10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-Q

(MARK ONE)

/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003

OR

/  / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM __________ TO __________

Commission File Number 000-22761

PMA Capital Corporation
(Exact name of registrant as specified in its charter)

Pennsylvania	23-2217932
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)
Mellon Bank Center, Suite 2800
1735 Market Street
Philadelphia, Pennsylvania	19103-7590
(Address of principal executive offices)	(Zip Code)

(215) 665-5046
(Registrant’s telephone number, including area code)

Not applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES /X/ NO / /

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES /X/ NO / /

There were 31,334,403 shares outstanding of the registrant’s Class A Common Stock, $5 par value per share, as of the close of business on October 31, 2003.

INDEX

		Page
Part I.	Financial Information
Item 1.	Financial Statements
	Consolidated balance sheets as of September 30, 2003 and December 31, 2002 (unaudited)	1
	Consolidated statements of operations for the three and nine months ended September 30, 2003 and 2002 (unaudited)	2
	Consolidated statements of cash flows for the nine months ended September 30, 2003 and 2002 (unaudited)	3
	Consolidated statements of comprehensive income (loss) for the three and nine months ended September 30, 2003 and 2002 (unaudited)	4
	Notes to the unaudited consolidated financial statements	5
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosure About Market Risk	37
Item 4.	Controls and Procedures	37
Part II.	Other Information
Item 1.	Legal Proceedings	37
Item 5.	Other Matters	37
Item 6.	Exhibits and Reports on Form 8-K	40
Signatures		41
Exhibit Index		42

Part I. Financial Information
Item 1. Financial Statements

PMA Capital Corporation
Consolidated Balance Sheets
(Unaudited)

(dollar amounts in thousands)	As of September 30, 2003			As of December 31, 2002
Assets:
Investments and cash:
Fixed maturities available for sale, at fair value
(amortized cost: 2003 - $1,749,008; 2002 - $1,477,921)	$	1,807,977		$	1,529,924
Short-term investments		187,320			298,686
Short-term investments, loaned securities collateral		113,978			--
Cash		34,954			43,853
Total investments and cash		2,144,229			1,872,463
Accrued investment income		23,764			18,600
Premiums receivable (net of valuation allowance:
2003 - $10,776; 2002 - $9,528)		379,041			363,675
Reinsurance receivables (net of valuation allowance:
2003 - $5,193; 2002 - $5,483)		1,252,928			1,295,083
Deferred income taxes, net		93,181			94,074
Deferred acquisition costs		105,089			89,222
Funds held by reinsureds		153,263			157,479
Other assets		255,292			215,198
Total assets	$	4,406,787		$	4,105,794
Liabilities:
Unpaid losses and loss adjustment expenses	$	2,486,776		$	2,449,890
Unearned premiums		490,461			405,379
Short-term debt		--			65,000
Long-term debt		186,250			86,250
Accounts payable, accrued expenses and other liabilities		297,028			253,175
Funds held under reinsurance treaties		313,688			249,670
Dividends to policyholders		14,851			14,998
Payable under securities loan agreements		113,960			42
Total liabilities		3,903,014			3,524,404
Commitments and contingencies (Note 7)
Shareholders' Equity:
Class A Common stock, $5 par value
(2003 - 60,000,000 authorized, 34,217,945 shares issued       and 31,329,063 outstanding
2002 - 40,000,000 authorized, 34,217,945 shares issued       and 31,328,922 outstanding)		171,090			171,090
Additional paid-in capital		109,331			109,331
Retained earnings		235,607			319,014
Accumulated other comprehensive income		40,341			34,552
Notes receivable from officers		(64	)		(62	)
Treasury stock, at cost (shares: 2003 - 2,888,882 and 2002 - 2,889,023)		(52,532	)		(52,535	)
Total shareholders' equity		503,773			581,390
Total liabilities and shareholders' equity	$	4,406,787		$	4,105,794

See accompanying notes to the consolidated financial statements.

1

PMA Capital Corporation
Consolidated Statements of Operations
(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollar amounts in thousands, except per share data)	2003			2002			2003			2002
Revenues:
Net premiums written	$	285,283		$	268,851		$	926,797		$	859,995
Change in net unearned premiums		8,199			(16,120	)		(73,623	)		(132,790	)
Net premiums earned		293,482			252,731			853,174			727,205
Net investment income		17,167			18,087			52,592			63,873
Net realized investment gains (losses)		1,392			(3,868	)		10,198			(20,028	)
Other revenues		4,147			4,057			15,913			11,471
Total revenues		316,188			271,007			931,877			782,521
Losses and expenses:
Losses and loss adjustment expenses		335,789			180,733			731,448			572,960
Acquisition expenses		63,221			55,390			191,656			161,202
Operating expenses		23,327			18,067			71,421			96,571
Dividends to policyholders		2,090			1,469			6,180			7,476
Interest expense		2,953			519			6,936			1,618
Total losses and expenses		427,380			256,178			1,007,641			839,827
Income (loss) before income taxes		(111,192	)		14,829			(75,764	)		(57,306	)
Income tax expense (benefit):
Current		(221	)		--			--			--
Deferred		(14,565	)		5,454			(2,227	)		(19,685	)
Total		(14,786	)		5,454			(2,227	)		(19,685	)
Net income (loss)	$	(96,406	)	$	9,375		$	(73,537	)	$	(37,621	)
Net income (loss) per share:
Basic	$	(3.08	)	$	0.30		$	(2.35	)	$	(1.20	)
Diluted	$	(3.08	)	$	0.30		$	(2.35	)	$	(1.20	)

See accompanying notes to the consolidated financial statements.

2

PMA Capital Corporation
Consolidated Statements of Cash Flows
(Unaudited)

	Nine Months Ended September 30,
(dollar amounts in thousands)	2003			2002
Cash flows from operating activities:
Net loss	$	(73,537	)	$	(37,621	)
Adjustments to reconcile net loss to net cash flows provided by
operating activities:
Deferred income tax benefit		(2,227	)		(19,685	)
Net realized investment (gains) losses		(10,198	)		20,028
Change in:
Premiums receivable and unearned premiums, net		69,716			59,004
Reinsurance receivables		42,155			365
Unpaid losses and loss adjustment expenses		36,886			(20,130	)
Funds held by reinsureds		4,216			(14,511	)
Funds held under reinsurance treaties		64,018			28,058
Deferred acquisition costs		(15,867	)		(22,886	)
Accounts payable, accrued expenses and other liabilities		44,562			(2,340	)
Dividends to policyholders		(147	)		(377	)
Accrued investment income		(5,164	)		(2,284	)
Other, net		(21,403	)		20,331
Net cash flows provided by operating activities		133,010			7,952
Cash flows from investing activities:
Fixed maturities available for sale:
Purchases		(826,555	)		(689,071	)
Maturities or calls		230,470			149,558
Sales		307,323			478,000
Net sales of short-term investments		111,188			69,161
Sale of subsidiary, net of cash sold		17,676			--
Other, net		(3,482	)		(6,776	)
Net cash flows provided by (used in) investing activities		(163,380	)		872
Cash flows from financing activities:
Dividends paid to shareholders		(9,869	)		(8,812	)
Issuance of long-term debt		100,000			55,000
Debt issue costs		(3,662	)		--
Repayments of short-term debt		(65,000	)		(62,500	)
Proceeds from exercise of stock options		2			2,866
Purchase of treasury stock		--			(1,726	)
Net repayments of notes receivable from officers		--			96
Net cash flows provided by (used in) financing activities		21,471			(15,076	)
Net decrease in cash		(8,899	)		(6,252	)
Cash - beginning of period		43,853			20,656
Cash - end of period	$	34,954		$	14,404
Supplementary cash flow information:
Income taxes paid (refunded)	$	2,600		$	(1,000	)
Interest paid	$	6,568		$	1,852

See accompanying notes to the consolidated financial statements.

3

PMA Capital Corporation
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)

	Three Months Ended September 30,					Nine Months Ended September 30,
(dollar amounts in thousands)	2003			2002		2003			2002
Net income (loss)	$	(96,406	)	$	9,375	$	(73,537	)	$	(37,621	)
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on securities:
Holding gains (losses) arising during the period		(13,930	)		24,889		11,199			14,313
Less: reclassification adjustment for (gains)
losses included in net income (loss) (net of
tax expense (benefit): $487 and ($1,354) for
three months ended September 30, 2003 and
2002; $3,569 and ($7,010) for nine months
ended September 30, 2003 and 2002)		(905	)		2,514		(6,629	)		13,018
Total unrealized gain (loss) on securities		(14,835	)		27,403		4,570			27,331
Unrealized gain from cash flow hedging activities
(net of tax expense of $211 for three and nine
months ended September 30, 2003)		391			--		391			--
Foreign currency translation gain, net of tax
expense: $88 and $170 for three months
ended September 30, 2003 and 2002; $446 and $417 for
nine months ended September 30, 2003 and 2002		164			314		828			777
Other comprehensive income (loss), net of tax		(14,280	)		27,717		5,789			28,108
Comprehensive income (loss)	$	(110,686	)	$	37,092	$	(67,748	)	$	(9,513	)

See accompanying notes to the consolidated financial statements.

4

PMA Capital Corporation

Notes to the Unaudited Consolidated Financial Statements

1. BUSINESS DESCRIPTION

The accompanying consolidated financial statements include the accounts of PMA Capital Corporation and its subsidiaries (collectively referred to as “PMA Capital” or the “Company”). PMA Capital is an insurance holding company that operates the following businesses:

The PMA Insurance Group — The PMA Insurance Group writes workers’ compensation, integrated disability and, to a lesser extent, other standard lines of commercial insurance, primarily in the eastern part of the United States. Approximately 90% of The PMA Insurance Group’s business is produced through independent agents and brokers.

PMA Re — Prior to November 6, 2003, the Company’s reinsurance operations offered excess of loss and pro rata property and casualty reinsurance protection mainly through reinsurance brokers. Effective November 6, 2003, the Company decided to withdraw from the reinsurance business. See Note 3 for further information.

Prior to May 1, 2002, the Company operated a third specialty risk management business, Caliber One, which wrote excess and surplus lines of business throughout the United States, generally through surplus lines brokers. Effective May 1, 2002, the Company announced its decision to withdraw from the excess and surplus lines marketplace. As a result of this decision, the results of this segment are reported as Run-off Operations. See Note 11 for additional information.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Basis of Presentation – The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. It is management’s opinion that all adjustments, including normal recurring accruals, considered necessary for a fair presentation have been included. Certain reclassifications of prior year amounts have been made to conform to the 2003 presentation.

The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Due to this and certain other factors, such as the seasonal nature of portions of the insurance business as well as competitive and other market conditions, operating results for the three and nine months ended September 30, 2003 are not necessarily indicative of the results to be expected for the full year.

The information included in this Form 10-Q should be read in conjunction with the Company’s audited consolidated financial statements and footnotes included in its 2002 Annual Report to Shareholders and incorporated by reference in its Form 10-K for the year ended December 31, 2002.

B. Recent Accounting Pronouncements – Effective December 31, 2002, the Company adopted the disclosure provisions of Statement of Financial Accounting Standards (“SFAS”) No. 148, “Accounting for Stock-Based Compensation - Transition and Disclosure.” SFAS No. 148 amended SFAS No. 123, “Accounting for Stock-Based Compensation,” to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company accounts for stock-based employee compensation using the intrinsic value method prescribed in Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees.” Accordingly, the Company has applied the disclosure provisions of SFAS No. 148.

5

The following table illustrates the effect on net income (loss) if the fair value based method had been applied:

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollar amounts in thousands, except per share data)	2003			2002			2003			2002
Net income (loss)	$	(96,406	)	$	9,375		$	(73,537	)	$	(37,621	)
Stock-based compensation expense
already included in reported net income
(loss), net of tax		39			31			116			101
Total stock-based compensation expense
determined under fair value based
method, net of tax		(434	)		(390	)		(952	)		(1,089	)
Pro forma net income (loss)	$	(96,801	)	$	9,016		$	(74,373	)	$	(38,609	)
Net income (loss) per share:
Basic - as reported	$	(3.08	)	$	0.30		$	(2.35	)	$	(1.20	)
Basic - pro forma	$	(3.09	)	$	0.29		$	(2.37	)	$	(1.23	)
Diluted - as reported	$	(3.08	)	$	0.30		$	(2.35	)	$	(1.20	)
Diluted - pro forma	$	(3.09	)	$	0.29		$	(2.37	)	$	(1.23	)

Effective January 1, 2003, the Company adopted the recognition provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”). The Company had previously applied the disclosure provisions of FIN 45 to its year end 2002 financial statements. FIN 45 requires certain guarantees to be recorded at fair value and also requires a guarantor to make certain disclosures, even when the likelihood of making payments under the guarantee is remote. Generally, FIN 45 applies to contracts or indemnification agreements that contingently require the guarantor to make payments to the guaranteed party. Adoption of FIN 45 did not have a material effect on the Company’s consolidated financial condition, results of operations or liquidity.

