Document:

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                                                                       Exh 10.10

                             REIMBURSEMENT CONTRACT

                             EFFECTIVE: JUNE 1, 2006
                                   (CONTRACT)

                                     between

                    LIBERTY AMERICAN SELECT INSURANCE COMPANY
                                PINELLAS PARK, FL
                                    (Company)

                                  NAIC # 32760

                                       and

         THE STATE BOARD OF ADMINISTRATION OF THE STATE OF FLORIDA (SBA)
         WHICH ADMINISTERS THE FLORIDA HURRICANE CATASTROPHE FUND (FHCF)

PREAMBLE

The Legislature of the State of Florida has enacted Section 215.555, Florida
Statutes "Statute", which directs the SBA to administer the FHCF. This Contract
is subject to the Statute and to any administrative rule adopted pursuant
thereto, and is not intended to be in conflict therewith.

In consideration of the promises set forth in this Contract, the parties agree
as follows:

ARTICLE I - SCOPE OF AGREEMENT

As a condition precedent to the SBA's obligations under this Contract, the
Company, an Authorized Insurer or an entity writing Covered Policies under
Section 627.351, Florida Statutes, in the State of Florida, shall report to the
SBA in a specified format the business it writes which is described in this
Contract as Covered Policies.

The terms of this Contract shall determine the rights and obligations of the
parties. This Contract provides reimbursement to the Company under certain
circumstances, as described herein, and does not provide or extend insurance or
reinsurance coverage to any person, firm, corporation or other entity. The SBA
shall reimburse the Company for its Ultimate Net Loss on Covered Policies in
excess of the Company's Retention as a result of each Loss Occurrence commencing
during the Contract Year, to the extent funds are available, all as hereinafter
defined.

                                                                      FHCF-2006K
                                                            Rule 19-8.010 F.A.C.

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ARTICLE II - PARTIES TO THE CONTRACT

This Contract is solely between the Company and the SBA which administers the
FHCF. In no instance shall any insured of the Company or any claimant against an
insured of the Company, or any other third party, have any rights under this
Contract, except as provided in Article XIV. The SBA will only disburse funds to
the Company, except as provided for in Article XIV of this Contract.

ARTICLE III - TERM

This Contract shall apply to Loss Occurrences which commence during the period
from 12:01 a.m., Eastern Time, June 1, 2006, to 12:01 a.m., Eastern Time, June
1, 2007 (Contract Year).

The Company must designate a coverage level, make the required selections, and
return this fully executed Contract (two originals) to the FHCF Administrator so
that the Contract is received by the FHCF Administrator no later than 5 p.m.,
Central Time, June 1, 2006. Failure to do so may result in a referral to the
Office of Insurance Regulation within the Department of Financial Services for
administrative action. Furthermore, the Company's coverage level under this
Contract will be deemed as follows:

(1)  For Companies that are a member of a National Association of Insurance
     Commissioners (NAIC) group, the same coverage level selected by the other
     Companies of the same NAIC group shall be deemed. If executed Contracts for
     none of the members of an NAIC group have been received by the FHCF
     Administrator, the coverage level from the prior Contract Year shall be
     deemed.

(2)  For Companies that are not a member of an NAIC group under which other
     Companies are active participants in the FHCF, the coverage level from the
     prior Contract Year shall be deemed.

(3)  For New Participants, as that term is defined in Article V(21), that are a
     member of an NAIC group, the same coverage level selected by the other
     Companies of the same NAIC group shall be deemed.

(4)  For New Participants that are not a member of an NAIC group under which
     other Companies are active participants in the FHCF, the 45%, 75% or 90%
     coverage levels may be selected providing that the FHCF Administrator
     receives executed Contracts within 30 calendar days of the effective date
     of the first Covered Policy, otherwise, the 45% coverage level shall be
     deemed.

Pursuant to the terms of this Contract, the SBA shall not be liable for Loss
Occurrences which commence after the effective time and date of expiration or
termination. Should this Contract expire or terminate while a Loss Occurrence
covered hereunder is in progress, the SBA shall be responsible for such Loss
Occurrence in progress in the same manner and to the same extent it would have
been responsible had the Contract expired the day following the conclusion of
the Loss Occurrence in progress.

ARTICLE IV - LIABILITY OF THE FHCF

(1)  The SBA shall reimburse the Company, with respect to each Loss Occurrence
     commencing during the Contract Year for the "Reimbursement Percentage"
     elected, this percentage times the amount of Ultimate Net Loss paid by the
     Company in excess of the Company's Retention, as adjusted pursuant to
     Article V(28), plus 5% of the reimbursed losses for Loss Adjustment Expense
     Reimbursement.

(2)  The Reimbursement Percentage will be 45% or 75% or 90%, at the Company's
     option as elected under Article XVIII.

(3)  The aggregate liability of the FHCF with respect to all Reimbursement
     Contracts covering this contract year shall not exceed the limit set forth
     under Section 215.555(4)(c)1., Florida Statutes. For specifics regarding
     loss reimbursement calculations, see section (3)(c) of Article X herein.

(4)  Reimbursement amounts shall not be reduced by reinsurance paid or payable
     to the Company from other sources.

                                                                      FHCF-2006K
                                                            Rule 19-8.010 F.A.C.

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(5)  After the end of the calendar year, the SBA shall notify insurers of the
     estimated Borrowing Capacity and the Balance of the Fund as of December 31.
     In May and October of each year, the SBA shall publish in the Florida
     Administrative Weekly a statement of the FHCF's estimated Borrowing
     Capacity and the projected Balance of the Fund as of December 31.

(6)  The obligation of the SBA with respect to all Contracts covering a
     particular Contract Year shall not exceed the Balance of the Fund as of
     December 31 of that Contract Year, together with the maximum amount the SBA
     is able to raise through the issuance of revenue bonds or other means
     available to the SBA under Section 215.555, Florida Statutes, up to the
     limit in accordance with Section 215.555(4)(c)1., Florida Statutes. The
     obligations and the liability of the SBA are more fully described in Rule
     19-8.013, Florida Administrative Code (F.A.C.). If Reimbursement Premiums,
     earnings thereon, or amounts collected as part of the premium that are
     attributable to the rapid cash buildup factor are used for debt service in
     the event of a temporary shortfall in the collection of emergency
     assessments, then the amount of the Premiums, earnings thereon, or amounts
     collected as part of the premium that are attributable to the rapid cash
     buildup factor so used will be reimbursed to the SBA without interest when
     sufficient emergency assessments are received.

ARTICLE V - DEFINITIONS

(1)  ACTUAL CLAIMS-PAYING CAPACITY OF THE FHCF

     This term means the sum of the Balance of the Fund as of December 31 of a
     Contract Year, plus any reinsurance purchased by the FHCF, plus the amount
     the SBA is able to raise through the issuance of revenue bonds up to the
     limit in accordance with Section 215.555(4)(c)1. and (6), Florida Statutes.

(2)  ACTUARIALLY INDICATED

     This term means, with respect to Premiums paid by Companies for
     reimbursement provided by the FHCF, an amount determined in accordance with
     the definition provided in Section 215.555(2)(a), Florida Statutes.

(3)  ADDITIONAL LIVING EXPENSE (ALE)

     ALE losses covered by the FHCF are not to exceed 40 percent of the insured
     value of a Residential Structure or its contents based on the coverage
     provided in the policy. Fair rental value, loss of use, loss of rents, or
     business interruption losses are not covered by the FHCF.

(4)  ADMINISTRATOR

     This term means the entity with which the SBA contracts to perform
     administrative tasks associated with the operations of the FHCF. The
     Administrator is Paragon Strategic Solutions Inc., 3600 American Boulevard
     West, Suite 700, Minneapolis, Minnesota 55431. The telephone number is
     (800) 689-3863, and the facsimile number is (800) 264-0492.

(5)  AUTHORIZED INSURER

     This term is defined in Section 624.09(1), Florida Statutes.

(6)  BORROWING CAPACITY

     This term means the amount of funds which are able to be raised by the
     issuance of revenue bonds or through other financing mechanisms, less bond
     issuance expenses and reserves.

(7)  CITIZENS PROPERTY INSURANCE CORPORATION (CITIZENS)

     This term means the entity formed under Section 627.351(6), Florida
     Statutes and refers to both Citizens Property Insurance Corporation High
     Risk Account and Citizens Property Insurance Corporation Personal Lines and
     Commercial Lines Accounts.

(8)  CONTRACT

     This term means this Reimbursement Contract for the current Contract Year.

(9)  COVERED EVENT

     This term means any one storm declared to be a hurricane by the National
     Hurricane Center, which causes insured losses in Florida, both while it is
     still a hurricane and throughout any subsequent

                                                                      FHCF-2006K
                                                            Rule 19-8.010 F.A.C.

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     downgrades in storm status by the National Hurricane Center. Any storm,
     including a tropical storm, which does not become a hurricane is not a
     Covered Event.

(10) COVERED POLICY OR COVERED POLICIES

     (a)  Covered Policy, as defined in Section 215.555(2)(c), Florida Statutes,
          is further clarified to mean only that portion of a binder, policy or
          contract of insurance that insures real or personal property located
          in the State of Florida to the extent such policy insures a
          Residential Structure, as defined in definition (27) herein, or the
          contents of a Residential Structure, located in the State of Florida.

     (b)  Due to the specialized nature of the definition of Covered Policies,
          Covered Policies are not limited to only one line of business in the
          Company's annual statement required to be filed by Section 624.424,
          Florida Statutes. Instead, Covered Policies are found in several lines
          of business on the Company's annual statement. Covered Policies will
          at a minimum be reported in the Company's statutory annual statement
          as:

          -    Fire

          -    Allied Lines

          -    Farmowners Multiple Peril

          -    Homeowners Multiple Peril

          -    Commercial Multiple Peril (non liability portion, covering
               condominiums and apartments)

          -    Inland Marine

          Note that where particular insurance exposures, e.g. mobile homes, are
          reported on an annual statement is not dispositive of whether or not
          the exposure is a Covered Policy.

     (c)  This definition applies only to the first-party property section of a
          policy pertaining strictly to the structure, its contents, appurtenant
          structures, or ALE coverage.

     (d)  Covered Policy also includes any collateral protection insurance
          policy covering personal residences which protects both the borrower's
          and the lender's financial interest, in an amount at least equal to
          the coverage for the dwelling in place under the lapsed homeowner's
          policy, if such policy can be accurately reported as required in
          Section 215.555(5), Florida Statutes. A Company will be deemed to be
          able to accurately report data if the required data, as specified in
          the Premium Formula adopted in Section 215.555(5), Florida Statutes,
          is available.

     (e)  See Article VI of this Contract for specific exclusions.

(11) DEDUCTIBLE BUY-BACK POLICIES

     This term means a specific policy that provides coverage to a policyholder
     for some portion of the policyholder's deductible under a policy issued by
     another insurer.

(12) ESTIMATED CLAIMS-PAYING CAPACITY OF THE FHCF

     This term means the sum of the projected Balance of the Fund as of December
     31 of a Contract Year, plus any reinsurance purchased by the FHCF, plus the
     most recent estimate of the Borrowing Capacity of the FHCF, determined
     pursuant to Section 215.555(4)(c), Florida Statutes.

(13) EXCESS POLICIES

     This term, for the purposes of this Contract, means a policy that provides
     insurance protection for large commercial property risks that provides a
     layer of coverage above a primary layer (which is insured by a different
     insurer) that acts much the same as a very large deductible.

(14) FLORIDA DEPARTMENT OF FINANCIAL SERVICES (DEPARTMENT)

     This term means the Florida regulatory agency, created pursuant to Section
     20.121, Florida Statutes, which is charged with regulating the Florida
     insurance market and administering the Florida Insurance Code.

(15) FLORIDA INSURANCE CODE

     This term means those chapters identified in Section 624.01, Florida
     Statutes, which are designated as the Florida Insurance Code.

                                                                      FHCF-2006K
                                                            Rule 19-8.010 F.A.C.

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(16) FORMULA OR THE PREMIUM FORMULA

     This term means the Formula approved by the SBA for the purpose of
     determining the Actuarially Indicated Premium to be paid to the FHCF. The
     Premium Formula is defined as an approach or methodology which leads to the
     creation of premium rates. The resulting rates are therefore incorporated
     as part of the Premium Formula.

(17) FUND BALANCE OR BALANCE OF THE FUND AS OF DECEMBER 31

     These terms mean the "Net assets: Unrestricted" as indicated on the
     unconsolidated FHCF Statement of Net Assets for the then current Contract
     Year, to which is added: reported FHCF losses (including Loss Adjustment
     Expense) for the then current Contract Year, whether paid or unpaid by
     FHCF, as of December 31, and from which is subtracted: any reinsurance
     recovered prior to, or recoverable as of, December 31; any obligations paid
     or expected to be paid with bonding proceeds or receipts from emergency
     assessments; amounts needed for administration for the then current State
     of Florida fiscal year which have not been spent and which are not
     reflected on the FHCF Statement of Net Assets; and the amount of
     undispersed mitigation funds appropriated for the then current State of
     Florida fiscal year.

(18) INSURER GROUP

     For purposes of the coverage option election in Section 215.555(4)(b),
     Florida Statutes, Insurer Group means the group designation assigned by the
     National Association of Insurance Commissioners (NAIC) for purposes of
     filing consolidated financial statements. A Company is a member of a group
     as designated by the NAIC until such Company is assigned another group
     designation or is no longer a member of a group recognized by the NAIC.

(19) LOSS OCCURRENCE

     This term means the sum of individual insured losses incurred under Covered
     Policies resulting from the same Covered Event. "Losses" means direct
     incurred losses under Covered Policies and excludes Loss Adjustment
     Expenses.

(20) LOSS ADJUSTMENT EXPENSE REIMBURSEMENT

     (a)  Loss Adjustment Expense Reimbursement shall be 5% of the reimbursed
          losses under this Contract as provided in Article IV, pursuant to
          Section 215.555(4)(b)1., Florida Statutes.

     (b)  To the extent that loss reimbursements are limited to the Payout
          Multiple applied to each Company, the 5% Loss Adjustment Expense is
          included in the total Payout Multiple applied to each Company.

(21) NEW PARTICIPANT(S)

     This term means all Companies which begin writing Covered Policies on or
     after the beginning of the Contract Year. A Company that removes exposure
     from either Citizens entity, as that term is defined in (7) above, pursuant
     to an assumption agreement effective on or after June 1 and had written no
     other Covered Policies before June 1 is also considered a New Participant.

(22) OFFICE OF INSURANCE REGULATION

     This term means that office within the Department of Financial Services and
     which was created in Section 20.121(3), Florida Statutes.

(23) PAYOUT MULTIPLE

     This term means the multiple as calculated in accordance with Section
     215.555(4)(c), Florida Statutes, which is derived by dividing the single
     season Claims-Paying Capacity of the FHCF by the total aggregate industry
     Reimbursement Premium for the FHCF for the Contract Year billed as of
     December 31 of the Contract Year. The final Payout Multiple is determined
     once Reimbursement Premiums have been billed as of December 31 and the
     amount of bond proceeds has been determined.

(24) PREMIUM

     This term means the same as Reimbursement Premium.

(25) PROJECTED PAYOUT MULTIPLE

     The Projected Payout Multiple is used to calculate a Company's projected
     payout pursuant to Section 215.555(4)(d)2.b., Florida Statutes. The
     Projected Payout Multiple is derived by dividing

                                                                      FHCF-2006K
                                                            Rule 19-8.010 F.A.C.

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     the estimated single season Claims-Paying Capacity of the FHCF by the
     estimated total aggregate industry Reimbursement Premium for the FHCF for
     the Contract Year. The Company's Reimbursement Premium as paid to the SBA
     for the Contract Year is multiplied by the Projected Payout Multiple to
     estimate the Company's coverage from the FHCF for the Contract Year.

(26) REIMBURSEMENT PREMIUM

     This term means the Premium determined by multiplying each $1,000 of
     insured value reported by the Company in accordance with Section
     215.555(5)(b), Florida Statutes, by the rate as derived from the Premium
     Formula, as described in Rule 19-8.028, F.A.C.

(27) RESIDENTIAL STRUCTURES

     This term means dwelling units used as a home or residence for other than
     transient occupancy, as that term is defined in Section 83.43(10), Florida
     Statutes. These include the primary structure and appurtenant structures
     insured under the same policy and any other structures covered under
     endorsements associated with a policy covering a residential structure, the
     principal function of which at the time of loss was as a primary or
     secondary residence. COVERED RESIDENTIAL STRUCTURES DO NOT INCLUDE any
     structures listed under Article VI herein.

