of this Agreement, by which the Borrower or
any of its Subsidiaries (a) acquires any going business or all or
substantially all of the assets of any firm, corporation or division or line
of business thereof, whether through purchase of assets, merger or otherwise,
or (b) directly or indirectly acquires (in one transaction or as the most
recent transaction in a series of transactions) at least a majority (in
number of votes) of the securities of a corporation which have ordinary
voting power for the election of directors (other than securities having such
power only by reason of the happening of a contingency) or a majority (by
percentage or voting power) of the outstanding partnership interests of a
partnership or membership interests of a limited liability company.

     "Purchasers" is defined in SECTION 12.3.1.

     "Rate Hedging Obligations" of a Person means any and all obligations of
such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions
and modifications thereof and substitutions therefor), under (a) any and all
agreements, devices or arrangements designed to protect at least

                                     -18-
<PAGE>

one of the parties thereto from the fluctuations of interest rates, exchange
rates or forward rates applicable to such party's assets, liabilities or
exchange transactions, including, but not limited to, dollar-denominated or
cross-currency interest rate exchange agreements, forward currency exchange
agreements, interest rate cap or collar protection agreements, forward rate
currency or interest rate options, puts and warrants, and (b) any and all
cancellations, buy backs, reversals, terminations or assignments of any of
the foregoing.

     "Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor
thereto or other regulation or official interpretation of said Board of
Governors relating to reserve requirements applicable to depositary
institutions.

     "Regulation T" means Regulation T of the Board of Governors of the
Federal Reserve System as from time to time in effect and shall include any
successor or other regulation or official interpretation of such Board of
Governors relating to the extension of credit by securities brokers and
dealers for the purpose of purchasing or carrying margin stocks applicable to
such Persons.

     "Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or
other regulation or official interpretation of said Board of Governors
relating to the extension of credit by banks for the purpose of purchasing or
carrying margin stocks applicable to such Persons.

     "Regulation X" means Regulation X of the Board of Governors of the
Federal Reserve System as from time to time in effect and shall include any
successor or other regulation or official interpretation of said Board of
Governors relating to the extension of credit by the specified lenders for
the purpose of purchasing or carrying margin stocks applicable to such
Persons.

     "Release" is defined in the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, 42 U.S.C. 39601 ET SEQ.

     "Reportable Event" means a reportable event as defined in Section 4043
of ERISA and the regulations issued under such section, with respect to a
Plan, excluding, however, such events as to which the PBGC has by regulation
waived the requirement of Section 4043(a) of ERISA that it be notified within
thirty (30) days of the occurrence of such event; PROVIDED, that a failure to
meet the minimum funding standard of Section 412 of the Code and of Section
302 of ERISA shall be a Reportable Event regardless of the issuance of any
such waiver of the notice requirement in accordance with either Section
4043(a) of ERISA or Section 412(d) of the Code.

     "Required Lenders" means Lenders in the aggregate having at least
66-2/3% of the Aggregate Commitment or, if the Aggregate Commitment has been
terminated, Lenders in the aggregate holding at least 66-2/3% of the
aggregate unpaid principal amount of the outstanding Loans.

                                     -19-
<PAGE>

     "Reserve Requirement" means, with respect to an Interest Period, the
maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on
Eurocurrency liabilities.

     "Revolver Termination Date" means February 23, 2000.

     "Risk-Based Capital Guidelines" is defined in SECTION 3.2.

     "S&P" means Standard & Poor's Ratings Group, and any successor thereto.

     "Section" means a numbered section of this Agreement, unless another
document is specifically referenced.

     "Significant Subsidiary" shall mean and include, at any time, each
Subsidiary of the Borrower to the extent that the Net Worth of such
Subsidiary is equal to or greater than $5,000,000.

     "Single Employer Plan" means a Plan subject to Title IV of ERISA
maintained by the Borrower or any member of the Controlled Group for
employees of the Borrower or any member of the Controlled Group, other than a
Multiemployer Plan.

     "Solvent" means, when used with respect to a Person, that (a) the fair
saleable value of the assets of such Person is in excess of the total amount
of the present value of its liabilities (including for purposes of this
definition all liabilities (including loss reserves as determined by such
Person), whether or not reflected on a balance sheet prepared in accordance
with Agreement Accounting Principles and whether direct or indirect, fixed or
contingent, secured or unsecured, disputed or undisputed), (b) such Person is
able to pay its debts or obligations in the ordinary course as they mature
and (c) such Person does not have unreasonably small capital to carry out its
business as conducted and as proposed to be conducted. "Solvency" shall have
a correlative meaning.

     "SOMSC" means Source One Mortgage Services Corporation, a Delaware
corporation.

     "SOMSC Credit Agreements" means the credit agreement or credit
agreements from time to time in effect among SOMSC, the financial
institutions from time to time party thereto and First Chicago, as agent, as
the same may be amended, supplemented, restated, replaced or otherwise
modified from time to time (and, subsequent to the termination thereof, as in
effect on the date of such termination).

     "Subsidiary" of a Person means (a) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the
time be owned or controlled, directly or indirectly, by such Person or by one
or more of its Subsidiaries or by such Person and one or more of its
Subsidiaries, or (b) any partnership, association, joint venture, limited
liability company or similar business organization more than 50% of the
ownership interests having ordinary voting power of which shall at the time
be so owned or controlled. Unless otherwise expressly provided, all
references herein to a "Subsidiary" shall mean a Subsidiary of the Borrower.

                                     -20-
<PAGE>

     "Termination Event" means, with respect to a Plan which is subject to
Title IV of ERISA, (a) a Reportable Event, (b) the withdrawal of the Borrower
or any other member of the Controlled Group from such Plan during a plan year
in which the Borrower or any other member of the Controlled Group was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA or was
deemed such under Section 4068(f) of ERISA, (c) the termination of such Plan,
the filing of a notice of intent to terminate such Plan or the treatment of
an amendment of such Plan as a termination under Section 4041 of ERISA, (d)
the institution by the PBGC of proceedings to terminate such Plan or (e) any
event or condition which might constitute grounds under Section 4042 of ERISA
for the termination of, or appointment of a trustee to administer, such Plan.

     "Transferee" is defined in SECTION 12.4.

     "Type" means, with respect to any Advance, its nature as an ABR Advance
or Eurodollar Advance.

     "Unfunded Liability" means the amount (if any) by which the present
value of all vested and unvested accrued benefits under a Single Employer
Plan exceeds the fair market value of assets allocable to such benefits, all
determined as of the then most recent valuation date for such Plans using
PBGC actuarial assumptions for single employer plan terminations.

     "Unmatured Default" means an event which but for the lapse of time or
the giving of notice, or both, would constitute a Default.

     "Unrestricted Subsidiary" means SOMSC and any Subsidiary thereof.

     "Valley" means Valley Group, Inc., an Oregon corporation.

     "Valley Credit Agreement" means the $15,000,000 third amended and
restated credit agreement, dated as of February 24, 1999, among Valley, the
lenders named therein and First Chicago, as agent, as the same may be
amended, supplemented or otherwise modified from time to time (and,
subsequent to the termination thereof, as in effect on the date of such
termination).

     "White Mountains" means White Mountains Holdings, Inc., a Delaware
corporation formerly known as Fund American Enterprises, Inc. and the
survivor of a merger with White Mountains Holdings, Inc., a New Hampshire
corporation.

     "White Mountains Credit Agreement" means the $50,000,000 second amended
and restated credit agreement, dated as of August 14, 1998, among White
Mountains, the financial institutions from time to time party thereto and
First Chicago, as agent, as amended through but not including the date hereof.

     "Wholly-Owned Subsidiary" of a Person means (a) any Subsidiary all of
the outstanding voting securities of which (other than directors' qualifying
or similar shares) shall at the time be owned or controlled, directly or
indirectly, by such Person or one or more Wholly-Owned Subsidiaries of such
Person, or by such Person and one or more Wholly-Owned Subsidiaries of such
Person, or (b) any partnership, association, joint venture, limited liability
company or similar business organization 100% of the ownership interests
having ordinary voting power of

                                     -21-
<PAGE>

which (other than directors' qualifying or similar shares) shall at the time
be so owned or controlled.

     "Year 2000 Issues" means anticipated costs, problems and uncertainties
associated with the inability of certain computer applications and hardware
to effectively function on and after January 1, 2000, as such inability
affects the business, operations and financial condition of the Borrower and
its Subsidiaries and of the Borrower's and its Subsidiaries' material
customers, suppliers and vendors.

     "Year 2000 Program" is defined in SECTION 5.21.

     The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms.

                                   ARTICLE II

                                   THE CREDITS

     2.1. ADVANCES. (a) From and including the date hereof to but excluding
the Revolver Termination Date, each Lender severally (and not jointly)
agrees, on the terms and conditions set forth in this Agreement, to make
Advances to the Borrower from time to time in amounts not to exceed in the
aggregate at any one time outstanding the amount of its pro-rata share of the
Aggregate Commitment existing at such time. Subject to the terms of this
Agreement, the Borrower may borrow, repay and reborrow Advances at any time
prior to the Revolver Termination Date. The Commitments to lend hereunder
shall expire on the Revolver Termination Date. Principal payments made after
the Revolver Termination Date may not be reborrowed.

         (b) The Borrower hereby agrees that if at any time, prior to the
Revolver Termination Date, as a result of reductions in the Aggregate
Commitment pursuant to SECTION 2.4 or otherwise, the aggregate balance of the
Loans exceeds the Aggregate Commitment, it shall repay, or cause to be
repaid, immediately outstanding Loans in such amount as may be necessary to
eliminate such excess.

         (c) The Borrower's obligation to pay the principal of, and interest
on, the Loans shall be evidenced by the Notes. Although the Notes shall be
dated the date of this Agreement, interest in respect thereof shall be
payable only for the periods during which the Loans evidenced thereby are
outstanding and, although the stated amount of each Note shall be equal to
the applicable Lender's Commitment, each Note shall be enforceable, with
respect to the Borrower's obligation to pay the principal amount thereof,
only to the extent of the unpaid principal amount of the Loans at the time
evidenced thereby.

         (d) All Advances and all Loans shall mature, and the principal
amount thereof and the unpaid accrued interest thereon shall be due and
payable in full, on the Maturity Date.

                                     -22-
<PAGE>

     2.2. RATABLE LOANS. Each Advance hereunder shall consist of Loans made
from the several Lenders ratably in proportion to the ratio that their
respective Commitments bear to the Aggregate Commitment.

     2.3. TYPES OF ADVANCES. The Advances may be ABR Advances or Eurodollar
Advances, or a combination thereof, selected by the Borrower in accordance
with SECTIONS 2.7 and 2.8.

     2.4. FACILITY FEE; REDUCTIONS IN AGGREGATE COMMITMENT. (a) The Borrower
agrees to pay to the Agent for the account of each Lender a facility fee
("Facility Fee") in an amount equal to the Applicable Facility Fee Margin per
annum times the daily average Commitment (or, on and after the Revolver
Termination Date, times the aggregate outstanding principal amount of the
Loans) of such Lender from the date hereof to and including the Maturity
Date, payable on each Payment Date hereafter and on the Maturity Date. All
accrued Facility Fees shall be payable on the effective date of any
termination of the obligations of the Lenders to make Loans hereunder.

         (b) The Borrower may permanently reduce the Aggregate Commitment in
whole, or in part ratably among the Lenders in a minimum aggregate amount of
$2,000,000, upon at least three (3) Business Days' written notice to the
Agent, which notice shall specify the amount of any such reduction; PROVIDED,
HOWEVER, that the amount of the Aggregate Commitment may not be reduced below
the aggregate principal amount of the outstanding Advances.

     2.5. MINIMUM AMOUNT OF EACH ADVANCE. Each Advance shall be in the
minimum amount of $2,000,000 (and in integral multiples of $500,000 if in
excess thereof), PROVIDED, HOWEVER, that (a) any ABR Advance may be in the
amount of the unused Aggregate Commitment and (b) in no event shall more than
six (6) Eurodollar Advances be permitted to be outstanding at any time.

     2.6. OPTIONAL PRINCIPAL PAYMENTS. The Borrower may from time to time
pay, without penalty or premium, all outstanding ABR Advances, or, in a
minimum aggregate amount of $2,000,000, any portion of the outstanding ABR
Advances, upon two (2) Business Days' prior written notice to the Agent.
Subject to SECTION 3.4 and upon three (3) Business Days' prior written
notice, a Eurodollar Advance may be paid prior to the last day of the
applicable Interest Period in a minimum amount of $2,000,000 or an integral
multiple of $500,000 in excess thereof.

     2.7. METHOD OF SELECTING TYPES AND INTEREST PERIODS FOR NEW ADVANCES.
The Borrower shall select the Type of Advance and, in the case of each
Eurodollar Advance, the Interest Period applicable to each Advance from time
to time; PROVIDED, HOWEVER, that in the event Loans are incurred on the date
of this Agreement, all Loans incurred on such date shall be ABR Advances. The
Borrower shall give the Agent irrevocable notice (a "BORROWING NOTICE") not
later than 10:00 a.m. (Chicago time) on the Borrowing Date of each ABR
Advance and at least three (3) Business Days before the Borrowing Date for
each Eurodollar Advance, specifying:

                                     -23-
<PAGE>

         (a) the Borrowing Date of such Advance, which shall be a Business
         Day;

         (b) the aggregate amount of such Advance;

         (c) the Type of Advance selected;

         (d) in the case of each Eurodollar Advance, the Interest Period
         applicable thereto, which shall end on or prior to the Maturity
         Date; and

         (e) any changes to money transfer instructions previously delivered
         to the Agent.

Not later than noon (Chicago time) on each Borrowing Date, each Lender shall
make available its Loan or Loans, in funds immediately available in Chicago,
to the Agent at its address specified pursuant to ARTICLE XIII. The Agent
will make the funds so received from the Lenders available to the Borrower at
the Agent's aforesaid address or at such account at such other institution in
the United States of America as the Borrower may indicate in the Borrowing
Notice.