Effective July 1, 2003, the Company adopted SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” This Statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” Adoption of this statement did not have a material impact on the Company’s financial condition, results of operations or liquidity.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). This statement is effective for instruments entered into or modified after May 31, 2003 and the disclosure requirements are effective for the third quarter of 2003. Adoption of this statement did not have a material impact on the Company’s financial statements.

In May 2002, the Company announced its decision to withdraw from the excess and surplus lines marketplace previously served by its Caliber One operating segment. The Company accounted for the discontinuation of this business under the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” which were effective January 1, 2002. SFAS No. 144 supercedes SFAS No. 121 “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,” and the accounting and reporting provisions of APB Opinion No. 30, “Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions,” and establishes a single accounting model for the disposal of long-lived assets and asset groups.

6

In January 2003, the Company sold the capital stock of Caliber One Indemnity Company. Pursuant to the agreement of sale, the Company has retained all assets and liabilities related to in-force policies and outstanding claim obligations and is running off such in-force policies and claim obligations. Accordingly, under SFAS No. 144, the results of operations of this segment are reported in results from continuing operations, and will continue to be reported as such until all in-force policies and outstanding claim obligations are satisfied, at which point the Company will report the results of the Run-off segment as discontinued operations. The long-lived assets of this segment have been tested for impairment in accordance with the provisions of SFAS No. 144. See Note 11 for additional information.

In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS No. 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. SFAS No. 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. Accordingly, this standard does not apply to the Company’s exit from the excess and surplus lines business, which the Company announced in May 2002. The Company will apply the provisions of SFAS No. 146 to its exit from the reinsurance business, which the Company announced in November 2003.

Effective January 1, 2002, the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets.” In accordance with SFAS No. 142, the Company no longer amortizes goodwill, but instead tests it periodically for impairment. During the second quarter of 2002, the Company recognized an impairment charge of $1.3 million associated with the goodwill of the Run-off Operations, which is included in operating expenses. As of September 30, 2003, the Company had no goodwill which is subject to the provisions of SFAS No. 142. The Company has approximately $3.0 million of equity method goodwill (included in other assets on the Balance Sheet), which is accounted for under the provisions of APB Opinion No. 18, “The Equity Method of Accounting for Investments in Common Stock.”

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”), which requires a company to assess if consolidation of an entity is appropriate based upon its variable economic interests in a variable interest entity (“VIE”). The initial determination of whether an entity is a VIE is required to be made on the date at which a company becomes involved with the entity. A VIE is an entity in which the equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. A company must consolidate a VIE if the company has a variable interest that will absorb a majority of the VIEs expected losses if they occur, receive a majority of the entity’s expected residual returns if they occur or both. FIN 46 also requires the disclosure of certain information related to VIEs in which a company holds a significant variable interest. On October 9, 2003 the FASB issued FASB Staff Position 46-6, which deferred the effective date for the application of the provisions of FIN 46 for VIEs created before February 1, 2003. As a result, FIN 46 is effective for those VIEs on December 31, 2003.

The Company is currently assessing the impact that implementing FIN 46 may have on its consolidated financial statements. Based on FIN 46 and its current interpretations, the Company does not expect that its business activities with Trabaja Reinsurance Corporation will warrant consolidation in its future financial statements. The Company is also currently evaluating the impact, if any, of FIN 46 on its reporting for three of its wholly owned statutory trusts, which issued $42.5 million of trust preferred securities that are included on the Company’s Balance Sheet at September 30, 2003. The Company does not expect that application of the provisions of FIN 46 to these trust preferred securities will have a material impact on its financial condition or results of operations. See Note 6 for additional information about the trust preferred debt.

3. SUBSEQUENT EVENTS

On November 4, 2003, the Company announced that it had recorded a pre-tax charge of approximately $150 million at September 30, 2003 to strengthen loss reserves at PMA Re. The principal nationally recognized ratings agencies that rate the financial strength of our principal insurance subsidiaries and the debt of PMA Capital Corporation have taken the following actions on our ratings:

• A.M. Best announced that it has lowered the insurer financial strength rating of PMA Capital Insurance Company, our reinsurance subsidiary, from A- (4^th of 16) to B++ (5^th of 16), and has lowered the insurer financial strength rating of The PMA Insurance Group (Pennsylvania Manufacturers’ Association Insurance Company,

7

Pennsylvania Manufacturers Indemnity Company and Manufacturers Alliance Insurance Company), or the Pooled Companies, our primary insurance subsidiaries, from A- (4^th of 16) to B++ (5^th of 16). All of these ratings are under review with negative implications.

• Standard & Poor’s announced that it has lowered the insurer financial strength of PMA Capital Insurance Company from A- (7^th of 21) to BBB- (10^th of 21), and has lowered the insurer financial strength of the Pooled Companies from A- (7^th of 21) to BBB (9^th of 21). Standard & Poor’s also lowered the senior debt ratings on PMA Capital Corporation from BBB- (10^th of 22) to BB- (13^th of 22). All of these ratings are on credit watch with negative implications.

• Moody’s Investors Service announced that it has lowered the insurer financial strength of PMA Capital Insurance Company from Baa1 (8^th of 21) to Ba1 (11^th of 21), and has lowered the insurer financial strength of the Pooled Companies from Baa1 (8^th of 21) to Baa2 (9^th of 21). Moody’s also lowered the senior debt ratings on PMA Capital Corporation from Ba1 (11^th of 21) to Ba3 (13^th of 21). All of these ratings are on review for further possible downgrade.

On November 6, 2003, the Company announced its decision to withdraw from the reinsurance business previously served by PMA Re, which will not be writing new reinsurance business in the future. The Company is currently evaluating the costs to exit from this business. The Company is currently exploring strategic alternatives and has engaged Banc of America Securities LLC to assist it in this activity.

As we have disclosed previously, a downgrade in the insurer financial strength ratings of our insurance subsidiaries could result in a material loss of business as policyholders move to other companies with higher financial strength ratings. Management believes that the aforementioned downgrades, especially the A.M. Best downgrades, may significantly impair the ability of the Company’s primary insurance operations to write business. Any further downgrades to the insurer financial strength ratings of our insurance subsidiaries would have a material adverse effect on the Company’s results of operations, liquidity and capital resources.

The downgrade in our debt ratings will affect our ability to raise additional debt with terms and conditions similar to our current debt, and, accordingly, will increase our cost of capital. In addition, this downgrade of our debt ratings will make it more difficult to raise capital to refinance any maturing debt obligations and to maintain or improve the current financial strength ratings of our principal insurance subsidiaries.

If Standard & Poor’s lowers the debt rating assigned to our 4.25% Senior Convertible Debentures due 2022, or the Debentures, below BB- and Moody’s lowers the debt rating assigned to the Debentures below Ba3, or the ratings assigned to the Debentures are suspended or withdrawn, or only one rating agency is rating the Debentures and the rating is below the levels specified in this sentence, then each $1,000 principal amount of the Debentures, of which $86.25 million is outstanding, will become convertible into 61.0948 shares of our Class A common stock at a conversion price of $16.368 per share, subject to adjustment upon certain events as described in the indenture filed as an exhibit to our Form 8-K dated October 16, 2002.

These ratings are subject to revision or withdrawal at any time by the rating agencies, and therefore, no assurance can be given that we or our principal insurance subsidiaries can maintain these ratings. Each rating should be evaluated independently of any other rating.

On November 4, 2003, the Company’s Board of Directors resolved to suspend dividends on the Company’s Class A common stock.

On November 6, 2003, several purported class action lawsuits were filed against PMA Capital Corporation and certain other defendants. A purported class action lawsuit captioned Pitt v. PMA Capital Corporation, et. al. has been filed in the Eastern District of Pennsylvania by alleged shareholders of PMA Capital who seek to represent a class of purchasers of PMA Capital securities from May 7, 2003 to November 3, 2003. The complaint names PMA Capital Corporation and certain officers as defendants. The complaint alleges, among other things, that the defendants violated Rule 10b-5 of the Securities Exchange Act of 1934 by making materially false and misleading public statements and material omissions during the class period regarding the Company’s loss reserves.

8

Two purported class action lawsuits, Augenbaum v. PMA Capital Corporation, et. al., and Klinghoffer v. PMA Capital Corporation, et. al., were filed in the Eastern District of Pennsylvania by alleged purchasers of the Company’s 4.25% Convertible Debentures and 8.50% Monthly Income Senior Notes. The complaints name PMA Capital Corporation, PMA Capital Trust I, PMA Capital Trust II, certain of the Company’s officers and directors and investment banking firms as defendants. The complaints allege, among other things, that the defendants violated Section 11, 12(a)(2) and 15 of the Securities Act of 1933 by making materially false and misleading statements about its reserves in the registration statement, prospectuses and prospectus supplements in connection with the debt.

On November 7, 2003, a purported class action lawsuit captioned Newman v. PMA Capital Corporation, John W. Smithson, Francis W. McDonnell and William E. Hitselberger, was filed in the Eastern District of Pennsylvania by alleged shareholders of PMA Capital who seek to represent a class of purchasers of PMA Capital securities from November 13, 1998 to November 3, 2003. The complaint alleges, among other things, that the defendants violated Rule 10b-5 of the Securities Exchange Act of 1934 by making materially false and misleading public statements and material omissions during the class period regarding the Company’s loss reserves.

Additional lawsuits alleging substantially similar claims may have been filed at the time of this filing or may be filed in the future. The Company intends to vigorously defend against the claims asserted in these actions. Although the lawsuits are in their earliest stages, the lawsuits may have a material adverse effect on the Company’s financial condition, results of operations and liquidity.

The Company is currently in default under two financial covenants under its Letter of Credit Facility. The lender has canceled the Letter of Credit Facility, which was scheduled to terminate on December 4, 2003. However, the lender has agreed to waive the defaults and to renew the outstanding letters of credit issued under the Letter of Credit Facility for one year. See Note 6 for additional information.

As of September 30, 2003, the Company had $21 million in cash at the holding company. Management currently believes that the Company’s available sources of funds will provide sufficient liquidity to meet its short-term obligations without receiving dividends from its insurance subsidiaries. The Company’s ability to meet its long-term obligations will depend on its ability to receive dividends from its insurance subsidiaries. Under the Company’s existing corporate structure, it directly owns one of its insurance subsidiaries, PMA Capital Insurance Company, which, in turn, owns the insurance subsidiaries comprising The PMA Insurance Group. As previously disclosed, the Company has agreed with the Pennsylvania Insurance Department that PMA Capital Insurance Company will not pay dividends to PMA Capital Corporation subsequent to November 6, 2003, without the prior approval of the Pennsylvania Insurance Department. As a result and because the Company must depend upon dividends from its operating subsidiaries to meet its long-term obligations, unless the Pennsylvania Insurance Department permits such dividends, the Company may not be able to receive dividends from its operating subsidiaries in sufficient amounts to pay these long-term obligations. Further, any event that would have a material adverse effect on the $21 million of holding company cash or the results of operations of the Company’s insurance subsidiaries could affect its liquidity and ability to meet its contractual obligations and operating needs.

On November 10, 2003, the Company announced that it has reached a preliminary agreement to sell to Imagine Insurance Company Limited (“Imagine”) the renewal rights to PMA Re’s finite business and the opportunity to assume PMA Re’s finite business currently in force. The consummation of the transaction is subject to the completion of due diligence and definitive documentation. Accordingly, there can be no assurance that the transaction will be consummated. Under the preliminary terms of the transaction, Imagine will compensate the Company based upon the amount of in-force business assumed and renewed by Imagine, which the Company cannot currently estimate. Accordingly, the Company cannot currently estimate whether the transaction will be material to its results of operations or liquidity.

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4. UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES

At September 30, 2003, the Company estimated that under all insurance policies and reinsurance contracts issued by its insurance businesses the Company’s liability for unpaid losses and loss adjustment expenses (“LAE”) for all events that occurred as of September 30, 2003 was $2,486.8 million. This amount includes estimated losses from claims plus estimated expenses to settle claims. This estimate includes amounts for losses occurring prior to September 30, 2003 whether or not these claims have been reported to the Company.

Unpaid losses and LAE reflect management’s best estimate of future amounts needed to pay claims and related settlement costs with respect to insured events which have occurred, including events that have not been reported to the Company. In many cases, significant periods of time, ranging up to several years or more, may elapse between the occurrence of an insured loss, the reporting of the loss to the Company and the Company’s payment of that loss. In general, liabilities for reinsurers become known more slowly than for primary insurers and are subject to more unforeseen development and uncertainty. As part of the process for determining the Company’s unpaid losses and LAE, various actuarial models are used that analyze historical data and consider the impact of current developments and trends, such as trends in claims severity and frequency and claims settlement trends. Also considered are legal developments, regulatory trends, legislative developments, changes in social attitudes and economic conditions.