(28) RETENTION

     The Company's Retention means the amount of hurricane losses under Covered
     Policies which must be incurred by the Company before it is eligible for
     reimbursement from the FHCF.

     (a)  When the Company experiences covered losses from one or two Covered
          Events during the Contract Year, the Company's full Retention shall be
          applied to each of the Covered Events.

     (b)  When the Company experiences covered losses from more than two Covered
          Events during the Contract Year, the Company's full Retention shall be
          applied to each of the two Covered Events causing the largest covered
          losses for the Company. For each other Covered Event resulting in
          covered losses, the Company's Retention shall be reduced to one-third
          of its full Retention and applied to all other Covered Events.

          1.   All reimbursement of covered losses for each Covered Event shall
               be based on the Company's full Retention until January 1 of the
               Contract Year. Adjustments to reflect a reduction to one-third of
               the full Retention shall be made as soon as practicable after
               January 1 of the Contract Year provided the Company reports its
               losses as specified in this Contract.

          2.   Adjustments to the Company's Retention shall be based upon its
               paid and outstanding losses as reported on the Company's Proof of
               Loss Reports but shall not include incurred but not reported
               losses. The Company's Proof of Loss Reports shall be used to
               determine which Covered Events constitute the Company's two
               largest Covered Events, and the reduction to one-third of the
               full Retention shall be applied to all other Covered Events for
               the Contract Year. After this initial determination, any
               subsequent adjustments shall be made by the SBA only if the
               quarterly loss reports reveal that loss development patterns have
               resulted in a change in the order of Covered Events entitled to
               the reduction to one-third of the full Retention.

     (c)  The Company's full Retention is established in accordance with the
          provisions of Section 215.555(2)(e), Florida Statutes, and shall be
          determined by multiplying the Retention Multiple by the Company's
          Reimbursement Premium for the Contract Year.

     (d)  Once the Company's limit of coverage has been exhausted, the Company
          will not be entitled to further reimbursements. The only exception is
          with regard to an entity created pursuant to 627.351(6), F.S. which is
          addressed in Article X(3)(c)2.c.

(29) RETENTION MULTIPLE

     (a)  The Retention Multiple is applied to the Company's Reimbursement
          Premium to determine the Company's Retention. The Retention Multiple
          for the 2006/2007 Contract Year shall be equal to $4.5 billion,
          adjusted based upon the reported exposure for the 2005/2006 Contract
          Year to reflect the percentage growth in exposure to the FHCF since
          2004, divided by the

                                                                      FHCF-2006K
                                                            Rule 19-8.010 F.A.C.

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          estimated total industry Reimbursement Premium at the 90%
          reimbursement percentage level for the Contract Year as determined by
          the SBA.

     (b)  The Retention Multiple as determined under (29)(a) above shall be
          adjusted to reflect the reimbursement percentage elected by the
          Company under this Contract as follows:

          1.   If the Company elects a 90% reimbursement percentage, the
               adjusted Retention Multiple is 100% of the amount determined
               under (29)(a) above;

          2.   If the Company elects a 75% reimbursement percentage, the
               adjusted Retention Multiple is 120% of the amount determined
               under (29)(a) above; or

          3.   If the Company elects a 45% reimbursement percentage, the
               adjusted Retention Multiple is 200% of the amount determined
               under (29)(a) above.

(30) ULTIMATE NET LOSS

     (a)  This term means all losses of the Company under Covered Policies,
          prior to the application of the Company's FHCF Retention, as defined
          under (28) above, and reimbursement percentage, and excluding loss
          adjustment expense, arising from each Loss Occurrence during the
          Contract Year, provided, however, that the Company's loss shall be
          determined in accordance with the deductible level written under the
          policy sustaining the loss.

     (b)  Salvages and all other recoveries, excluding reinsurance recoveries,
          shall be first deducted from such loss to arrive at the amount of
          liability attaching hereunder.

     (c)  All salvages, recoveries or payments recovered or received subsequent
          to a loss settlement under this Contract shall be applied as if
          recovered or received prior to the aforesaid settlement and all
          necessary adjustments shall be made by the parties hereto.

     (d)  Nothing in this clause shall be construed to mean that losses under
          this Contract are not recoverable until the Company's Ultimate Net
          Loss has been ascertained.

     (e)  The SBA shall be subrogated to the rights of the Company to the extent
          of its reimbursement of the Company. The Company agrees to assist and
          cooperate with the SBA in all respects as regards such subrogation.
          The Company further agrees to undertake such actions as may be
          necessary to enforce its rights of salvage and subrogation, and its
          rights, if any, against other insurers as respects any claim, loss, or
          payment arising out of a Covered Event.

ARTICLE VI - EXCLUSIONS

This Contract does not provide reimbursement for:

(1)  Any losses not defined as being within the scope of a Covered Policy.

(2)  Any policy which excludes wind or hurricane coverage.

(3)  Any Excess Policy or Deductible Buy-Back Policy that requires individual
     ratemaking.

(4)  Any liability of the Company attributable to losses for fair rental value,
     loss of use, loss of rents, or business interruption.

(5)  Any collateral protection policy that does not meet the definition of
     Covered Policy as defined in Article V(10)(d) herein.

(6)  Any reinsurance assumed by the Company.

(7)  Any exposure for: hotels, motels, timeshares, or other similar structures
     that are rented out daily, weekly, or monthly; homeowner associations, if
     no habitational structures are insured under the policy; and shelters,
     camps or retreats.

(8)  Commercial healthcare facilities and nursing homes; however, a nursing home
     which is an integral part of a retirement community consisting primarily of
     habitational structures that are not nursing homes will not be subject to
     this exclusion.

(9)  Any exposure under commercial policies covering only appurtenant structures
     or structures that do not function as a habitational structure (e.g. a
     policy covering only the pool of an apartment complex).

(10) Personal contents in a commercial storage facility covered under a policy
     that covers only those personal contents.

                                                                      FHCF-2006K
                                                            Rule 19-8.010 F.A.C.

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(11) Policies covering only Additional Living Expense.

(12) Any exposure for barns or barns with apartments.

(13) Any exposure for builders risk coverage or new residential structures still
     under construction.

(14) Any exposure described as a vacant property under a commercial policy.

(15) Any exposure for recreational vehicles or boats (including boat related
     equipment) requiring licensing and written on a separate policy or
     endorsement.

(16) Any liability of the Company for extra contractual obligations and excess
     of original policy limits liabilities.

(17) Losses in excess of the sum of the Balance of the Fund as of December 31 of
     the Contract Year and the amount the SBA is able to raise through the
     issuance of revenue bonds or by the use of other financing mechanisms, up
     to the limit pursuant to Section 215.555(4)(c), Florida Statutes.

(18) Any liability assumed by the Company from Pools, Associations, and
     Syndicates. Exception: Covered Policies assumed from Citizens under the
     terms and conditions of an executed assumption agreement between the
     Authorized Insurer and Citizens are covered by this Contract.

(19) All liability of the Company arising by contract, operation of law, or
     otherwise, from its participation or membership, whether voluntary or
     involuntary, in any insolvency fund. "Insolvency fund" includes any
     guaranty fund, insolvency fund, plan, pool, association, fund or other
     arrangement, howsoever denominated, established or governed, which provides
     for any assessment of or payment or assumption by the Company of part or
     all of any claim, debt, charge, fee, or other obligation of an insurer, or
     its successors or assigns, which has been declared by any competent
     authority to be insolvent, or which is otherwise deemed unable to meet any
     claim, debt, charge, fee or other obligation in whole or in part.

(20) Any liability of the Company for loss or damage caused by or resulting from
     nuclear reaction, nuclear radiation, or radioactive contamination from any
     cause, whether direct or indirect, proximate or remote, and regardless of
     any other cause or event contributing concurrently or in any other sequence
     to the loss.

(21) The FHCF does not provide coverage for water damage which is generally
     excluded under property insurance contracts and has been defined to mean
     flood, surface water, waves, tidal water, overflow of a body of water,
     storm surge, or spray from any of these, whether or not driven by wind.

(22) Specialized Fine Arts Risks as defined in Rule 19-8.028(4)(d), F.A.C.

ARTICLE VII - MANAGEMENT OF CLAIMS AND LOSSES

The Company shall investigate and settle or defend all claims and losses. All
payments of claims or losses by the Company within the terms and limits of the
appropriate coverage parts of Covered Policies shall be binding on the SBA,
subject to the terms of this Contract, including the provisions in Article XIII
relating to inspection of records and examinations.

ARTICLE VIII - LOSS REIMBURSEMENT ADJUSTMENTS

(1)  OFFSETS

     The SBA reserves the right to offset amounts payable to the SBA from the
     Company, including amounts payable under previous Contract Years, against
     any reimbursement or advance amounts due and payable to the Company from
     the SBA as a result of the liability of the SBA.

(2)  REIMBURSEMENT ADJUSTMENTS

     Section 215.555(4)(d) and (e), Florida Statutes, provides the SBA with the
     right to seek the return of excess loss reimbursements which have been paid
     to the Company along with interest thereon. Excess loss reimbursements are
     those payments made to the Company by the SBA that are in excess of the
     Company's coverage under the Contract Year. Excess loss reimbursements may
     result from adjustments to the Projected Payout Multiple or the Payout
     Multiple, incorrect exposure (Data Call) submissions or resubmissions,
     incorrect calculations of Reimbursement Premiums or Retentions,

                                                                      FHCF-2006K
                                                            Rule 19-8.010 F.A.C.

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     incorrect Proof of Loss Reports, incorrect calculation of reinsurance
     recoveries, or subsequent readjustment of policyholder claims, including
     subrogation and salvage, or any combination of the foregoing. The Company
     will be sent an invoice showing the due date for adjustments along with the
     interest due thereon through the due date. The applicable interest rate for
     interest credits, and for interest charges for adjustments beyond the
     Company's control, will be the average rate earned by the SBA for the FHCF
     for the first five months of the Contract Year. The applicable interest
     rate for interest charges due to adjustments resulting from incorrect
     exposure submissions or Proof of Loss Reports will accrue at this rate plus
     5%. Interest will continue to accrue if not paid by the due date.

ARTICLE IX - REIMBURSEMENT PREMIUM

(1)  The Company shall, in a timely manner, pay the SBA its Reimbursement
     Premium for the Contract Year. The Reimbursement Premium for the Contract
     Year shall be calculated in accordance with Section 215.555, Florida
     Statutes, with any rules promulgated thereunder, and with Article X(2).

(2)  Since the calculation of the Actuarially Indicated Premium assumes that the
     Companies will pay their Reimbursement Premiums timely, interest charges
     will accrue under the following circumstances. A Company may choose to
     estimate its own Premium installments. However, if the Company's estimation
     is less than the provisional Premium billed, an interest charge will accrue
     on the difference between the estimated Premium and the final Premium. If a
     Company estimates its first installment, the Administrator shall bill that
     estimated Premium as the second installment as well, which will be
     considered as an estimate by the Company. No interest will accrue regarding
     any provisional Premium if paid as billed by the FHCF's Administrator,
     except in the case of an estimated second installment as set forth in this
     Article. Also, if a Company makes an estimation that is higher than the
     provisional Premium billed but is less than the final Premium, interest
     will not accrue. If the Premium payment is not received from a Company when
     it is due, an interest charge will accrue on a daily basis until the
     payment is received. Interest will also accrue on Premiums resulting from
     submissions or resubmissions finalized after December 1 of the Contract
     Year. An interest credit will be applied for any Premium which is overpaid
     as either an estimate or as a provisional Premium. Interest shall not be
     credited past December 1 of the Contract Year. The applicable interest rate
     for interest credits will be the average rate earned by the SBA for the
     FHCF for the first five months of the Contract Year. The applicable
     interest rate for interest charges will accrue at this rate plus 5%.

ARTICLE X - REPORTS AND REMITTANCES

(1)  EXPOSURES

     (a)  If the Company writes Covered Policies before June 1 of the Contract
          Year, the Company shall report to the SBA, unless otherwise provided
          in Rule 19-8.029, F.A.C., no later than the statutorily required date
          of September 1 of the Contract Year, by ZIP Code or other limited
          geographical area as specified by the SBA, its insured values under
          Covered Policies as of June 30 of the Contract Year as outlined in the
          annual reporting of insured values form, FHCF-D1A (Data Call) adopted
          for the Contract Year under Rule 19-8.029, F.A.C., and other data or
          information in the format specified by the SBA.

     (b)  If the Company first begins writing Covered Policies on or after June
          1 but prior to December 1 of the Contract Year, the Company shall
          report to the SBA, no later than March 1 of the Contract Year, by ZIP
          Code or other limited geographical area as specified by the SBA, its
          insured values under Covered Policies as of December 31 of the
          Contract Year as outlined in the Supplemental Instructions for New
          Participants section of the Data Call adopted for the Contract Year
          under Rule 19-8.029, F.A.C., and other data or information in the
          format specified by the SBA.

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     (c)  If the Company first begins writing Covered Policies on or after
          December 1 but through and including May 31 of the Contract Year, the
          Company shall not report its exposure data for the Contract Year to
          the SBA.

     (d)  The requirement that a report is due on a certain date means that the
          report shall be in the physical possession of the FHCF's Administrator
          in Minneapolis no later than 5 p.m. on the due date. If the applicable
          due date is a Saturday, Sunday or legal holiday, then the actual due
          date will be the day immediately following the applicable due date
          which is not a Saturday, Sunday or legal holiday. For purposes of the
          timeliness of the submission, neither the United States Postal Service
          postmark nor a postage meter date is in any way determinative. Reports
          sent to the SBA in Tallahassee, Florida, will be returned to the
          sender. Reports not in the physical possession of the FHCF's
          Administrator by 5 p.m., Central Time, on the applicable due date are
          late.

     (e)  Pursuant to the provisions of Section 215.557, Florida Statutes, the
          reports of insured values under Covered Policies by ZIP Code submitted
          to the SBA pursuant to Section 215.555, Florida Statutes, are
          confidential and exempt from the provisions of Section 119.07(1),
          Florida Statutes, and Section 24(a), Art. I of the State Constitution.

(2)  REIMBURSEMENT PREMIUM

     (a)  If the Company writes Covered Policies before June 1 of the Contract
          Year, the Company shall pay the FHCF its Reimbursement Premium in
          installments due on or before August 1, October 1, and December 1 of
          the Contract Year in amounts to be determined by the FHCF. However, if
          the Company's Reimbursement Premium for the prior Contract Year was
          less than $5,000, the Company's full provisional Reimbursement
          Premium, in an amount equal to the Reimbursement Premium paid in the
          prior year, shall be due in full on or before August 1 of the Contract
          Year. The Company will be invoiced for amounts due, if any, beyond the
          provisional Reimbursement Premium payment, on or before December 1 of
          the Contract Year. In addition, if a company has been placed under
          regulatory supervision by a State or control of the Company has been
          transferred through any legal or regulatory proceeding to a state
          regulator or court appointed receiver or rehabilitator (referred to in
          the aggregate as "State action"), the full annual provisional
          Reimbursement Premium as billed and any outstanding balances will be
          due on August 1, or the date that such State action occurs after
          August 1 of the Contract Year.

     (b)  A New Participant that first begins writing Covered Policies on or
          after June 1 but prior to December 1 of the Contract Year shall pay
          the FHCF a provisional Reimbursement Premium of $1,000 upon execution
          of this Contract. The Administrator shall calculate the Company's
          actual Reimbursement Premium for the period based on its actual
          exposure as of December 31 of the Contract Year, as reported on or
          before March 1. To recognize that New Participants have limited
          exposure during this period, the actual Premium as determined by
          processing the Company's exposure data shall then be divided in half,
          the provisional Premium shall be credited, and the resulting amount
          shall be the total Premium due for the Company for the remainder of
          the Contract Year. However, if that amount is less than $1,000, then
          the Company shall pay $1,000. The Premium payment is due no later than
          May 1 of the Contract Year. The Company's Retention and coverage will
          be determined based on the total Premium due as calculated above.

     (c)  A New Participant that first begins writing Covered Policies on or
          after December 1 but through and including May 31 of the Contract Year
          shall pay the FHCF a Reimbursement Premium of $1,000 upon execution of
          this Contract.