     2.8. CONVERSION AND CONTINUATION OF OUTSTANDING ADVANCES. ABR Advances
shall continue as ABR Advances unless and until such ABR Advances are
converted into Eurodollar Advances. Each Eurodollar Advance shall continue as
a Eurodollar Advance until the end of the then applicable Interest Period
therefor, at which time such Eurodollar Advance shall be automatically
converted into an ABR Advance unless the Borrower shall have given the Agent
a Conversion/Continuation Notice requesting that, at the end of such Interest
Period, such Eurodollar Advance continue as a Eurodollar Advance for the same
or another Interest Period. Subject to the terms of SECTION 2.5, the Borrower
may elect from time to time to convert all or any part of an Advance of any
Type into any other Type or Types of Advances; PROVIDED, HOWEVER, that any
conversion of any Eurodollar Advance shall be made on, and only on, the last
day of the Interest Period applicable thereto. The Borrower shall give the
Agent irrevocable notice (a "CONVERSION/CONTINUATION NOTICE") of each
conversion of an ABR Advance or continuation of a Eurodollar Advance not
later than 10:00 a.m. (Chicago time) on the conversion date, in the case of a
conversion into an ABR Advance, or at least three (3) Business Days, in the
case of a conversion into or continuation of a Eurodollar Advance, prior to
the date of the requested conversion or continuation, specifying:

         (a) the requested date of such conversion or continuation, which
         shall be a Business Day;

         (b) the aggregate amount and Type of the Advance which is to be
         converted or continued; and

         (c) the amount and Type(s) of Advance(s) into which such Advance is
         to be converted or continued and, in the case of a conversion into
         or continuation of a Eurodollar Advance, the duration of the
         Interest Period applicable thereto, which shall end on or prior
         to the Maturity Date.

                                     -24-
<PAGE>

     2.9. CHANGES IN INTEREST RATE, ETC. Each ABR Advance shall bear interest
at the Alternate Base Rate from and including the date of such Advance or the
date on which such Advance was converted into an ABR Advance to (but not
including) the date on which such ABR Advance is paid or converted to a
Eurodollar Advance. Changes in the rate of interest on that portion of any
Advance maintained as an ABR Advance will take effect simultaneously with
each change in the Alternate Base Rate. Each Eurodollar Advance shall bear
interest from and including the first day of the Interest Period applicable
thereto to, but not including, the last day of such Interest Period at the
Eurodollar Rate determined by the Agent as applicable to such Eurodollar
Advance based upon the Borrower's selections under SECTIONS 2.7 AND 2.8 and
otherwise in accordance with the terms hereof. Changes in the Applicable
Eurodollar Margin will take effect simultaneously with each change in a
Level. No Interest Period may end after the Maturity Date.

     2.10. RATES APPLICABLE AFTER DEFAULT. Notwithstanding anything to the
contrary contained in SECTIONS 2.7 or 2.8, no Advance may be made as,
converted into or continued as a Eurodollar Advance (except with the consent
of the Agent and the Required Lenders) when any Default or Unmatured Default
has occurred and is continuing. During the continuance of a Default the
Required Lenders may, at their option, by notice to the Borrower (which
notice may be revoked at the option of the Required Lenders notwithstanding
any provision of SECTION 8.2 requiring unanimous consent of the Lenders to
changes in interest rates), declare that each Eurodollar Advance and ABR
Advance shall bear interest (for the remainder of the applicable Interest
Period in the case of Eurodollar Advances) at a rate per annum equal to the
rate otherwise applicable plus two percent (2%) per annum; PROVIDED, HOWEVER,
that such increased rate shall automatically and without action of any kind
by the Lenders become and remain applicable until revoked by the Required
Lenders in the event of a Default described in SECTIONS 7.6 or 7.7.

     2.11. METHOD OF PAYMENT. All payments of the Obligations hereunder shall
be made, without setoff, deduction or counterclaim, in immediately available
funds to the Agent at the Agent's address specified pursuant to ARTICLE XIII,
or at any other Lending Installation of the Agent specified in writing by the
Agent to the Borrower (at least two (2) Business Days in advance), by noon
(Chicago time) on the date when due and shall be applied ratably by the Agent
among the Lenders. Each payment delivered to the Agent for the account of any
Lender shall be delivered promptly by the Agent to such Lender in the same
type of funds that the Agent received at its address specified pursuant to
ARTICLE XIII or at any Lending Installation specified in a notice received by
the Agent from such Lender. The Agent is hereby authorized to charge the
account of the Borrower maintained with the Agent for each payment of
principal, interest and fees as it becomes due hereunder.

     2.12. NOTES. Each Lender is hereby authorized to record the principal
amount of each of its Loans and each repayment on the schedule attached to
its Note; PROVIDED, HOWEVER, that neither the failure to so record nor any
error in such recordation shall affect the Borrower's obligations under such
Note.

     2.13. INTEREST PAYMENT DATES; INTEREST AND FEE BASIS. Interest accrued
on each ABR Advance shall be payable on each Payment Date, commencing with
the first such date to occur

                                     -25-

<PAGE>

after the date hereof, on any date on which an ABR Advance is prepaid,
whether due to acceleration or otherwise, and at maturity. Interest accrued
on that portion of the outstanding principal amount of any ABR Advance
converted into a Eurodollar Advance on a day other than a Payment Date shall
be payable on the date of conversion. Interest accrued on each Eurodollar
Advance shall be payable on the last day of its applicable Interest Period,
on any date on which the Eurodollar Advance is prepaid, whether by
acceleration or otherwise, and at maturity. Interest accrued on each
Eurodollar Advance having an Interest Period longer than three (3) months
shall also be payable on the last day of each three-month interval during
such Interest Period. Interest and commitment fees shall be calculated for
actual days elapsed on the basis of a 360-day year. Interest shall be payable
for the day an Advance is made but not for the day of any payment on the
amount paid if payment is received prior to noon (Chicago time) at the place
of payment. If any payment of principal of or interest on an Advance shall
become due on a day which is not a Business Day, such payment shall be made
on the next succeeding Business Day and, in the case of a principal payment,
such extension of time shall be included in computing interest in connection
with such payment.

     2.14. NOTIFICATION OF ADVANCES, INTEREST RATES, PREPAYMENTS AND
COMMITMENT REDUCTIONS. Promptly after receipt thereof, the Agent will notify
each Lender of the contents of each Aggregate Commitment reduction notice,
Borrowing Notice, Conversion/Continuation Notice, and repayment notice
received by it hereunder. The Agent will notify each Lender of the interest
rate applicable to each Eurodollar Advance promptly upon determination of
such interest rate and will give each Lender prompt notice of each change in
the Alternate Base Rate.

     2.15. LENDING INSTALLATIONS. Each Lender may book its Loans at any
Lending Installation selected by such Lender and may change its Lending
Installation from time to time. All terms of this Agreement shall apply to
any such Lending Installation and the Notes shall be deemed held by each
Lender for the benefit of such Lending Installation. Each Lender may, by
written or telex notice to the Agent and the Borrower, designate a Lending
Installation through which Loans will be made by it and for whose account
Loan payments are to be made.

     2.16. NON-RECEIPT OF FUNDS BY THE AGENT. Unless the Borrower or a
Lender, as the case may be, notifies the Agent prior to the date on which it
is scheduled to make payment to the Agent of (a) in the case of a Lender, the
proceeds of a Loan, or (b) in the case of the Borrower, a payment of
principal, interest or fees to the Agent for the account of the Lenders, that
it does not intend to make such payment, the Agent may assume that such
payment has been made. The Agent may, but shall not be obligated to, make the
amount of such payment available to the intended recipient in reliance upon
such assumption. If the Borrower has not in fact made such payment to the
Agent, the Lenders shall, on demand by the Agent, repay to the Agent the
amount so made available together with interest thereon in respect of each
day during the period commencing on the date such amount was so made
available by the Agent until the date the Agent recovers such amount at a
rate per annum equal to the Federal Funds Effective Rate for such day. If any
Lender has not in fact made such payment to the Agent, such Lender or the
Borrower shall, on demand by the Agent, repay to the Agent the amount so made
available together with interest thereon in respect of each day during the
period commencing on the date such amount was so made available by the Agent
until the date the Agent recovers such amount at a rate per annum equal to
(a) in the case of payment by a Lender, the Federal Funds Effective

                                     -26-
<PAGE>

Rate for such day, or (b) in the case of payment by the Borrower, the
interest rate applicable to the relevant Loan.

     2.17. TAXES. (a) Any payments made by the Borrower under this Agreement
shall be made free and clear of, and without deduction or withholding for or
on account of, any present or future income, stamp or other taxes, levies,
imposts, duties, charges, fees, deductions or withholdings, now or hereafter
imposed, levied, collected, withheld or assessed by any Governmental
Authority, excluding net income taxes and franchise taxes or any other tax
based upon any income imposed on the Agent or any Lender by the jurisdiction
in which the Agent or such Lender is incorporated or has its principal place
of business or maintains its Lending Installation. If any such non-excluded
taxes, levies, imposts, duties, charges, fees, deductions or withholdings
("Non-Excluded Taxes") are required to be withheld from any amounts payable
to the Agent or any Lender hereunder, the amounts so payable to the Agent or
such Lender shall be increased to the extent necessary to yield to the Agent
or such Lender (after payment of all Non-Excluded Taxes) interest or any such
other amounts payable hereunder at the rates or in the amounts specified in
or pursuant to this Agreement; PROVIDED, HOWEVER, that the Borrower shall not
be required to increase any such amounts payable to any Lender that is not
organized under the laws of the U.S. or a state thereof if such Lender fails
to comply with the requirements of paragraph (b) of this SECTION 2.17.
Whenever any Non-Excluded Taxes are payable by the Borrower, as promptly as
practicable thereafter the Borrower shall send to the Agent for its own
account or for the account of such Lender, as the case may be, a certified
copy of an original official receipt received by the Borrower showing payment
thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the
appropriate taxing authority or fails to remit to the Agent the required
receipts or other required documentary evidence, the Borrower shall indemnify
the Agent and the Lenders for any incremental taxes, interest or penalties
that may become payable by any Agent or any Lender as a result of any such
failure. The agreements in this SECTION 2.17 shall survive the termination of
this Agreement and the payment of all other amounts payable hereunder.

         (b) At least five (5) Business Days prior to the first date on which
interest or fees are payable hereunder for the account of any Lender, each
Lender that is not incorporated under the laws of the United States of
America, or a state thereof, agrees that it will deliver to each of the
Borrower and the Agent two (2) duly completed and properly executed copies of
United States Internal Revenue Service Form 1001 or 4224 (or any applicable
successor form), certifying in either case that such Lender is entitled to
receive payments under this Agreement and the Notes without deduction or
withholding of any United States federal income taxes. Each Lender which so
delivers a Form 1001 or 4224 (or any applicable successor form) further
undertakes to deliver to each of the Borrower and the Agent two (2)
additional duly completed and properly executed copies of such form (or any
applicable successor form) on or before the date that such form expires
(currently, three (3) successive calendar years for Form 1001 and each tax
year for Form 4224) or becomes obsolete or after the occurrence of any event
requiring a change in the most recent forms so delivered by it, and such
amendments thereto or extensions or renewals thereof as may be reasonably
requested by the Borrower or the Agent, in each case certifying that such
Lender is entitled to receive payments under this Agreement and the Notes
without deduction or withholding of any United States federal income taxes,
unless an event (including, without limitation, any change in treaty, law or
regulation) has occurred prior to the

                                     -27-
<PAGE>

date on which any such delivery would otherwise be required which renders all
such forms inapplicable or which would prevent such Lender from duly
completing and delivering any such form with respect to it and such Lender
advises the Borrower and the Agent that it is not capable of receiving
payments without any deduction or withholding of United States federal income
tax.

     2.18. AGENT'S FEES. The Borrower shall pay to the Agent those fees, in
addition to the Facility Fees referenced in SECTION 2.4(a), in the amounts
and at the times separately agreed to between the Agent and the Borrower.

                                   ARTICLE III

                             CHANGE IN CIRCUMSTANCES

     3.1. YIELD PROTECTION. If, after the date hereof, the adoption of or any
change in any law or any governmental or quasi-governmental rule, regulation,
policy, guideline or directive (whether or not having the force of law), or
any new interpretation thereof, or the compliance of any Lender with such
adoption, change or interpretation,

          (a) subjects any Lender or any applicable Lending Installation to
          any tax, duty, charge or withholding on or from payments due from
          the Borrower (excluding taxation of the overall net income of any
          Lender or applicable Lending Installation imposed by the
          jurisdiction in which such Lender or Lending Installation is
          incorporated or has its principal place of business), or changes
          the basis of taxation of principal, interest or any other payments
          to any Lender or Lending Installation in respect of its Loans or
          other amounts due it hereunder, or

          (b) imposes or increases or deems applicable any reserve,
          assessment, insurance charge, special deposit or similar
          requirement against assets of, deposits with or for the account of,
          or credit extended by, any Lender or any applicable Lending
          Installation (other than reserves and assessments taken into
          account in determining the interest rate applicable to Eurodollar
          Advances), or

          (c) imposes any other condition the result of which is to increase
          the cost to any Lender or any applicable Lending Installation of
          making, funding or maintaining Loans or reduces any amount
          receivable by any Lender or any applicable Lending Installation in
          connection with any Loans, or requires any Lender or any applicable
          Lending Installation to make any payment calculated by reference to
          the amount of Loans held, or interest received by it, by an amount
          deemed material by such Lender,

                                     -28-
<PAGE>

then, within fifteen (15) days of demand by such Lender, the Borrower shall
pay such Lender that portion of such increased expense incurred or resulting
in an amount received which such Lender determines is attributable to making,
funding and maintaining its Loans and its Commitment.

     3.2. CHANGES IN CAPITAL ADEQUACY REGULATIONS. If a Lender determines the
amount of capital required or expected to be maintained by such Lender, any
Lending Installation of such Lender or any corporation controlling such
Lender is increased as a result of a Change, then, within fifteen (15) days
of demand by such Lender, the Borrower shall pay such Lender the amount
necessary to compensate for any shortfall in the rate of return on the
portion of such increased capital which such Lender determines is
attributable to this Agreement, its Loans or its obligation to make Loans
hereunder (after taking into account such Lender's policies as to capital
adequacy). "CHANGE" means (a) any change after the date of this Agreement in
the Risk-Based Capital Guidelines, or (b) any adoption of or change in any
other law, governmental or quasi-governmental rule, regulation, policy,
guideline, interpretation, or directive (whether or not having the force of
law) after the date of this Agreement which affects the amount of capital
required or expected to be maintained by any Lender or any Lending
Installation or any corporation controlling any Lender. "RISK-BASED CAPITAL
GUIDELINES" means (a) the risk-based capital guidelines in effect in the
United States on the date of this Agreement and (b) the corresponding capital
regulations promulgated by regulatory authorities outside the United States
implementing the July 1988 report of the Basle Committee on Banking
Regulation and Supervisory Practices entitled "International Convergence of
Capital Measurements and Capital Standards" and any amendments to such
regulations adopted prior to the date of this Agreement.