PMA Re increased net loss reserves for prior accident years by $150 million and $170 million for the three and nine months ended September 30, 2003, respectively. PMA Re’s third quarter 2003 reserve charge relates to higher than expected underwriting losses, primarily from casualty business written in accident years 1997 through 2000. Approximately 75% of the charge relates to general liability business written from 1997 to 2000 with substantially all of the remainder from the commercial automobile line written during these same years. During the third quarter, Company actuaries conducted their periodic comprehensive reserve review. Based on the actuarial work performed, which included analyzing recent trends in the levels of the reported and paid claims, an updated selection of actuarially determined loss reserve estimates was developed by accident year for each major line of business written by PMA Re. The information derived during this review indicated that a large portion of the change in expected loss development was due to increasing loss trends emerging in calendar year 2003 for prior accident years. This increase in 2003 loss trends caused the Company to determine that the reserve levels, primarily for accident years 1997 to 2000, needed to be increased by $150 million. An independent actuarial firm also conducted a comprehensive review of PMA Re’s Traditional-Treaty, Specialty-Treaty and Facultative loss reserves, and concluded that applicable carried loss reserves were reasonable at September 30, 2003.

PMA Re’s analysis was enhanced by an extensive review of specific accounts, comprising about 40% of carried reserves for accident years 1997 to 2000. Company actuaries visited a number of former ceding company clients, which collectively comprised about 25% of PMA Re’s total gross loss and LAE reserves from accident years 1997 to 2000, to discuss reserving and reporting experience with these ceding companies. Company actuaries separately evaluated an additional number of other ceding companies, representing approximately 15% of PMA Re’s total gross loss and LAE reserves from accident years 1997 to 2000, to understand and examine data trends.

Management believes that its unpaid losses and LAE are fairly stated at September 30, 2003. However, estimating the ultimate claims liability is necessarily a complex and judgmental process inasmuch as the amounts are based on management’s informed estimates and judgments using data currently available. As additional experience and data become available regarding claims payment and reporting patterns, legislative developments, judicial theories of liability, the impact of regulatory trends on benefit levels for both medical and indemnity payments, changes in social attitudes and economic conditions, the estimates are revised accordingly. If the Company’s ultimate losses, net of reinsurance, prove to differ substantially from the amounts recorded at September 30, 2003, the related adjustments could have a material adverse impact on the Company’s financial condition, results of operations and liquidity.

5. REINSURANCE

The Company follows the customary insurance practice of reinsuring with other insurance companies a portion of the risks under the policies written by its insurance subsidiaries. The Company’s insurance and reinsurance subsidiaries maintain reinsurance to protect themselves against the severity of losses on individual claims and unusually serious occurrences in which a number of claims produce an aggregate extraordinary loss. Although reinsurance does not discharge the insurance subsidiaries from their primary liabilities to their policyholders for losses insured under the insurance policies, it does make the assuming reinsurer liable to the insurance subsidiaries for the reinsured portion of the risk.

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The components of net premiums written, net premiums earned and losses and LAE incurred are as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollar amounts in thousands)	2003			2002			2003			2002
Premiums written:
Direct	$	162,779		$	130,238		$	498,198		$	517,883
Assumed		189,601			192,068			635,775			585,360
Ceded		(67,097	)		(53,455	)		(207,176	)		(243,248	)
Net	$	285,283		$	268,851		$	926,797		$	859,995
Premiums earned:
Direct	$	156,717		$	151,721		$	441,917		$	459,005
Assumed		203,912			168,636			596,792			511,577
Ceded		(67,147	)		(67,626	)		(185,535	)		(243,377	)
Net	$	293,482		$	252,731		$	853,174		$	727,205
Losses and LAE:
Direct	$	122,531		$	109,500		$	344,439		$	418,629
Assumed		284,190			87,760			577,080			335,586
Ceded		(70,932	)		(16,527	)		(190,071	)		(181,255	)
Net	$	335,789		$	180,733		$	731,448		$	572,960

6. DEBT

(dollar amounts in thousands)	As of September 30, 2003		As of December 31, 2002
Short-term debt:
Bank credit facility	$	-	$	65,000
Long-term debt:
4.25% Convertible debt		86,250		86,250
Trust preferred securities		42,500		-
8.50% Senior notes		57,500		-
Total long-term debt		186,250		86,250
Total debt	$	186,250	$	151,250

In October 2002, the Company issued $86.25 million aggregate principal amount of Convertible Debt due September 30, 2022 from which the Company received net proceeds of approximately $83.7 million. The Convertible Debt bears interest at a rate of 4.25% per annum, payable semi-annually on March 30 and September 30. In addition, contingent interest may be payable by the Company to the holders of the Convertible Debt commencing September 30, 2006, under certain circumstances. Each $1,000 principal amount of the Convertible Debt is convertible into 61.0948 shares of the Company’s Class A common stock at a conversion price of $16.368 per share under certain events specified in the indenture, including if the Company’s senior debt rating is below Ba3 by Standard & Poor’s or BB- by Moody’s, or the ratings assigned to the Debentures are suspended or withdrawn, or only one rating agency is rating the Debentures and the rating is below the levels specified in this sentence. Further, holders of the Convertible Debt, at their option, may require the Company to repurchase all or a portion of their debentures on September 30, 2006, 2008, 2010, 2012 and 2017, or, subject to specified exceptions, upon a change in control. The Company may choose to pay the repurchase price in cash or shares of Class A common stock. The Convertible Debt is redeemable in cash, in whole or in part, at the Company’s option at any time on or after September 30, 2006.

During September 2003, the Company privately placed $10.0 million (“Trust Preferred”) of 30-year floating rate trust preferred securities through a wholly owned statutory trust subsidiary, realizing net proceeds of approximately $9.7 million. The Trust Preferred has a 30-year maturity and is redeemable in whole, or in part, after five years from issuance

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at its stated liquidation amount plus accrued and unpaid interest. The interest rate on the Trust Preferred equals the three-month London InterBank Offered Rate (“LIBOR”) plus 4.05% and is payable on a quarterly basis. At September 30, 2003, the interest rate on the Trust Preferred was 5.19%.

The Company has the right to defer interest payments on the trust preferred securities for up to twenty consecutive quarters but, if so deferred, the Company may not declare or pay cash dividends or distributions on its Class A common stock. The obligations of the statutory trust subsidiaries are guaranteed by PMA Capital with respect to distributions and payments of the trust preferred securities and the Company issued junior subordinated debentures to the statutory trust subsidiaries which have substantially the same terms as the trust preferred securities.

The Company entered into interest rate swaps with notional amounts of $17.5 million and $15.0 million and designated them as cash flow hedges to manage interest costs and cash flows associated with the variable interest rates associated with trust preferred securities sold in the first six months of 2003. The interest rate swaps effectively converted these trust preferred floating-rate securities sold in the first six months of 2003 to fixed rate debt with interest rates of 6.70% and 6.80%, respectively. The Company settled these interest rate swaps for net proceeds of $1.1 million in November 2003.

The Company has a letter of credit facility (the “Letter of Credit Facility”) which provides for up to $50.0 million in letter of credit capacity. At September 30, 2003, the aggregate outstanding face amount of letters of credit issued was $15.0 million. The Letter of Credit Facility is utilized primarily for collateralizing reinsurance obligations of the insurance subsidiaries of the Company. The Letter of Credit Facility is collateralized by securities with a total amortized cost of $17.9 million and a fair value of $18.2 million at September 30, 2003. The securities pledged as collateral are included in fixed maturities on the Balance Sheet. At September 30, 2003, fees for the Letter of Credit Facility were 0.45% per annum on the utilized portion and 0.15% on the unutilized portion.

The covenants supporting the Company’s outstanding debt and the Letter of Credit Facility contain provisions that, among other matters, limit the Company’s ability to incur additional indebtedness, merge, consolidate and acquire or sell assets. The covenants of the Company’s Letter of Credit Facility also require the Company to satisfy certain ratios related to statutory surplus, debt-to-capitalization, cash coverage, risk-based capital and reinsurance recoverables to equity. Additionally, the covenants of the Letter of Credit Facility place restrictions on dividends to shareholders.

The Company is currently in default under certain financial covenants under its Letter of Credit Facility. The lender has cancelled the Letter of Credit Facility, which was scheduled to terminate on December 4, 2003. However, the lender has agreed to waive the default and to renew the outstanding letters of credit issued under the Letter of Credit Facility for one year.

7. COMMITMENTS AND CONTINGENCIES

In general, the Company’s businesses are subject to a changing social, economic, legal, legislative and regulatory environment that could affect them. Some of the changes include initiatives to restrict insurance pricing and the application of underwriting standards and reinterpretations of insurance contracts long after the policies were written in an effort to provide coverage unanticipated by the Company. The eventual effect on the Company of the changing environment in which it operates remains uncertain.

In July 2003, the Company executed a 15-year lease extension for 87,500 square feet of office space in Philadelphia, Pennsylvania. Total lease payments under the lease are expected to be $1.1 million annually in 2004, 2005, 2006 and 2007, and $18.0 million thereafter.

In the event a property and casualty insurer operating in a jurisdiction where the Company’s licensed insurance subsidiaries also operate becomes or is declared insolvent, state insurance regulations provide for the assessment of other licensed insurers to fund any capital deficiency of the insolvent insurer. Generally, this assessment is based upon the ratio of an insurer’s voluntary premiums written to the total premiums written for all insurers in that particular jurisdiction. As of September 30, 2003, the Company had a recorded liability of $6.8 million for these assessments, which is included in accounts payable, accrued expenses and other liabilities on the Balance Sheet.

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The Company has provided a guaranty of $7.0 million related to loans on properties in which the Company has an interest. This guarantee shall continue to be in force until the related loan has been satisfied. The loan is scheduled to be repaid on November 1, 2004. The Company has also provided guarantees of $2.2 million related to an executive loan program for officers of the Company with a financial institution. This program expires on December 31, 2003.

Under the terms of the sale of one of the Company’s insurance subsidiaries in 1998, the Company has agreed to indemnify the buyer, up to a maximum of $15.0 million if the actual claim payments in the aggregate exceed the estimated payments upon which the loss reserves of the former subsidiary were established. If the actual claim payments in the aggregate are less than the estimated payments upon which the loss reserves have been established, the Company will participate in such favorable loss reserve development.

The Company is continuously involved in numerous lawsuits arising, for the most part, in the ordinary course of business, either as a liability insurer defending third-party claims brought against its insureds, or as an insurer defending coverage claims brought against it by its policyholders or other insurers. While the outcome of all litigation involving the Company, including insurance-related litigation, cannot be determined, litigation is not expected to result in losses that differ from recorded reserves by amounts that would be material to the Company’s financial condition, results of operations or liquidity. In addition, reinsurance recoveries related to claims in litigation, net of the allowance for uncollectible reinsurance, are not expected to result in recoveries that differ from recorded recoverables by amounts that would be material to the Company’s financial condition, results of operations or liquidity.

In November 2003, several purported class action lawsuits were filed against PMA Capital Corporation and certain other defendants. See Note 3 for additional information.

8. SHAREHOLDERS’ EQUITY

In May 2003, shareholders approved an increase in the authorized shares of PMA Capital’s Class A common stock, which has a $5 par value, from 40 million shares to 60 million shares.

9. EARNINGS PER SHARE

Shares used as the denominator of the basic and diluted earnings per share were computed as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2003		2002		2003		2002
Basic shares - weighted average shares outstanding		31,328,965		31,328,813		31,328,936		31,269,995
Effect of dilutive stock options		-		293,180		-		-
Total diluted shares		31,328,965		31,621,993		31,328,936		31,269,995

For all periods presented, there were no differences in the numerator (net income (loss)) for the basic and diluted earnings per share calculation. The effects of 3.1 million stock options were excluded from the computation of diluted earnings per share for the three and nine months ended September 30, 2003, and the effect of 1.2 million and 3.2 million stock options were excluded from the computation of diluted earnings per share for the three and nine months ended September 30, 2002, respectively, because they would have been anti-dilutive.

The 2003 diluted shares do not assume the conversion of the Company’s 4.25% convertible debentures into 5.3 million shares of Class A common stock because under the terms of the Convertible Debt agreement they did not meet the required conditions for holders to be able to convert the debentures.

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10. INCOME TAXES

Income taxes have been provided using the liability method in accordance with SFAS No. 109, “Accounting for Income Taxes.” Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts as measured by tax laws and regulations. SFAS No. 109 requires a valuation allowance to be recorded when it is more likely than not that some or all of the deferred tax asset will not be realized.