     (d)  The requirement that the Reimbursement Premium is due on a certain
          date means that the Premium shall be in the physical possession of the
          FHCF no later than 5 p.m., Eastern Time, on the due date applicable to
          the particular installment. If remitted by check to the FHCF's Post
          Office Box, the check shall be physically in the Post Office Box
          550261, Tampa, FL 33655-0261, as set out on the invoice sent to the
          Company. If remitted by check by hand delivery, the check shall be
          physically on the premises of the FHCF's bank in Tampa, Florida, as
          set out on

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          the invoice sent to the Company. If remitted electronically, the wire
          transfer shall have been completed to the FHCF's account at its bank
          in Tampa, Florida, as set out on the invoice sent to the Company. If
          the applicable due date is a Saturday, Sunday or legal holiday, then
          the actual due date will be the day immediately following the
          applicable due date which is not a Saturday, Sunday or legal holiday.
          For purposes of the timeliness of the remittance, neither the United
          States Postal Service postmark nor a postage meter date is in any way
          determinative. Premium checks sent to the SBA in Tallahassee, Florida,
          or to the FHCF's Administrator in Minneapolis, Minnesota, will be
          returned to the sender. Reimbursement Premiums not in the physical
          possession of the FHCF by 5 p.m., Eastern Time, on the applicable due
          date are late.

     (e)  Except as required by Section 215.555(7)(c), Florida Statutes, or as
          described in the following sentence, Reimbursement Premiums, together
          with earnings thereon, received in a given Contract Year will be used
          only to pay for losses attributable to Covered Events occurring in
          that Contract Year or for losses attributable to Covered Events in
          subsequent Contract Years and will not be used to pay for losses in
          prior years or for debt service on revenue bonds. Amounts collected as
          part of the premium that are attributable to the rapid cash buildup
          factor, as permitted by Section 215.555(5)(b), Florida Statutes may be
          used to pay for losses attributable to prior years. Pursuant to
          Section 215.555(6)(a)1., Florida Statutes, Premiums, earnings thereon,
          and amounts collected as part of the premium that are attributable to
          rapid cash buildup may be used for payments relating to revenue bonds
          in the event Emergency Assessments are insufficient. If Premiums,
          earnings thereon, or amounts collected as part of the premium that are
          attributable to rapid cash buildup are used for debt service, then the
          amount of the Premiums, earnings thereon, or amounts collected as part
          of the premium that are attributable to rapid cash buildup so used
          shall be returned, without interest, to the Fund when Emergency
          Assessments remain available after making payment relating to the
          revenue bonds and any other purposes for which Emergency Assessments
          were levied.

(3)  CLAIMS AND LOSSES

     (a)  IN GENERAL

          1.   Claims and losses resulting from Loss Occurrences commencing
               during the Contract Year shall be reported by the Company and
               reimbursed by the FHCF as provided herein and in accordance with
               the Statute, this Contract, and any rules adopted pursuant to the
               Statute. For a Company participating in a quota share primary
               insurance agreement(s) with Citizens Property Insurance
               Corporation High Risk Account, Citizens and the Company shall
               report only their respective portion of losses under the quota
               share primary insurance agreement(s). Pursuant to Section
               215.555(4)(c), Florida Statutes, the SBA is obligated to pay for
               losses not to exceed the Actual Claims-Paying Capacity of the
               FHCF, up to the limit in accordance with Section 215.555(4)(c)1.,
               Florida Statutes, for any one Contract Year.

          2.   If the Company is in non-compliance with Section 215.555, Florida
               Statutes for any Contract Year, including deadlines for sending
               in Contracts, addendums or attachments to Contracts, Data Call
               submissions or resubmissions, loss reports, or in responding to
               SBA exam requirements, the SBA reserves the right to withhold
               reimbursements or advances until such time the Company becomes
               compliant.

     (b)  LOSS REPORTS

          1.   At the direction of the SBA, the Company shall report its
               projected Ultimate Net Loss from each Loss Occurrence to provide
               information to the SBA in determining any potential liability for
               possible reimbursable losses under the Contract on the Interim
               Loss Report, Form FHCF-L1A, as adopted in Rule 19-8.029, F.A.C.
               Interim Loss Reports (including subsequent Interim Loss Reports
               if required by the SBA) will be due in no less than fourteen days
               from the date of the notice from the SBA that such a report is
               required.

          2.   FHCF loss reimbursements will be issued based on Ultimate Net
               Loss information reported by the Company on the Proof of Loss
               Report, Form FHCF-L1B, as adopted in Rule 19-8.029, F.A.C. To
               qualify for reimbursement, the Proof of Loss Report must have the

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               original signatures of two executive officers authorized
               by the Company to sign the report. While a Company may submit a
               Proof of Loss Report requesting reimbursement at any time
               following a Loss Occurrence, all Companies shall submit a
               mandatory Proof of Loss Report for each Loss Occurrence no
               earlier than December 1 and no later than December 31 of the
               Contract Year during which the Covered Event(s) occurs using the
               most current data available, regardless of the amount of Ultimate
               Net Loss or the amount of loss reimbursements or advances already
               received. Reports may be faxed only if the Company does not
               qualify for a reimbursement.

          3.   Quarterly thereafter until all claims and losses resulting from a
               Loss Occurrence are fully discharged or the Company has received
               its full coverage under the Contract Year in which the Loss
               Occurrence(s) occurred, the Company shall submit updated Proof of
               Loss Reports for each Loss Occurrence, as applicable. If the
               Company's Retention must be recalculated as the result of an
               exposure resubmission, and if the recalculated Retention changes
               the FHCF's reimbursement obligations, then the Company shall
               submit additional Proof of Loss Reports for recalculation of the
               FHCF's obligations.

          4.   Annually thereafter, all Companies shall submit a mandatory
               year-end Proof of Loss Report for each Loss Occurrence, as
               applicable, using the most current data available. This Proof of
               Loss Report shall be filed no earlier than December 1 and no
               later than December 31 of each year and shall continue until the
               earlier of the expiration of the commutation period described in
               (3)(d) below or until all claims and losses resulting from the
               Loss Occurrence are fully discharged including any adjustments to
               such losses due to salvage or other recoveries.

          5.   The SBA, except as noted below, will determine and pay, within 30
               days or as soon as practicable after receiving Proof of Loss
               Reports, the reimbursement amount due based on losses paid by the
               Company to date and adjustments to this amount based on
               subsequent quarterly information. The adjustments to
               reimbursement amounts shall require the SBA to pay, or the
               Company to return, amounts reflecting the most recent
               determination of losses. The FHCF shall have the right to conduct
               a claims examination prior to the issuance of any advances or
               reimbursements submitted by Companies that have been placed under
               regulatory supervision by a State or where control has been
               transferred through any legal or regulatory proceeding to a state
               regulator or court appointed receiver or rehabilitator.

          6.   If a Covered Event occurs during the Contract Year, but after
               December 31, at the direction of the SBA, Companies shall file an
               Interim Loss Report within 30 days after the Covered Event and
               Proof of Loss Reports quarterly thereafter. Subparagraphs 2-5
               above regarding Proof of Loss Reports shall apply.

          7.   All Proof of Loss Reports received will be compared with the
               FHCF's exposure data to establish the facial reasonableness of
               the reports. The SBA may also review the results of current and
               prior Contract Year exposure and loss examinations to determine
               the reasonableness of the reported losses. Except as noted in
               paragraph 4. above, Companies meeting these tests for
               reasonableness will be scheduled for reimbursement. Companies not
               meeting these tests for reasonableness will be handled on a
               case-by-case basis and will be contacted to provide specific
               information regarding their individual book of business. The
               discovery of errors in a Company's reported exposure under the
               Data Call may require a resubmission of the current Contract Year
               Data Call which, as the Data Call impacts the Company's premium,
               retention, and coverage for the Contract Year, will be required
               before the Company's request for reimbursement or an advance will
               be fully processed by the Administrator.

     (c)  LOSS REIMBURSEMENT CALCULATIONS

          1.   In general, the Company's paid Ultimate Net Losses must exceed
               its full FHCF Retention for a specific Covered Event before any
               reimbursement is payable from the FHCF for that Covered Event. As
               described in Article V(28), Retention adjustments will be made
               after

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               January 1 of the Contract Year. No interest is payable on
               additional payments to the Company due to this type of Retention
               adjustment. Each Company sustaining reimbursable losses will
               receive the amount of reimbursement due under the Contract up to
               the amount of the Company's payout. If more than one Covered
               Event occurs in any one Contract Year, any reimbursements due
               from the FHCF shall take into account the Company's Retention for
               each Covered Event. However, the Company's reimbursements from
               the FHCF for all Covered Events occurring during the Contract
               Year shall not exceed, in aggregate, the Projected Payout
               Multiple or Payout Multiple, as applicable, times the individual
               Company's Reimbursement Premium for the Contract Year.

          2.   In determining reimbursements under this Contract, the SBA shall:

               a.   First, reimburse Companies qualified as limited
                    apportionment companies under Section 627.351(2)(b)3.,
                    Florida Statutes, for the amount (if any) of reimbursement
                    due under the individual Company's Contract, but not to
                    exceed the lesser of $10 million or an amount equal to 10
                    times the individual Company's Reimbursement Premium for the
                    Contract Year. This provision does not apply if the
                    projected Balance of the Fund as of December 31 of the
                    Contract Year, exclusive of any bonding capacity of the
                    FHCF, exceeds $2 billion. Further, if the Company is a
                    member of an NAIC group, the Company may not receive
                    reimbursement under this provision if any other member of
                    the NAIC group has received reimbursement under this
                    provision.

               b.   Next, reimburse each of the Companies for the amount (if
                    any) of reimbursement due under the individual Company's
                    Contract, but not to exceed for all Loss Occurrences, an
                    amount equal to the Projected Payout Multiple or the Payout
                    Multiple, as applicable, times the individual Company's
                    Reimbursement Premium for the Contract Year. For a limited
                    apportionment company, any amount payable under this
                    provision shall be reduced by the amount (if any) payable
                    under (a) above.

               c.   Thereafter, pursuant to Section 215.555(4)(d)2.c., Florida
                    Statutes, establish the prorated reimbursement level at the
                    highest level for which any remaining fund balance or bond
                    proceeds (as limited by Section 215.555(4)(c), Florida
                    Statutes) are sufficient to reimburse entities created
                    pursuant to Section 627.351(6), Florida Statutes, for
                    reimbursable losses exceeding the amounts payable pursuant
                    to (b) above for the Contract Year. The proration shall be
                    determined based on each entity's share of their aggregate
                    reimbursable losses exceeding the amounts payable pursuant
                    to (b) above. Any additional reimbursements pursuant to this
                    paragraph shall not include losses under an entity's FHCF
                    Retention and will be at the 90% Reimbursement Percentage.
                    In order to determine the amount available for additional
                    reimbursements, the SBA will review reported loss
                    information from all Companies and determine that all
                    Companies which received payments for reimbursable losses
                    but which did not exceed their projected payout have settled
                    all, or substantially all, of their claims eligible for
                    reimbursement. The SBA will then determine the remaining
                    amount of Claims-Paying Capacity available for such
                    additional reimbursements.

          3.   Reserve established. When a Covered Event occurs in a subsequent
               Contract Year when reimbursable losses are still being paid for a
               Covered Event in a previous Contract Year, the SBA will establish
               a reserve for the outstanding reimbursable losses for the
               previous Contract Year, based on the length of time the losses
               have been outstanding, the amount of losses already paid, the
               percentage of incurred losses still unpaid, and any other factors
               specific to the loss development of the Covered Events involved.

     (d)  COMMUTATION

          1.   Not less than 36 months or more than 60 months after the end of
               the Contract Year, the Company shall report to the FHCF all
               claims and losses, both reported and unreported, for the Contract
               Year which are not finally settled and which may be reimbursable
               losses under this Contract. The Company and the SBA or their
               respective representatives may, by

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               mutual agreement, determine the capitalized value of all claims
               and losses, both reported and unreported, resulting from Loss
               Occurrences commencing during the Contract Year, and the Company
               shall provide the SBA with a copy of a written opinion on such
               capitalized value by the Company's certifying actuary. Payment by
               the SBA of its portion of any amount or amounts so mutually
               agreed and certified by the Company's certifying actuary shall
               constitute a complete and final release of the SBA in respect of
               all claims and losses, both reported and unreported, under this
               Contract.

          2.   If agreement on capitalized value cannot be reached within 60
               days after the Company reports its claims and losses to the FHCF,
               the Company and the SBA may mutually appoint an actuary or
               appraiser to investigate, determine and capitalize such claims or
               losses. If both parties then agree, the SBA shall pay its portion
               of the amount so determined to be the capitalized value of such
               claims or losses.

          3.   If the parties fail to agree, then any difference shall be
               settled by a panel of three actuaries, one to be chosen by each
               party and the third by the two so chosen. If either party does
               not appoint an actuary within 30 days, the other party may
               appoint two actuaries. If the two actuaries fail to agree on the
               selection of a third actuary within 30 days of their appointment,
               each of them shall name two, of whom the other shall decline one
               and the decision shall be made by drawing lots. All the actuaries
               shall be regularly engaged in the valuation of property claims
               and losses and shall be members of the Casualty Actuarial Society
               and of the American Academy of Actuaries. None of the actuaries
               shall be under the control of either party to this Contract. Each
               party shall submit its case to its actuary within 30 days of the
               appointment of the third actuary. The decision in writing of any
               two actuaries, when filed with the parties hereto, shall be final
               and binding on both parties.

          4.   The reasonable and customary expense of the actuaries and of the
               commutation (as a result of 2. and 3. above) shall be equally
               divided between the two parties. Said commutation shall take
               place in Tallahassee, Florida, unless some other place is
               mutually agreed upon by the Company and the SBA.

(4)  ADVANCES

     (a)  In accordance with Section 215.555(4)(e), Florida Statutes, the SBA
          may make advances for loss reimbursements as defined herein, at market
          interest rates, to the Company in accordance with Section
          215.555(4)(e), Florida Statutes. An advance is an early reimbursement
          which allows the Company to continue to pay claims in a timely manner.
          Advances will be made based on the Company's Ultimate Net Loss, on an
          incurred basis, as reported on a Proof of Loss Report, and shall
          include Loss Adjustment Expense Reimbursement as calculated by the
          FHCF. In order to be eligible for an advance, the Company must submit
          its exposure data for the Contract Year as required under paragraph
          (1) of this Article. Except as noted below, advances, if approved,
          will be made as soon as practicable after the SBA receives a written
          request, signed by two officers of the Company, for an advance of a
          specific amount and any other information required for the specific
          type of advance under subparagraphs (c) and (e) below. All
          reimbursements due to a Company shall be offset against any amount of
          outstanding advances plus the interest due thereon.

     (b)  For advances or excess advances, which are advances that are in excess
          of the amount to which the Company is entitled, the market interest
          rate shall be the prime rate as published in the Wall Street Journal
          on the first business day of the Contract Year. This rate will be
          adjusted annually on the first business day of each subsequent
          Contract Year, regardless of whether the Company executes subsequent
          Contracts. All interest charged will commence on the date the SBA
          issues a check for an advance and will cease on the date upon which
          the FHCF has received the Company's Proof of Loss Report(s) for the
          Covered Event(s) for which the Company qualifies for reimbursement(s).
          If such reimbursement(s) are less than the amount of outstanding
          advance(s) issued to the Company, interest will continue to accrue on
          the outstanding balance of the advance(s) until subsequent Proof of
          Loss Reports qualify the Company for

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          reimbursement under any Covered Event equal to or exceeding the amount
          of any outstanding advance(s). Interest shall be billed on a periodic
          basis. If it is determined that the Company received funds in excess
          of those to which it was entitled, the interest as to those sums will
          not cease on the date of the receipt of the Proof of Loss Report but
          will continue until the Company reimburses the FHCF for the
          overpayment.

     (c)  If the Company has an outstanding advance balance as of December 31 of
          this or any other Contract Year, the Company is required to have an
          actuary certify outstanding and incurred but not reported losses as
          reported on the applicable December Proof of Loss Report.

     (d)  The specific type of advances enumerated in the Section 215.555,
          Florida Statutes, follow.

          1.   Advances to Companies to prevent insolvency, as defined under
               Article XIV of this Contract.

               a.   Section 215.555(4)(e)1., Florida Statutes, provides that the
                    SBA shall advance to the Company amounts necessary to
                    maintain the solvency of the Company, up to 50 percent of
                    the SBA's estimate of the reimbursement due to the Company.

               b.   In addition to the requirements outlined in subparagraph
                    (4)(a) above, the requirements for an advance to a Company
                    to prevent insolvency are that the Company demonstrates it
                    is likely to qualify for reimbursement and that the
                    immediate receipt of moneys from the SBA is likely to
                    prevent the Company from becoming insolvent, and the Company
                    provides the following information:

                    i.   Current assets;

                    ii.  Current liabilities other than liabilities due to the
                         Covered Event;

                    iii. Current surplus as to policyholders;

                    iv.  Estimate of other expected liabilities not due to the
                         Covered Event; and

                    v.   Amount of reinsurance available to pay claims for the
                         Covered Event under other reinsurance treaties.

               c.   The SBA's final decision regarding an application for an
                    advance to prevent insolvency shall be based on whether or
                    not, considering the totality of the circumstances,
                    including the SBA's obligations to provide reimbursement for
                    all Covered Events occurring during the Contract Year,
                    granting an advance is essential to allowing the entity to
                    continue to pay additional claims for a Covered Event in a
                    timely manner.