     3.3. AVAILABILITY OF TYPES OF ADVANCES. If (a) any Lender determines
that maintenance of its Eurodollar Loans at a suitable Lending Installation
would violate any applicable law, rule, regulation, or directive, whether or
not having the force of law and gives notice of such fact to the Agent or (b)
the Required Lenders determine that (i) deposits of a type and maturity
appropriate to match fund Eurodollar Advances are not available or (ii) the
interest rate applicable to a Eurodollar Advance does not accurately or
fairly reflect the cost of making or maintaining such Advance, then the Agent
shall suspend the availability of Eurodollar Advances until such circumstance
no longer exists and require any Eurodollar Advances to be repaid or
converted to ABR Advances, subject to the payment of any funding
indemnification amounts required by SECTION 3.4.

     3.4. FUNDING INDEMNIFICATION. If any payment of a Eurodollar Advance
occurs on a date which is not the last day of the applicable Interest Period,
whether because of acceleration, prepayment or otherwise, or a Eurodollar
Advance is not made on the date specified by the Borrower for any reason
other than default by the Lenders, the Borrower will indemnify the Agent and
each Lender for any loss or cost incurred by it resulting therefrom,
including, without limitation, any loss or cost in liquidating or employing
deposits acquired to fund or maintain the Eurodollar Advance.

     3.5. LENDER STATEMENTS; SURVIVAL OF INDEMNITY. To the extent reasonably
possible, each Lender shall designate an alternate Lending Installation with
respect to its Eurodollar Advances to reduce any liability of the Borrower to
such Lender under SECTIONS 2.17, 3.1 and 3.2

                                     -29-
<PAGE>

or to avoid the unavailability of a Type of Advance under SECTION 3.3, so
long as such designation is not disadvantageous to such Lender. Each Lender
shall deliver a written statement of such Lender to the Borrower (with a copy
to the Agent) as to the amount due, if any, under SECTIONS 2.17, 3.1, 3.2 or
3.4. Such written statement shall set forth in reasonable detail the
calculations upon which such Lender determined such amount and shall be
final, conclusive and binding on the Borrower in the absence of manifest
error. Determination of amounts payable under such Sections in connection
with a Eurodollar Advance shall be calculated as though each Lender funded
its Eurodollar Advances through the purchase of a deposit of the type and
maturity corresponding to the deposit used as a reference in determining the
Eurodollar Rate applicable to such Loan, whether in fact that is the case or
not. Unless otherwise provided herein, the amount specified in the written
statement of any Lender shall be payable on demand after receipt by the
Borrower of the written statement. The obligations of the Borrower under
SECTIONS 2.17, 3.1, 3.2 and 3.4 shall survive payment of the Obligations and
termination of this Agreement.

     3.6. SUBSTITUTION OF LENDERS. Any Lender claiming any additional amounts
payable pursuant to SECTION 2.17, 3.1 or 3.2 or which gives a notice
described in SECTION 3.3(a) shall, so long as no Default or Unmatured Default
has occurred and is continuing, upon the written request of the Borrower
delivered, within ninety (90) days after such Lender's claim or notice, to
such Lender and the Agent, assign, pursuant to and in accordance with the
provisions of SECTION 12.3, all of its rights and obligations under this
Agreement and under the Loan Documents to another Lender or to a commercial
bank, other financial institution, commercial finance company or other
business lender selected by the Borrower and reasonably acceptable to the
Agent that has agreed not to claim any additional amounts under SECTION 2.17,
3.1 or 3.2 with respect to some or all of the costs or regulatory charges
that gave rise to such assigning Lender's claim for such compensation or, as
applicable, has not made a determination of the type described in SECTION
3.3(a), in consideration for (a) the payment by such assignee to such
assigning Lender of the principal of, and interest accrued and unpaid to the
date of such assignment on, the Loans held by such assigning Lender, (b) the
payment by the Borrower to such assigning Lender of any and all other amounts
owing to such assigning Lender under any provision of this Agreement accrued
and unpaid to the date of such assignment and (c) the payment by the Borrower
to such assigning Lender of any amounts which would be payable to such Lender
pursuant to SECTION 3.4 were such assignment treated as a repayment of such
Loans.

                                   ARTICLE IV

                              CONDITIONS PRECEDENT

     4.1. EFFECTIVENESS. This Agreement shall not become effective (in which
case the Existing Credit Agreement shall remain in full force and effect)
unless and until Borrower has furnished the following to the Agent with
sufficient copies for the Lenders and the other conditions set forth below
have been satisfied:

          (a) CHARTER DOCUMENTS; GOOD STANDING CERTIFICATES. Copies of the
     certificate of incorporation of the Borrower, together with all
     amendments thereto, certified by the

                                     -30-
<PAGE>

     appropriate governmental officer in its jurisdiction of incorporation,
     together with a good standing certificate issued by the Secretary of
     State of its jurisdiction of incorporation and such other jurisdictions
     as shall be reasonably requested by the Agent.

          (b) BY-LAWS AND RESOLUTIONS. Copies, certified by the Secretary or
     Assistant Secretary of the Borrower, of its by-laws and of its Board of
     Directors' resolutions authorizing the execution, delivery and
     performance of the Loan Documents to which the Borrower is a party.

          (c) SECRETARY'S CERTIFICATE. An incumbency certificate, executed by
     the Secretary or Assistant Secretary of the Borrower, which shall
     identify by name and title and bear the signature of the officers of the
     Borrower authorized to sign the Loan Documents and to make borrowings
     hereunder, upon which certificate the Agent and the Lenders shall be
     entitled to rely until informed of any change in writing by the Borrower.

          (d) OFFICER'S CERTIFICATE. A certificate signed by an Authorized
     Officer of the Borrower, in form and substance satisfactory to the
     Agent, to the effect that on the date hereof (both before and after
     giving effect to the consummation of the other transactions contemplated
     hereby and the making of any Loans hereunder on such date): (i) no
     Default or Unmatured Default has occurred and is continuing; (ii) no
     injunction or temporary restraining order which would prohibit the
     making of the Loans or other litigation which could reasonably be
     expected to have a Material Adverse Effect is pending or, to the best of
     such Person's knowledge, threatened; (iii) all orders, consents,
     approvals, licenses, authorizations, or validations of, or filings,
     recordings or registrations with, or exemptions by, any Governmental
     Authority required in connection with the execution, delivery and
     performance of this Agreement have been or, prior to the time required,
     will have been, obtained, given, filed or taken and are or will be in
     full force and effect (or the Borrower has obtained effective judicial
     relief with respect to the application thereof) and all applicable
     waiting periods have expired; (iv) each of the representations and
     warranties set forth in ARTICLE V of this Agreement is true and correct
     on and as of the date hereof; and (v) since September 30, 1998, no event
     or change has occurred that has caused or evidences a Material Adverse
     Effect.

          (e) LEGAL OPINION. A written opinion of Brobeck, Phleger & Harrison
     LLP, counsel to the Borrower, addressed to the Agent and the Lenders in
     form and substance acceptable to the Agent and its counsel.

          (f) NOTES. Notes payable to the order of each of the Lenders duly
     executed by the Borrower.

          (g) LOAN DOCUMENTS. Executed originals of this Agreement and each
     of the Loan Documents, which shall be in full force and effect, together
     with all schedules, exhibits, certificates, instruments, opinions,
     documents and financial statements required to be delivered pursuant
     hereto and thereto.

          (h) LETTERS OF DIRECTION. Written money transfer instructions with
     respect to the initial Advances and to future Advances in form and
     substance acceptable to the

                                     -31-
<PAGE>

     Agent and its counsel addressed to the Agent and signed by an Authorized
     Officer, together with such other related money transfer authorizations
     as the Agent may have reasonably requested.

          (i) SOLVENCY CERTIFICATE. A written solvency certificate from the
     chief financial officer of the Borrower in form and content satisfactory
     to the Agent with respect to the value, Solvency and other factual
     information of, or relating to, as the case may be, the Borrower, on a
     consolidated basis.

          (j) PAYMENTS UNDER EXISTING CREDIT AGREEMENT. Repayment in full of
     all loans and of all accrued and unpaid fees and interest arising under
     the Existing Credit Agreement.

          (k) PAYMENT OF FEES. The Borrower shall have paid all fees due to
     First Chicago.

          (l) FOLKSAMERICA CREDIT AGREEMENT. Executed original of the
     Folksamerica Credit Agreement, which shall be in full force and effect,
     in a form satisfactory to the Lenders.

          (m) WHITE MOUNTAINS CREDIT AGREEMENT. Evidence satisfactory to the
     Agent that the White Mountains Credit Agreement has been terminated and
     all Indebtedness, liabilities and obligations outstanding thereunder
     shall have been paid in full.

          (n) YEAR 2000 MATTERS. Information satisfactory to the Agent and
     the Required Lenders regarding the Borrower's Year 2000 Program.

          (o) REGULATORY MATTERS. Receipt of any required regulatory
     approvals from any Governmental Authority.

          (p) OTHER. Such other documents as the Agent, any Lender or their
     counsel may have reasonably requested.

     4.2. EACH FUTURE ADVANCE. The Lenders shall not be required to make any
Advance unless on the applicable Borrowing Date:

          (a) There exists no Default or Unmatured Default and none would result
     from such Advance;

          (b) The representations and warranties contained in ARTICLE V are
     true and correct as of such Borrowing Date (except to the extent such
     representations and warranties are expressly made as of a specified
     date, in which event such representations and warranties shall be true
     and correct as of such specified date);

          (c) A Borrowing Notice shall have been properly submitted; and

                                     -32-
<PAGE>

          (d) All legal matters incident to the making of such Advance shall
     be satisfactory to the Lenders and their counsel.

     Each Borrowing Notice with respect to each such Advance shall constitute
a representation and warranty by the Borrower that the conditions contained
in SECTIONS 4.2 (a), (b) and (c) have been satisfied. Any Lender may require
a duly completed compliance certificate in substantially the form of EXHIBIT
B hereto as a condition to making an Advance.

                                    ARTICLE V

                         REPRESENTATIONS AND WARRANTIES

     The Borrower represents and warrants to the Lenders that:

     5.1. CORPORATE EXISTENCE AND STANDING. The Borrower and each Subsidiary
is a corporation duly incorporated, validly existing and in good standing
under the laws of its respective jurisdiction of incorporation and is duly
qualified and in good standing as a foreign corporation and is duly
authorized to conduct its business in each jurisdiction in which its business
is conducted or proposed to be conducted, except where the failure to be so
qualified could not reasonably be expected to have a Material Adverse Effect.

     5.2. AUTHORIZATION AND VALIDITY. The Borrower has all requisite power
and authority (corporate and otherwise) and legal right to execute and
deliver each of the Loan Documents and to perform its obligations thereunder.
The execution and delivery by the Borrower of the Loan Documents and the
performance of its respective obligations thereunder has been duly authorized
by proper corporate proceedings and the Loan Documents constitute legal,
valid and binding obligations of the Borrower enforceable against the
Borrower in accordance with their terms, except as enforceability may be
limited by bankruptcy, insolvency or similar laws affecting the enforcement
of creditors' rights generally.

     5.3. COMPLIANCE WITH LAWS AND CONTRACTS. The Borrower and its
Subsidiaries have complied in all material respects with all applicable
statutes, rules, regulations, orders and restrictions of any domestic or
foreign government or any instrumentality or agency thereof, having
jurisdiction over the conduct of their respective businesses or the ownership
of their respective properties, except where the failure to so comply could
not reasonably be expected to have a Material Adverse Effect. Neither the
execution and delivery by the Borrower of the Loan Documents, the application
of the proceeds of the Loans or the consummation of the transactions
contemplated in the Loan Documents, nor compliance with the provisions of the
Loan Documents will, or at the relevant time did, (a) violate any law, rule,
regulation (including Regulations T, U and X), order, writ, judgment,
injunction, decree or award binding on the Borrower or any Subsidiary or the
Borrower's or any Subsidiary's charter, articles or certificate of
incorporation or by-laws, (b) violate the provisions of or require the
approval or consent of any party to any indenture, instrument or agreement to
which the Borrower or any Subsidiary is a party or is subject, or by which
it, or its property, is bound, or conflict with or constitute a default
thereunder, or result in the creation or imposition of any Lien (other than
Liens permitted by, the

                                     -33-
<PAGE>

Loan Documents) in, of or on the property of the Borrower or any Subsidiary
pursuant to the terms of any such indenture, instrument or agreement, or (c)
require any consent of the stockholders of any Person, except for approvals
or consents which will be obtained on or before the initial Advance and are
disclosed on SCHEDULE 5.3, except for any violation of, or failure to obtain
an approval or consent required under, any such indenture, instrument or
agreement that could not reasonably be expected to have a Material Adverse
Effect.

     5.4. GOVERNMENTAL CONSENTS. No order, consent, approval, qualification,
license, authorization, or validation of, or filing, recording or
registration with, or exemption by, or other action in respect of, any court,
governmental or public body or authority, or any subdivision thereof, any
securities exchange or other Person is or at the relevant time was required
to authorize, or is or at the relevant time was required in connection with
the execution, delivery, consummation or performance of, or the legality,
validity, binding effect or enforceability of, any of the Loan Documents.
Neither the Borrower nor any Subsidiary is in default under or in violation
of any foreign, federal, state or local law, rule, regulation, order, writ,
judgment, injunction, decree or award binding upon or applicable to the
Borrower or such Subsidiary, in each case the consequences of which default
or violation could reasonably be expected to have a Material Adverse Effect.

     5.5. FINANCIAL STATEMENTS. The Borrower has heretofore furnished to each
of the Lenders (a) the December 31, 1997 audited consolidated financial
statements of the Borrower and its Subsidiaries, and (b) the unaudited
consolidated financial statements of the Borrower and its Subsidiaries
through September 30, 1998 (collectively, the "FINANCIAL STATEMENTS"). Each
of the Financial Statements was prepared in accordance with Agreement
Accounting Principles and fairly presents the consolidated financial
condition and operations of the Borrower and its Subsidiaries at such dates
and the consolidated results of their operations for the respective periods
then ended (except, in the case of such unaudited statements, for normal
year-end audit adjustments).