As of September 30, 2003, the Company has a net operating loss (“NOL”) carryforward of $230 million, which will begin to expire in 2018, and an $8.4 million alternative minimum tax credit carryforward, which does not expire. The NOL carryforward, which produces a gross deferred tax asset of $80.5 million, will be applied to reduce future taxable income of the Company. During the quarter, the Company evaluated the recoverability of its deferred tax asset. Based upon management’s consideration of projected future taxable income and reversal of deferred tax liabilities, a valuation allowance in the amount of $24 million was established. This valuation allowance amount reserves against $15.6 million of gross deferred tax assets related to the NOL carryforward and $8.4 million related to the alternative minimum tax credit carryforward because it is more likely than not that this portion of the benefit will not be realized. The realizability of the Company’s deferred tax asset and the corresponding valuation allowance will be assessed periodically based on the Company’s current and anticipated results of operations. The valuation allowance could either increase or decrease in the near term if the Company’s estimates of future taxable income change.

11. RUN-OFF OPERATIONS

In May 2002, the Company announced its decision to withdraw from the excess and surplus lines marketplace previously served by the Caliber One operating segment. On January 2, 2003, the Company closed on the sale of the capital stock of Caliber One Indemnity Company. The sale generated gross proceeds of approximately $31 million and resulted in a pre-tax gain of $2.5 million, which is included in other revenues in the Statement of Operations for the nine months ended September 30, 2003. During the first quarter of 2003, the Company recognized an additional $2.5 million writedown of assets, including approximately $2 million for reinsurance receivables and $500,000 for premiums receivable, reflecting an assessment of their estimated net realizable value. The writedown is included in operating expenses in the Statement of Operations for the nine months ended September 30, 2003.

Pursuant to the agreement of sale, the Company has retained all assets and liabilities related to the in-force policies and outstanding claim obligations relating to Caliber One’s business written prior to closing on the sale. As a result of the Company’s decision to exit from and run off this business, the results of this segment are reported as Run-off Operations.

As a result of the decision to exit from and run off this business, results for the Run-off Operations for the nine months ended September 30, 2002 included a charge of $43 million pre-tax ($28 million after-tax). Components of the pre-tax charge include approximately $16 million to write-down assets to their estimated net realizable value, including a non-cash charge of approximately $6 million for leasehold improvements and other fixed assets and $1.3 million for goodwill.

In addition, the $43 million pre-tax charge includes expenses associated with the recognition of liabilities of approximately $27 million, including reinsurance costs of approximately $19 million, long-term lease costs of approximately $4 million and involuntary employee termination benefits of approximately $3 million. At September 30, 2003, the Company has a remaining obligation of approximately $1.2 million for net lease costs and approximately $182,000 for severance.

During 2002, approximately 80 Caliber One employees, primarily in the underwriting area, were terminated in accordance with the Company’s exit plan. Approximately 14 positions, primarily claims, remain after the terminations. Involuntary employee termination benefits of approximately $2.6 million have been paid through September 30, 2003, including approximately $700,000 during the first nine months of 2003.

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12. BUSINESS SEGMENTS

The Company’s total revenues, substantially all of which are generated within the U.S., and pre-tax operating income (loss) by principal business segment are presented in the table below.

Operating income (loss), which is GAAP net income (loss) excluding net realized investment gains and losses, is the financial performance measure used by the Company’s management and Board of Directors to evaluate and assess the results of the Company’s insurance businesses. Accordingly, the Company reports operating income by segment in this footnote as required by SFAS No. 131, “Disclosures About Segments of an Enterprise and Related Information.” The Company’s management and Board of Directors use operating income as the measure of financial performance for the Company’s business segments because (i) net realized investment gains and losses are unpredictable and not necessarily indicative of current operating fundamentals or future performance of the business segments and (ii) in many instances, decisions to buy and sell securities are made at the holding company level, and such decisions result in net realized gains and losses that do not relate to the operations of the individual segments. Operating income (loss) does not replace net income (loss) as the GAAP measure of our consolidated results of operations.

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollar amounts in thousands)	2003			2002			2003			2002
Revenues:
The PMA Insurance Group	$	154,179		$	116,150		$	430,252		$	347,419
PMA Re (1)		161,350			144,750			480,635			423,691
Corporate and Other		333			(389	)		1,231			(922	)
Run-off Operations(2)		(1,066	)		14,364			9,561			32,361
Net realized investment gains (losses)		1,392			(3,868	)		10,198			(20,028	)
Total revenues	$	316,188		$	271,007		$	931,877		$	782,521
Components of net income (loss):
Pre-tax operating income (loss):
The PMA Insurance Group	$	7,345		$	6,714		$	22,523		$	19,508
PMA Re (1)		(113,673	)		15,196			(91,989	)		41,902
Corporate and Other		(6,259	)		(3,211	)		(16,497	)		(11,191	)
Run-off Operations(2)		3			(2	)		1			(87,497	)
Net realized investment gains (losses)		1,392			(3,868	)		10,198			(20,028	)
Income (loss) before income taxes		(111,192	)		14,829			(75,764	)		(57,306	)
Income tax expense (benefit)		(14,786	)		5,454			(2,227	)		(19,685	)
Net income (loss)	$	(96,406	)	$	9,375		$	(73,537	)	$	(37,621	)

(1) On November 6, 2003, the Company announced its decision to withdraw from the reinsurance business previously served by PMA Re. Accordingly, the results of this segment will be reported as run-off operations commencing with the fourth quarter of 2003.

(2) In May 2002, the Company announced its decision to withdraw from the excess and surplus lines marketplace. As a result of this decision, the results of this segment, formerly known as Caliber One, are reported as Run-off Operations.

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Net premiums earned by business segment are as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollar amounts in thousands)	2003			2002			2003			2002
The PMA Insurance Group:
Workers' compensation and integrated disability	$	118,826		$	84,480		$	322,187		$	249,684
Commercial automobile		13,478			10,280			40,472			34,144
Commercial multi-peril		7,543			6,432			22,110			19,987
Other		2,120			1,998			7,789			5,715
Total premiums earned		141,967			103,190			392,558			309,530
PMA Re (1):
Finite Risk and Financial Products
Casualty		26,265			16,687			87,782			84,844
Property		24,991			22,977			79,907			69,936
Other		2,131			4,740			5,929			14,231
Total		53,387			44,404			173,618			169,011
Traditional - Treaty
Casualty		48,827			47,039			134,939			111,648
Property		20,865			20,985			59,937			54,767
Other		456			1,404			1,031			2,147
Total		70,148			69,428			195,907			168,562
Specialty - Treaty
Casualty		18,143			15,320			53,541			34,041
Property		347			3,309			1,305			990
Other		65			110			381			320
Total		18,555			18,739			55,227			35,351
Facultative
Casualty		4,260			1,162			14,452			9,010
Property		3,056			1,778			5,968			4,609
Other		1			-			5			-
Total		7,317			2,940			20,425			13,619
Accident
Casualty		11			-			137			-
Other		3,942			-			10,289			-
Total		3,953			-			10,426			-
Total casualty		97,506			80,208			290,851			239,543
Total property		49,259			49,049			147,117			130,302
Total other(2)		6,595			6,254			17,635			16,698
Total premiums earned		153,360			135,511			455,603			386,543
Run-off Operations		(1,617	)		14,250			5,621			31,785
Corporate and Other		(228	)		(220	)		(608	)		(653	)
Consolidated net premiums earned	$	293,482		$	252,731		$	853,174		$	727,205

(1) On November 6, 2003, the Company announced its decision to withdraw from the reinsurance business previously served by PMA Re. Accordingly, the results of this segment will be reported as run-off operations commencing with the fourth quarter of 2003.

(2) Primarily aviation, ocean marine and accident.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion of our financial condition as of September 30, 2003, compared with December 31, 2002, and our results of operations for the three and nine months ended September 30, 2003, compared with the same periods last year. This discussion should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) included in our Form 10-K for the year ended December 31, 2002 (“2002 Form 10-K”), to which the reader is directed for additional information. The term “GAAP” refers to accounting principles generally accepted in the United States of America.

The MD&A contains forward-looking statements which involve inherent risks and uncertainties. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. These statements are based upon current estimates, assumptions and projections. Actual results may differ materially from those projected in such forward-looking statements, and therefore, you should not place undue reliance on them. See the Cautionary Statements on page 36 for a list of factors that could cause our actual results to differ materially from those contained in any forward-looking statement. Also, see Business – Risk Factors in our 2002 Form 10-K for a further discussion of risks that could materially affect our business.

RESULTS OF OPERATIONS

Consolidated Results

We recorded net losses of $96.4 million and $73.5 million for the three and nine months ended September 30, 2003, respectively, compared to net income of $9.4 million and a net loss of $37.6 million for the same periods last year.

The net loss for the third quarter and first nine months of 2003 includes an after-tax charge of $97.5 million ($150 million pre-tax), to increase loss reserves at PMA Re. On November 6, 2003, we announced our decision to exit from the reinsurance business and we will not be writing new reinsurance business in the future. See Recent Events beginning on page 18 for additional information. Additionally, based on an updated evaluation of our deferred tax asset at September 30, 2003, we established a valuation allowance on the deferred tax asset of $24 million.

The net loss for the nine months ended September 30, 2002 includes a second quarter charge of approximately $28 million after-tax ($43 million pre-tax) for costs to exit from and run off business written by the Run-off Operations (formerly known as the Caliber One operating segment) and unfavorable prior year loss development of $26 million after-tax ($40 million pre-tax) at the Run-off Operations in the first quarter of 2002.

Included in net income (loss) are after-tax net realized investment gains of $905,000 and $6.6 million for the three and nine months ended September 30, 2003, respectively, compared to after-tax net realized losses of $2.5 million and $13.0 million for the same periods last year. The net realized losses in 2002 include impairment losses of $4.1 million and $14.4 million after-tax, respectively, on fixed income securities.

Consolidated revenues increased to $316.2 million and $931.9 million for the three and nine months ended September 30, 2003, respectively, compared to $271.0 million and $782.5 million for the same periods last year. The increases in revenues reflect higher net premiums earned by The PMA Insurance Group and PMA Re due primarily to rate increases. Additionally, pre-tax net realized investment gains were $1.4 million and $10.2 million for the third quarter and first nine months of 2003, compared to pre-tax net realized investment losses of $3.9 million and $20.0 million for the same periods last year.

In this MD&A, in addition to providing consolidated net income (loss), we also provide segment operating income (loss) because we believe that it is a meaningful measure of the profit or loss generated by our operating segments. Operating income (loss), which is GAAP net income (loss) excluding net realized investment gains and losses, is the financial performance measure used by our management and Board of Directors to evaluate and assess the results of our insurance businesses. Accordingly, we report operating income by segment in Note 12 to our Unaudited Consolidated Financial Statements as required by SFAS No. 131, “Disclosures About Segments of an Enterprise and Related Information.”Our management and Board of Directors use operating income as the measure of financial performance because (i) net realized

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investment gains and losses are unpredictable and not necessarily indicative of current operating fundamentals or future performance of the business segments and (ii) in many instances, decisions to buy and sell securities are made at the holding company level, and such decisions result in net realized gains and losses that do not relate to the operations of the individual segments. Operating income (loss) does not replace net income (loss) as the GAAP measure of our consolidated results of operations.

Following is a reconciliation of our segment operating results to GAAP net income (loss). Please see Note 12 to our Unaudited Consolidated Financial Statements for further information.

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollar amounts in thousands)	2003			2002			2003			2002
Components of net income (loss):
Pre-tax operating income (loss):
The PMA Insurance Group	$	7,345		$	6,714		$	22,523		$	19,508
PMA Re (1)		(113,673	)		15,196			(91,989	)		41,902
Corporate and Other		(6,259	)		(3,211	)		(16,497	)		(11,191	)
Run-off Operations(2)		3			(2	)		1			(87,497	)
Net realized investment gains (losses)		1,392			(3,868	)		10,198			(20,028	)
Income (loss) before income taxes		(111,192	)		14,829			(75,764	)		(57,306	)
Income tax expense (benefit)		(14,786	)		5,454			(2,227	)		(19,685	)
Net income (loss)	$	(96,406	)	$	9,375		$	(73,537	)	$	(37,621	)

(1) On November 6, 2003, we announced our decision to withdraw from the reinsurance business previously served by PMA Re. Accordingly, the results of this segment will be reported as run-off operations commencing with the fourth quarter of 2003.

(2) In May 2002, we announced our decision to withdraw from the excess and surplus lines marketplace. As a result of this decision, the results of this segment, formerly known as Caliber One, are reported as Run-off Operations.

We also provide combined ratios and operating ratios for our insurance segments on pages 20 and 23. The “combined ratio” is a measure of property and casualty underwriting performance. The combined ratio computed using GAAP-basis numbers is equal to losses and loss adjustment expenses (“LAE”), plus acquisition expenses, insurance-related operating expenses and policyholders’ dividends, where applicable, all divided by net premiums earned. A combined ratio of less than 100% reflects an underwriting profit. Because time normally elapses between the receipt of premiums and the payment of claims and certain related expenses, we invest the available premiums. Underwriting results do not include investment income from these funds. Given the long-tail nature of our liabilities, we believe that the operating ratios are also important in evaluating our business. The operating ratio is the combined ratio less the net investment income ratio, which is net investment income divided by premiums earned.