          2.   Advances to entities created pursuant to Section 627.351(6),
               Florida Statutes.

               a.   Section 215.555(4)(e)2., Florida Statutes, provides that the
                    SBA may advance to an entity created pursuant to Section
                    627.351(6), Florida Statutes, up to 90% of the lesser of the
                    SBA's estimate of the reimbursement due or the entity's
                    share of the actual aggregate Reimbursement Premium for that
                    Contract Year, multiplied by the current available liquid
                    assets of the FHCF.

               b.   In addition to the requirements outlined in subparagraph
                    (4)(a) above, the requirements for an advance to entities
                    created pursuant to Section 627.351(6), Florida Statutes are
                    that the entity must demonstrate to the SBA that the advance
                    is essential to allow the entity to pay claims for a Covered
                    Event.

          3.   Advances to limited apportionment companies.

               Section 215.555(4)(e)3., Florida Statutes, provides that the SBA
               may advance the amount of estimated reimbursement payable to
               limited apportionment companies.

     (e)  In determining whether or not to grant an advance and the amount of an
          advance, the SBA:

          1.   Shall determine whether its assets available for the payment of
               obligations are sufficient and sufficiently liquid to fulfill its
               obligations to other Companies prior to granting an advance;

          2.   Shall review and consider all the information submitted by such
               Companies;

          3.   Shall review such Companies' compliance with all requirements of
               Section 215.555, Florida Statutes;

          4.   Shall consult with all relevant regulatory agencies to seek all
               relevant information;

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          5.   Shall review the damage caused by the Covered Event and when that
               Covered Event occurred; and

          6.   Shall consider any other factors deemed relevant.

     (f)  In situations where a Company has been placed under regulatory
          supervision by a State, or where control has been transferred through
          any legal or regulatory proceeding to a state regulator, court
          appointed receiver or rehabilitator, or a state insurance guarantee
          association, all requirements of the Company outlined herein shall
          remain applicable and must be met prior to the issuance of any advance
          of reimbursements for which the Company may be eligible to receive
          under the Contract.

     (g)  Any amount advanced by the SBA shall be used by the Company only to
          pay claims of its policyholders for the Covered Event or Covered
          Events which have precipitated the immediate need to continue to pay
          additional claims as they become due.

(5)  DELINQUENT PREMIUM PAYMENTS

     Failure to submit a Premium or Premium installment when due is a violation
     of the terms of this Contract and Section 215.555, Florida Statutes.
     Interest on late payments shall be due as set forth in Article IX(2) of
     this Contract.

(6)  INADEQUATE DATA SUBMISSIONS

     If exposure data or other information required to be reported by the
     Company under the terms of this Contract is not received by the FHCF in the
     format specified by the FHCF and is inadequate to the extent that the FHCF
     requires resubmission of data, the Company will be required to pay the FHCF
     a resubmission fee of $1,000. The $1,000 fee is also applicable to exposure
     resubmissions made as a result of examinations of the Company's exposure
     and claims data. A resubmission of exposure data may delay the processing
     of the Company's request for reimbursement or an advance.

(7)  DELINQUENT SUBMISSIONS

     Failure to submit an exposure submission or resubmission, or loss reports,
     when due is a violation of the terms of this Contract and Section 215.555,
     Florida Statutes.

ARTICLE XI - TAXES

In consideration of the terms under which this Contract is issued, the Company
agrees to make no deduction in respect of the Premium herein when making premium
tax returns to the appropriate authorities. Should any taxes be levied on the
Company in respect of the Premium herein, the Company agrees to make no claim
upon the SBA for reimbursement in respect of such taxes.

ARTICLE XII - ERRORS AND OMISSIONS

Any inadvertent delay, omission, or error on the part of the SBA shall not be
held to relieve the Company from any liability which would attach to it
hereunder if such delay, omission, or error had not been made.

ARTICLE XIII - INSPECTION OF RECORDS

The Company shall allow the SBA to inspect, examine, and verify, at reasonable
times, all records of the Company relating to the Covered Policies under this
Contract, including Company files concerning claims, losses, or legal
proceedings regarding subrogation or claims recoveries which involve this
Contract, including premium, loss records and reports involving exposure data on
Covered Policies. This right by the SBA to inspect, examine, and verify shall
survive the completion and closure of an exposure examination or loss
examination file and the termination of the Contract. The Company shall have no
right to re-open an exposure or loss reimbursement examination once closed and
the findings have been accepted by the Company; any re-opening shall be at the
sole discretion of the SBA. All discovered errors, inadvertent omissions, and
typographical errors associated with the data reporting of insured values,
discovered prior to the closing of the file and acceptance of the examination
findings by the

                                                                      FHCF-2006K
                                                            Rule 19-8.010 F.A.C.

                                       16

<PAGE>

Company, shall be corrected to reflect the proper values. The Company shall
retain its records in accordance with the requirements for records retention
regarding exposure reports and claims reports outlined herein, and in any
administrative rules adopted pursuant to Section 215.555, Florida Statutes.
Companies writing covered collateral protection policies, as defined in
definition (10)(d) of Article V herein, must be able to provide documentation
that the policy covers personal residences, protects both the borrower's and
lender's interest, and that the coverage is in an amount at least equal to the
coverage for the dwelling in place under the lapsed homeowner's policy.

(1)  EXAMINATION REQUIREMENTS FOR EXPOSURE VERIFICATION

     The Company shall retain complete and accurate records, in policy level
     detail, of all exposure data submitted to the SBA in any Contract Year
     until the SBA has completed its examination of the Company's exposure
     submissions. The Company shall also retain complete and accurate records of
     any completed exposure examination for any Contract Year in which the
     Company incurred losses until the completion of the loss reimbursement
     examination for that Contract Year. The records to be retained shall
     include the exam file which supports the exposure reported to the SBA and
     any other information which would allow for a complete examination of the
     Company's reported exposure data. The exam file shall be prepared according
     to the SBA Exam File Specifications outlined in the Data Call. The Company
     must also have available, at the time of the examination, a copy of its
     underwriting manual, a copy of its rating manual, and staff to respond to
     the questions of the SBA or its agents. The Company is also required to
     retain declarations pages and policy applications to support reported
     exposure. To meet the requirement that the application must be retained,
     the Company may retain either the actual application or may retain the
     actual application in an electronic format. A complete list of records to
     be retained are set forth in Form FHCF-EAP1, adopted in Rule 19-8.030,
     F.A.C.

(2)  EXAMINATION REQUIREMENTS FOR LOSS REPORTS

     The Company shall retain complete and accurate records of all reported
     losses and/or advances submitted to the SBA until the SBA has completed its
     examination of the Company's reimbursable losses. The records to be
     retained are set forth as part of the Proof of Loss Report, Form FHCF-L1B,
     adopted in Rule 19-8.029, F.A.C., and Form FHCF-LAP1, adopted in Rule
     19-8.030, F.A.C. The Company must also retain the required exposure exam
     file for the Contract Year in which the loss occurred, and must have
     available any other information which would allow for a complete
     examination of the Company's losses.

(3)  EXAMINATION PROCEDURES

     (a)  The FHCF will send an examination notice to the Company providing the
          commencement date of the examination, the site of the examination, any
          accommodation requirements of the examiner, and the reports and data
          which must be assembled by the Company and forwarded to the FHCF upon
          request. The Company shall be prepared to choose one location in which
          to be examined, unless otherwise specified by the SBA.

     (b)  The reports and data are required to be forwarded to the FHCF as set
          forth in an examination notice letter. The information is then
          forwarded to the examiner. If the FHCF receives accurate and complete
          records as requested, the examiner will contact the Company to inform
          the Company as to what policies or other documentation will be
          required once the examiner is on site. Any records not required to be
          provided to the examiner in advance shall be made available at the
          time the examiner arrives on site.

     (c)  At the conclusion of the examiner's work and the management review of
          the examiner's report, findings, recommendations, and work papers, the
          FHCF will forward a preliminary draft of the examination report to the
          Company and require a response from the Company by a date certain as
          to the examination findings and recommendations.

     (d)  If the Company accepts the examination findings and recommendations,
          and there is no recommendation for resubmission of the Company's
          exposure data, the examination report will be finalized and the exam
          file closed.

                                                                      FHCF-2006K
                                                            Rule 19-8.010 F.A.C.

                                       17

<PAGE>

     (e)  If the Company disputes the examiner's findings, the areas in dispute
          will be resolved by a meeting or a conference call between the Company
          and FHCF management.

     (f)1. The recommendation of a loss reimbursement examination could require
          the Company to resubmit or update its loss reports or exposure data.

     2.   If the recommendation of the examiner is to resubmit the Company's
          exposure data for the Contract Year in question, then the FHCF will
          send the Company a letter outlining the process for resubmission and
          including a deadline to resubmit. The resubmission will include a data
          file to be submitted to the FHCF's Administrator and an exam file to
          be submitted to the offices of the SBA. The resubmission is also
          required to be accompanied by a detailed written description of the
          specific changes made to the resubmitted data. Once the resubmission
          is received by the FHCF's Administrator, the FHCF's Administrator
          calculates a revised Reimbursement Premium for the Contract Year which
          has been examined. The SBA shall then review the resubmission with
          respect to the examiner's findings, and accept the resubmission or
          contact the Company with any questions regarding the resubmission.
          Once the SBA has accepted the resubmission as a sufficient response to
          the examiner's findings, the FHCF's Administrator will send the
          Company an invoice for any Reimbursement Premium and interest due or
          to refund Reimbursement Premium, as the case may be. Once the
          resubmission has been approved, the exam file is closed.

     3.   If the recommendation of the examiner is either to resubmit the
          Company's exposure data for the Contract Year in question or giving
          the option to pay the estimated Premium difference, then the FHCF will
          send the Company a letter outlining the process for resubmission or
          for paying the estimated Premium difference and including a deadline
          for the resubmission or the payment to be received by the FHCF's
          Administrator. If the Company chooses to resubmit, the same procedures
          outlined in Article XIII(3)(f)2. apply.

     4.   If the recommendation of the examiner is to update the Company's Proof
          of Loss Report(s) for the Contract Year under review, the FHCF will
          send the Company a letter outlining the process for submitting the
          Proof of Loss Report(s) and including a deadline to file. The updated
          Proof of Loss Report(s) will be submitted to the FHCF's Administrator
          with a copy of the Proof of Loss Report(s) and a supporting detailed
          claims listing to be submitted to the offices of the SBA. The report
          is required to be accompanied by a detailed written description of the
          specific changes made. Once the Proof of Loss Report(s) is received by
          the FHCF Administrator, the FHCF's Administrator will calculate a
          revised reimbursement. The SBA shall then review the submitted Proof
          of Loss Report(s) with respect to the examiner's findings, and accept
          the Proof of Loss Report(s) as filed or contact the Company with any
          questions. Once the SBA has accepted the corrected Proof of Loss
          Report(s) as a sufficient response to the examiner's findings, the
          FHCF's Administrator will send the Company an invoice for any
          overpayments and interest due or the additional reimbursement owed the
          Company, as the case may be. Once the Proof of Loss Report(s) is
          approved, the exam file is closed.

     (g)  If the Company continues to dispute the examiner's findings and/or
          recommendations and no resolution of the disputed matters is obtained
          through discussions between the Company and FHCF management, then the
          process within the SBA is at an end and further administrative
          remedies may be pursued under Chapter 120, Florida Statutes.

     (h)  The examiner's list of errors is made available in the examination
          report sent to the Company. Given that the examination was based on a
          sample of the Company's policies or claims rather than the whole
          universe of the Company's Covered Policies or reported claims, the
          error list is not intended to provide a complete list of errors but is
          intended to indicate what information needs to be reviewed and
          corrected throughout the Company's book of Covered Policy business or
          claims information to ensure more complete and accurate reporting to
          the FHCF.

                                                                      FHCF-2006K
                                                            Rule 19-8.010 F.A.C.

                                       18

<PAGE>

(4)  COSTS OF THE EXAMINATIONS

     The costs of the examinations shall be borne by the SBA. However, in order
     to remove any incentive for a Company to delay preparations for an
     examination, the SBA shall be reimbursed by the Company for any examination
     expenses incurred in addition to the usual and customary costs, which
     additional expenses were incurred as a result of the Company's failure,
     despite proper notice, to be prepared for the examination or as a result of
     a Company's failure to provide requested information. All requested
     information must be complete and accurate. The Company shall be notified of
     any administrative remedies which may be obtained under Chapter 120,
     Florida Statutes.

ARTICLE XIV - INSOLVENCY OF THE COMPANY

Company shall notify the FHCF immediately upon becoming insolvent. Pursuant to
Section 215.555(4)(g), Florida Statutes, the FHCF is required to pay the "net
amount of all reimbursement moneys" due an insolvent insurer to the Florida
Insurance Guaranty Association (FIGA) for the benefit of Florida policyholders.
For the purpose of this Contract, a Company is insolvent when an order of
liquidation with a finding of insolvency has been entered by a court of
competent jurisdiction. In light of the need for an immediate infusion of funds
to enable policyholders of insolvent companies to be paid for their claims, the
SBA may enter into agreements with FIGA allowing exposure and loss examinations
to take place immediately without the usual notice and response time limitations
and allowing the FHCF to make loss reimbursements (net of any amounts payable to
the SBA from the Company or FIGA) to FIGA before the examinations are completed
and before the response time expires for claims filing by reinsurers and
financial institutions, which have a priority interest in those funds pursuant
to Section 215.555(4)(g), Florida Statutes. Such agreements must ensure the
availability of the necessary records and adequate security must be provided so
that if the FHCF determines that it overpaid FIGA on behalf of the Company, or
if claims are filed by reinsurers or financial institutions having a priority
interest in these funds, that the funds will be repaid to the FHCF by FIGA with
in a reasonable time.

ARTICLE XV - TERMINATION

The FHCF and the obligations of both parties under this Contract can be
terminated only as may be provided by law or applicable rules.

ARTICLE XVI - VIOLATIONS

Pursuant to the provisions of Section 215.555(10), Florida Statutes, any
violation of the terms of this Contract by the Company constitutes a violation
of the Insurance Code of the State of the Florida. Pursuant to the provisions of
Section 215.555(11), Florida Statutes, the SBA is authorized to take any action
necessary to enforce any administrative rules adopted pursuant to Section
215.555, Florida Statutes, and the provisions and requirements of this Contract.

ARTICLE XVII - APPLICABLE LAW

(1)  APPLICABLE LAW: This Contract shall be governed by and construed according
     to the laws of the State of Florida in respect of any matter relating to or
     arising out of this Contract.

(2)  NOTICE OF RIGHTS: Pursuant to Chapter 120, Florida Statutes, and the
     Uniform Rules of Procedure, codified as Chapters 28-101 through 28-111,
     F.A.C., a person whose substantial interests are affected by a decision of
     the SBA regarding the FHCF may request a hearing within 21 days shall have
     waived his or her right to a hearing. The hearing may be a formal hearing
     or an informal hearing pursuant to the provisions of Sections 120.569 and
     120.57, Florida Statutes. The petition must be filed (received) in the
     office of the Agency Clerk, General Counsel's Office, State Board of
     Administration of Florida, P.O. Box 13300, Tallahassee, FL 32317-3300,
     within the 21 day period.

                                                                      FHCF-2006K
                                                            Rule 19-8.010 F.A.C.

                                       19

<PAGE>

ARTICLE XVIII - REIMBURSEMENT CONTRACT ELECTIONS

REIMBURSEMENT PERCENTAGE

For purposes of determining reimbursement (if any) due the Company under this
Contract and in accordance with the Statute, the Company has the option to elect
a 45% or 75% or 90% reimbursement percentage under this Contract. If the Company
is a member of an NAIC group, all members must elect the same reimbursement
percentage, and the individual executing this Contract on behalf of the Company,
by placing his or her initials in the box under (a) below, affirms that the
Company has elected the same reimbursement percentage as all members of its NAIC
group. If the Company is an entity created pursuant to Section 627.351, Florida
Statutes, the Company must elect the 90% reimbursement percentage. The Company
shall not be permitted to change its reimbursement percentage during the
Contract Year. The Company shall be permitted to change its reimbursement
percentage at the beginning of a new Contract Year, but may not reduce its
reimbursement percentage if a Covered Event required the issuance of revenue
bonds, until the bonds have been fully repaid.