     5.6. MATERIAL ADVERSE CHANGE. No material adverse change in the
business, Property, condition (financial or otherwise), performance,
prospects or results of operations of the Borrower and its Subsidiaries has
occurred since December 31, 1997.

     5.7. TAXES. The Borrower and its Subsidiaries have filed or caused to be
filed on a timely basis and in correct form all United States federal and
applicable foreign, state and local tax returns and all other tax returns
which are required to be filed and have paid all taxes due pursuant to said
returns or pursuant to any assessment received by the Borrower or any
Subsidiary, except such taxes, if any, as are being contested in good faith
and as to which adequate reserves have been provided in accordance with
Agreement Accounting Principles and as to which no Lien exists. As of the
date hereof, the United States income tax returns of the Borrower on a
consolidated basis have been audited by the Internal Revenue Service through
its fiscal period ending December 31, 1988, and all tax years beginning on or
after January 1, 1989 are currently being audited or are subject to audit. No
tax liens have been filed and no claims are being asserted with respect to
any such taxes which could reasonably be expected to have a Material Adverse
Effect. The charges, accruals and reserves on the books of the Borrower and

                                     -34-
<PAGE>

its Subsidiaries in respect of any taxes or other governmental charges are in
accordance with Agreement Accounting Principles.

     5.8. LITIGATION AND CONTINGENT OBLIGATIONS. There is no litigation,
arbitration, proceeding, inquiry or governmental investigation pending or, to
the knowledge of any of their officers, threatened against or affecting the
Borrower or any Subsidiary or any of their respective properties which could
reasonably be expected to have a Material Adverse Effect or to prevent,
enjoin or unduly delay the making of the Loans under this Agreement. Neither
the Borrower nor any Subsidiary has any material contingent obligations
incurred outside of the ordinary course of its business except as set forth
on SCHEDULE 5.8 hereto or disclosed in the Financial Statements or in
financial statements required to be delivered under SECTIONS 6.1(a) and (b)
or as otherwise disclosed by the Borrower in writing to the Lenders and as
permitted under this Agreement.

     5.9. CAPITALIZATION. SCHEDULE 5.9 hereto contains (a) an accurate
description of the Borrower's capitalization as of September 30, 1998 and (b)
an accurate list of all of the existing Subsidiaries as of the date of this
Agreement, setting forth their respective jurisdictions of incorporation and
the percentage of their capital stock owned by the Borrower or other
Subsidiaries. All of the issued and outstanding shares of capital stock of
the Borrower and of each Subsidiary have been duly authorized and validly
issued, are fully paid and non-assessable, and are free and clear of all
Liens. Neither the Borrower nor any of its Subsidiaries is subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock or any convertible securities, rights
or options relating to its capital stock except as otherwise set forth on
SCHEDULE 5.9 or pursuant to management incentive plans implemented after the
date of this Agreement.

     5.10. ERISA. Except as disclosed on SCHEDULE 5.10, neither the Borrower
nor any other member of the Controlled Group maintains any Single Employer
Plans, and no Single Employer Plan has any Unfunded Liability. Neither the
Borrower nor any other member of the Controlled Group maintains, or is
obligated to contribute to, any Multiemployer Plan or has incurred, or is
reasonably expected to incur, any withdrawal liability to any Multiemployer
Plan. Each Plan complies in all material respects with all applicable
requirements of law and regulations other than any such failure to comply
which could not reasonably be expected to have a Material Adverse Effect.
Neither the Borrower nor any member of the Controlled Group has, with respect
to any Plan, failed to make any contribution or pay any amount required under
Section 412 of the Code or Section 302 of ERISA or the terms of such Plan.
There are no pending or, to the knowledge of the Borrower, threatened claims,
actions, investigations or lawsuits against any Plan, any fiduciary thereof,
or the Borrower or any member of the Controlled Group with respect to a Plan.
Neither the Borrower nor any member of the Controlled Group has engaged in
any prohibited transaction (as defined in Section 4975 of the Code or Section
406 of ERISA) in connection with any Plan which would subject such Person to
any material liability. Within the last five (5) years neither the Borrower
nor any member of the Controlled Group has engaged in a transaction which
resulted in a Single Employer Plan with an Unfunded Liability being
transferred out of the Controlled Group which could reasonably be expected to
have a Material Adverse Effect. No Termination Event has occurred or is
reasonably expected to occur with respect to any Plan which is subject to
Title IV of ERISA which could reasonably be expected to have a Material
Adverse Effect.

                                     -35-

<PAGE>

     5.11. DEFAULTS. No Default or Unmatured Default has occurred and is
continuing.

     5.12. FEDERAL RESERVE REGULATIONS. Neither the Borrower nor any
Subsidiary is engaged, directly or indirectly, principally, or as one of its
important activities, in the business of extending, or arranging for the
extension of, credit for the purpose of purchasing or carrying Margin Stock.
No part of the proceeds of any Loan will be used in a manner which would
violate, or result in a violation of, Regulation T, Regulation U or
Regulation X. Neither the making of any Advance hereunder nor the use of the
proceeds thereof will violate or be inconsistent with the provisions of
Regulation T, Regulation U or Regulation X.

     5.13. INVESTMENT COMPANY. Neither the Borrower nor any Subsidiary is, or
after giving effect to any Advance will be, an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.

     5.14. CERTAIN FEES. No broker's or finder's fee or commission was, is or
will be payable by the Borrower or any Subsidiary with respect to any of the
transactions contemplated by this Agreement, except as described in SECTION
9.5. The Borrower hereby agrees to indemnify the Agent and the Lenders
against, and agrees that it will hold each of them harmless from, any claim,
demand or liability for broker's or finder's fees or commissions alleged to
have been incurred by the Borrower in connection with any of the transactions
contemplated by this Agreement and any expenses (including, without
limitation, attorneys' fees and time charges of attorneys for the Agent or
any Lender, which attorneys may be employees of the Agent or any Lender)
arising in connection with any such claim, demand or liability. No other
similar fee or commissions will be payable by the Borrower or any Subsidiary
for any other services rendered to the Borrower or any Subsidiary ancillary
to any of the transactions contemplated by this Agreement.

     5.15. SOLVENCY. As of the date hereof, after giving effect to the
consummation of the transactions contemplated by the Loan Documents and the
payment of all fees, costs and expenses payable by the Borrower or its
Subsidiaries with respect to the transactions contemplated by the Loan
Documents and the Loans incurred by the Borrower under this Agreement, the
Borrower on a consolidated basis is Solvent.

     5.16. INDEBTEDNESS. Attached hereto as SCHEDULE 5.16 is a complete and
correct list of all Indebtedness of the Borrower and its Subsidiaries (other
than Unrestricted Subsidiaries) outstanding on the date of this Agreement
(other than Indebtedness in a principal amount not exceeding $500,000 for a
single item of Indebtedness and $2,000,000 in the aggregate for all such
Indebtedness listed), showing the aggregate principal amount which was
outstanding on such date after giving effect to the application of the
proceeds of Loans incurred by the Borrower on the initial Borrowing Date.

     5.17. MATERIAL AGREEMENTS. Except as set forth in SCHEDULE 5.17 and
except for agreements or arrangements with regulatory agencies with regard to
Insurance Subsidiaries or agreements of any Unrestricted Subsidiary, neither
the Borrower nor any Subsidiary is a party to any agreement or instrument or
subject to any charter or other corporate restriction which could reasonably
be expected to have a Material Adverse Effect or which restricts or imposes

                                     -36-
<PAGE>

conditions upon the ability of any Subsidiary to (a) pay dividends or make
other distributions on its capital stock (b) make loans or advances to the
Borrower, (c) repay loans or advances from Borrower or (d) grant Liens to the
Agent to secure the Obligations. Neither the Borrower nor any Subsidiary is
in default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement to which it
is a party, which default could reasonably be expected to have a Material
Adverse Effect.

     5.18. ENVIRONMENTAL LAWS. There are no claims, investigations,
litigation, administrative proceedings, notices, requests for information
(each a "PROCEEDING"), whether pending or threatened, or judgments or orders
asserting violations of applicable federal, state and local environmental,
health and safety statutes, regulations, ordinances, codes, rules, orders,
decrees, directives and standards ("ENVIRONMENTAL LAWS") or relating to any
toxic or hazardous waste, substance or chemical or any pollutant,
contaminant, chemical or other substance defined or regulated pursuant to any
Environmental Law, including, without limitation, asbestos, petroleum, crude
oil or any fraction thereof ("HAZARDOUS MATERIALS") asserted against the
Borrower or any of its Subsidiaries other than in connection with an
insurance policy issued in the ordinary course of business to any Person
(other than the Borrower or any Subsidiary of the Borrower) which, in any
case, could reasonably be expected to have a Material Adverse Effect. As of
the date hereof, the Borrower and its Subsidiaries do not have liabilities
exceeding $500,000 in the aggregate for all of them with respect to
compliance by them with applicable Environmental Laws or related to the
generation, treatment, storage, disposal, release, investigation or cleanup
by them of Hazardous Materials, and no facts or circumstances exist which
could give rise to such liabilities with respect to compliance with
applicable Environmental Laws and the generation, treatment, storage,
disposal, release, investigation or cleanup of Hazardous Materials.

     5.19. INSURANCE. The Borrower and its Subsidiaries maintain with
financially sound and reputable insurance companies insurance on their
Property in such amounts and covering such risks as is consistent with sound
business practice.

     5.20. DISCLOSURE. No information, exhibit or report furnished by either
Borrower or any of its Subsidiaries to the Agent or to any Lender in
connection with the negotiation of, or compliance with, the Loan Documents
contained any material misstatement of fact or omitted to state a material
fact or any fact necessary to make the statements contained therein not
materially misleading. There is no fact known to the Borrower (other than
matters of a general economic or political nature) that has had or could
reasonably be expected to have a Material Adverse Effect and that has not
been disclosed herein or in such other documents, certificates and statements
furnished to the Lenders for use in connection with the transactions
contemplated by this Agreement.

     5.21. YEAR 2000. The Borrower has made a reasonable assessment of the
Year 2000 Issues and has a realistic and achievable program for remediating
the Year 2000 Issues on a timely basis (the "Year 2000 Program"). Based on
such assessment and on the Year 2000 Program the Borrower does not reasonably
anticipate that Year 2000 Issues will have a Material Adverse Effect.

                                     -37-
<PAGE>

                                   ARTICLE VI

                                    COVENANTS

     During the term of this Agreement, unless the Required Lenders shall
otherwise consent in writing:

     6.1. FINANCIAL REPORTING. The Borrower will maintain, for itself and
each Subsidiary, a system of accounting established and administered in
accordance with generally accepted accounting principles, consistently
applied, and furnish to the Lenders:

          (a) As soon as practicable and in any event within 100 days after
     the close of each of its Fiscal Years, an unqualified audit report
     certified by independent certified public accountants, acceptable to the
     Lenders, prepared in accordance with Agreement Accounting Principles on
     a consolidated and consolidating basis (consolidating statements need
     not be certified by such accountants) for itself and its Subsidiaries,
     including balance sheets as of the end of such period and related
     statements of income, retained earnings and cash flows.

          (b) As soon as practicable and in any event within sixty (60) days
     after the close of each of the first three (3) Fiscal Quarters of each
     of its Fiscal Years, for itself and its Subsidiaries, consolidated and
     consolidating unaudited balance sheets as at the close of each such
     period and consolidated and consolidating statements of income, retained
     earnings and cash flows for the period from the beginning of such Fiscal
     Year to the end of such quarter, all certified by its chief financial
     officer.

          (c) Together with the financial statements required by CLAUSES (a)
     and (b) above, a compliance certificate in substantially the form of
     EXHIBIT B hereto signed by its chief financial officer showing the
     calculations necessary to determine compliance with this Agreement and
     stating that no Default or Unmatured Default exists, or if any Default
     or Unmatured Default exists, stating the nature and status thereof.

          (d) Promptly after the same becomes available after the close of
     each Fiscal Year, a statement of the Unfunded Liabilities of each Single
     Employer Plan, certified as correct by an actuary enrolled under ERISA.

          (e) As soon as possible and in any event within ten (10) days after
     the Borrower knows that any Termination Event has occurred with respect
     to any Plan, a statement, signed by the chief financial officer of the
     Borrower, describing said Termination Event and the action which the
     Borrower proposes to take with respect thereto.

          (f) As soon as possible and in any event within ten (10) days after
     receipt by either Borrower, a copy of (i) any notice, claim, complaint
     or order to the effect that the Borrower or any of its Subsidiaries is
     or may be liable to any Person as a result of the

                                     -38-
<PAGE>

     release by the Borrower or any of its Subsidiaries of any Hazardous
     Materials into the environment or requiring that action be taken to
     respond to or clean up a Release of Hazardous Materials into the
     environment, and (ii) any notice, complaint or citation alleging any
     violation of any Environmental Law or Environmental Permit by the
     Borrower or any of its Subsidiaries. Within ten (10) days of the
     Borrower or any Subsidiary having knowledge of the enactment or
     promulgation of any Environmental Law which could reasonably be expected
     to have a Material Adverse Effect, the Borrower shall provide the Agent
     with written notice thereof.

          (g) Promptly upon the furnishing thereof to the shareholders of the
     Borrower, copies of all financial statements, reports and proxy
     statements so furnished.

          (h) Promptly upon the filing thereof, copies of all registration
     statements and annual, quarterly, monthly or other regular reports which
     the Borrower or any of its Subsidiaries files with the Securities and
     Exchange Commission.

          (i) Promptly and in any event within ten (10) days after learning
     thereof, notification of (i) any tax assessment, demand, notice of
     proposed deficiency or notice of deficiency received by the Borrower or
     any other Consolidated Person or (ii) the filing of any tax Lien or
     commencement of any judicial proceeding by or against any such
     Consolidated Person, if any such assessment, demand, notice, Lien or
     judicial proceeding relates to tax liabilities in excess of ten percent
     (10%) of the net worth (determined according to generally accepted
     accounting standards and without reduction for any reserve for such
     liabilities) of the Borrower and its Subsidiaries taken as a whole.

          (j) Promptly after the same becomes available, any management
     letter prepared by the accountants conducting the audit of the financial
     statements delivered pursuant to SECTION 6.1 (a).

          (k) As soon as possible and in any event within two (2) Business
     Days after the Borrower obtains knowledge thereof, notice of any change
     in the Applicable Credit Rating of S&P or Moody's.