Recent Events

On November 4, 2003, we announced that we had recorded a pre-tax charge of approximately $150 million at September 30, 2003 to strengthen loss reserves at PMA Re. The principal nationally recognized ratings agencies that rate the financial strength of our principal insurance subsidiaries and the debt of PMA Capital Corporation have taken the following actions on our ratings:

• A.M. Best announced that it has lowered the insurer financial strength rating of PMA Capital Insurance Company, our reinsurance subsidiary, from A- (4^thof 16) to B++ (5^thof 16), and has lowered the insurer financial strength rating of The PMA Insurance Group (Pennsylvania Manufacturers’Association Insurance Company, Pennsylvania Manufacturers Indemnity Company and Manufacturers Alliance Insurance Company), or the Pooled Companies, our primary insurance subsidiaries, from A- (4^thof 16) to B++ (5^th of 16). All of these ratings are under review with negative implications.

• Standard & Poor’s announced that it has lowered the insurer financial strength of PMA Capital Insurance Company from A- (7^thof 21) to BBB- (10^thof 21), and has lowered the insurer financial

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strength of the Pooled Companies from A- (7^thof 21) to BBB (9^thof 21). Standard & Poor’s also lowered the senior debt ratings on PMA Capital Corporation from BBB- (10^thof 22) to BB- (13^thof 22). All of these ratings are on credit watch with negative implications.

• Moody’s Investors Service announced that it has lowered the insurer financial strength of PMA Capital Insurance Company from Baa1 (8^thof 21) to Ba1 (11^thof 21), and has lowered the insurer financial strength of the Pooled Companies from Baa1 (8^thof 21) to Baa2 (9^thof 21). Moody’s also lowered the senior debt ratings on PMA Capital Corporation from Ba1 (11^thof 21) to Ba3 (13^thof 21). All of these ratings are on review for further possible downgrade.

See Part II – Item 5 – Other Information – Risk Factors beginning on page 37 for additional information regarding our ratings.

On November 4, 2003, our Board of Directors resolved to suspend the dividends on our Class A Common stock.

On November 6, 2003, we announced our decision to withdraw from the reinsurance business previously served by PMA Re, which will not be writing new reinsurance business in the future. We are presently evaluating our strategic alternatives regarding this business. We have agreed with the Pennsylvania Insurance Department that PMA Capital Insurance Company will not pay dividends to us subsequent to November 6, 2003, without the prior approval of the Pennsylvania Insurance Department. See Part II – Item 5 – Other Information – Risk Factors beginning on page 37 for additional information regarding our agreement with the Pennsylvania Insurance Department. Several purported class action lawsuits were filed against us and certain other defendants. For further information, see Part II – Item 1 – Legal Proceedings.

On November 10, 2003, the Company announced that it has reached a preliminary agreement to sell to Imagine Insurance Company Limited (“Imagine”) the renewal rights to PMA Re’s finite business and the opportunity to assume PMA Re’s finite business currently in force. The consummation of the transaction is subject to the completion of due diligence and definitive documentation. Accordingly, there can be no assurance that the transaction will be consummated. Under the preliminary terms of the transaction, Imagine will compensate the Company based upon the amount of in-force business assumed and renewed by Imagine, which the Company cannot currently estimate. Accordingly, the Company cannot currently estimate whether the transaction will be material to its results of operations or liquidity.

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Segment Results

The PMA Insurance Group

Summarized financial results of The PMA Insurance Group are as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
(dollar amounts in thousands)	2003		2002		2003		2002
Net premiums written	$	149,130	$	118,627	$	462,809	$	378,727
Net premiums earned	$	141,967	$	103,190	$	392,558	$	309,530
Net investment income		8,134		8,971		24,608		27,002
Other revenues		4,078		3,989		13,086		10,887
Total revenues		154,179		116,150		430,252		347,419
Losses and LAE		105,197		78,121		288,433		230,549
Acquisition and operating expenses		39,547		29,846		113,116		89,886
Dividends to policyholders		2,090		1,469		6,180		7,476
Total losses and expenses		146,834		109,436		407,729		327,911
Pre-tax operating income (1)	$	7,345	$	6,714	$	22,523	$	19,508
Combined ratio		101.3%		103.0%		101.5%		103.3%
Less: net investment income ratio		-5.7%		-8.7%		-6.3%		-8.7%
Operating ratio		95.6%		94.3%		95.2%		94.6%

(1) Operating income is the financial performance measure that our management and Board of Directors use to evaluate the results of our insurance businesses. For further information, see pages 17 — 18, and Note 12 to our Unaudited Consolidated Financial Statements.

Pre-tax operating income for The PMA Insurance Group improved to $7.3 million and $22.5 million for the three and nine months ended September 30, 2003, compared to $6.7 million and $19.5 million for the same periods in 2002. The increases in operating income were primarily due to improved underwriting results, partially offset by lower net investment income.

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Premiums

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollar amounts in thousands)	2003			2002			2003			2002
Workers' compensation and integrated disability:
Direct premiums written	$	140,018		$	102,518		$	411,258		$	329,115
Premiums assumed		6,074			5,207			17,860			9,307
Premiums ceded		(16,195	)		(7,641	)		(42,058	)		(28,378	)
Net premiums written	$	129,897		$	100,084		$	387,060		$	310,044
Commercial Lines:
Direct premiums written	$	22,749		$	22,422		$	87,003		$	83,943
Premiums assumed		417			362			826			1,080
Premiums ceded		(3,933	)		(4,241	)		(12,080	)		(16,340	)
Net premiums written	$	19,233		$	18,543		$	75,749		$	68,683
Total:
Direct premiums written	$	162,767		$	124,940		$	498,261		$	413,058
Premiums assumed		6,491			5,569			18,686			10,387
Premiums ceded		(20,128	)		(11,882	)		(54,138	)		(44,718	)
Net premiums written	$	149,130		$	118,627		$	462,809		$	378,727

Direct workers’ compensation and integrated disability premiums written increased by $37.5 million and $82.1 million for the three and nine months ended September 30, 2003 primarily due to price increases of approximately 10% on workers’ compensation business and an increase in the volume of risks underwritten for the workers’ compensation and integrated disability lines of business. Our retention rate on existing accounts was 85% for the nine months ended September 30, 2003. Direct writings of commercial lines of business other than workers’ compensation, such as commercial auto, general liability, umbrella, multi-peril and commercial property lines (collectively, “Commercial Lines”), increased by $327,000 and $3.1 million for the three and nine months ended September 30, 2003, compared to the same periods in 2002, primarily due to improved pricing that averaged approximately 15% in the first nine months of 2003. Although we cannot currently predict the impact of the recent ratings downgrade on The PMA Insurance Group’s future premium growth and future retention rate, such downgrades may lower the future growth and the retention rate. Further, the recent ratings downgrades may make it more difficult to write business at the same rates and favorable terms and conditions as our current businesses.

Ceded premiums increased $8.2 million and $9.4 million for the three and nine months ended September 30, 2003, compared to the same periods in 2002. Premiums ceded for workers’ compensation and integrated disability increased by $8.6 million and $13.7 million as a result of the increase in direct premiums written as well as an increase in rates being charged by reinsurers. Premiums ceded for Commercial Lines decreased by $308,000 and $4.3 million, primarily because we have increased our net retention in Commercial Lines.

Net premiums written increased 26% and 22% while net premiums earned increased 38% and 27% for the three and nine months ended September 30, 2003, respectively, compared to the same periods in 2002. Generally, trends in net premiums earned follow patterns similar to net premiums written adjusted for the customary lag related to the timing of premium writings within the year. Direct premiums are earned principally on a pro rata basis over the terms of the policies. However, with respect to policies that provide for premium adjustments, such as experience-rated or exposure-based adjustments, such premium adjustment may be made subsequent to the end of the policy’s coverage period and will be recorded as earned premium in the period in which the adjustment is made.

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Losses and Expenses

The components of the GAAP combined ratios are as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2003		2002		2003		2002
Loss and LAE ratio		74.1%		75.7%		73.5%		74.5%
Expense ratio:
Acquisition expenses		16.8%		17.5%		16.9%		17.5%
Operating expenses(1)		8.9%		8.4%		9.5%		8.9%
Total expense ratio		25.7%		25.9%		26.4%		26.4%
Policyholders' dividend ratio		1.5%		1.4%		1.6%		2.4%
Combined ratio		101.3%		103.0%		101.5%		103.3%

(1) The operating expense ratio equals insurance-related operating expenses divided by net premiums earned. Insurance-related operating expenses were $12.6 million and $37.6 million for the three and nine months ended September 30, 2003, respectively, and $8.7 million and $27.5 million for the three and nine months ended September 30, 2002, respectively

The loss and LAE ratios improved 1.6 points and 1.0 point for the three and nine months ended September 30, 2003, respectively, compared to the same periods in 2002. The improvements in the loss and LAE ratio are primarily due to lower prior year development and discount accretion for the three and nine months ended September 30, 2003, compared to the same periods last year. The PMA Insurance Group recorded $278,000 and $434,000 of unfavorable prior year reserve development for the three and nine months ended September 30, 2003, respectively, compared to $1.2 million and $1.1 million for the same periods last year. The unfavorable development in the third quarter of 2002 is due to unfavorable loss experience on rent-a-captive business. The unfavorable development in the first nine months of 2002 is due to higher than expected claims handling costs.

Our current accident year loss and LAE ratios improved moderately in 2003, compared to the same periods in 2002, as price increases have outpaced increasing loss costs. Medical cost inflation was the primary driver of the increasing loss costs in 2003. We estimate our medical cost inflation to be approximately 11%, which has contributed to increased severity of workers’ compensation losses. As discussed below, lower policyholder dividends are also used as a means to improve a policy’s overall profitability.

Overall, the total expense ratio was essentially flat for the three and nine months ended September 30, 2003, compared to the same periods in 2002, as overall expenses increased in line with higher earned premiums.

The policyholders’ dividend ratio was essentially flat for the third quarter and improved by 0.8 points for the nine months ended September 30, 2003, compared to the same periods in 2002. Under policies that are subject to dividend plans, the customer may receive a dividend based upon loss experience during the policy period. The improvement in the policyholders’ dividend ratio occurred primarily because The PMA Insurance Group sold less business under dividend plans and wrote business under lower paying dividend plans. Lower dividend payments are effectively another form of price increase that contributes to the overall profitability of our workers’ compensation business.

Net Investment Income

Net investment income was $8.1 million and $24.6 million for the three and nine months ended September 30, 2003, compared to $9.0 million and $27.0 million for the same periods in 2002. The lower net investment income primarily reflects a reduction in invested asset yields of approximately 130 and 100 basis points during the third quarter and first nine months of 2003, compared to the same periods last year, partially offset by a higher invested asset base that increased approximately 19% and 11% for the three and nine months ended September 30, 2003.

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PMA Re

On November 6, 2003, we announced our decision to withdraw from the reinsurance business and we will not be writing new business in the future. See Recent Events beginning on page 18 for additional information. We are currently in the process of analyzing the costs of withdrawing from this business. Because of our decision to withdraw from the reinsurance business, we expect that PMA Re’s premiums written and earned, losses and LAE, and operating expenses will decline materially over the next four quarters. Therefore, PMA Re’s results for the three and nine months ended September 30, 2003, will not be indicative of results for future periods.

Summarized financial results of PMA Re are as follows:

	Three Months Ended September 30,					Nine Months Ended September 30,
(dollar amounts in thousands)	2003			2002		2003			2002
Net premiums written	$	139,770		$	153,862	$	470,813		$	453,169
Net premiums earned	$	153,360		$	135,511	$	455,603		$	386,543
Net investment income		7,990			9,239		25,032			37,148
Total revenues		161,350			144,750		480,635			423,691
Losses and LAE		231,403			92,574		437,358			271,430
Acquisition and operating expenses		43,620			36,980		135,266			110,359
Total losses and expenses		275,023			129,554		572,624			381,789
Pre-tax operating income (loss) (1)	$	(113,673	)	$	15,196	$	(91,989	)	$	41,902
Combined ratio		179.3%			95.6%		125.7%			98.8%
Less: net investment income ratio		-5.2%			-6.8%		-5.5%			-9.6%
Operating ratio		174.1%			88.8%		120.2%			89.2%

(1) Operating income is the financial performance measure that our management and Board of Directors use to evaluate the results of our insurance businesses. For further information, see pages 17-18, and Note 12 to our Unaudited Consolidated Financial Statements.