The Reimbursement Percentage elected by the Company for the prior Contract Year
effective June 1, 2005 was as follows: (Legal_Name) - (M_2005_Coverage_Option)

(a)  NAIC GROUP AFFIRMATION: Initial the following box if the Company is part of
     an NAIC Group:

                                      (TBM)

(b)  REIMBURSEMENT PERCENTAGE ELECTION: The Company hereby elects the following
     Reimbursement Percentage for the Contract Year from 12:01 a.m., Eastern
     Time, June 1, 2006, to 12:01 a.m., Eastern Time, June 1, 2007, (the
     individual executing this Contract on behalf of the Company shall place his
     or her initials in the box to the left of the percentage elected for the
     Company):

                       (BOX) 45% OR (BOX) 75% OR (TBM) 90%

REPORTING EXPOSURE FOR A SINGLE STRUCTURE, WITH A MIX OF COMMERCIAL HABITATIONAL
AND COMMERCIAL NON-HABITATIONAL EXPOSURE, WRITTEN ON A COMMERCIAL POLICY

This section is applicable to all Companies which either have exposure for
single structures with a mix of commercial habitational and commercial
non-habitational exposure written under a Commercial Policy, or have the
authority to write such policies. If the Company does not have the authority to
write this type of exposure, this section DOES NOT apply; initial the N/A box on
the next page, which completes this ARTICLE. If the Company DOES write, or has
the authority to write, this type of exposure, please read and complete the
remainder of this ARTICLE.

COMMERCIAL-RESIDENTIAL CLASS CODE

If a single structure is used for both habitational and non-habitational
purposes and the structure has a commercial-residential class code (based on a
classification plan on file with and reviewed by the Administrator), the entire
exposure for the structure should be reported to the FHCF under the Data Call,
and the FHCF will reimburse losses for the entire structure as well.

                                                                      FHCF-2006K
                                                            Rule 19-8.010 F.A.C.

                                       20

<PAGE>

COMMERCIAL NON-RESIDENTIAL/BUSINESS CLASS CODE

If a single structure is used for both habitational and non-habitational
purposes and the structure has a commercial non-residential or business class
code (based on a classification plan on file with and reviewed by the
Administrator), the habitational portion of that structure should be identified
and reported to the FHCF under the Data Call.

However, in recognition of the unusual nature of commercial structures with
incidental habitational exposure and the hardship some companies may face in
having to carve out such incidental habitational exposure, as well as the losses
to such structures, the FHCF will accommodate these companies by allowing them
to exclude the entire exposure for the single structure from their Data Call
submission, providing the following two conditions are met:

(1)  The decision to not carve out and report the incidental habitational
     exposure shall apply to all such structures insured by the Company; and

(2)  If the incidental habitational exposure is not reported to the FHCF, the
     Company agrees it shall not report losses to the structure and the FHCF
     shall not reimburse any losses to the structure.

Initial the CARVING box below if the Company is able to carve out and report its
incidental habitational exposure, OR, if this requirement presents a hardship,
the Company must communicate its decision to not carve out and to not report the
incidental exposure by having the individual executing this Contract on behalf
of the Company placing his or her initials in the NOT CARVING box below. If the
Company does not currently write such policies, but has the authority to write
such policies after the start date of this Contract, the decision to carve or
not carve out the incidental habitational exposure must be indicated below.

                     (BOX)    OR      (TBM)      OR   (BOX)
                    CARVING        NOT CARVING          NA

By initialing the CARVING OR NOT CARVING box above, the Company is making an
irrevocable decision for the corresponding Contract Year Data Call submission
and any subsequent resubmissions.

IMPORTANT NOTE: SINCE THIS ELECTION WILL IMPACT YOUR DATA CALL SUBMISSION,
                PLEASE SHARE THIS DECISION WITH THE INDIVIDUAL(S) RESPONSIBLE
                FOR COMPILING YOUR DATA CALL SUBMISSION.

                                                                      FHCF-2006K
                                                            Rule 19-8.010 F.A.C.

                                       21

<PAGE>

ARTICLE XIX - SIGNATURES

APPROVED BY:

Florida Hurricane Catastrophe Fund

By: State Board of Administration of the State of Florida

By: /s/ Linda Lettera, General Counsel for   08/07/2006
    --------------------------------------   Date
    Coleman Stipanovich
    Executive Director

Approved as to legality:

By: /s/ Thomas A. Bink, General Counsel for   08/03/2006
    ---------------------------------------   Date
    Linda Lettera
    General Counsel
    FL Bar ID#311911

Liberty American Select Insurance Company f/k/a Mobile USA Insurance Company
Company

By: /s/ T. Bruce Meyer, Corporate President & CEO   05/22/2006
    ---------------------------------------------   Date
Name/Title

                                                                      FHCF-2006K
                                                            Rule 19-8.010 F.A.C.

                                       22
<PAGE>

                                 ADDENDUM NO. 1
                                       TO
                             REIMBURSEMENT CONTRACT
                             EFFECTIVE: JUNE 1, 2006
                                   (CONTRACT)

                                     between

                    LIBERTY AMERICAN SELECT INSURANCE COMPANY
                                PINELLAS PARK, FL
                                    (Company)

                                  NAIC # 32760

                                       and

      THE STATE BOARD OF ADMINISTRATION OF THE STATE OF FLORIDA (SBA) WHICH
            ADMINISTERS THE FLORIDA HURRICANE CATASTROPHE FUND (FHCF)

IT IS HEREBY AGREED, effective at 12:01 a.m., Eastern Time, June 1, 2006, that
this Contract shall be amended as follows:

ARTICLE V - DEFINITIONS

(16) FORMULA OR THE PREMIUM FORMULA

     This term means the Formula approved by the SBA for the purpose of
     determining the Actuarially Indicated Premium to be paid to the FHCF. The
     Premium Formula is defined as an approach or methodology which leads to the
     creation of premium rates. The formula shall, pursuant to Section
     215.555(5)(b), Florida Statutes, include a factor of 25 percent of the
     fund's actuarially indicated premium in order to provide for more rapid
     cash buildup in the FHCF. The resulting rates are therefore incorporated as
     part of the Premium Formula.

Article VI(4) shall be amended as follows:

ARTICLE VI - EXCLUSIONS

(4)  Any liability of the Company attributable to losses for fair rental value,
     loss of rent or rental income, or business interruption.

                                                         FHCF-2006K-1, rev. 6/06
                                                                19-8.010, F.A.C.

                                        1

<PAGE>

Article (X)(3)(c)2. is amended as follows:

ARTICLE X - REPORTS AND REMITTANCES

     2.   In determining reimbursements under this Contract, the SBA shall:

          a.   Reimburse each of the Companies for the amount (if any) of
               reimbursement due under the individual Company's Contract, but
               not to exceed for all Loss Occurrences, an amount equal to the
               Projected Payout Multiple or the Payout Multiple, as applicable,
               times the individual Company's Reimbursement Premium for the
               Contract Year.

          b.   Thereafter, pursuant to Section 215.555(4)(d)2.b., Florida
               Statutes, establish the prorated reimbursement level at the
               highest level for which any remaining fund balance or bond
               proceeds (as limited by Section 215.555(4)(c), Florida Statutes)
               are sufficient to reimburse entities created pursuant to Section
               627.351(6), Florida Statutes, for reimbursable losses exceeding
               the amounts payable pursuant to (a) above for the Contract Year.
               The proration shall be determined based on each entity's share of
               their aggregate reimbursable losses exceeding the amounts payable
               pursuant to (a) above. Any additional reimbursements pursuant to
               this paragraph shall not include losses under an entity's FHCF
               Retention and will be at the 90% Reimbursement Percentage. In
               order to determine the amount available for additional
               reimbursements, the SBA will review reported loss information
               from all Companies and determine that all Companies which
               received payments for reimbursable losses but which did not
               exceed their projected payout have settled all, or substantially
               all, of their claims eligible for reimbursement. The SBA will
               then determine the remaining amount of Claims-Paying Capacity
               available for such additional reimbursements.

APPROVED BY:

Florida Hurricane Catastrophe Fund

By: State Board of Administration

By: /s/ Linda Lettera, General Counsel for   08/07/2006
    --------------------------------------   Date
    Coleman Stipanovich
    Executive Director

Approved as to legality:

/s/ Thomas A. Bink, General Counsel for      08/03/2006
---------------------------------------      Date
Linda Lettera
General Counsel
FL Bar ID#311911

Liberty American Select Insurance Company f/k/a Mobile USA Insurance Company
COMPANY

By: /s/ T. Bruce Meyer, Corporate President & CEO
    ---------------------------------------------
Name/Title                                                       Date 05/22/2006

                                                         FHCF-2006K-1, rev. 6/06
                                                                19-8.010, F.A.C.

                                        2

<PAGE>

                                 ADDENDUM NO. 2
                                       TO
                             REIMBURSEMENT CONTRACT
                             EFFECTIVE: JUNE 1, 2006
                                   (CONTRACT)

                                     between

                    LIBERTY AMERICAN SELECT INSURANCE COMPANY
                                PINELLAS PARK, FL
                                    (Company)

                                  NAIC # 32760

                                       and

         THE STATE BOARD OF ADMINISTRATION OF THE STATE OF FLORIDA (SBA)
         WHICH ADMINISTERS THE FLORIDA HURRICANE CATASTROPHE FUND (FHCF)

IT IS HEREBY AGREED, effective at 12:01 a.m., Eastern Time, June 1, 2006, that
this Contract shall be amended as follows:

ADDITIONAL COVERAGE OPTION FOR LIMITED APPORTIONMENT COMPANIES PURSUANT TO
SECTION 215.555(4)(B), FLORIDA STATUTES.

Insurers which qualify as Limited Apportionment Companies under s.
627.351(6)(c), Florida Statutes may select additional FHCF reimbursement
coverage of up to $10 million dollars. The additional premium to be charged for
this additional reimbursement coverage shall be 50 percent of the additional
reimbursement coverage provided, which shall include one prepaid full
reinstatement. The additional premium shall be due and payable in three equal
installments on August 1, 2006, on October 1, 2006, and on December 1, 2006. The
minimum retention level that must be retained associated with this additional
coverage layer is 30 percent of the insurer's surplus as of March 31, 2006. The
reimbursement percentage applicable to this additional coverage shall be 100
percent, which includes reimbursement for loss adjustment expense as provided
under the Reimbursement Contract.

This additional reimbursement coverage shall be in addition to all other
coverage provided by the SBA under the Company's Reimbursement Contract and
shall be in addition to the claims-paying capacity of the FHCF as defined in
Section 215.555(4)(c)1., Florida Statutes, but only with respect to those
insurers that select the additional coverage option. This additional coverage
shall not overlap or duplicate coverage otherwise provided for in the
Reimbursement Contract or offset any co-payments. The claims-paying capacity
with respect to all other participating insurers,

                                                         FHCF-2006K-2, rev. 6/06
                                                                19-8.010, F.A.C.

                                        1

<PAGE>

including Limited Apportionment Companies that do not select the additional
coverage option, shall be limited to their reimbursement premium's proportionate
share of the actual claims-paying capacity as defined in Section
215.555(4)(c)1., Florida Statutes and as provided for under the terms of the
Reimbursement Contract. Coverage provided in the Reimbursement Contract for
participating insurers will not be affected by the additional premiums paid by
Limited Apportionment Companies exercising this additional coverage option.

Coverage provided in this additional coverage option shall otherwise be
consistent with terms and conditions as relates to the Reimbursement Contract
including, but not limited to, definitions, coverage for Covered Policies as
defined, exclusions, loss reporting, and examination procedures.

The optional coverage provided in this Addendum expires on May 31, 2007 and is
not renewable.

ALL LIMITED APPORTIONMENT COMPANIES MUST INDICATE BELOW THE LEVEL OF OPTIONAL
ADDITIONAL COVERAGE SELECTED FROM ZERO UP TO THE STATUTORY MAXIMUM OF $10
MILLION DOLLARS. IF NO ADDITIONAL COVERAGE IS SELECTED, THE COMPANY SHALL
INDICATE BY PLACING $0 IN THE BLANK SPACE PROVIDED BELOW.

Amount of Additional FHCF Coverage selected: (Indicate an amount from $0 for no
additional coverage up to $10 million; there is no additional coverage available
in excess of $10 million) $10 Million.

IF THIS ADDENDUM NO. 2 IS RETURNED WITHOUT THE ABOVE BLANK SPACE FILLED IN WITH
A DOLLAR AMOUNT, IT SHALL BE DEEMED BY THE STATE BOARD OF ADMINISTRATION TO BE A
CHOICE NOT TO SELECT THE ADDITIONAL COVERAGE.

Liberty American Select Insurance Company f/k/a Mobile USA Insurance Company
COMPANY

By: /s/ T. Bruce Meyer, Corporate President & CEO
    ---------------------------------------------
Name/Title                                                       Date 05/22/2006

APPROVED BY:

Florida Hurricane Catastrophe Fund

By: State Board of Administration of
    the State of Florida

By: /s/ Linda Lettera, General Counsel for  08/21/2006
    --------------------------------------  Date
    Coleman Stipanovich
    Executive Director

Approved as to legality:

By: /s/ Thomas A. Bink, General Counsel for   08/03/2006
    ---------------------------------------   Date
    Linda Lettera
    General Counsel
    FL                                 Bar                             ID#311911

                                                         FHCF-2006K-2, rev. 6/06
                                                         19-8.010, F.A.C.

                                        2exv10w2

 

EMPLOYMENT AGREEMENT

     AGREEMENT made as of the 1st day of October 1, 2006, by and among BICUS SERVICES CORPORATION,
a Pennsylvania corporation, MERCER INSURANCE GROUP, INC, a Pennsylvania corporation, MERCER
INSURANCE COMPANY, a Pennsylvania corporation, and PAUL R. CORKERY.

     Bicus Services Corporation, a wholly-owned subsidiary of Mercer Insurance Company, desires to
employ Mr. Corkery, and Mr. Corkery is willing to serve Bicus Services Corporation on the terms and
conditions herein provided.

     In order to effect the foregoing, the parties hereto desire to enter into an employment
agreement on the terms and conditions set forth below. Accordingly, in consideration of the
premises and the respective covenants and agreements of the parties contained herein, and intending
to be legally bound hereby, the parties hereto agree as follows:

     1. Definitions. Each capitalized word and term used herein shall have the meaning
ascribed to it in the glossary appended hereto, unless the context in which such word or term is
used otherwise clearly requires. Such glossary is incorporated herein by reference and made a part
hereof.

     2. Employment. The Company hereby agrees to employ the Executive, and the Executive
hereby agrees to serve the Company, on the terms and conditions set forth herein.

     3. Term of Agreement. The Executive’s employment under this Agreement shall commence
on the date of this Agreement and, except as otherwise provided herein, shall continue until March
31, 2008; provided, however, that commencing on March 31, 2007 and each March 31 thereafter, the
term of this Agreement shall automatically be extended for one additional year beyond the term
otherwise established unless, prior to such March 31st date, the Company shall not have given a
Notice of Extension in the form attached hereto as Exhibit A.

     4. Position and Duties. The Executive shall serve as a Senior Vice President of the
Company, and he shall have such responsibilities, duties and authority as may, from time to time,
be generally associated with such positions. In addition, the Executive shall serve in such
capacity, with respect to each Subsidiary or Affiliate, as the Board of Directors of each such
Subsidiary or Affiliate shall designate from time to time. During the term of this Agreement, he
shall devote substantially all of his working time and efforts to the business and affairs of the
Company, the Subsidiaries and the Affiliate; provided, however, that nothing herein shall be
construed as precluding him from devoting a reasonable amount of time to civic, charitable, trade
association, and similar activities, at least to the extent he is presently devoting time.

     5. Compensation and Related Matters.

     Base Compensation. During the period of the Executive’s employment hereunder, the
Company shall pay to him annual base compensation of $200,000.

     Thereafter, the Board of Directors of the Company shall periodically review the Executive’s
employment performance, in accordance with policies generally in effect from time to time, for
possible merit or cost-of-living increases in such base compensation. Except for a

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reduction which is proportionate to a company-wide reduction in executive pay, the annual base
compensation paid to the Executive in any period shall not be less than the annual base
compensation paid to him in any prior period. The frequency and manner of payment of such base
compensation shall be in accordance with the Company’s executive payroll practices from time to
time in effect. Nothing herein shall be construed as precluding the Executive from entering into
any salary reduction or deferral plan or arrangement during the term of this Agreement; provided,
however, that his base compensation shall be determined without regard to any such salary reduction
or deferral for purposes of calculating the amount of any compensation and benefits to which he or
his surviving spouse may be entitled under Paragraph 6, 7, 10, or 11 following his termination of
employment. The amounts set forth in the first sentence of this subparagraph shall be pro rated to
the extent such period is less than a year.