          (l) Such other information (including non-financial information) as
     the Agent or any Lender may from time to time reasonably request.

     6.2. USE OF PROCEEDS. The Borrower will, and will cause each Subsidiary
to, use the proceeds of the Advances to meet the working capital and general
corporate needs of the Borrower and its Subsidiaries, including, but not
limited to, the making of Investments permitted by SECTION 6.15. The Borrower
will not, nor will it permit any Subsidiary to, use any of the proceeds of
the Advances in a manner which would violate, or result in a violation of,
Regulation T, Regulation U or Regulation X, or to finance the Purchase of any
Person which has not been approved and recommended by the board of directors
(or functional equivalent thereof) of such Person.

     6.3. NOTICE OF DEFAULT. The Borrower will give prompt notice in writing
to the Lenders of the occurrence of (a) any Default or Unmatured Default and
(b) of any other event or

                                     -39-
<PAGE>

development, financial or other, relating specifically to the Borrower or any
of its Subsidiaries (and not of a general economic or political nature) which
could reasonably be expected to have a Material Adverse Effect.

     6.4. CONDUCT OF BUSINESS. The Borrower will, and will cause each
Subsidiary to, carry on and conduct its business in substantially the same
manner and in substantially the same fields of business as it is presently
conducted, to not conduct any significant business except for financial
services, and to do all things necessary to remain duly incorporated, validly
existing and in good standing as a domestic corporation in its jurisdiction
of incorporation and maintain all requisite authority to conduct its business
in each jurisdiction in which its business is conducted.

     6.5. TAXES. The Borrower will, and will cause each Subsidiary to, timely
file complete and correct United States federal and applicable foreign, state
and local tax returns required by applicable law and pay when due all taxes,
assessments and governmental charges and levies upon it or its income,
profits or Property, except those which are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves have been
set aside in accordance with generally accepted accounting principles or
statutory accounting practices, as applicable.

     6.6. INSURANCE. The Borrower will, and will cause each Subsidiary to,
maintain with financially sound and reputable insurance companies insurance
on all their Property in such amounts and covering such risks as is
consistent with sound business practice, and the Borrower will furnish to the
Agent and any Lender upon request full information as to the insurance
carried.

     6.7. COMPLIANCE WITH LAWS. The Borrower will, and will cause each
Subsidiary to, comply with all laws, rules, regulations, orders, writs,
judgments, injunctions, decrees or awards to which it may be subject, the
failure to comply with which could reasonably be expected to have a Material
Adverse Effect.

     6.8. MAINTENANCE OF PROPERTIES. The Borrower will, and will cause each
Subsidiary to, do all things necessary to maintain, preserve, protect and
keep its Property in good repair, working order and condition, and make all
necessary and proper repairs, renewals and replacements so that its business
carried on in connection therewith may be properly conducted at all times.

     6.9. INSPECTION. The Borrower will, and will cause each Subsidiary to,
at reasonable times during normal business hours and upon reasonable notice,
permit the Agent and the Lenders, by their respective representatives and
agents, to inspect any of the Property, corporate books and financial records
of the Borrower and each Subsidiary, to examine and make copies of the books
of accounts and other financial records of the Borrower and each Subsidiary,
and to discuss the affairs, finances and accounts of the Borrower and each
Subsidiary with, and to be advised as to the same by, their respective
officers at such reasonable times and intervals as the Lenders may designate.
The Borrower will keep or cause to be kept, and cause each Subsidiary to keep
or cause to be kept, appropriate records and books of account in which
complete entries

                                     -40-
<PAGE>

are to be made reflecting its and their business and financial transactions,
such entries to be made in accordance with Agreement Accounting Principles.

     6.10. DIVIDENDS. The Borrower will not declare or pay any dividends or
make any distributions on its capital stock (other than dividends payable in
its own capital stock) or redeem, repurchase or otherwise acquire or retire
any of its capital stock or any options or other rights in respect thereof at
any time outstanding, except that so long as no Default or Unmatured Default
exists before or after giving effect to the declaration or payment of such
dividends or distributions or repurchase or redemption of such stock or other
transaction, the Borrower may declare and pay dividends, and make
distributions, on its common stock and repurchase and redeem and otherwise
acquire or retire its common stock and any options or other rights in respect
thereof.

     6.11. INDEBTEDNESS. The Borrower will not, nor will it permit any
Subsidiary (other than an Unrestricted Subsidiary) to, create, incur or
suffer to exist any Indebtedness, except:

          (a) the Loans;

          (b) Indebtedness existing on the date hereof and described in
     SCHEDULE 5.16 hereto (it being understood and agreed that Indebtedness
     in a principal amount not exceeding $500,000 for a single item of
     Indebtedness and $2,000,000 in the aggregate for all such Indebtedness
     listed shall be permitted to exist pursuant to this SECTION 6.11(b)
     notwithstanding the absence thereof on SCHEDULE 5.16) and any renewals,
     extensions, refundings or refinancings of such Indebtedness (including
     any necessary pre-payment premium payments on such Indebtedness);
     PROVIDED that the amount thereof is not increased and the maturity or
     scheduled amortization of principal thereof is not shortened (unless to
     a maturity or scheduled amortization occurring after the Maturity Date);

          (c) Indebtedness owing by (x) the Borrower to any Wholly-Owned
     Subsidiary and (y) any Wholly-Owned Subsidiary to a Wholly-Owned
     Subsidiary or the Borrower;

          (d) Indebtedness of Folksamerica and its Subsidiaries permitted
     under the Folksamerica Credit Agreement and Indebtedness of Valley and
     its Subsidiaries permitted under the Valley Credit Agreement;

          (e) Indebtedness of the Borrower, the proceeds of which are used
     directly or indirectly to refund or refinance Indebtedness of
     Wholly-Owned Subsidiaries of the Borrower (other than any Unrestricted
     Subsidiaries); PROVIDED, however that the amount thereof is not
     increased, the maturity or scheduled amortization of principal thereof
     is not set to a maturity or scheduled amortization occurring before the
     Maturity Date hereunder and the terms of the proposed Indebtedness are
     not otherwise, in the reasonable judgment of the Required Lenders,
     disadvantageous (relative to the terms of the Indebtedness refunded or
     refinanced) to the interests of the Lenders hereunder;

          (f) Indebtedness secured by Liens permitted pursuant to SECTION
     6.14(f);

          (g) Contingent Obligations permitted by SECTION 6.13; and

                                     -41-
<PAGE>

          (h) other Indebtedness, so long as such other Indebtedness does not
     at any time exceed $10,000,000 in aggregate principal amount.

     6.12. MERGER. The Borrower will not, nor will it permit any Significant
Subsidiary to, merge or consolidate with or into any other Person, except
that:

          (a) a Wholly-Owned Subsidiary (other than any Unrestricted
     Subsidiary) may merge (i) into the Borrower, (ii) with any Wholly-Owned
     Subsidiary of the Borrower or (iii) with any other Person so long as no
     Default or Unmatured Default shall have occurred or be continuing before
     and after giving effect to such merger and the surviving entity of such
     merger is the Borrower (in the case of CLAUSE (i)) or a Wholly-Owned
     Subsidiary of the Borrower (in the case of either CLAUSE (ii) or (iii));

          (b) a Significant Subsidiary may merge or consolidate with any
     Person so long as either (x) (i) no Default or Unmatured Default shall
     have occurred or be continuing before and after giving effect to such
     merger or consolidation and (ii) such Significant Subsidiary is the
     continuing or surviving corporation or (y) neither the Borrower nor any
     Subsidiaries hold any capital stock of such Significant Subsidiary after
     giving effect to such merger or consolidation; and

          (c) the Borrower may merge or consolidate with any other Person, so
     long as immediately thereafter (and after giving effect thereto), (i) no
     Default or Unmatured Default exists, (ii) the Borrower is the continuing
     or surviving corporation and (iii) the covenants contained in SECTION
     6.20 shall be complied with on a PRO FORMA basis on the date of, and
     after giving effect to, such merger or consolidation.

     6.13. CONTINGENT OBLIGATIONS. The Borrower will not, nor will it permit
any Subsidiary (other than an Unrestricted Subsidiary) to, make or suffer to
exist any Contingent Obligation (including, without limitation, any
Contingent Obligation with respect to the obligations of a Subsidiary),
except (a) the issuance of financial guarantees in the ordinary course of
business and consistent with past practices, (b) by endorsement of
instruments for deposit or collection in the ordinary course of business, (c)
for insurance policies issued in the ordinary course of business, (d) the
issuance of intercompany guarantees (other than for an Unrestricted
Subsidiary, excluding Contingent Obligations regarding servicing
arrangements) so long as the primary obligation is permitted pursuant to this
Agreement, (e) Contingent Obligations which are permitted pursuant to the
Folksamerica Credit Agreement and the Valley Credit Agreement and (f) the
Contingent Obligations described on SCHEDULE 5.8.

     6.14. LIENS. The Borrower will not, nor will it permit any Subsidiary
to, create, incur, or suffer to exist any Lien in, of or on the Property
(other than Margin Stock) of the Borrower or any of its Subsidiaries (other
than an Unrestricted Subsidiary), except:

          (a) Liens for taxes, assessments or governmental charges or levies
     on its Property if the same shall not at the time be delinquent or
     thereafter can be paid without penalty, or are being contested in good
     faith and by appropriate proceedings and for which adequate reserves in
     accordance with generally accepted principles of accounting shall have
     been set aside on its books;

                                     -42-
<PAGE>

          (b) Liens imposed by law, such as carriers', warehousemen's and
     mechanics' liens and other similar liens arising in the ordinary course
     of business which secure the payment of obligations not more than sixty
     (60) days past due or which are being contested in good faith by
     appropriate proceedings and for which adequate reserves shall have been
     set aside on its books;

          (c) Liens arising out of pledges or deposits under worker's
     compensation laws, unemployment insurance, old age pensions, or other
     social security or retirement benefits, or similar legislation;

          (d) Utility easements, building restrictions and such other
     encumbrances or charges against real property as are of a nature
     generally existing with respect to properties of a similar character and
     which do not in any material way affect the marketability of the same or
     interfere with the use thereof in the business of the Borrower or its
     Subsidiaries;

          (e) Liens existing on the date hereof and described in SCHEDULE
     6.14 hereto;

          (f) Liens in, of or on Property acquired after the date of this
     Agreement (by purchase, construction or otherwise), each of which Liens
     either (1) existed on such Property before the time of its acquisition
     and was not created in anticipation thereof, or (2) was created solely
     for the purpose of securing Indebtedness representing, or incurred to
     finance, refinance or refund, the cost (including the cost of
     construction) of such Property; PROVIDED that no such Lien shall extend
     to or cover any Property of the Borrower or such Subsidiary other than
     the Property so acquired and improvements thereon; and PROVIDED,
     FURTHER, that the principal amount of Indebtedness secured by any such
     Lien shall at the time the Lien is incurred not exceed 75% of the fair
     market value (as determined in good faith by a financial officer of the
     Borrower and, in the case of such Property having a fair market value in
     excess of $500,000, certified by such officer to the Agent, with a copy
     for each Lender) of the Property at the time it was so acquired;

          (g) Liens of Folksamerica and its Subsidiaries permitted under the
     Folksamerica Credit Agreement and Liens of Valley and its Subsidiaries
     permitted under the Valley Credit Agreement; and

          (h) Liens not otherwise permitted by the foregoing clauses (a)
     through (g) securing any Indebtedness of the Borrower, PROVIDED that the
     aggregate principal amount of Indebtedness secured by Liens permitted by
     this CLAUSE (h) shall not exceed $5,000,000 at any time.

     6.15. INVESTMENTS AND PURCHASES. The Borrower will not, and will not
permit any Subsidiary (other than any Unrestricted Subsidiary) to, make or
suffer to exist any Investments (including, without limitation, loans and
advances to, and other Investments in, Subsidiaries), or commitments
therefor, or to create any Subsidiary or to become or remain a partner in any
partnership or joint venture, or to make any Purchases, except:

          (a) Cash and Cash Equivalents;

                                     -43-
<PAGE>

          (b) Investments or commitments therefor (such commitments being set
     forth on SCHEDULE 6.15) in existence as of the date hereof (including
     Investments in Subsidiaries as of the date hereof);

          (c) Investments in debt securities rated BBB- or better by S&P,
     Baa-3 or better by Moody's or NAIC-2 or better by the NAIC; PROVIDED,
     that any such Investment which, at any time after which it is made,
     ceases to meet such rating requirements shall remain permitted hereby
     until thirty (30) days after the date on which such rating requirement
     is no longer met;

          (d) Purchases of or Investments in businesses or entities engaged
     in the insurance business and/or insurance services or businesses
     reasonably incident thereto (including holding companies, the
     Subsidiaries of which on a consolidated basis are primarily engaged in
     such businesses) which do not constitute hostile takeovers (including
     the creation of Subsidiaries in connection therewith) so long as no
     Default or Unmatured Default has occurred and is continuing or would
     occur after giving effect to such Purchase or Investment;

          (e) other Investments by the Borrower in any Person which is a
     Subsidiary (other than any Unrestricted Subsidiary) as of the date
     hereof, so long as no Default or Unmatured Default has occurred and is
     continuing or would occur after giving effect to such Investment;

          (f) loans made by (x) the Borrower to any Wholly-Owned Subsidiary
     (other than any Unrestricted Subsidiary) and (y) any Wholly-Owned
     Subsidiary to a Wholly-Owned Subsidiary (other than any Unrestricted
     Subsidiary) or the Borrower so long as, in all cases, no Default or
     Unmatured Default has occurred and is continuing or would occur after
     giving effect to such loan;

          (g) Investments by the Borrower (in addition to those permitted by
     CLAUSES (a) through (f) of this SECTION 6.15) in an amount not exceeding
     in aggregate at any time $40,000,000 PLUS the FSA Amount (including the
     creation of Subsidiaries and Investments therein and Investments in any
     partnership or joint venture) so long as at the time of such Investment
     no Default or Unmatured Default has occurred and is continuing or would
     occur after giving effect to such Investment; PROVIDED, however, that
     any Investments pursuant to this CLAUSE (g) are made from net proceeds
     traceable to either (i) dividends, sales, transfers or other
     distributions of equity interests in SOMSC or (ii) the sale or issuance
     of equity securities of the Borrower after the date hereof;

          (h) Investments by the Borrower (in addition to those permitted by
     the other clauses of this SECTION 6.15) in an amount not exceeding in
     aggregate at any time $10,000,000 (including the creation of
     Subsidiaries and Investments therein and Investments in any partnership
     or joint venture) so long as at the time of any such Investment no
     Default or Unmatured Default has occurred and is continuing or would
     occur after giving effect to such Investment; and

                                     -44-
<PAGE>

          (i) other Investments by Folksamerica and its Subsidiaries
     permitted under the Folksamerica Credit Agreement and other Investments
     by Valley and its Subsidiaries permitted under the Valley Credit
     Agreement.