PMA Re recorded pre-tax operating losses of $113.7 million and $92.0 million for the three and nine months ended September 30, 2003, respectively, compared to pre-tax operating income of $15.2 million and $41.9 million for the same periods in 2002. The results for PMA Re primarily reflect the $150 million reserve charge associated mainly with accident years 1997 to 2000. See Losses and Expenses beginning on page 25 for additional information about the reserve charge.

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Premiums

PMA Re’s gross premiums written by business unit and major lines of business are as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
(dollar amounts in thousands)	2003		2002		2003		2002
Business Unit:
Finite Risk and Financial Products	$	68,388	$	42,635	$	263,668	$	201,053
Traditional - Treaty		69,375		94,602		218,316		268,181
Specialty - Treaty		25,019		31,488		74,527		61,278
Facultative		15,461		16,616		46,168		43,303
Accident		4,868		1,158		14,411		1,158
Total	$	183,111	$	186,499	$	617,090	$	574,973
Major Lines of Business:
Casualty lines	$	120,244	$	117,498	$	402,678	$	371,178
Property lines		54,685		62,139		190,083		186,350
Other lines(1)		8,182		6,862		24,329		17,445
Total	$	183,111	$	186,499	$	617,090	$	574,973

(1) Primarily aviation, ocean marine and accident.

PMA Re’s net premiums written by business unit and major lines of business are as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
(dollar amounts in thousands)	2003		2002		2003		2002
Business Unit:
Finite Risk and Financial Products	$	44,067	$	40,968	$	170,975	$	183,122
Traditional - Treaty		61,095		80,642		197,750		202,982
Specialty - Treaty		23,087		26,712		70,640		50,720
Facultative		7,403		4,595		20,333		15,400
Accident		4,118		945		11,115		945
Total	$	139,770	$	153,862	$	470,813	$	453,169
Major Lines of Business:
Casualty lines	$	91,029	$	94,823	$	313,771	$	282,841
Property lines		41,879		52,601		138,314		153,473
Other lines(1)		6,862		6,438		18,728		16,855
Total	$	139,770	$	153,862	$	470,813	$	453,169

(1) Primarily aviation, ocean marine and accident.

Gross premiums written were $183.1 million and $617.1 million for the three and nine months ended September 30, 2003, respectively, compared with $186.5 million and $575.0 million for the same periods last year, primarily reflecting lower premiums from our Traditional-Treaty unit, partially offset by higher premiums from our Finite Risk and Financial Products unit. In addition, gross premiums written for the nine months ended September 30, 2002, included an additional $58.1 million of gross premiums written ($44.2 million of net premiums written) recorded in the second quarter of 2002 as a result of a change in our estimate of ultimate premiums written. Because premiums from ceding companies are typically reported on a delayed basis, we monitor and update, as appropriate, the estimated ultimate premiums written. Our

24

periodic review of estimated ultimate premiums written, comparing actual reported premiums to originally estimated premiums based on ceding company estimates, indicated that premiums written in recent years, primarily for 2001 and 2000 in the Traditional- and Specialty-Treaty units, were higher than originally estimated. The increase in net premiums earned of $35.5 million caused by this adjustment was offset by corresponding losses and LAE and acquisition expenses.

Ceded premiums were $43.3 million and $146.3 million for the three and nine months ended September 30, 2003, respectively, compared to $32.6 million and $121.8 million for the same periods last year. Ceded premiums represented 24% of gross premiums written for both the third quarter and first nine months of 2003, compared to 17% and 21% for the same periods last year. Ceded premiums for the third quarter and first nine months of 2003 reflect ceded premiums of approximately $22.8 million and $88.6 million, respectively, from our Finite Risk and Financial Products unit due under a quota share retrocessional cover that cedes one-third of this unit’s 2003 premiums and losses.

Traditionally, trends in net premiums earned follow patterns similar to net premiums written. Premiums are earned principally on a pro rata basis over the coverage periods of the underlying policies. However, with respect to policies that provide for premium adjustments, such as experienced-rated or exposure-based adjustments, such premium adjustments may be made subsequent to the end of the policy’s coverage period and will be recorded as earned premium in the period in which the adjustment is made.

Losses and Expenses

The components of the GAAP combined ratios are as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2003		2002		2003		2002
Loss and LAE ratio		150.9%		68.3%		96.0%		70.2%
Expense ratio:
Acquisition expenses		25.7%		24.9%		27.3%		25.4%
Operating expenses		2.7%		2.4%		2.4%		3.2%
Total expense ratio		28.4%		27.3%		29.7%		28.6%
Combined ratio		179.3%		95.6%		125.7%		98.8%

The loss and LAE ratio was 150.9% and 96.0% for the three and nine months ended September 30, 2003, respectively, compared to 68.3% and 70.2% for the same periods in 2002. During the three and nine months ended September 30, 2003, PMA Re increased its net loss reserves for prior accident years by $150 million and $170 million, respectively. PMA Re’s third quarter 2003 reserve charge relates to higher than expected underwriting losses, primarily from casualty business written in accident years 1997 through 2000. Approximately 75% of the charge relates to general liability business written from 1997 to 2000 with substantially all of the remainder from the commercial automobile line written during these same years. During the third quarter, our actuaries conducted their periodic comprehensive reserve review. Based on the actuarial work performed, which included analyzing recent trends in the levels of the reported and paid claims, an updated selection of actuarially determined loss reserve estimates was developed by accident year for each major line of business written by PMA Re. The information derived during this review indicated that a large portion of the change in expected loss development was due to increasing loss trends emerging in calendar year 2003 for prior accident years. This increase in 2003 loss trends caused us to determine that the reserve levels, primarily for accident years 1997 to 2000, needed to be increased by $150 million. An independent actuarial firm also conducted a comprehensive review of PMA Re’s Traditional-Treaty, Specialty-Treaty and Facultative loss reserves, and concluded that applicable carried loss reserves were reasonable at September 30, 2003.

PMA Re’s analysis was enhanced by an extensive review of specific accounts, comprising about 40% of carried reserves for accident years 1997 to 2000. Our actuaries visited a number of former ceding company clients, which collectively comprised about 25% of PMA Re’s total gross loss and LAE reserves from accident years 1997 to 2000, to discuss reserving and reporting experience with these ceding companies. Our actuaries separately evaluated an additional number of other ceding companies, representing approximately 15% of PMA Re’s total gross loss and LAE reserves from accident years 1997 to 2000, to understand and examine data trends.

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Net Investment Income

Net investment income was $8.0 million for the third quarter of 2003, compared to $9.2 million for the same period in 2002, reflecting lower yields on the invested asset portfolio of approximately 150 basis points on an average invested asset base that increased approximately 19%, partially offset by higher interest earned of $700,000 on funds held arrangements, primarily assumed contracts. Net investment income was $25.0 million for the first nine months of 2003, compared to $37.1 million for the same period last year, reflecting lower yields on the invested asset portfolio of approximately 130 basis points on an average invested asset base that increased approximately 9%, and lower interest earned of $4.8 million on funds held arrangements. For the nine months ended September 30, 2003, the reduction in interest earned on funds held arrangements was substantially offset by lower losses on the associated assumed Finite Risk and Financial Products contracts. In a funds held arrangement, the ceding company retains the premiums, and losses are offset against these funds in an experience account. Because the reinsurer is not in receipt of the funds, the reinsurer earns interest on the experience fund balance at a predetermined credited interest rate.

Run-off Operations

Summarized financial results of the Run-off Operations are as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollar amounts in thousands)	2003			2002			2003			2002
Net premiums written	$	(3,389	)	$	(3,418	)	$	(6,217	)	$	28,752
Net premiums earned	$	(1,617	)	$	14,250		$	5,621		$	31,785
Net investment income		551			114			1,440			576
Other revenues		--			--			2,500			--
Total revenues		(1,066	)		14,364			9,561			32,361
Losses and LAE		(811	)		10,038			5,657			70,981
Acquisition and operating expenses		(258	)		4,328			3,903			48,877
Total losses and expenses		(1,069	)		14,366			9,560			119,858
Pre-tax operating income (loss) (1)	$	3		$	(2	)	$	1		$	(87,497	)

(1) Operating income is the financial performance measure that our management and Board of Directors use to evaluate the results of our insurance businesses. For further information, see pages 17-18, and Note 12 to our Unaudited Consolidated Financial Statements.

In May 2002, we announced our decision to withdraw from the excess and surplus lines marketplace previously served by the Caliber One operating segment. On January 2, 2003, we closed on the sale of the capital stock of Caliber One Indemnity Company. Pursuant to the agreement of sale, we have retained all assets and liabilities related to the in-force policies and outstanding claim obligations relating to Caliber One’s business written prior to closing on the sale. As a result of our decision to exit this business, the results of this segment are reported as Run-off Operations.

Pre-tax operating results were essentially breakeven for the Run-off Operations for the three and nine months ended September 30, 2003. The first quarter 2003 sale of the capital stock of Caliber One Indemnity Company generated gross proceeds of approximately $31 million and resulted in a pre-tax gain of $2.5 million, which is included in other revenues in the Statement of Operations for the nine months ended September 30, 2003. During the first quarter of 2003, the Run-off Operations recognized an additional $2.5 million writedown of assets, including approximately $2 million for reinsurance receivables and $500,000 for premiums receivable, reflecting an assessment of their estimated net realizable value. The writedown is included in operating expenses in the Statement of Operations for the nine months ended September 30, 2003.

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Pre-tax operating results for the Run-off Operations were essentially breakeven for the third quarter of 2002. For the nine months ended September 30, 2002, the Run-off Operations recorded a pre-tax operating loss of $87.5 million. Results for the nine months ended September 30, 2002 included a charge of $43 million pre-tax ($28 million after-tax) as a result of the decision to exit from and run off this business. Components of the pre-tax charge include approximately $16 million to write-down assets to their estimated net realizable value, including a non-cash charge of approximately $6 million for leasehold improvements and other fixed assets and $1.3 million for goodwill. In addition, the $43 million pre-tax charge includes expenses associated with the recognition of liabilities of approximately $27 million, including reinsurance costs of approximately $19 million, long-term lease costs of approximately $4 million and involuntary employee termination benefits of approximately $3 million. At September 30, 2003, we have a remaining obligation of approximately $1.2 million for net lease costs and approximately $182,000 for severance.

Pre-tax operating results for the first nine months of 2002 also included net unfavorable prior year development of $40 million. During the first quarter of 2002, company actuaries conducted their reserve review to determine the impact of any emerging data on loss development trends and recorded unpaid losses and LAE reserves. Based on the actuarial work performed, which included analyzing recent trends in the levels of the reported and paid claims, an updated range of actuarially determined loss reserve estimates was developed by accident year for each major line of business written by this segment. Management’s selection of the ultimate losses resulting from this review indicated that net loss reserves needed to be increased by $40 million. This unfavorable prior year development reflected the impact of higher than expected claim severity and, to a lesser extent, frequency, that emerged in the first quarter of 2002 on casualty lines of business, primarily professional liability policies for the nursing homes class of business; general liability, including policies covering contractors’ liability for construction defects; and commercial automobile, mainly for accident years 1999 and 2000.

Loss Reserves

At September 30, 2003, we estimated that under all insurance policies and reinsurance contracts issued by our insurance businesses our liability for unpaid losses and LAE for all events that occurred as of September 30, 2003 is $2,486.8 million. This amount includes estimated losses from claims plus estimated expenses to settle claims. Our estimate includes amounts for losses occurring prior to September 30, 2003 whether or not these claims have been reported to us.

Unpaid losses and LAE reflect management’s best estimate of future amounts needed to pay claims and related settlement costs with respect to insured events which have occurred, including events that have not been reported to us. In many cases, significant periods of time, ranging up to several years or more, may elapse between the occurrence of an insured loss, the reporting of the loss to us and our payment of that loss. In general, liabilities for reinsurers become known more slowly than for primary insurers and are subject to more unforeseen development and uncertainty. As part of the process for determining our unpaid losses and LAE, various actuarial models are used that analyze historical data and consider the impact of current developments and trends, such as trends in claims severity and frequency and claims settlement trends. Also considered are legal developments, regulatory trends, legislative developments, changes in social attitudes and economic conditions.

Management believes that its unpaid losses and LAE are fairly stated at September 30, 2003. However, estimating the ultimate claims liability is necessarily a complex and judgmental process inasmuch as the amounts are based on management’s informed estimates and judgments using data currently available. As additional experience and data become available regarding claims payment and reporting patterns, legal and legislative developments, judicial theories of liability, the impact of regulatory trends on benefit levels for both medical and indemnity payments, changes in social attitudes and economic conditions, the estimates are revised accordingly. If our ultimate losses, net of reinsurance, prove to differ substantially from the amounts recorded at September 30, 2003, the related adjustments could have a material adverse effect on our financial condition, results of operations and liquidity. See the discussion under PMA Re –Losses and Expenses beginning on page 25 and Run-off Operations beginning on page 26 for additional information regarding increases in loss reserves for prior years.