          (a) Incentive Compensation. During the period of the Executive’s employment
hereunder, he shall be entitled to participate in all incentive plans, stock option plans, stock
appreciation rights plans, and similar arrangements maintained by the Company or its Affiliates for
executive officers on a basis and at award levels consistent and commensurate with his position and
duties hereunder.

          (b) Employee Benefit Plans and Other Plans or Arrangements. The Executive shall be
entitled to participate in all Employee Benefit Plans of the Company and its Affiliates on the same
basis as other executive officers of the Company. In addition, he shall be entitled to participate
in and enjoy any other plans and arrangements that provide for sick leave, vacation, sabbatical, or
personal days, education payment or reimbursement, business-related seminars, and similar fringe
benefits provided to or for the executive officers of the Company and its Affiliates from time to
time, but at least to the extent he is presently entitled to participate in and enjoy such plans
and arrangements.

          (c) Expenses. During the period of the Executive’s employment hereunder, he shall be
entitled to receive prompt reimbursement for all reasonable and customary expenses, including
transportation expenses, incurred by him in performing services hereunder in accordance with the
general policies and procedures established by the Company.

     6. Termination By Reason of Disability.

          (a) In General. In the event the Executive becomes unable to perform his duties on a
full-time basis by reason of the occurrence of his Disability and, within 30 days after a Notice of
Termination is given, he shall not have returned to the full-time performance of such duties, his
employment may be terminated by the Company.

          (b) Compensation and Benefits. In the event of the termination of the Executive’s
employment under Subparagraph (a), the Company shall pay or provide the compensation and benefits
set forth below:

          (1) The Executive shall be paid an amount per annum equal to the greater of (i) his
highest base compensation received during one of the two calendar years immediately
preceding the calendar year in which the Date of Termination occurs, or (ii) his base
compensation in effect immediately prior to the Date of Termination (or prior to any
reduction which entitled him to terminate his employment for Good Reason) for one year
beginning with such Date of Termination. The frequency and manner of

2

 

payment of such amounts shall be in accordance with the Company’s executive payroll
practices from time to time in effect.

          (2) The Executive shall be paid an amount equal to the higher of the aggregate
bonus(es) paid to him with respect to one of the two years immediately preceding the year in
which the Date of Termination occurs. Such amount shall be paid to him in cash on the first
anniversary date of the Date of Termination.

          (3) The Executive shall be paid an amount equal to the highest annual contribution made
on his behalf (other than his own salary reduction contributions) to each tax-qualified and
non-qualified Defined Contribution Plan of the Company or its Affiliates with respect to the
year in which the Date of Termination occurs or one of the two years immediately preceding
such year. The amount separately determined for each such plan shall be aggregated and
shall be paid to him in cash on the first anniversary date of the Date of Termination.

          (4) The Executive shall accrue benefits equal to the excess of (i) the aggregate
retirement benefits he would have received under the terms of each tax-qualified and
non-qualified Defined Benefit Plan of the Company or its Affiliates as in effect immediately
prior to the Date of Termination had he (A) continued to be employed for one more year, and
(B) received (on a pro rated basis, as appropriate) the greater of (I) the highest
compensation taken into account under each such plan with respect to one of the two years
immediately preceding the year in which the Date of Termination occurs, or (II) his
annualized base compensation in effect immediately prior to the Date of Termination (or
prior to any reduction which entitled him to terminate his employment for Good Reason), over
(ii) the retirement benefits he actually receives under such plans. The frequency, manner
and extent of payment of such benefits shall be consistent with the terms of the plans to
which they relate and any elections made thereunder.

          (5) The Executive and his eligible dependents shall be entitled to continue to
participate at the same aggregate benefit levels, for one year and at no out-of-pocket or
tax cost to him, in the Welfare Benefit Plans in which he was a participant immediately
prior to the Date of Termination, to the extent permitted under the terms of such plans and
applicable law. To the extent the Company or its Affiliates are unable to provide for
continued participation in a Welfare Benefit Plan, it shall provide an equivalent benefit
directly at no out-of-pocket or tax cost to him. For purposes of the preceding two
sentences, the Company shall be deemed to have provided a benefit at no tax cost to him if
it pays an additional amount to him or on his behalf, with respect to those benefits which
would otherwise be nontaxable to him, calculated in a manner consistent with the provisions
of Paragraph 12.

          (c) Adjustment to Certain Subparagraph (b) Compensation and Benefits. Notwithstanding
the provisions of Subparagraph (b)(5), the Company or its Affiliates’ obligation to pay or fund any
disability insurance premiums on behalf of the Executive shall be suspended while his Disability
continues, provided the cessation of payment or funding does not result in the termination of
disability benefits. Any amounts otherwise due under Subparagraph (b) shall be reduced (but not
below zero) by the dollar amount of disability benefits received by him pursuant to plans or
policies funded, directly at its cost, by the Company or its Affiliates.

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          (d) Earlier Cessation of Certain Welfare Benefits. Notwithstanding the provisions of
Subparagraph (b)(5), neither the Company nor an Affiliate shall be required to provide, at its
cost, the welfare benefits covered therein after the later of (i) the attainment by the Executive
and his spouse (if any) of age 65, or (ii) the date specified in the relevant plan document for
benefit termination (assuming that he was employed until age 65 or the normal retirement date, if
any, specified in such document).

          (e) Death During Remaining Term of Agreement.

          (1) In the event the Executive dies during the remaining term of this Agreement
following his termination for Disability and he is survived by a spouse, the compensation
and benefits remaining to be paid and provided under Subparagraph (b) shall be unaffected by
his death and shall be paid and provided to her or on her behalf; provided, however, that
the extent of her rights to the accrued benefits described in Subparagraph (b)(4) shall be
determined by reference to the relevant plan provisions and any elections made under such
plans; and provided further, that neither the Company nor an Affiliate shall be required to
provide continued benefits with respect to her deceased husband; and provided further, that
in no event shall the Company or an Affiliate be required to provide, at its cost, the other
welfare benefits described in Subparagraph (b)(5) to such spouse and her eligible dependents
after the earlier of (i) her death, or (ii) the later of (A) her attainment of age 65, or
(B) the date specified in the relevant plan document for benefit termination (assuming that
the Executive was employed until age 65 or the normal retirement date, if any, specified in
such document).

          (2) In the event the Executive dies during the remaining term of this Agreement
following his termination for Disability and he is not survived by a spouse, (i) the Company
or an Affiliate shall thereafter make the remaining payments described in Subparagraphs
(b)(1) through (b)(3) directly to his estate, (ii) the extent of the rights of any person to
the accrued benefits described in Subparagraph (b)(4) shall be determined by reference to
the relevant plan provisions and any elections made under such plans, and (iii) the Company
and its Affiliates’ obligation to provide continued benefits under Subparagraph (b)(5) shall
terminate.

          (f) Compensation and Benefits Upon Expiration of Remaining Term of Agreement. Upon
the expiration of the remaining term of this Agreement following the Executive’s termination for
Disability, and provided his Disability then continues, he shall be entitled to receive the
compensation and benefits provided under the terms of the Company or an Affiliates’ long-term
disability plan in effect on the Date of Termination or, if greater, at the expiration of such
remaining term. Such compensation and benefits shall continue until the earlier of (i) his death,
or (ii) the later of (A) his attainment of age 65, or (B) the date specified in the plan document
for benefit termination. To the extent the Company or an Affiliate is unable to provide such
compensation and benefits under its long-term disability plan, it shall provide equivalent
compensation and benefits directly at no out-of-pocket or tax cost to him. For purposes of the
preceding sentence, the Company or the Affiliate shall be deemed to have provided compensation and
benefits at no tax cost to him if it pays an additional amount to him or on his behalf, with
respect to the compensation and benefits which would otherwise be nontaxable to him, calculated in
a manner consistent with the provisions of Paragraph 12.

4

 

     7. Termination By Reason of Death.

          (a) Compensation and Benefits to Surviving Spouse. In the event the Executive dies
while he is employed under this Agreement and is survived by a spouse, the Company or an Affiliate
shall pay or provide the compensation and benefits set forth below:

               (1) The surviving spouse shall be paid an amount equal to the greater of (i) the
Executive’s highest base compensation received during one of the two calendar years
immediately preceding the calendar year in which the Date of Termination occurs, or (ii) his
base compensation in effect immediately prior to the Date of Termination (or prior to any
reduction which entitled him to terminate his employment for Good Reason) for a period of
one year, beginning with such Date of Termination. The frequency and manner of payment of
such amounts shall be in accordance with the Company’s executive payroll practices from time
to time in effect.

               (2) The surviving spouse shall be paid an amount equal to the highest payment made to
Executive under each incentive bonus plan of the Company with respect to one of the two
years immediately preceding the year in which the Date of Termination occurs. Such amount
shall be paid in cash to her within 30 days after the Date of Termination.

               (3) The surviving spouse shall be paid an amount equal to the sum of the highest annual
contribution made on the Executive’s behalf (other than his own salary reduction
contributions) to each tax-qualified and non-qualified Defined Contribution Plan of the
Company or an Affiliate with respect to the year in which the Date of Termination occurs or
one of the two years immediately preceding such year. Such amount shall be paid in cash to
her within 30 days after the Date of Termination or within 30 days after such amount can
first be determined, whichever is later.

               (4) Subject to the following sentence, the surviving spouse shall be paid benefits
determined by reference to the excess of (i) the aggregate retirement benefits the Executive
would have accrued under the terms of each tax-qualified and non-qualified Defined Benefit
Plan as in effect immediately prior to the Date of Termination, had he (A) continued to be
employed for a period of one year following the Date of Termination, and (B) received (on a
pro rated basis, as appropriate) the greater of (I) the highest compensation taken into
account under each such plan with respect to one of the two years immediately preceding the
year in which the Date of Termination occurs, or (II) his annualized base compensation in
effect immediately prior to the Date of Termination (or prior to any reduction which
entitled him to terminate his employment for Good Reason), over (ii) the retirement benefits
actually determined under such plans. The frequency, manner, and extent of payment of such
benefits shall be consistent with the terms of the plans to which they relate and any
elections made thereunder.

               (5) The surviving spouse and her eligible dependents shall be entitled to continue to
participate at the same aggregate benefit levels, for a period of one year following the
Date of Termination and at no out-of-pocket or tax cost to her, in the Welfare Benefit Plans
in which the Executive was a participant immediately prior to the Date of Termination, to
the extent permitted under the terms of such plans and applicable

5

 

law; provided, however, that neither the Company nor its Affiliates shall be required
to provide continued benefits with respect to her deceased husband; and provided further,
that neither the Company nor its Affiliates shall thereafter be required to provide, at its
cost, the other welfare benefits covered by such plans to such spouse and her eligible
dependents after the earlier of (i) her death, or (ii) the later of (A) her attainment of
age 65, or (B) the date specified in the relevant plan document for benefit termination
(assuming the Executive was employed until age 65 or the normal retirement date, if any,
specified in such document). To the extent the Company or an Affiliate is unable to provide
for continued participation in a Welfare Benefit Plan as required, it shall provide an
equivalent benefit directly at no out-of-pocket or tax cost to her. For purposes of the
preceding two sentences, the Company or the Affiliate shall be deemed to have provided a
benefit at no tax cost to her if it pays an additional amount to her or on her behalf, with
respect to those benefits which would otherwise be nontaxable to her, calculated in a manner
consistent with the provisions of Paragraph 12.

          (b) Compensation and Benefits to Estate, Etc. In the event the Executive dies while
he is employed under this Agreement and is not survived by a spouse, (i) the Company or an
Affiliate shall make the payments described in Subparagraphs (a)(1) through (a)(3) directly to his
estate, (ii) the extent of the rights of any person to the accrued benefits described in
Subparagraph (a)(4) shall be determined by reference to the relevant plan provisions and any
elections made under such plans, and (iii) the Company and its Affiliates’ obligation to provide
benefits under Subparagraph (a)(5) shall terminate.

     8. Termination By the Company for Cause.

          (a) In General. In the event the Company intends to terminate the Executive’s
employment for Cause, it shall deliver a Notice of Termination to him which specifies a Date of
Termination not less than 30 days following the date of such notice, unless a shorter period of
notice is required by the principal regulator of any Affiliate of the Company.

          (b) Compensation. Within 30 days after the Executive’s termination under Subparagraph
(a), the Company shall pay him, in one lump sum, his accrued but unpaid base compensation and
vacation compensation earned through the Date of Termination.

     9. Termination By the Executive Without Good Reason.

          (a) In General. In the event the Executive intends to terminate his employment
without Good Reason, he shall deliver a Notice of Termination to the Company which specifies a Date
of Termination not less than (i) 90 days following the date of such notice, if a Change in Control
shall not have occurred, or (ii) 30 days following the date of such notice, if a Change in Control
shall have occurred.

          (b) Compensation. Within 30 days after the Executive’s termination under Subparagraph
(a), the Company shall pay him, in one lump sum, his accrued but unpaid base compensation and
vacation compensation earned through the Date of Termination.

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     10. Termination By the Company Without Disability or Cause.

          (a) In General. In the event the Company intends to terminate the Executive’s
employment for any reason other than Disability or Cause, it shall deliver a Notice of Termination
to him which specifies a Date of Termination not less than 90 days following the date of such
notice.

          (b) Compensation and Benefits During Remaining Term of Agreement. In the event of the
termination of the Executive’s employment under Subparagraph (a), the Company or an Affiliate shall
pay or provide the compensation and benefits described in Paragraph 6(b), except that all such
compensation and benefits shall be for the remaining term of this Agreement and, with respect to
Subparagraphs 6(b)(2) and (3), an additional pro rated amount shall be paid to him in cash on the
last day of the remaining term of this Agreement. Such pro rated amount shall be determined by
reference to a fraction, the numerator of which is the number of whole months elapsed during the
year in which termination occurs, and the denominator of which is 12.

          (c) Adjustment to Certain Subparagraph (b) Compensation and Benefits. In the event
the Executive suffers a Disability during the remaining term of this Agreement following the Date
of Termination, the Company or an Affiliate’s obligation to pay or fund any disability insurance
premiums on his behalf shall be suspended while his Disability continues, provided the cessation of
payment or funding does not result in the termination of disability benefits. Any amounts
described in Paragraph 6(b) and otherwise payable under Subparagraph (b) shall be reduced (but not
below zero) by the dollar amount of disability benefits received by him pursuant to plans or
policies funded, directly at its cost, by the Company or an Affiliate.

          (d) Earlier Cessation of Certain Welfare Benefits. Notwithstanding the provisions of
Subparagraph (b), neither the Company nor an Affiliate shall be required to provide, at its cost,
the welfare benefits covered by Paragraph 6(b)(5) after the later of (i) the attainment by the
Executive and his spouse (if any) of age 65, or (ii) the date specified in the relevant plan
document for benefit termination (assuming that he was employed until age 65 or the normal
retirement date, if any, specified in such document).

          (e) Death During Remaining Term of Agreement.

          (1) In the event the Executive dies during the remaining term of this Agreement
following his termination without Disability or Cause by the Company and he is survived by a
spouse, the compensation and benefits required to be paid and provided under Subparagraph
(b) shall be unaffected by his death and shall be paid and provided to her or on her behalf;
provided, however, that the extent of her rights to the accrued benefits described in
Paragraph 6(b)(4) shall be determined by reference to the relevant plan provisions and any
elections made under such plans; and provided further, that neither the Company nor an
Affiliate shall be required to provide continued benefits with respect to her deceased
husband; and provided further, that in no event shall the Company nor an Affiliate be
required to provide, at its cost, the other welfare benefits described in Paragraph 6(b)(5)
to such spouse and her eligible dependents after the earlier of (i) her death, or (ii) the
later of (A) her attainment of age 65, or (B) the date specified

7

 

in the relevant plan document for benefit termination (assuming that the Executive was
employed until age 65 or the normal retirement date, if any, specified in such document).

          (2) In the event the Executive dies during the remaining term of this Agreement
following his termination without Disability or Cause and he is not survived by a spouse,
(i) the Company shall thereafter make the remaining payments described in Paragraphs 6(b)(1)
through 6(b)(3) directly to his estate, (ii) the extent of the rights of any person to the
accrued benefits described in Paragraph 6(b)(4) shall be determined by reference to the
relevant plan provisions and any elections made under such plans, and (iii) the Company and
any Affiliate’s obligation to provide the continued benefits described in Paragraph 6(b)(5)
shall terminate.

     11. Termination By the Executive for Good Reason.

          (a) In General. In the event the Executive intends to terminate his employment for
Good Reason, he shall deliver a Notice of Termination to the Company which specifies a Date of
Termination not less than 30 days following the date of such notice.