     6.16. AFFILIATES. The Borrower will not, and will not permit any
Subsidiary to, enter into any material transaction (including, without
limitation, the purchase or sale of any Property or service) with, or make
any payment or transfer to, any Affiliate (other than a Wholly-Owned
Subsidiary), except in the ordinary course of business and pursuant to the
reasonable requirements of the Borrower's or such Subsidiary's business and
upon fair and reasonable terms no less favorable to the Borrower or such
Subsidiary than the Borrower or such Subsidiary would obtain in a comparable
arms-length transaction, except that any Unrestricted Subsidiary may make
loans to the Borrower.

     6.17. ENVIRONMENTAL MATTERS. The Borrower shall and shall cause each of
its Subsidiaries to (a) at all times comply in all material respects with all
applicable Environmental Laws and (b) promptly take any and all necessary
remedial actions in response to the presence, storage, use, disposal,
transportation or Release of any Hazardous Materials on, under or about any
real property owned, leased or operated by the Borrower or any of its
Subsidiaries.

     6.18. CHANGE IN CORPORATE STRUCTURE; FISCAL YEAR. The Borrower shall
not, nor shall it permit any Subsidiary to, (a) permit any amendment or
modification to be made to its certificate or articles of incorporation or
by-laws which is materially adverse to the interests of the Lenders or (b)
change its Fiscal Year to end on any date other than December 31 of each year.

     6.19. INCONSISTENT AGREEMENTS. The Borrower shall not, nor shall it
permit any Subsidiary (other than an Unrestricted Subsidiary) to, enter into
any indenture, agreement, instrument or other arrangement which by its terms,
(a) other than pursuant to the Folksamerica Credit Agreement or the Valley
Credit Agreement or pursuant to agreements or arrangements with regulatory
agencies with regard to Insurance Subsidiaries, directly or indirectly
contractually prohibits or restrains, or has the effect of contractually
prohibiting or restraining, or contractually imposes materially adverse
conditions upon, the incurrence of the Obligations, the granting of Liens to
secure the Obligations, the amending of the Loan Documents or the ability of
any Subsidiary to (i) pay dividends or make other distributions on its
capital stock, (ii) make loans or advances to the Borrower or (iii) repay
loans or advances from the Borrower or (b) contains any provision which would
be violated or breached by the making of Advances or by the performance by
the Borrower or any Subsidiary of any of its obligations under any Loan
Document.

     6.20. FINANCIAL COVENANTS.

          6.20.1 MINIMUM NET WORTH. The Borrower shall, at all times after
     the date hereof, maintain a minimum Net Worth at least equal to (a) the
     sum of (i) $514,530,000, PLUS (ii) an amount equal to 90% of the cash
     and non-cash proceeds of any equity securities issued by the Borrower
     after September 30, 1998, MINUS (b) an amount equal to the lesser of (i)
     $30,000,000 or (ii) the aggregate amount expended by the Borrower after
     September 30, 1998 to repurchase its capital stock in compliance with
     SECTION 6.10.

                                     -45-

<PAGE>

          6.20.2 MAXIMUM LEVERAGE RATIO. The Borrower shall, at all times
     after the date hereof, maintain a Leverage Ratio of not greater than 35%.

          6.20.3 FINANCE ASSETS RATIO. The Borrower shall, at all times after
     the date hereof when Loans are outstanding and the aggregate sum of cash
     and Cash Equivalents of the Borrower and its Subsidiaries (excluding any
     Insurance Subsidiaries, Folksamerica, Valley and SOMSC) at such time is
     less than the aggregate outstanding principal amount of Advances at such
     time, maintain a Finance Assets Ratio of not less than 1.5:1.0.

     6.21. TAX CONSOLIDATION. The Borrower will not and will not permit any
of its Subsidiaries to (a) file or consent to the filing of any consolidated,
combined or unitary income tax return with any Person other than the Borrower
and its Subsidiaries or (b) amend, terminate or fail to enforce any existing
tax sharing agreement or similar arrangement if such action would cause a
Material Adverse Effect.

     6.22. ERISA COMPLIANCE.

     With respect to any Plan, neither the Borrower nor any Subsidiary shall:

          (a) engage in any "prohibited transaction" (as such term is defined
     in Section 406 of ERISA or Section 4975 of the Code) for which a civil
     penalty pursuant to Section 502(i) of ERISA or a tax pursuant to Section
     4975 of the Code in excess of $500,000 could be imposed;

          (b) incur any "accumulated funding deficiency" (as such term is
     defined in Section 302 of ERISA) in excess of $500,000, whether or not
     waived, or permit any Unfunded Liability to exceed $500,000;

          (c) permit the occurrence of any Termination Event which could
     result in a liability to the Borrower or any other member of the
     Controlled Group in excess of $500,000;

          (d) be an "employer" (as such term is defined in Section 3(5) of
     ERISA) required to contribute to any Multiemployer Plan or a
     "substantial employer" (as such term in defined in Section 4001(a)(2) of
     ERISA) required to contribute to any Multiple Employer Plan; or

          (e) permit the establishment or amendment of any Plan or fail to
     comply with the applicable provisions of ERISA and the Code with respect
     to any Plan which could result in liability to the Borrower or any other
     member of the Controlled Group which, individually or in the aggregate,
     could reasonably be expected to have a Material Adverse Effect.

     6.23. YEAR 2000. The Borrower will take and will cause each of its
Subsidiaries to take all such actions as are reasonably necessary to
successfully implement the Year 2000 Program and to assure that Year 2000
Issues will not have a Material Adverse Effect. At the request of

                                     -46-
<PAGE>

the Agent or any Lender, the Borrower will provide a description of the Year
2000 Program, together with any updates or progress reports with respect
thereto.

                                   ARTICLE VII

                                    DEFAULTS

     The occurrence of any one or more of the following events shall
constitute a Default:

     7.1. Any representation or warranty made or deemed made by or on behalf
of the Borrower or any of its Subsidiaries to the Lenders or the Agent under
or in connection with this Agreement, any other Loan Document, any Loan or
any certificate or information delivered in connection with this Agreement
shall be false in any material respect on the date as of which made.

     7.2. Nonpayment of (a) any principal of any Note when due, or (b) any
interest upon any Note or any commitment fee or other fee or obligations
under any of the Loan Documents within five (5) days after the same becomes
due.

     7.3. The breach by the Borrower of any of the terms or provisions of
SECTION 6.2, SECTION 6.3(a) or SECTIONS 6.10 through 6.16 or SECTIONS 6.18
through 6.22.

     7.4. The breach by the Borrower (other than a breach which constitutes a
Default under SECTIONS 7.1, 7.2 or 7.3) of any of the terms or provisions of
this Agreement which is not remedied within twenty (20) days after written
notice from the Agent or any Lender.

     7.5. The default by the Borrower or any of its Subsidiaries in the
performance of any term, provision or condition contained in any agreement or
agreements under which any Funded Indebtedness aggregating in excess of
$10,000,000 ($20,000,000, or such lower cross-default threshold amount as is
provided in the SOMSC Credit Agreements, in the case of SOMSC) was created or
is governed, or the occurrence of any other event or existence of any other
condition, the effect of any of which is to cause, or to permit the holder or
holders of such Funded Indebtedness to cause, such Funded Indebtedness to
become due prior to its stated maturity; or any such Funded Indebtedness of
the Borrower or any of its Subsidiaries shall be declared to be due and
payable or required to be prepaid (other than by a regularly scheduled
payment) prior to the stated maturity thereof.

     7.6. The Borrower or any of its Significant Subsidiaries shall (a) have
an order for relief entered with respect to it under the Federal bankruptcy
laws as now or hereafter in effect, (b) make an assignment for the benefit of
creditors, (c) apply for, seek, consent to, or acquiesce in, the appointment
of a receiver, custodian, trustee, examiner, liquidator or similar official
for it or any substantial portion of its Property, (d) institute any
proceeding seeking an order for relief under the Federal bankruptcy laws as
now or hereafter in effect or seeking to adjudicate it a bankrupt or
insolvent, or seeking dissolution, winding up, liquidation, reorganization,
arrangement, adjustment or composition of it or its debts under any law
relating to bankruptcy,

                                     -47-
<PAGE>

insolvency or reorganization or relief of debtors or fail to file an answer
or other pleading denying the material allegations of any such proceeding
filed against it, (e) take any corporate action to authorize or effect any of
the foregoing actions set forth in this SECTION 7.6, (f) fail to contest in
good faith any appointment or proceeding described in SECTION 7.7 or (g)
become unable to pay, not pay, or admit in writing its inability to pay, its
debts generally as they become due.

     7.7. Without the application, approval or consent of the Borrower or any
of its Significant Subsidiaries, a receiver, trustee, examiner, liquidator or
similar official shall be appointed for the Borrower or any of its
Significant Subsidiaries or any substantial portion of its Property, or a
proceeding described in SECTION 7.6(d) shall be instituted against the
Borrower or any of its Significant Subsidiaries and such appointment
continues undischarged or such proceeding continues undismissed or unstayed
for a period of sixty (60) consecutive days.

     7.8. The Borrower or any of its Subsidiaries shall fail within thirty
(30) days to pay, bond or otherwise discharge any judgment or order for the
payment of money in excess of $2,000,000 (or multiple judgments or orders for
the payment of an aggregate amount in excess of $10,000,000), which is not
stayed on appeal or otherwise being appropriately contested in good faith and
as to which no enforcement actions have been commenced.

     7.9. Any Change in Control shall occur.

     7.10. The occurrence of any "default", as defined in any Loan Document
(other than this Agreement or the Notes) or the breach of any of the terms or
provisions of any Loan Document (other than this Agreement or the Notes),
which default or breach continues beyond any period of grace therein provided.

     7.11. Any License of any Insurance Subsidiary (a) shall be revoked by
the Governmental Authority which issued such License, or any action
(administrative or judicial) to revoke such License shall have been commenced
against such Insurance Subsidiary and shall not have been dismissed within
thirty (30) days after the commencement thereof, (b) shall be suspended by
such Governmental Authority for a period in excess of thirty (30) days or (c)
shall not be reissued or renewed by such Governmental Authority upon the
expiration thereof following application for such reissuance or renewal of
such Insurance Subsidiary, which, in any case, could reasonably be expected
to have a Material Adverse Effect.

     7.12. Any Insurance Subsidiary shall be the subject of a final
non-appealable order imposing a fine by or at the request of any state
insurance regulatory agency as a result of the violation by such Insurance
Subsidiary of such state's applicable insurance laws or the regulations
promulgated in connection therewith which could reasonably be expected to
have a Material Adverse Effect.

     7.13. Any Insurance Subsidiary shall become subject to any conservation,
rehabilitation or liquidation order, directive or mandate issued by any
Governmental Authority or any Insurance Subsidiary shall become subject to
any other directive or mandate issued by any Governmental Authority in either
case which could reasonably be expected to have a Material Adverse Effect and
which is not stayed within thirty (30) days.

                                     -48-
<PAGE>

                                  ARTICLE VIII

                 ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES

     8.1. ACCELERATION. If any Default described in SECTIONS 7.6 or 7.7
occurs with respect to the Borrower, the obligations of the Lenders to make
Loans hereunder shall automatically terminate and the Obligations shall
immediately become due and payable without any election or action on the part
of the Agent or any Lender. If any other Default occurs, the Required Lenders
(or the Agent with the consent of the Required Lenders) may terminate or
suspend the obligations of the Lenders to make Loans hereunder, or declare
the Obligations to be due and payable, or both, whereupon the Obligations
shall become immediately due and payable, without presentment, demand,
protest or notice of any kind, all of which the Borrower hereby expressly
waives.

     If, within ten (10) Business Days after acceleration of the maturity of
the Obligations or termination of the obligations of the Lenders to make
Loans hereunder as a result of any Default (other than any Default as
described in SECTIONS 7.6 or 7.7 with respect to the Borrower) and before any
judgment or decree for the payment of the Obligations due shall have been
obtained or entered, the Required Lenders (in their sole discretion) shall so
direct, the Agent shall, by notice to the Borrower, rescind and annul such
acceleration and/or termination.

     8.2. AMENDMENTS. Subject to the provisions of this ARTICLE VIII, the
Required Lenders (or the Agent with the consent in writing of the Required
Lenders) and the Borrower may enter into agreements supplemental hereto for
the purpose of adding or modifying any provisions to the Loan Documents or
changing in any manner the rights of the Lenders or the Borrower hereunder or
waiving any Default hereunder; PROVIDED, HOWEVER, that no such supplemental
agreement shall, without the consent of each Lender:

          (a) Extend the final maturity of any Loan or Note or reduce the
     principal amount thereof, or reduce the rate or, subject to SECTION
     2.10, extend the time of payment of interest or fees thereon;

          (b) Reduce the percentage specified in the definition of Required
     Lenders;

          (c) Increase the amount of the Commitment of any Lender hereunder;

          (d) Extend the Revolver Termination Date or the Maturity Date;

          (e) Amend this SECTION 8.2; or

          (f) Permit any assignment by the Borrower of its Obligations or its
     rights hereunder.

No amendment of any provision of this Agreement relating to the Agent shall
be effective without the written consent of the Agent. The Agent may waive
payment of the fee required under SECTION 12.3.2 without obtaining the
consent of any other party to this Agreement.

                                     -49-
<PAGE>

     8.3. PRESERVATION OF RIGHTS. No delay or omission of the Lenders or the
Agent to exercise any right under the Loan Documents shall impair such right
or be construed to be a waiver of any Default or an acquiescence therein, and
the making of a Loan notwithstanding the existence of a Default or the
inability of the Borrower to satisfy the conditions precedent to such Loan
shall not constitute any waiver or acquiescence. Any single or partial
exercise of any such right shall not preclude other or further exercise
thereof or the exercise of any other right, and no waiver, amendment or other
variation of the terms, conditions or provisions of the Loan Documents
whatsoever shall be valid unless in writing signed by the Lenders required
pursuant to SECTION 8.2, and then only to the extent in such writing
specifically set forth. All remedies contained in the Loan Documents or by
law afforded shall be cumulative and all shall be available to the Agent and
the Lenders until the Obligations have been paid in full.