For additional discussion of loss reserves and reinsurance, see pages 34 to 37 of the MD&A included in our 2002 Form 10-K, as well as pages 13 to 20 of our Form 10-K for the year ended December 31, 2002.

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Corporate and Other

The Corporate and Other segment includes unallocated investment income and expenses, including debt service. Corporate and Other recorded pre-tax operating losses of $6.3 million and $16.5 million for the three and nine months ended September 30, 2003, compared to pre-tax operating losses of $3.2 million and $11.2 million for the same periods in 2002, primarily due to higher interest expense. Interest expense increased by $2.4 million and $5.3 million for the three and nine months ended September 30, 2003, compared to the same periods in 2002, primarily due to a higher average amount of debt outstanding in 2003, compared with last year.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity is a measure of an entity’s ability to secure sufficient cash to meet its contractual obligations and operating needs. At the holding company level, our primary sources of liquidity are dividends and net tax payments from subsidiaries, and capital raising activities. We utilize cash to pay debt obligations, including interest costs; dividends to shareholders; taxes to the Federal government; and corporate expenses. In addition, we periodically use cash resources to capitalize subsidiaries and to repurchase shares of our common stock.

Our domestic insurance subsidiaries’ ability to pay dividends to us is limited by the insurance laws and regulations of Pennsylvania. All of our domestic insurance entities are owned by PMA Capital Insurance Company (“PMACIC”). As a result, dividends from The PMA Insurance Group’s Pooled Companies may not be paid directly to PMA Capital. We have agreed with the Pennsylvania Insurance Department that PMACIC will not pay dividends to us subsequent to November 6, 2003, without the prior approval of the Pennsylvania Insurance Department. The PMA Insurance Group’s Pooled Companies can pay up to $27.4 million in dividends to PMACIC during 2003. Dividends received from subsidiaries were $8.0 million and $24.0 million for the three and nine months ended September 30, 2003, respectively, and $7.0 million and $21.0 million for the three and nine months ended September 30, 2002, respectively.

Net tax payments received from subsidiaries were $5.6 million and $8.3 million for the three and nine months ended September 30, 2003, compared to $11.6 million and $18.4 million for the same periods in 2002.

Our contractual obligations by payment due period are as follows:

(dollar amounts in thousands)	2004	2005-2006	2007-2009	Thereafter
Long-Term Debt (Principal and Interest):
4.25% Convertible Debt(1)	$3,666	$7,331	$10,997	$132,987
8.50% Senior Notes	4,888	9,775	14,663	99,044
Trust Preferred Securities(2)	2,235	4,471	6,706	95,028
	10,789	21,577	32,366	327,059
Operating Leases(3)	6,287	9,777	10,395	18,963
Total	$17,076	$31,354	$42,761	$346,022

(1) Holders of the Convertible Debt, at their option, may require the Company to repurchase all or a portion of their debentures on September 30, 2006, 2008, 2010, 2012 and 2017.

(2) See discussion below for the variable interest rates on the Trust Preferred Securities. The obligation related to the Trust Preferred Securities have been calculated using the interest rates in effect at September 30, 2003.

(3) The operating lease obligations referred to in the table above are primarily obligations of our insurance subsidiaries and are net of sublease payments of $1.4 million in 2004, $3.0 million in 2005-2006, $4.8 million in 2007-2009 and $7.7 million thereafter.

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In July 2003, we executed a 15-year lease extension for our 87,500 square feet of office space in Philadelphia, Pennsylvania. Our total lease payments under the lease are expected to be $1.1 million annually in 2004, 2005, 2006 and 2007, and $18.0 million thereafter.

At December 31, 2002, we had $65 million of short-term debt under our bank credit facility (“Credit Facility”) and $86.25 million aggregate principal amount of 4.25% convertible senior debentures (“Convertible Debt”). We repaid and retired the Credit Facility in the first half of 2003.

During May 2003, we privately placed $17.5 million (“Trust Preferred 1”) and $15.0 million (“Trust Preferred 2”) of 30-year floating rate trust preferred securities through two wholly owned statutory trust subsidiaries. We used all of the approximately $31.5 million of net proceeds from the sales of these securities to pay down a portion of our then outstanding bank credit facility. During September 2003, we privately placed $10.0 million (“Trust Preferred 3”) of 30-year floating rate trust preferred securities through a wholly owned statutory trust subsidiary, from which we realized net proceeds of approximately $9.7 million. Each of Trust Preferred 1, 2 and 3 has a 30-year maturity and is redeemable in whole, or in part, after five years from issuance at their stated liquidation amount plus accrued and unpaid interest. The interest rates on Trust Preferred 1, 2 and 3 equal the three-month London InterBank Offered Rate (“LIBOR”) plus 4.10%, 4.20% and 4.05%, respectively, and is payable on a quarterly basis. At September 30, 2003, the interest rates on Trust Preferred 1, 2 and 3 were 5.23%, 5.34% and 5.19%, respectively.

We have the right to defer interest payments on Trust Preferred 1, 2 and 3 for up to twenty consecutive quarters but, if so deferred, we may not declare or pay cash dividends or distributions on our Class A common stock. The obligations of the statutory trust subsidiaries are guaranteed by PMA Capital with respect to distributions and payments of Trust Preferred 1, 2 and 3.

We entered into interest rate swaps with notional amounts of $17.5 million and $15.0 million and designated them as cash flow hedges to manage interest costs and cash flows associated with the variable interest rates associated with Trust Preferred 1 and 2. The interest rate swaps effectively converted Trust Preferred 1 and 2 floating-rate securities to fixed rate debt with interest rates of 6.70% and 6.80%, respectively. We sold these interest rate swaps for net proceeds of $1.1 million in November 2003.

In June 2003, we issued $57.5 million of 8.50% monthly income senior notes (“Senior Notes”) due June 15, 2018, from which we realized net proceeds of approximately $55 million. We used the proceeds from the offering to repay the remaining balance outstanding under our prior bank credit facility, to increase the statutory capital and surplus of our insurance subsidiaries, and for general corporate purposes. We have the right to call these securities beginning in June 2008.

We incurred interest expense of $3.0 million and $7.0 million for the three and nine months ended September 30, 2003, compared to $519,000 and $1.6 million for the same periods last year. We paid interest of $3.6 million and $6.6 million for the three and nine months ended September 30, 2003, compared to $1.0 million and $1.9 million for the same periods last year.

We maintain a $50.0 million secured letter of credit facility (the “Letter of Credit Facility”). The Letter of Credit Facility is utilized primarily for securing reinsurance obligations of our insurance subsidiaries. As of September 30, 2003, we had $15.0 million outstanding under the Letter of Credit Facility. We are currently in default under two financial covenants under our Letter of Credit Facility. The lender has canceled the Letter of Credit Facility, which was scheduled to terminate on December 4, 2003. However, the lender has agreed to waive the defaults and to renew the outstanding letters of credit issued under the Letter of Credit Facility for one year.

We paid dividends to shareholders of $3.3 million and $9.9 million, respectively, during the three and nine months ended September 30, 2003, compared to $3.3 million and $8.8 million for the same periods last year. The increase in dividends paid for the nine months ended September 30, 2003, compared to the same period last year, is due to the additional shares outstanding resulting from our December 2001 issuance of 9,775,000 shares of Class A common stock, which occurred subsequent to the record date for the January 2002 dividend payment. We did not declare a dividend in the fourth quarter of 2003 and we have suspended payment of common stock dividends at the current time.

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We did not repurchase any shares during the first nine months of 2003. During the first nine months of 2002, we repurchased 90,000 shares at a total cost of $1.7 million. Since the inception of our share repurchase program in 1998, we have repurchased a total of approximately 3.9 million shares at a cost of $74.6 million. Our remaining share repurchase authorization at September 30, 2003 is $15.4 million. Decisions regarding share repurchases are subject to prevailing market conditions and an evaluation of the costs and benefits associated with alternative uses of capital.

We have provided a guaranty of $7.0 million related to a loan on properties in which we have an interest. This guaranty shall continue to be in force until the related loan has been satisfied. The loan is scheduled to be repaid on November 1, 2004. We have also provided guarantees of $2.2 million related to an executive loan program for our officers with a financial institution. The program expires on December 31, 2003.

As of September 30, 2003, we had $21 million in cash at the holding company. Management currently believes that our available sources of funds will provide sufficient liquidity to meet our short-term obligations without receiving dividends from our insurance subsidiaries. Our ability to meet our long-term obligations will depend on our ability to receive dividends from our insurance subsidiaries. Under our existing corporate structure, we directly own one of our insurance subsidiaries, PMA Capital Insurance Company, which, in turn, owns the insurance subsidiaries comprising The PMA Insurance Group. As previously disclosed, we have agreed with the Pennsylvania Insurance Department that PMA Capital Insurance Company will not pay dividends to PMA Capital Corporation subsequent to November 6, 2003, without the prior approval of the Pennsylvania Insurance Department. As a result and because we must depend upon dividends from our operating subsidiaries to meet our long-term obligations, unless the Pennsylvania Insurance Department permits such dividends, we may not be able to receive dividends from our operating subsidiaries in sufficient amounts to pay these long-term obligations. Further, any event that would have a material adverse effect on the $21 million of holding company cash or the results of operations of our insurance subsidiaries could affect our liquidity and ability to meet our contractual obligations and operating needs.

In addition, our ability to refinance our existing debt obligations or raise additional capital is dependent upon several factors, including conditions with respect to both the equity and debt markets and the ratings of any securities that we may issue as established by the principal rating agencies. Because of our recent debt ratings downgrades, it is unlikely that we would be able to refinance our outstanding debt obligations with the same terms and conditions as presently exist. See Recent Events beginning on page 18 for additional discussion regarding ratings downgrades.

INVESTMENTS

At September 30, 2003, our investment assets were carried at a fair value of $2,109.3 million and had an amortized cost of $2,050.3 million. The average credit quality of the portfolio is AA. At September 30, 2003, $18.0 million, or 0.9%, of our total investments were below investment grade, of which $2.9 million of these below investment grade investments were in an unrealized loss position, which totaled approximately $148,000. At September 30, 2003, all of our fixed income investments were publicly traded and all were rated by at least one nationally recognized credit rating agency.

The net unrealized gain on our fixed maturities at September 30, 2003 was $59.0 million, or 3.4% of the amortized cost basis. The net unrealized gain included gross unrealized gains of $71.3 million and gross unrealized losses of $12.3 million. For all but one security, which was carried at its fair value of $15.1 million at September 30, 2003, we determine the market value of each fixed income security using prices obtained in the public markets. For this security, whose fair value is not reliably determined from these public market sources, we utilized the services of our outside professional investment asset manager to determine the fair value. The asset manager determines the fair value of the security by using a discounted present value of the estimated future cash flows (interest and principal repayment).

We review the securities in our fixed income portfolio on a periodic basis to specifically review individual securities for any meaningful decline in fair value below amortized cost. Our analysis addresses all securities whose fair value is significantly below amortized cost at the time of the analysis, with additional emphasis placed on securities whose fair value has been below amortized cost for an extended period of time. As part of our periodic review process, we utilize the expertise of our outside professional asset managers who provide us with an updated assessment of each issuer’s current credit situation based on recent issuer activities, such as quarterly earnings announcements or other pertinent financial news for the company, recent developments in a particular industry, economic outlook for a particular industry and rating agency actions.

In addition to company-specific financial information and general economic data, we also consider our ability and intent to hold a particular security to maturity or until the fair value of the bond recovers to a level in excess of the carrying

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value. Our ability and intent to hold securities to such time is evidenced by our strategy and process to match the cash flow characteristics of the invested asset portfolio, both interest income and principal repayment, to the actuarially determined estimated liability pay-out patterns of each insurance company’s claims liabilities. As a result of this periodic review process, we have determined that there currently is no need to sell any of the fixed maturity investments prior to their scheduled/expected maturity to fund anticipated claim payments.

As of September 30, 2003, our investment asset portfolio had gross unrealized losses of $12.3 million. For securities that were in an unrealized loss position at September 30, 2003, the length of time that such securities have been in an unrealized loss position, as measured by their month-end fair values, is as follows:

(dollar amounts in millions)	Number of Securities		Fair Value		Amortized Cost		Unrealized Loss		Percentage Fair Value to Amortized Cost
Less than 6 months		111	$	92.8	$	94.8	$	2.0		98%
6 to 9 months		0		--		--		--		N/A
9 to 12 months		4		10.1		11.6		1.5		87%
More than 12 months		8		34.7		41.8		7.1		83%
Subtotal		123		137.6		148.2		10.6		93%
U.S. Treasury and
Agency securities		53		117.0		118.7		1.7		99%
Total		176	$	254.6	$	266.9	$	12.3		95%

Of the 8 securities that have been in an unrealized loss position for more than 12 months, 7 securities have an unrealized loss of less than $1 million each and/or less than 20% of each security’s amortized cost. These 7 securities have an average unrealized loss per security of approximately $306,000. We own one security with an unrealized loss in excess of $1 million and greater than 20% of its amortized cost at September 30, 2003. This security, a structured security backed by a U.S. Treasury Strip, is rated AAA and has a market value of $15.1 million and an amortized cost of $20.0 million. The security matures in 2011 at a value of $20.0 million, and we have both the ability and intent to hold it until maturity.