          (b) Compensation and Benefits During Remaining Term of Agreement. In the event of the
termination of the Executive’s employment under Subparagraph (a), the Company shall pay or provide
the compensation and benefits described in Paragraph 6(b), except that all such compensation and
benefits shall be for the remaining term of this Agreement and, with respect to Subparagraphs
6(b)(2) and (3), an additional pro rated amount shall be paid to him in cash on the last day of the
remaining term of this Agreement. Such pro rated amount shall be determined by reference to a
fraction, the numerator of which is the number of whole months elapsed during the year in which
termination occurs, and the denominator of which is 12.

          (c) Adjustment to Certain Subparagraph (b) Compensation and Benefits. In the event
the Executive suffers a Disability during the remaining term of this Agreement following the Date
of Termination, the Company or any Affiliate’s obligation to pay or fund any disability insurance
premiums on his behalf shall be suspended while his Disability continues, provided the cessation of
payment or funding does not result in the termination of disability benefits. Any amounts
described in Paragraph 6(b) and otherwise payable under Subparagraph (b) shall be reduced (but not
below zero) by the dollar amount of disability benefits received by him pursuant to plans or
policies funded, directly at its cost, to the Company or any Affiliate.

          (d) Earlier Cessation of Certain Welfare Benefits. Notwithstanding the provisions of
Subparagraph (b), neither the Company nor an Affiliate shall be required to provide, at its cost,
the welfare benefits covered by Paragraph 6(b)(5) after the later of (i) the attainment by the
Executive and his spouse (if any) of age 65, or (ii) the date specified in the relevant plan
document for benefit termination (assuming that he was employed until age 65 or the normal
retirement date, if any, specified in such document).

          (e) Death During Remaining Term of Agreement.

          (1) In the event the Executive dies during the remaining term of this Agreement
following his termination for Good Reason and he is survived by a spouse, the compensation
and benefits required to be paid and provided under Subparagraph (b)

8

 

shall be unaffected by his death and shall be paid and provided to her or on her
behalf; provided, however, that the extent of her rights to the accrued benefits described
in Paragraph 6(b)(4) shall be determined by reference to the relevant plan provisions and
any elections made under such plans; and provided further, that neither the Company nor any
Affiliate shall be required to provide continued benefits with respect to her deceased
husband; and provided further, that in no event shall the Company or any Affiliate be
required to provide, at its cost, the other welfare benefits described in Paragraph 6(b)(5)
to such spouse and her eligible dependents after the earlier of (i) her death, or (ii) the
later of (A) her attainment of age 65, or (B) the date specified in the relevant plan
document for benefit termination (assuming that the Executive was employed until age 65 or
the normal retirement date, if any, specified in such document).

          (2) In the event the Executive dies during the remaining term of this Agreement
following his termination for Good Reason and he is not survived by a spouse, (i) either the
Company or any Affiliate shall thereafter make the remaining payments described in
Paragraphs 6(b)(1) through 6(b)(3) directly to his estate, (ii) the extent of the rights of
any person to the accrued benefits described in Paragraph 6(b)(4) shall be determined by
reference to the relevant plan provisions and any elections made under such plans, and (iii)
the Company or any Affiliate’s obligation to provide the continued benefits described in
Paragraph 6(b)(5) shall terminate.

     12. Provisions Relating to Excise Taxes.

          (a) In General. In the event the Executive becomes liable, for any taxable year, for
the payment of an Excise Tax (because of a change in control) with respect to the compensation and
benefits payable by the Company or an Affiliate under this Agreement or otherwise, the Company
shall make one or more Gross-Up Payments to the Executive or on his behalf. The amount of any
Gross-Up Payment shall be calculated by a certified public accountant or other tax professional
designated jointly by the Executive and the Company. The provisions of this paragraph shall apply
with respect to the Executive’s surviving spouse or estate, where relevant.

          (b) Methodology for Calculation of Gross-Up Payment. For purposes of determining the
amount of any Gross-Up Payment, the Executive shall be deemed to pay income taxes at the highest
federal, state, and local marginal rates of tax for the calendar year in which the Gross-Up Payment
is to be made, net of the maximum reduction in federal income tax which could be obtained from the
deduction of state and local income taxes. In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account at the time the Gross-Up Payment was made,
the Executive shall repay to the Company, at the time that the amount of such reduction in Excise
Tax is finally determined, the portion of the Gross-Up Payment attributable to the reduction (plus
a portion of the Gross-Up Payment attributable to the Excise Tax and the federal, state, and local
income taxes imposed on the portion of the Gross-Up Payment being repaid by the Executive to the
extent such repayment results in a reduction in Excise Tax or federal, state, or local income tax),
plus interest on the amount of such repayment. Such interest shall be calculated by using the rate
in effect under Section 1274(d)(1) of the IRC, on the date the Gross-Up Payment was made, for debt
instruments with a term equal to the period of time which has elapsed from the date the Gross-Up
Payment was made to the date of repayment. In the event that the Excise Tax is subsequently
determined to exceed the amount

9

 

taken into account at the time the Gross-Up Payment was made (including by reason of any
payment the existence or amount of which could not be determined at the time of the Gross-Up
Payment), the Company shall make an additional Gross-Up Payment with respect to the excess at the
time the amount thereof is finally determined, plus interest calculated in a manner similar to that
described in the preceding sentence.

          (c) Time of Payment. Any Gross-Up Payment provided for herein shall be paid not later
than the 30th day following the payment of any compensation or the provision of any benefit which
causes such payment to be made; provided, however, that if the amount of such payment cannot be
finally determined on or before such day, the Company shall pay on such day an estimate of the
minimum amount of such payment and shall pay the remainder of such payment (together with interest
calculated in a manner similar to that described in Subparagraph (b)) as soon as the amount thereof
can be determined. In the event that the amount of an estimated payment exceeds the amount
subsequently determined to have been due, such excess shall constitute a loan by the Company to the
Executive, payable on the 30th day after demand by the Company (together with interest calculated
in a manner similar to that described in Subparagraph (b)).

          (d) Notwithstanding the provisions of this paragraph to the contrary, the actual amounts
payable hereunder as Gross-Up Payments shall be coordinated with any similar amounts paid to the
Executive under any other contract, plan, or arrangement.

     13. Fees and Expenses of the Executive. After a Change in Control and except as
provided in the following sentence, the Company shall pay, within 30 days following demand by the
Executive, all legal, accounting, actuarial, and related fees and expenses incurred by him in
connection with the enforcement of this Agreement. An arbitration panel or a court of competent
jurisdiction shall be empowered to deny payment to the Executive of such fees and expenses only if
it determines that he instituted a proceeding hereunder, or otherwise acted, in bad faith.

     14. Reduction for Compensation and Benefits Received Under the Company Severance Policy,
Etc. Notwithstanding anything herein to the contrary, in the event the Executive, his
surviving spouse, or any other person becomes entitled to continued compensation and benefits
hereunder by reason of the Executive’s termination of employment and, in addition, compensation or
similar benefits are payable under a severance policy, program or arrangement maintained by the
Company (other than retirement plans), then the compensation or benefits otherwise payable
hereunder shall be reduced by the compensation or benefits provided under such severance policy,
program or arrangement.

     15. Mitigation. The Executive shall not be required to mitigate the amount of any
compensation or benefits which may become payable hereunder by reason of his termination by seeking
other employment or otherwise, nor, except as otherwise provided in the following sentence or
elsewhere herein, shall the amount of any such compensation or benefits be reduced by any
compensation or benefits received by the Executive as the result of his employment by another
employer. Notwithstanding anything in this Agreement to the contrary, the Company or any
Affiliate’s obligation to provide any medical and dental benefits hereunder may be suspended, with
the written concurrence of the Executive or, if applicable, his surviving spouse during any period
of time that such benefits are being provided by reason of his or her employment.

10

 

16. Funding of Compensation and Benefits; Acceleration of Certain Payments.

          (a) Grantor Trust. In the event the Executive’s employment is terminated without
Cause or he terminates his employment for Good Reason and a Change in Control has occurred as of
the Date of Termination or occurs thereafter, the Executive shall have the right to require the
Company to establish a grantor trust (taxable to the Company) and fund such trust, on an
actuarially sound basis, to provide the compensation and benefits to which he is entitled
hereunder, other than those which may be paid pursuant to the provisions of Subparagraph (c). The
specific terms of such trust shall be as agreed to by the parties in good faith; provided, however,
that the trustee shall be a financial institution independent of the Company; and provided further,
that in no event shall the Company be entitled to withdraw funds from the trust for its benefit, or
otherwise voluntarily assign or alienate such funds, until such time as all compensation and
benefits required hereunder are paid and provided. The determination of the extent of required
funding, including any supplemental funding in the event of adverse investment performance of trust
assets, shall be made by an actuary or a certified public accountant retained by each party. To
the extent such professionals cannot agree on the proper level of funding, they shall select a
third such professional whose determination shall be binding upon the parties. Notwithstanding the
foregoing, the Company and its Affiliates shall remain liable for all compensation and benefits
required to be paid or provided hereunder.

          (b) Alternate Security. In lieu of the right given to the Executive under
Subparagraph (a), he shall have the right under such circumstances to require that the Company or
its Affiliates provide (i) an irrevocable standby letter of credit issued by a financial
institution other than the Company or any Subsidiary of the Company with a senior debt credit
rating of “A” or better by Moody’s Investors Service or Standard & Poor’s Corporation, or (ii)
other security reasonably acceptable to him, to secure the payment of such compensation and
benefits.

          (c) Accelerated Payment of Present Value of Certain Compensation. In the event the
Executive’s employment is terminated without Cause or he terminates his employment for Good Reason,
the Executive shall have the continuing right to demand that the present value of the remaining
payments described in Paragraphs 6(b)(1) through (3), and payable by reason of the provisions of
Paragraph 10 or 11 (as the case may be), be paid to him in one lump sum within 10 days after the
date written demand is given. For purposes of calculating the present value of such payments, a
discount factor shall be applied to each such payment which is equal to the relevant applicable
federal rate in effect on the date written demand is given by him, determined by reference to the
period of time between the date of such notice and the scheduled time such payment would otherwise
be made. In the event any payment described in Paragraphs 6(b)(1) through (3) is not yet
determinable on the date written demand is made, the other payments shall nonetheless be made as
provided above; and the undetermined payment shall be made within 30 days after it becomes
determinable, calculated as provided in the preceding sentence but by treating the date on which
the payment becomes determinable as the date of written notice. Nothing in this subparagraph shall
be construed as affecting the Executive’s right to one or more Gross-Up Payments in accordance with
the provisions of Paragraph 12; and a Gross-Up Payment (if applicable) will be calculated and made
with any payment made under this subparagraph, as well as any other Gross-Up Payments that may be
required hereunder at a subsequent date.

11

 

     17. Withholding Taxes. All compensation and benefits provided for herein shall, to
the extent required by law, be subject to federal, state, and local tax withholding.

     18. Confidential Information. The Executive agrees that subsequent to his employment
with the Company, he will not, at any time, communicate or disclose to any unauthorized person,
without the written consent of the Company, any proprietary or other confidential information
concerning the Company or any Subsidiary or any Affiliate of the Company; provided, however, that
the obligations under this paragraph shall not apply to the extent that such matters (i) are
disclosed in circumstances where the Executive is legally obligated to do so, or (ii) become
generally known to and available for use by the public otherwise than by his wrongful act or
omission; and provided further, that he may disclose any knowledge of insurance, financial, legal
and economic principles, concepts and ideas which are not solely and exclusively derived from the
business plans and activities of the Company.

19. Covenants Not to Compete or to Solicit.

          (a) Noncompetition. During his employment, and if the Executive’s employment
terminates under Paragraph 8 or 9 prior to a Change in Control, then for a period of 12 months
after the Date of Termination, the Executive agrees he will not, without the written consent in
writing of the Board of Directors of the Company, endeavor to entice away from the Company, a
Subsidiary or any Affiliate, or otherwise interfere with the relationship of the Company, a
Subsidiary or any Affiliate with any person who is, or was within the then most recent 12 month
period, a customer, agent or supplier of the Company, a Subsidiary or any Affiliate. If at the
time of the enforcement of this paragraph a court holds that the duration, scope, or area
restrictions stated herein are unreasonable under the circumstances then existing and, thus,
unenforceable, the Company and the Executive agree that the maximum duration, scope, or area
reasonable under such circumstances shall be substituted for the stated duration, scope, or area.

          (b) Nonsolicitation. During his employment, and if the Executive’s employment
terminates under Paragraph 8 or 9 prior to a Change in Control, then for a period of 12 months
after the Date of Termination, the Executive shall not, whether on his own behalf or on behalf of
any other individual or business entity, solicit, endeavor to entice away from the Company, a
Subsidiary or any Affiliate, or otherwise interfere with the relationship of the Company, a
Subsidiary or any Affiliate with any person who is, or was within the then most recent 12 month
period, an employee or associate thereof; provided, however, that this subparagraph shall not apply
following the occurrence of a Change in Control.

     20. Arbitration. To the extent permitted by applicable law, any controversy or
dispute arising out of or relating to this Agreement, or any alleged breach hereof, shall be
settled by arbitration in Pennington, New Jersey, in accordance with the commercial rules of the
American Arbitration Association then in existence (to the extent such rules are not inconsistent
with the provisions of this Agreement), it being understood and agreed that the arbitration panel
shall consist of three individuals acceptable to the parties hereto. In the event that the parties
cannot agree on three arbitrators within 20 days following receipt by one party of a demand for
arbitration from another party, then the Executive and the Company shall each designate one
arbitrator and the two arbitrators selected shall select the third arbitrator. The arbitration
panel so selected shall convene a hearing no later than 90 days following the selection of the
panel. The

12

 

arbitration award shall be final and binding upon the parties, and judgment may be entered
thereon in the Commonwealth of Pennsylvania Court of Common Pleas or in any other court of
competent jurisdiction.

     21. Additional Equitable Remedy. The Executive acknowledges and agrees that the
Company’s remedy at law for a breach or a threatened breach of the provisions of Paragraphs 18 and
19 would be inadequate; and, in recognition of this fact and notwithstanding the provisions of
Paragraph 20, in the event of such a breach or threatened breach by him, it is agreed that the
Company shall be entitled to request equitable relief in the form of specific performance,
temporary restraining order, temporary or permanent injunction, or any other equitable remedy which
may then be available. Nothing in this paragraph shall be construed as prohibiting the Company
from pursuing any other remedy available under this Agreement for such a breach or threatened
breach.

     22. Related Agreements. Except as may otherwise be provided herein, to the extent
that any provision of any other agreement between the Company and the Executive shall limit,
qualify, duplicate, or be inconsistent with any provision of this Agreement, the provision in this
Agreement shall control and such provision of such other agreement shall be deemed to have been
superseded, and to be of no force or effect, as if such other agreement had been formally amended
to the extent necessary to accomplish such purpose.

     23. No Effect on Other Rights. Except as otherwise specifically provided herein,
nothing contained in this Agreement shall be construed as adversely affecting any rights the
Executive may have under any agreement, plan, policy or arrangement to the extent any such right is
not inconsistent with the provisions hereof.

     24. Exclusive Rights and Remedy. Except for any explicit rights and remedies the
Executive may have under any other contract, plan or arrangement with the Company, the compensation
and benefits payable hereunder and the remedy for enforcement thereof shall constitute his
exclusive rights and remedy in the event of his termination of employment.

     25. Director and Officer Liability Insurance; Indemnification. The Company and Mercer
shall provide the Executive (including his heirs, executors, and administrators) with coverage
under a standard directors’ and officers’ liability insurance policy, at the Company and Mercer’s
expense, in amounts consistent with amounts provided by peer corporations to their directors and
officers, and shall indemnify him as both a director and as an officer (and his heirs, executors,
and administrators) to the fullest extent permitted under Pennsylvania law against all expenses and
liabilities reasonably incurred by him in connection with or arising out of any action, suit, or
proceeding in which he may be involved by reason of his having been an officer or director of the
Company or any Subsidiary or Affiliate (whether or not he continues to be such an officer or
director at the time of incurring such expenses or liabilities). Such expenses and liabilities
shall include, but not be limited to, judgments, court costs, and attorneys’ fees, and the costs of
reasonable settlements.