                                   ARTICLE IX

                               GENERAL PROVISIONS

     9.1. SURVIVAL OF REPRESENTATIONS. All representations and warranties of
the Borrower or any Subsidiary contained in any Loan Document shall survive
delivery of the Notes and the making of the Loans herein contemplated.

     9.2. GOVERNMENTAL REGULATION. Anything contained in this Agreement to
the contrary notwithstanding, no Lender shall be obligated to extend credit
to the Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation.

     9.3. TAXES. Any stamp, documentary or similar taxes, assessments or
charges payable or ruled payable by any governmental authority in respect of
the Loan Documents shall be paid by the Borrower, together with interest and
penalties, if any.

     9.4. HEADINGS. Section headings in the Loan Documents are for
convenience of reference only, and shall not govern the interpretation of any
of the provisions of the Loan Documents.

     9.5. ENTIRE AGREEMENT. The Loan Documents embody the entire agreement
and understanding among the Borrower, the Agent and the Lenders and supersede
all prior agreements and understandings among the Borrower, the Agent and the
Lenders relating to the subject matter thereof other than the fee letter,
dated January 5, 1999, in favor of First Chicago.

     9.6. SEVERAL OBLIGATIONS; BENEFITS OF THIS AGREEMENT. The respective
obligations of the Lenders hereunder are several and not joint and no Lender
shall be the partner or agent of any other (except to the extent to which the
Agent is authorized to act as such). The failure of any Lender to perform any
of its obligations hereunder shall not relieve any other Lender from any of
its obligations hereunder. This Agreement shall not be construed so as to
confer any right or benefit upon any Person other than the parties to this
Agreement and their respective successors and assigns.

                                     -50-
<PAGE>

     9.7. EXPENSES; INDEMNIFICATION. The Borrower shall reimburse the Agent
for any reasonable costs, internal charges and out-of-pocket expenses
(including attorneys' fees and time charges of attorneys for the Agent, which
attorneys may be employees of the Agent) paid or incurred by the Agent in
connection with the preparation, negotiation, execution, delivery, review,
actual or proposed amendment, modification, and administration of the Loan
Documents. The Borrower also agrees to reimburse the Agent and the Lenders
for any reasonable costs, internal charges and out-of-pocket expenses
(including attorneys' fees and time charges of attorneys for the Agent and
the Lenders, which attorneys may be employees of the Agent or the Lenders)
paid or incurred by the Agent or any Lender in connection with the collection
and enforcement of the Loan Documents. The Borrower further agrees to
indemnify the Agent and each Lender, its directors, officers and employees
against all losses, claims, damages, penalties, judgments, liabilities and
expenses (including, without limitation, all expenses of litigation or
preparation therefor whether or not the Agent or any Lender is a party
thereto) which any of them may pay or incur arising out of or relating to
this Agreement, the other Loan Documents, the transactions contemplated
hereby or thereby or the direct or indirect application or proposed
application of the proceeds of any Loan hereunder arising from claims or
assertions by third parties except to the extent that they arise out of the
gross negligence or willful misconduct of the party seeking indemnification.
The obligations of the Borrower under this Section shall survive the
termination of this Agreement.

     9.8. NUMBERS OF DOCUMENTS. All statements, notices, closing documents,
and requests hereunder shall be furnished to the Agent with sufficient
counterparts so that the Agent may furnish one to each of the Lenders.

     9.9. ACCOUNTING. Except as provided to the contrary herein, all
accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with Agreement
Accounting Principles.

     9.10. SEVERABILITY OF PROVISIONS. Any provision in any Loan Document
that is held to be inoperative, unenforceable, or invalid in any jurisdiction
shall, as to that jurisdiction, be inoperative, unenforceable, or invalid
without affecting the remaining provisions in that jurisdiction or the
operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Loan Documents are
declared to be severable.

     9.11. NONLIABILITY OF LENDERS. The relationship between the Borrower and
the Lenders and the Agent shall be solely that of borrower and lender.
Neither the Agent nor any Lender shall have any fiduciary responsibilities to
the Borrower. Neither the Agent nor any Lender undertakes any responsibility
to the Borrower to review or inform the Borrower of any matter in connection
with any phase of the Borrower's business or operations. The Borrower shall
rely entirely upon its own judgment with respect to its business, and any
review, inspection or supervision of, or information supplied to the Borrower
by the Agent or the Lenders is for the protection of the Agent and the
Lenders and neither the Borrower nor any other Person is entitled to rely
thereon. Whether or not such damages are related to a claim that is subject
to the waiver effected above and whether or not such waiver is effective,
neither the Agent nor any Lender shall have any liability with respect to,
and the Borrower hereby waives, releases and agrees not to sue for, any
special, indirect or consequential damages suffered by the Borrower in
connection

                                     -51-
<PAGE>

with, arising out of, or in any way related to the Loan Documents or the
transactions contemplated thereby or the relationship established by the Loan
Documents, or any act, omission or event occurring in connection therewith.

     9.12. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A
CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS (INCLUDING, WITHOUT LIMITATION, 735 ILCS SECTION
105/5-1 ET SEQ, BUT OTHERWISE WITHOUT REGARD TO THE CONFLICT OF LAWS
PROVISIONS) OF THE STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS
APPLICABLE TO NATIONAL BANKS.

     9.13. CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY SUBMITS
TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS
STATE COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO ANY LOAN DOCUMENT AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT
ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW
OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING
HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY LENDER TO BRING PROCEEDINGS
AGAINST THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL
PROCEEDING BY THE BORROWER AGAINST THE AGENT OR ANY LENDER OR ANY AFFILIATE
OF THE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN
ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL
BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS; PROVIDED, THAT SUCH
PROCEEDINGS MAY BE BROUGHT IN OTHER COURTS IF JURISDICTION MAY NOT BE
OBTAINED IN A COURT IN CHICAGO, ILLINOIS.

     9.14. WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT AND EACH LENDER
HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN
ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR
THE RELATIONSHIP ESTABLISHED THEREUNDER.

     9.15. DISCLOSURE. The Borrower and each Lender hereby (a) acknowledge
and agree that First Chicago and/or its Affiliates from time to time may hold
other investments in, make other loans to or have other relationships with
the Borrower, including, without limitation, in connection with any interest
rate hedging instruments or agreements or swap transactions, and (b) waive
any liability of First Chicago or such Affiliate to the Borrower or any
Lender, respectively, arising out of or resulting from such investments,
loans or relationships other than liabilities arising out of the gross
negligence or willful misconduct of First Chicago or its

                                     -52-
<PAGE>

Affiliates to the extent that such liability would not have arisen but for
First Chicago's status as Agent hereunder.

     9.16. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement, and
any of the parties hereto may execute this Agreement by signing any such
counterpart. This Agreement shall be effective when it has been executed by
the Borrower, the Agent and the Lenders and each party has notified the Agent
that it has taken such action.

     9.17. TREATMENT OF CERTAIN INFORMATION: CONFIDENTIALITY.

         (a) The Borrower acknowledges that (i) services may be offered or
provided to it (in connection with this Agreement or otherwise) by each
Lender or by one or more Subsidiaries or Affiliates of such Lender and (ii)
information delivered to each Lender by the Borrower and its Subsidiaries may
be provided to each such Subsidiary and Affiliate, it being understood that
any such Subsidiary or Affiliate receiving such information shall be bound by
the provisions of clause (b) below as if it were a Lender hereunder.

         (b) Each Lender and the Agent agrees (on behalf of itself and each
of its affiliates, directors, officers, employees and representatives) to use
reasonable precautions to keep confidential, in accordance with their
customary procedures for handling confidential information of this nature and
in accordance with safe and sound banking practices, any non-public
information supplied to it by the Borrower pursuant to this Agreement,
provided that nothing herein shall limit the disclosure of any such
information (i) to the extent required by statute, rule, regulation or
judicial process, (ii) to counsel for any of the Lenders or the Agent, (iii)
to bank examiners, auditors or accountants, (iv) to the Agent or any other
Lender (or to First Chicago Capital Markets, Inc.), (v) in connection with
any litigation to which any one or more of the Lenders or the Agent is a
party, (vi) to a subsidiary or affiliate of such Lender as provided in clause
(a) above, (vii) to any assignee or participant (or prospective assignee or
participant) so long as such assignee or participant (or prospective assignee
or participant) agrees with the respective Lender to keep such information
confidential on substantially the terms set forth in this SECTION 9.17(b),
(viii) to any other Person as may be reasonably required in the course of the
enforcement of any Lender's rights or remedies hereunder or under any of such
Lender's Note, or (ix) to any other creditor of either Borrower or any of its
Subsidiaries at any time during the continuance of a Default; PROVIDED that
in no event shall any Lender or the Agent be obligated or required to return
any materials furnished by the Borrower.

                                    ARTICLE X

                                    THE AGENT

     10.1. APPOINTMENT. First Chicago is hereby appointed Agent hereunder and
under each other Loan Document, and each of the Lenders authorizes the Agent
to act as the agent of such Lender. The Agent agrees to act as such upon the
express conditions contained in this ARTICLE X.

                                     -53-
<PAGE>

The Agent shall not have a fiduciary relationship in respect of the Borrower
or any Lender by reason of this Agreement or any other Loan Document.

     10.2. POWERS. The Agent shall have and may exercise such powers under
the Loan Documents as are specifically delegated to the Agent by the terms of
each thereof, together with such powers as are reasonably incidental thereto.
The Agent shall have no implied duties to the Lenders, or any obligation to
the Lenders to take any action thereunder, except any action specifically
provided by the Loan Documents to be taken by the Agent.

     10.3. GENERAL IMMUNITY. Neither the Agent nor any of its directors,
officers, agents or employees shall be liable to the Borrower or any Lender
for any action taken or omitted to be taken by it or them hereunder or under
any other Loan Document or in connection herewith or therewith except for its
or their own gross negligence or willful misconduct.

     10.4. NO RESPONSIBILITY FOR LOANS, RECITALS, ETC. Neither the Agent nor
any of its directors, officers, agents or employees shall be responsible for
or have any duty to ascertain, inquire into, or verify (a) any statement,
warranty or representation made in connection with any Loan Document or any
borrowing hereunder, (b) the performance or observance of any of the
covenants or agreements of any obligor under any Loan Document, including,
without limitation, any agreement by an obligor to furnish information
directly to each Lender; (c) the satisfaction of any condition specified in
ARTICLE IV, except receipt of items required to be delivered to the Agent and
not waived at closing, or (d) the validity, effectiveness, sufficiency,
enforceability or genuineness of any Loan Document or any other instrument or
writing furnished in connection therewith. The Agent shall have no duty to
disclose to the Lenders information that is not required to be furnished by
the Borrower to the Agent at such time, but is voluntarily furnished by the
Borrower to the Agent (either in its capacity as Agent or in its individual
capacity).

     10.5. ACTION ON INSTRUCTIONS OF LENDERS. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder and under
any other Loan Document in accordance with written instructions signed by the
Required Lenders (or, to the extent required by SECTION 8.2, all Lenders),
and such instructions and any action taken or failure to act pursuant thereto
shall be binding on all of the Lenders and on all holders of Notes. The Agent
shall be fully justified in failing or refusing to take any action hereunder
and under any other Loan Document unless it shall first be indemnified to its
satisfaction by the Lenders pro rata against any and all liability, cost and
expense that it may incur by reason of taking or continuing to take any such
action.

     10.6. EMPLOYMENT OF AGENTS AND COUNSEL. The Agent may execute any of its
duties as Agent hereunder and under any other Loan Document by or through
employees, agents and attorneys-in-fact and shall not be answerable to the
Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. The Agent shall be entitled to advice of
counsel concerning all matters pertaining to the agency hereby created and
its duties hereunder and under any other Loan Document.

     10.7. RELIANCE ON DOCUMENTS; COUNSEL. The Agent shall be entitled to
rely upon any Note, notice, consent, certificate, affidavit, letter,
telegram, statement, paper or document

                                     -54-
<PAGE>

believed by it to be genuine and correct and to have been signed or sent by
the proper person or persons, and, in respect to legal matters, upon the
opinion of counsel selected by the Agent, which counsel may be employees of
the Agent.

     10.8. AGENT'S REIMBURSEMENT AND INDEMNIFICATION. The Lenders agree to
reimburse and indemnify the Agent ratably in proportion to their respective
Commitments (or, if the Commitments have been terminated, in proportion to
their Commitments immediately prior to such termination) (a) for any amounts
not reimbursed by the Borrower for which the Agent is entitled to
reimbursement by the Borrower under the Loan Documents, (b) for any other
expenses incurred by the Agent on behalf of the Lenders, in connection with
the preparation, execution, delivery, administration and enforcement of the
Loan Documents, and (c) for any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind and nature whatsoever which may be imposed on, incurred by or asserted
against the Agent in any way relating to or arising out of the Loan Documents
or any other document delivered in connection therewith or the transactions
contemplated thereby, or the enforcement of any of the terms thereof or of
any such other documents; PROVIDED, that no Lender shall be liable for any of
the foregoing to the extent they arise from the gross negligence or willful
misconduct of the Agent. The obligations of the Lenders under this SECTION
10.8 shall survive payment of the Obligations and termination of this
Agreement.

     10.9. NOTICE OF DEFAULT. The Agent shall not be deemed to have knowledge
or notice of the occurrence of any Default or Unmatured Default hereunder
unless the Agent has received written notice from a Lender or the Borrower
referring to this Agreement describing such Default or Unmatured Default and
stating that such notice is a "notice of default". In the event that the
Agent receives such a notice, the Agent shall give prompt notice thereof to
the Lenders.

     10.10. RIGHTS AS A LENDER. In the event the Agent is a Lender, the Agent
shall have the same rights and powers hereunder and under any other Loan
Document as any Lender, including, without limitation, pursuant to ARTICLE
XII hereof, and may exercise the same as though it were not the Agent, and
the term "Lender" or "Lenders" shall, at any time when the Agent is a Lender,
unless the context otherwise indicates, include the Agent in its individual
capacity. The Agent may accept deposits from, lend money to, and generally
engage in any kind of trust, debt, equity or other transaction, in addition
to those contemplated by this Agreement or any other Loan Document, with the
Borrower or any of its Subsidiaries in which the Borrower or such Subsidiary
is not restricted hereby from engaging with any other Person.