     26. Notices. Any notice required or permitted under this Agreement shall be
sufficient if it is in writing and shall be deemed given (i) at the time of personal delivery to
the addressee, or (ii) at the time sent certified mail, with return receipt requested, addressed as
follows:

13

 

	 	 	 	 	 
	 	 	If to the Executive—
	 
	 	 	 	 
	 

	 	 	 	Mr. Paul R. Corkery
	 

	 	 	 	29 Skillmans Lane
	 

	 	 	 	Somerset, NJ 08873
	 
	 	 	 	 
	 	 	If to Mercer, or the Company—
	 
	 	 	 	 
	 

	 	 	 	10 North Highway 31
	 

	 	 	 	P.O. Box 278
	 

	 	 	 	Pennington, NJ 08534
	 
	 	 	 	 
	 

	 	 	 	Attention: Chairman of the Board of Directors

The name or address of any addressee may be changed at any time and from time to time by notice
similarly given.

     27. No Waiver. The failure by any party to this Agreement at any time or times
hereafter to require strict performance by any other party of any of the provisions, terms, or
conditions contained in this Agreement shall not waive, affect, or diminish any right of the first
party at any time or times thereafter to demand strict performance therewith and with any other
provision, term, or condition contained in this Agreement. Any actual waiver of a provision, term,
or condition contained in this Agreement shall not constitute a waiver of any other provision,
term, or condition herein, whether prior or subsequent to such actual waiver and whether of the
same or a different type. The failure of the Company to promptly terminate the Executive’s
employment for Cause or the Executive to promptly terminate his employment for Good Reason shall
not be construed as a waiver of the right of termination, and such right may be exercised at any
time following the occurrence of the event giving rise to such right.

     28. Joint and Several Obligations of Mercer and the Company. Mercer and the Company
shall be jointly and severally liable for all compensation and benefits that may become payable
hereunder to or on behalf of the Executive or, if applicable, his surviving spouse, estate or
beneficiaries.

     29. Survival. Notwithstanding the nominal termination of this Agreement and the
Executive’s employment hereunder, the provisions hereof which specify continuing obligations,
compensation and benefits, and rights (including the otherwise applicable term hereof) shall remain
in effect until such time as all such obligations are discharged, all such compensation and
benefits are received, and no party or beneficiary has any remaining actual or contingent rights
hereunder.

     30. Severability. In the event any provision in this Agreement shall be held illegal
or invalid for any reason, such illegal or invalid provision shall not affect the remaining
provisions hereof, and this Agreement shall be construed, administered and enforced as though such
illegal or invalid provision were not contained herein.

14

 

     31. Binding Effect and Benefit. The provisions of this Agreement shall be binding
upon and shall inure to the benefit of the successors and assigns of the Company and the executors,
personal representatives, surviving spouse, heirs, devisees, and legatees of the Executive.

     32. Entire Agreement. This Agreement embodies the entire agreement among the parties
with respect to the subject matter hereof, and it supersedes all prior discussions and oral
understandings of the parties with respect thereto.

     33. No Assignment. This Agreement, and the benefits and obligations hereunder, shall
not be assignable by any party hereto except by operation of law.

     34. No Attachment. Except as otherwise provided by law, no right to receive
compensation or benefits under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation, or to set off,
execution, attachment, levy, or similar process, and any attempt, voluntary or involuntary, to
effect any such action shall be null and void.

     35. Captions. The captions of the several paragraphs and subparagraphs of this
Agreement have been inserted for convenience of reference only. They constitute no part of this
Agreement and are not to be considered in the construction hereof.

     36. Counterparts. This Agreement may be executed in any number of counterparts, each
of which shall be deemed one and the same instrument, which may be sufficiently evidenced by any
one counterpart.

     37. Number. Wherever any words are used herein in the singular form, they shall be
construed as though they were used in the plural form, as the context requires, and vice
versa.

     38. Applicable Law. Except to the extent preempted by federal law, the provisions of
this Agreement shall be construed, administered, and enforced in accordance with the domestic
internal law of the Commonwealth of Pennsylvania.

     39. Prior Agreements. The execution of this Agreement terminates any and all previous
employment agreements among the Company, its Affiliates and Mr. Corkery.

     40. Joinder. Mercer and Mercer Insurance have joined in this Agreement for the
purpose of guaranteeing the performance of the Company’s obligations hereunder.

15

 

     IN WITNESS WHEREOF, the parties have executed this Agreement, or caused it to be executed, as
of the date first above written.

	 	 	 	 	 	 	 
	 	 	 	 	 
	 	 	Paul R. Corkery	 	 
	 
	 	 	 	 	 	 
	 	 	BICUS SERVICE CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 

	 	Attest:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	MERCER INSURANCE GROUP, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 

	 	Attest:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	MERCER INSURANCE COMPANY	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 

	 	Attest:	 	 	 	 
	 

	 	 	 	 	 	 

16

 

GLOSSARY

     “Affiliate” means with respect to any Person, a Person or entity that, directly or indirectly,
controls, or is controlled by, or is under common control with such Person or entity, including
without limitation, Mercer and Mercer Insurance Group, Inc.

     “Board of Directors” means the board of directors of the relevant corporation.

     “Cause” means (i) a documented repeated and willful failure by the Executive to perform his
duties, but only after written demand and only if termination is effected by action taken by a vote
of (A) prior to a Change in Control, at least a majority of the directors of the Company then in
office, or (B) after a Change in Control, at least 80% of the nonofficer directors of the Company
then in office, (ii) his final conviction of a felony, (iii) conduct by him which constitutes moral
turpitude which is directly and materially injurious to the Company or any Subsidiary or affiliated
company, (iv) willful material violation of corporate policy, or (v) the issuance by the regulator
of the Company or any Subsidiary or Affiliate of an unappealable order to the effect that he be
permanently discharged.

     For purposes of this definition, no act or failure to act on the part of the Executive shall be
considered “willful” unless done or omitted not in good faith and without reasonable belief that
the action or omission was in the best interest of the Company or any of its Subsidiaries or
Affiliate.

     “Change in Control” means the occurrence of any of the following events:

     (a) any Person (except (i) Mercer or any Subsidiary or Affiliate of Mercer, or (ii) any
Employee Benefit Plan (or any trust forming a part thereof) maintained by Mercer or any
Subsidiary or Affiliate) is or becomes the beneficial owner, directly or indirectly, of,
Mercer or any Affiliate’s securities representing 19.9% or more of the combined voting power
of Mercer or any Affiliate’s then outstanding securities, or 50.1% or more of the combined
voting power of a Material Subsidiary’s then outstanding securities, other than pursuant to
a transaction described in Clause (c);

     (b) there occurs a sale, exchange, transfer or other disposition of substantially all
of the assets of Mercer or a Material Subsidiary to another entity, except to an entity
controlled directly or indirectly by Mercer or an Affiliate;

     (c) there occurs a merger, consolidation, share exchange, division or other
reorganization of or relating to Mercer, unless—

     (i) the shareholders of Mercer immediately before such merger, consolidation,
share exchange, division or reorganization own, directly or indirectly, immediately
thereafter at least two-thirds of the combined voting power of the outstanding
voting securities of the Surviving Company in substantially the same proportion as
their ownership of the voting securities immediately before such merger,
consolidation, share exchange, division or reorganization; and

1

 

     (ii) the individuals who, immediately before such merger, consolidation, share
exchange, division or reorganization, are members of the Incumbent Board continue to
constitute at least two-thirds of the board of directors of the Surviving Company;
provided, however, that if the election, or nomination for election by Mercer’s
shareholders, of any new director was approved by a vote of at least two-thirds of
the Incumbent Board, such director shall, for the purposes hereof, be considered a
member of the Incumbent Board; and provided further, however, that no individual
shall be considered a member of the Incumbent Board if such individual initially
assumed office as a result of either an actual or threatened Election Contest or
Proxy Contest, including by reason of any agreement intended to avoid or settle any
Election Contest or Proxy Contest; and

     (iii) no Person (except (A) Mercer or any Subsidiary or Affiliate of Mercer,
(B) any Employee Benefit Plan (or any trust forming a part thereof) maintained by
Mercer or any Subsidiary or Affiliate of Mercer, or (C) the Surviving Company or any
Subsidiary or Affiliate of the Surviving Company) has beneficial ownership of 19.9%
or more of the combined voting power of the Surviving Company’s outstanding voting
securities immediately following such merger, consolidation, share exchange,
division or reorganization;

     (d) a plan of liquidation or dissolution of Mercer, other than pursuant to bankruptcy
or insolvency laws, is adopted; or

     (e) during any period of two consecutive years, individuals who, at the beginning of
such period, constituted the Board of Directors of Mercer cease for any reason to constitute
at least a majority of such Board of Directors, unless the election, or the nomination for
election by Mercer’s shareholders, of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the beginning of the
period; provided, however, that no individual shall be considered a member of the Board of
Directors of Mercer at the beginning of such period if such individual initially assumed
office as a result of either an actual or threatened Election Contest or Proxy Contest,
including by reason of any agreement intended to avoid or settle any Election Contest or
Proxy Contest.

Notwithstanding the foregoing, a Change in Control shall not be deemed to have occurred if a Person
becomes the beneficial owner, directly or indirectly, of securities representing 19.9% or more of
the combined voting power of Mercer’s then outstanding securities solely as a result of an
acquisition by Mercer of its voting securities which, by reducing the number of shares outstanding,
increases the proportionate number of shares beneficially owned by such Person; provided, however,
that if a Person becomes a beneficial owner of 19.9% or more of the combined voting power of
Mercer’s then outstanding securities by reason of share repurchases by Mercer and thereafter
becomes the beneficial owner, directly or indirectly, of any additional voting securities of
Mercer, then a Change in Control shall be deemed to have occurred with respect to such Person under
Clause (a).

Notwithstanding anything contained herein to the contrary, if the Executive’s employment is
terminated and he reasonably demonstrates that such termination (i) was at the request of a third

2

 

party who has indicated an intention of taking steps reasonably calculated to effect a Change in
Control and who effects a Change in Control, or (ii) otherwise occurred in connection with, or in
anticipation of, a Change in Control which actually occurs, then for all purposes hereof, a Change
in Control shall be deemed to have occurred on the day immediately prior to the date of such
termination of his employment.

     “Company” means Bicus Services Corporation, a Pennsylvania corporation, and any successor
thereto.

     “Date of Termination” means:

     (a) if the Executive’s employment is terminated for Disability, 30 days after the
Notice of Termination is given (provided that he shall not have returned to the performance
of his duties on a full-time basis during such 30-day period);

     (b) if the Executive’s employment terminates by reason of his death, the date of his
death;

     (c) if the Executive’s employment is terminated by the Company for Cause, the date
specified in the Notice of Termination;

     (d) if the Executive’s employment is terminated by him without Good Reason, the date
specified in the Notice of Termination;

     (e) if the Executive’s employment is terminated by the Company for any reason other
than for Disability or Cause, the date specified in the Notice of Termination; or

     (f) if the Executive’s employment is terminated by him for Good Reason, the date
specified in the Notice of Termination;

provided, however that the Date of Termination shall mean the actual date of termination in the
event the parties mutually agree to a date other than that described above.

     “Defined Benefit Plan” has the meaning ascribed to such term in Section 3(35) of ERISA.

     “Defined Contribution Plan” has the meaning ascribed to such term in Section 3(34) of ERISA.

     “Disability” has the meaning ascribed to the term “permanent and total disability” in Section
22(e)(3) of the IRC.

     “Election Contest” means a solicitation with respect to the election or removal of directors
that is subject to the provisions of Rule 14a-11 of the 1934 Act.

     “Employee Benefit Plan” has the meaning ascribed to such term in Section 3(3) of ERISA.

3

 

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended and as the same
may be amended from time to time.

     “Excise Tax” means the tax imposed by Section 4999 of the IRC (or any similar tax that may
hereafter be imposed by federal, state or local law).

     “Executive” means Paul R. Corkery, an individual residing in Somerset, New Jersey.

     “Good Reason” means:

          (a) prior to a Change in Control—

     (i) a change in the Executive’s status or position, or any material diminution
in his duties or responsibilities;

     (ii) a reduction in the Executive’s base compensation, other than a reduction
which is proportionate to a company-wide reduction in executive pay;

     (iii) a failure to increase the Executive’s base compensation, consistent with
his performance rating, within 24 months since the last increase, other than similar
treatment on a company-wide basis for executives or a voluntary deferral by him of
an increase;

     (iv) requiring the Executive to be based more than 20 miles from his current
office location as of the date of this Agreement;

     (v) delivery to the Executive of a Notice of Nonextension; or

     (vi) any purported termination of the Executive’s employment which is not in
accordance with the terms of this Agreement; and

          (b) after a Change in Control—

     (i) a change in the Executive’s status or position, or any material diminution
in his duties or responsibilities;

     (ii) any increase in the Executive’s duties inconsistent with his position;

     (iii) any reduction in the Executive’s base compensation;

     (iv) a failure to increase the Executive’s base compensation, consistent with
his performance review, within 12 months of the last increase; or a failure to
consider the Executive for an increase within 12 months of his last performance
review;

     (v) a failure to continue in effect any Employee Benefit Plan in which the
Executive participates, including (whether or not they constitute Employee Benefit
Plans) incentive bonus, stock option, or other qualified or nonqualified plans of
deferred compensation (A) other than as a result of the normal expiration

4

 

of such a plan, or (B) unless such plan is merged or consolidated into, or
replaced with, a plan with benefits which are of equal or greater value;

     (vi) requiring the Executive to be based more than 20 miles from where his
principal office was located immediately prior to the Change in Control;

     (vii) refusal to allow the Executive to attend to matters or engage in
activities in which he was permitted to engage prior to the Change in Control;

     (viii) delivery to the Executive of a Notice of Nonextension;

     (ix) failure to secure the affirmation by a Successor, within seven business
days prior to a Change in Control, of this Agreement and its or the Company’s
continuing obligations hereunder (or where there is not at least three business days
advance notice that a Person may become a Successor, within one business day after
having notice that such Person may become or has become a Successor); or

     (x) any purported termination of the Executive’s employment which is not in
accordance with the terms of this Agreement.

Notwithstanding anything herein to the contrary, at the election of the Executive, beginning with
seven days prior to the Change in Control and continuing through the first anniversary of such
Change in Control, he may terminate his employment for any reason or no reason and such termination
will be treated as having occurred for Good Reason.

     “Gross-Up Payment” means an additional payment to be made to or on behalf of the Executive in
an amount such that the net amount retained by him, after deduction of any Excise Tax on the Total
Payments and any federal, state, and local income tax and Excise Tax on such additional payment,
equals the Total Payments.

     “Incumbent Board” means the Board of Directors of Mercer or an Affiliate as constituted at any
relevant time.

     “IRC” means the Internal Revenue Code of 1986, as amended and as the same may be amended from
time to time.

     “Material Subsidiary” means a Subsidiary whose net worth, determined under generally accepted
accounting principles, at the fiscal year end immediately prior to any relevant time is at least
25% of the aggregate net worth of the controlled group of corporations of which Mercer is the
common parent.

     “1934 Act” means the Securities Exchange Act of 1934, as amended and as the same may be
amended from time to time.

     “Mercer” means Mercer Insurance Group, Inc., a Pennsylvania corporation and the holding
company for Mercer Insurance.

5

 

     “Mercer Insurance” means Mercer Insurance Company, a Pennsylvania insurance company.

     “Notice of Extension” means a written notice in the form attached hereto as Exhibit A
delivered to or by the Executive that advises that the Agreement will be extended as provided in
Paragraph 3.

     “Notice of Termination” means a written notice that (i) indicates the specific termination
provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive’s employment under the
provision so indicated, and (iii) gives the required advance notice of termination.

     “Person” has the same meaning as such term has for purposes of Sections 13(d) and 14(d) of the
1934 Act.

     “Proxy Contest” means the solicitation of proxies or consents by or on behalf of a Person
other than the Board of Directors of Mercer.

     “Subsidiary” means any business entity of which a majority of its voting power or its equity
securities or equity interests is owned, directly or indirectly by Mercer.

     “Successor” means any Person that succeeds to, or has the practical ability to control (either
immediately or with the passage of time), Mercer’s business directly, by merger or consolidation,
or indirectly, by purchase of Mercer’s voting securities or all or substantially all of its assets.

     “Surviving Company” means the business entity that is a resulting company following a merger,
consolidation, share exchange, division or other reorganization of or relating to Mercer or any
Affiliate.

     “Total Payments” means the compensation and benefits that become payable under the Agreement
or otherwise (and which may be subject to an Excise Tax) by reason of the Executive’s termination
of employment, determined without regard to any Gross-Up Payments that may also be made.

     “Welfare Benefit Plan” has the meaning ascribed to the term “employee welfare benefit plan” in
Section 3(1) of ERISA. For purposes of determining the Executive’s or his dependents’ right to
continued welfare benefits hereunder following his termination of employment, the meaning of such
term shall include any retiree health plan maintained by Mercer or any Affiliate at any time after
the relevant Date of Termination, notwithstanding the fact that the Executive is not a participant
therein prior to such date.

6

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