     10.11. LENDER CREDIT DECISION. Each Lender acknowledges that it has,
independently and without reliance upon the Agent or any other Lender and
based on the financial statements prepared by the Borrower and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and the other Loan
Documents. Each Lender also acknowledges that it will, independently and
without reliance upon the Agent or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue
to make its own credit decisions in taking or not taking action under this
Agreement and the other Loan Documents.

                                     -55-

<PAGE>

     10.12. SUCCESSOR AGENT. The Agent may resign at any time by giving
written notice thereof to the Lenders and the Borrower, such resignation to
be effective upon the appointment of a successor Agent or, if no successor
Agent has been appointed, forty-five (45) days after the retiring Agent gives
notice of its intention to resign. Upon any such resignation, the Required
Lenders shall have the right to appoint, on behalf of the Lenders, a
successor Agent, which successor Agent, so long as no Default is continuing,
shall be reasonably acceptable to the Borrower. If no successor Agent shall
have been so appointed by the Required Lenders and shall have accepted such
appointment within thirty (30) days after the resigning Agent's giving notice
of its intention to resign, then the resigning Agent may appoint, on behalf
of the Borrower and the Lenders, a successor Agent, which successor Agent, so
long as no Default is continuing, shall be reasonably acceptable to the
Borrower. If the Agent has resigned and no successor Agent has been
appointed, the Lenders may perform all the duties of the Agent hereunder and
the Borrower shall make all payments in respect of the Obligations to the
applicable Lender and for all other purposes shall deal directly with the
Lenders. No successor Agent shall be deemed to be appointed hereunder until
such successor Agent has accepted the appointment. Any such successor Agent
shall be a commercial bank having capital and retained earnings of at least
$250,000,000 and with a Lending Installation in the United States of America.
Upon the acceptance of any appointment as Agent hereunder by a successor
Agent, such successor Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the resigning Agent. Upon
the effectiveness of the resignation of the Agent, the resigning Agent shall
be discharged from its duties and obligations hereunder and under the Loan
Documents. After the effectiveness of the resignation of an Agent, the
provisions of this ARTICLE X shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting
as the Agent hereunder and under the other Loan Documents.

     10.13. DOCUMENTATION AGENT. Each of Fleet National Bank and First Union
National Bank is hereby appointed Documentation Agent of the Lenders
hereunder and under each Loan Document. Each of Fleet National Bank and First
Union National Bank shall not have any duties, responsibilities or
liabilities in its capacity as Documentation Agent.

     10.14. CO-AGENT. Deutsche Bank AG is hereby appointed Co-Agent of the
Lenders hereunder and under each Loan Document. Deutsche Bank AG shall not
have any duties, responsibilities or liabilities in its capacity as Co-Agent.

                                   ARTICLE XI

                            SETOFF; RATABLE PAYMENTS

     11.1. SETOFF. In addition to, and without limitation of, any rights of
the Lenders under applicable law, if the Borrower becomes insolvent, however
evidenced, or any Default or Unmatured Default occurs, any and all deposits
(including all account balances, whether provisional or final and whether or
not collected or available) and any other Indebtedness at any time held or
owing by any Lender to or for the credit or account of the Borrower may be
offset and applied toward the payment of the Obligations owing to such
Lender, whether or not the Obligations, or any part hereof, shall then be due.

                                     -56-
<PAGE>

     11.2. RATABLE PAYMENTS. If any Lender, whether by setoff or otherwise,
has payment made to it upon its Loans (other than payments received pursuant
to SECTIONS 2.17, 3.1, 3.2 or 3.4) in a greater proportion than its pro-rata
share of such Loans, such Lender agrees, promptly upon demand, to purchase a
portion of the Loans held by the other Lenders so that after such purchase
each Lender will hold its ratable proportion of Loans. If any Lender, whether
in connection with setoff or amounts which might be subject to setoff or
otherwise, receives collateral or other protection for its Obligations or
such amounts which may be subject to setoff, such Lender agrees, promptly
upon demand, to take such action necessary such that all Lenders share in the
benefits of such collateral ratably in proportion to their Loans. In case any
such payment is disturbed by legal process, or otherwise, appropriate further
adjustments shall be made. If an amount to be setoff is to be applied to
Indebtedness of the Borrower to a Lender, other than Indebtedness evidenced
by any of the Notes held by such Lender, such amount shall be applied ratably
to such other Indebtedness and to the Indebtedness evidenced by such Notes.

                                   ARTICLE XII

                BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS

     12.1. SUCCESSORS AND ASSIGNS. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Borrower and
the Lenders and their respective successors and assigns, except that (a) the
Borrower shall not have the right to assign its rights or obligations under
the Loan Documents, and (b) any assignment by any Lender must be made in
compliance with SECTION 12.3. Notwithstanding CLAUSE (b) of the preceding
sentence, any Lender may at any time, without the consent of the Borrower or
the Agent, assign all or any portion of its rights under this Agreement and
its Notes to a Federal Reserve Bank; PROVIDED, HOWEVER, that no such
assignment to a Federal Reserve Bank shall release the transferor Lender from
its obligations hereunder. The Agent may treat the payee of any Note as the
owner thereof for all purposes hereof unless and until such payee complies
with SECTION 12.3 in the case of an assignment thereof or, in the case of any
other transfer, a written notice of the transfer is filed with the Agent. Any
assignee or transferee of a Note agrees by acceptance thereof to be bound by
all the terms and provisions of the Loan Documents. Any request, authority or
consent of any Person, who at the time of making such request or giving such
authority or consent is the holder of any Note, shall be conclusive and
binding on any subsequent holder, transferee or assignee of such Note or of
any Note or Notes issued in exchange therefor.

     12.2. PARTICIPATIONS.

         12.2.1. PERMITTED PARTICIPANTS; EFFECT. Any Lender may, in the
ordinary course of its business and in accordance with applicable law, at any
time sell to one or more banks or other entities ("PARTICIPANTS")
participating interests in any Loan owing to such Lender, any Note held by
such Lender, any Commitment of such Lender or any other interest of such
Lender under the Loan Documents. In the event of any such sale by a Lender of
participating interests to a Participant, such Lender's obligations under the
Loan Documents shall remain unchanged, such Lender shall remain solely
responsible to the other parties hereto for the performance of such
obligations, such Lender shall remain the holder of any such Note for all
purposes under the

                                     -57-
<PAGE>

Loan Documents, all amounts payable by the Borrower under this Agreement
shall be determined as if such Lender had not sold such participating
interests, and the Borrower and the Agent shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under the Loan Documents.

         12.2.2. VOTING RIGHTS. Each Lender shall retain the sole right to
approve, without the consent of any Participant, any amendment, modification
or waiver of any provision of the Loan Documents other than any amendment,
modification or waiver which effects any of the modifications referenced in
CLAUSES (a) through (f) of SECTION 8.2.

         12.2.3. BENEFIT OF SETOFF. The Borrower agrees that each Participant
shall be deemed to have the right of setoff provided in SECTION 11.1 in
respect of its participating interest in amounts owing under the Loan
Documents to the same extent as if the amount of its participating interest
were owing directly to it as a Lender under the Loan Documents; PROVIDED,
that each Lender shall retain the right of setoff provided in SECTION 11.1
with respect to the amount of participating interests sold to each
Participant. The Lenders agree to share with each Participant, and each
Participant, by exercising the right of setoff provided in SECTION 11.1,
agrees to share with each Lender, any amount received pursuant to the
exercise of its right of setoff, such amounts to be shared in accordance with
SECTION 11.2 as if each Participant were a Lender.

     12.3. ASSIGNMENTS.

         12.3.1. PERMITTED ASSIGNMENTS. Any Lender may, in the ordinary
course of its business and in accordance with applicable law, at any time
assign to one or more banks or other entities, excluding the Borrower or an
Affiliate thereof, ("PURCHASERS") all or any part of its rights and
obligations under the Loan Documents; provided, however, that in the case of
an assignment to an entity which is not a Lender or an Affiliate of a Lender,
such assignment shall be in a minimum amount of $5,000,000 (or, if less, the
entire amount of such Lender's Commitment). Such assignment shall be
substantially in the form of EXHIBIT C hereto or in such other form as may be
agreed to by the parties thereto. The consent of the Borrower and the Agent
shall be required prior to an assignment becoming effective with respect to a
Purchaser which is not a Lender or an Affiliate thereof; PROVIDED, HOWEVER,
that if a Default has occurred and is continuing, the consent of the Borrower
shall not be required. Such consent shall not be unreasonably withheld or
delayed.

         12.3.2. EFFECT; EFFECTIVE DATE. Upon (a) delivery to the Agent of a
notice of assignment, substantially in the form attached as Exhibit I to
EXHIBIT C hereto (a "NOTICE OF ASSIGNMENT"), together with any consents
required by SECTION 12.3.1, and (b) payment of a $3,500 fee to the Agent for
processing such assignment, such assignment shall become effective on the
effective date specified in such Notice of Assignment. On and after the
effective date of such assignment, (a) such Purchaser shall for all purposes
be a Lender party to this Agreement and any other Loan Document executed by
the Lenders and shall have all the rights and obligations of a Lender under
the Loan Documents, to the same extent as if it were an original party
hereto, and (b) the transferor Lender shall be released with respect to the
percentage of the Aggregate Commitment and Loans assigned to such Purchaser
without any further consent or

                                     -58-
<PAGE>

action by the Borrower, the Lenders or the Agent. Upon the consummation of
any assignment to a Purchaser pursuant to this SECTION 12.3.2, the transferor
Lender, the Agent and the Borrower shall make appropriate arrangements so
that replacement Notes are issued to such transferor Lender and new Notes or,
as appropriate, replacement Notes, are issued to such Purchaser, in each case
in principal amounts reflecting their Commitment, as adjusted pursuant to
such assignment.

     12.4. DISSEMINATION OF INFORMATION. Subject to SECTION 9.17, the
Borrower authorizes each Lender to disclose to any Participant or Purchaser
or any other Person acquiring an interest in the Loan Documents by operation
of law (each a "TRANSFEREE") and any prospective Transferee any and all
information in such Lender's possession concerning the creditworthiness of
the Borrower and its Subsidiaries.

     12.5. TAX TREATMENT. If any interest in any Loan Document is transferred
to any Transferee which is organized under the laws of any jurisdiction other
than the United States or any State thereof, the transferor Lender shall
cause such Transferee, concurrently with the effectiveness of such transfer,
to comply with the provisions of SECTION 2.17.

                                  ARTICLE XIII

                                     NOTICES

     13.1. GIVING NOTICE. All notices and other communications provided to
any party hereto under this Agreement or any other Loan Document shall be in
writing, by facsimile, first class U.S. mail or overnight courier and
addressed or delivered to such party at its address set forth below its
signature hereto or at such other address as may be designated by such party
in a notice to the other parties. Any notice, if mailed and properly
addressed with first class postage prepaid, return receipt requested, shall
be deemed given three (3) Business Days after deposit in the U.S. mail; any
notice, if transmitted by facsimile, shall be deemed given when transmitted;
and any notice given by overnight courier shall be deemed given when received
by the addressee.

     13.2. CHANGE OF ADDRESS. The Borrower, the Agent and any Lender may each
change the address for service of notice upon it by a notice in writing to
the other parties hereto.

                           [signature pages to follow]

                                     -59-
<PAGE>

         IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have
executed this Agreement as of the date first above written.

                                     FUND AMERICAN ENTERPRISES HOLDINGS, INC.

                                     By:
                                        -------------------------------------

                                     Print Name:
                                                -----------------------------

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

                                     Address: 80 South Main Street
                                              Hanover, New Hampshire 03755
                                              Attn: Reid T. Campbell
                                                    Vice President and
                                                    Director of Finance
                                              Fax No.:   (603) 640-2203
                                              Tel. No.:  (603) 643-4562

                                     -60-
<PAGE>

                                PRICING SCHEDULE

-----------------------------------------------------------------------------
                           APPLICABLE EURODOLLAR MARGIN
                              (AS A PER ANNUM RATE)
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                          APPLICABLE EURODOLLAR MARGIN
                                            (BASED ON PERCENT USAGE)
                                  ------------------------------------------
                 LEVEL            Less than 66 2/3%     Greater than 66 2/3%
                 -----
                <S>               <C>                   <C>
                Level I                0.300%                  0.550%
                Level II               0.375%                  0.625%
                Level III              0.475%                  0.725%
                Level IV               0.800%                  1.050%
</TABLE>

-----------------------------------------------------------------------------
                       APPLICABLE FACILITY FEE MARGIN
                           (AS A PER ANNUM RATE)
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
                  LEVEL                   APPLICABLE FACILITY FEE MARGIN
                  -----                   ------------------------------
                <S>                       <C>
                Level I                               0.100%
                Level II                              0.125%
                Level III                             0.150%
                Level IV                              0.200%
</TABLE>

     For the purposes of this Schedule, the following terms have the
following meanings:

     "Applicable Credit Rating" shall mean the highest rating level assigned
by S&P or Moody's, as the case may be, to any long-term senior debt of the
Borrower which ranks on parity, as to payment and security, with the Loans
and the obligations of the Borrower under this Agreement.

     "Level" means, and includes, Level I, Level II, Level III or Level IV,
whichever is in effect at the relevant time.

     "Level I" shall exist at any time the Applicable Credit Rating of S&P is
equal to or greater than BBB+ OR the Applicable Credit Rating of Moody's is
equal to or greater than Baa1.

     "Level II" shall exist at any time (a) the Applicable Credit Rating of
S&P is equal to or greater than BBB OR the Applicable Credit Rating of
Moody's is equal to or greater than Baa2 and (b) Level I does not exist.

     "Level III" shall exist at any time the Applicable Credit Rating of S&P
is BBB- AND the Applicable Credit Rating of Moody's is Baa3.

                                     -61-
<PAGE>

     "Level IV" shall exist at any time the Applicable Credit Rating of S&P
is less than BBB- OR the Applicable Credit Rating of Moody's is less than
Baa3 OR at any time neither S&P nor Moody's assigns an Applicable Credit
Rating.

     "Percent Usage" shall mean at any time the percentage equal to the
aggregate outstanding principal amount of the Loans to the Aggregate
Commitment (or, on and after the Revolver Termination Date, the Percent Usage
shall be the percentage equal to the percentage determined on the Revolver
Termination Date).

                                     -62-

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