The contractual maturity of securities in an unrealized loss position at September 30, 2003 was as follows:

(dollar amounts in millions)	Fair Value		Amortized Cost		Unrealized Loss		Percentage Fair Value to Amortized Cost
2004-2007	$	5.3	$	5.4	$	0.1		98%
2008-2012		44.4		45.2		0.8		98%
2013 and later		28.5		29.9		1.4		95%
Mortgage-backed and other
asset-backed securities		59.4		67.7		8.3		88%
Subtotal		137.6		148.2		10.6		93%
U.S. Treasury and
Agency securities		117.0		118.7		1.7		99%
Total	$	254.6	$	266.9	$	12.3		95%

For all securities that are in an unrealized loss position for an extended period of time, we perform an evaluation of the specific events attributable to the market decline of the security. We consider the length of time and extent to which the security’s market value has been below cost as well as the general market conditions, industry characteristics and the fundamental operating results of the issuer to determine if the decline is due to changes in interest rates, changes relating to a decline in credit quality of the issuer, or general market conditions. We also consider as part of the evaluation our intent and ability to hold the security until its fair value has recovered to a level at least equal to the amortized cost.

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Where we determine that a security’s unrealized loss is other than temporary, a realized loss is recognized in the period in which the decline in value is determined to be other than temporary.

We recorded no impairment losses for the third quarter of 2003. During the nine months ended September 30, 2003, we determined there were other than temporary declines in fair value of securities issued by four companies, resulting in impairment charges of $1.3 million pre-tax related primarily to securities issued by airline companies. The write-downs were measured based on public market prices and our expectation of the future realizable value for the security at the time we determined the decline in value was other than temporary.

During the nine months ended September 30, 2002, we determined there were other than temporary declines in market value of securities issued by 8 companies, resulting in an impairment charge of $22.2 million pre-tax, including $14.2 million for WorldCom. Included in the year to date impairment charge of $22.2 million were $6.4 million of charges related to other than temporary impairments recognized in the third quarter, primarily for securities issued by energy companies.

During the nine months ended September 30, 2003, we had gross realized gains and losses of $12.3 million and $2.1 million, respectively. The gross realized losses were primarily attributable to impairment losses as discussed above.

OTHER MATTERS

Other Factors Affecting Our Business

In general, our businesses are subject to a changing social, economic, legal, legislative and regulatory environment that could affect them. Some of the changes include initiatives to restrict insurance pricing and the application of underwriting standards and reinterpretations of insurance contracts long after the policies were written in an effort to provide coverage unanticipated by us. The eventual effect on us of the changing environment in which we operate remains uncertain. The Pennsylvania Insurance Department is currently conducting its triennial examination of our insurance subsidiaries, including a review of the future business plans of those subsidiaries.

Comparison of SAP and GAAP Results

Results presented in accordance with GAAP vary in certain respects from results presented in accordance with statutory accounting practices prescribed or permitted by the Pennsylvania Insurance Department (collectively “SAP”). Prescribed SAP includes state laws, regulations and general administrative rules, as well as a variety of National Association of Insurance Commissioners (“NAIC”) publications. Permitted SAP encompasses all accounting practices that are not prescribed. Our domestic insurance subsidiaries use SAP to prepare various financial reports for use by insurance regulators.

Recent Accounting Pronouncements

Effective December 31, 2002, we adopted the disclosure provisions of Statement of Financial Accounting Standards (“SFAS”) No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure.” SFAS No. 148 amended SFAS No. 123, “Accounting for Stock-Based Compensation,” to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. We account for stock-based employee compensation using the intrinsic value method prescribed in Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees.” Accordingly, we have applied the disclosure provisions of SFAS No. 148.

Effective January 1, 2003, we adopted the recognition provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”). We have previously applied the disclosure provisions of FIN 45 to our year end 2002 financial statements. FIN 45 requires certain guarantees to be recorded at fair value and also requires a

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guarantor to make certain disclosures, even when the likelihood of making payments under the guarantee is remote. Generally, FIN 45 applies to contracts or indemnification agreements that contingently require the guarantor to make payments to the guaranteed party. Adoption of FIN 45 did not have a material effect on our consolidated financial condition, results of operations or liquidity.

Effective July 1, 2003, we adopted SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” This Statement amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” Adoption of this statement did not have a material impact on our financial condition, results of operations or liquidity.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). This statement is effective for instruments entered into or modified after May 31, 2003 and the disclosure requirements are effective for the third quarter of 2003. Adoption of this statement did not have a material impact on our financial statements.

In May 2002, we announced our decision to withdraw from the excess and surplus lines marketplace previously served by our Caliber One operating segment. We accounted for the discontinuation of this business under the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” which were effective January 1, 2002. SFAS No. 144 supercedes SFAS No. 121 “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,” and the accounting and reporting provisions of APB Opinion No. 30, “Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions,” and establishes a single accounting model for the disposal of long-lived assets and asset groups.

In January 2003, we sold the capital stock of Caliber One Indemnity Company. Pursuant to the agreement of sale, we have retained all assets and liabilities related to in-force policies and outstanding claim obligations and are running off such in-force policies and claim obligations. Accordingly, under SFAS No. 144, the results of operations of this segment are reported in results from continuing operations, and will continue to be reported as such until all in-force policies and outstanding claim obligations are satisfied, at which point we will report the results of the Run-off segment as discontinued operations. The long-lived assets of this segment have been tested for impairment in accordance with the provisions of SFAS No. 144.

In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS No. 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. SFAS No. 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. Accordingly, this standard does not apply to our exit from the excess and surplus lines business, which we announced in May 2002. We will apply the provisions of SFAS No. 146 to our exit from the reinsurance business, which we announced in November 2003

Effective January 1, 2002, we adopted SFAS No. 142, “Goodwill and Other Intangible Assets.” In accordance with SFAS No. 142, we no longer amortize goodwill, but instead test it periodically for impairment. During the second quarter of 2002, we recognized an impairment charge of $1.3 million associated with the goodwill of the Run-off Operations, which is included in operating expenses. As of September 30, 2003, we had no goodwill which is subject to the provisions of SFAS No. 142. We have approximately $3.0 million of equity method goodwill (included in other assets on the Balance Sheet), which is accounted for under the provisions of APB Opinion No. 18, ‘The Equity Method of Accounting for Investments in Common Stock.’

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”), which requires a company to assess if consolidation of an entity is appropriate based upon its variable economic interests in a variable interest entity (“VIE”). The initial determination of whether an entity is a VIE is required to be made on the date at which a company becomes involved with the entity. A VIE is an entity in which the equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its

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activities without additional subordinated financial support from other parties. A company must consolidate a VIE if the company has a variable interest that will absorb a majority of the VIEs expected losses if they occur, receive a majority of the entity’s expected residual returns if they occur or both. FIN 46 also requires the disclosure of certain information related to VIEs in which a company holds a significant variable interest. On October 9, 2003 the FASB issued FASB Staff Position 46-6, which deferred the effective date for the application of the provisions of FIN 46 for VIEs created before February 1, 2003. As a result, FIN 46 is effective for those VIEs on December 31, 2003.

We are currently assessing the impact that implementing FIN 46 may have on our consolidated financial statements. Based on FIN 46 and its current interpretations, we do not expect that our business activities with Trabaja Reinsurance Corporation will warrant consolidation in our future financial statements. We are also currently evaluating the impact, if any, of FIN 46 on reporting for three of our wholly owned statutory trusts, which issued $42.5 million of trust preferred securities that are included on our Balance Sheet at September 30, 2003. We do not expect that application of the provisions of FIN 46 to these trust preferred securities will have a material impact on our financial condition or results of operations.

Critical Accounting Estimates

The critical accounting estimates described below update the critical accounting estimates described on pages 45 to 47 of the MD&A included in our 2002 Form 10-K, and should be read in conjunction with those critical accounting estimates.

Unpaid losses and loss adjustment expenses

At September 30, 2003, we estimated that under all insurance policies and reinsurance contracts issued by our insurance businesses our liability for all events that occurred as of September 30, 2003 is $2,486.8 million. This amount includes estimated losses from claims plus estimated expenses to settle claims. Our estimate also includes amounts for losses occurring prior to September 30, 2003 whether or not these claims have been reported to us.

In arriving at the estimate of unpaid claims, our actuaries performed detailed studies of historical data for incurred claims, reported claims and paid claims for each major line of business and by accident year. The review of this data results in patterns and trends that are analyzed using actuarial models that assume that historical development patterns will be predictive of future patterns. Along with this historical data, our actuaries consider the impact of legal and legislative developments, regulatory trends, changes in social attitudes and economic conditions. From this assessment, we develop various sets of assumptions that we believe are reasonable, valid and can be relied upon to help us predict future claim trends. These assumptions are then applied to various actuarially accepted methods and techniques, which provide us with a range of possible outcomes of the ultimate claims to be paid by us in the future. Management uses its judgment to select the best estimate of the amounts needed to pay all future claims and related expenses from this range of possible outcomes. Under GAAP, we record a liability on our balance sheet equal to our best estimate of the ultimate claims liability.

It is important to realize and understand that the process of estimating our ultimate claims liability is necessarily a complex and judgmental process inasmuch as the amounts are based on management’s informed estimates and judgments using data currently available to us. In many cases, significant periods of time, ranging up to several years or more, may elapse between the occurrence of an insured loss, the reporting of the loss to us and our payment of that loss. In general, liabilities for reinsurers become known more slowly than for primary insurers and are subject to more unforeseen development and uncertainty. As additional experience and data become available regarding claim payment and reporting patterns, legal and legislative developments, regulatory trends on benefit levels for both medical and indemnity payments, and economic conditions, we revise our estimates accordingly. We believe that our liability for unpaid losses and loss adjustment expenses is fairly stated at September 30, 2003. However, if our future estimate of ultimate unpaid losses is larger than the recorded amounts, we would have to increase our reserves. Any increase in reserves would result in a charge to earnings in the period recorded. Accordingly, any reserve adjustment could have a material adverse effect on our financial condition, results of operations and liquidity.

As outlined above, our loss and LAE reserves at September 30, 2003 have been established using generally accepted actuarial techniques and are based on numerous critical assumptions and informed judgments about reported and paid claim trends and their implication on our estimate of the ultimate loss for reported and incurred but unreported claims at

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the balance sheet date. We have established a loss and LAE reserve for unpaid claims at September 30, 2003 that we believe is a reasonable and adequate provision based on the information available to us. If we revised our assessment of loss reporting and claims payment patterns because of changes in those patterns, such that it resulted in a 1% change in our net loss and LAE reserves, then our pre-tax income would change by approximately $12 million.

For additional information about our liability for unpaid losses and loss adjustment expenses, see Note 4 to our Consolidated Financial Statements as well as the discussion beginning on page 27 of this Management’s Discussion and Analysis.

Deferred Tax Assets

We record deferred tax assets and liabilities to the extent of the tax effect of differences between the financial statement carrying values and tax bases of assets and liabilities. The deferral of tax losses is evaluated based upon management’s estimates of the future profitability of the Company’s taxable entities based on current forecasts. A valuation allowance is established for any portion of a deferred tax asset that management believes is more likely than not going to be realized. At September 30, 2003, PMA Capital has a net deferred tax asset of $93.2 million, resulting from $202.6 million of deferred tax assets reduced by a deferred tax asset valuation of $24.0 million and further reduced by $85.4 million of deferred tax liabilities. In establishing the appropriate value of this asset, management must make judgments about the Company’s ability to utilize the net tax benefit from the reversal of temporary differences and the utilization of operating loss carryforwards that expire mainly from 2018 through 2023.

In evaluating the recoverability of our net deferred tax asset, management has considered the recent performance of its business, which generated pre-tax losses of $111.2 million through the first nine months of 2003, due primarily to the $150 million loss reserve charge at PMA Re in the third quarter, and $79.2 million of losses for the full year ended December 31, 2002 due primarily to losses from Run-off Operations. Such performance may call into question our ability to be profitable, and we have reduced our deferred tax asset at September 30, 2003 by $24 million to establish a valuation allowance. We believe that our future results will improve due to the profitability of more recent accident year business and due to our exit from the business segments that generated a substantial portion of our net loss in 2002 and 2003. Accordingly, despite our recent earnings history, we have estimated at September 30, 2003 that our insurance operations will generate sufficient future taxable income to utilize the net deferred tax asset, net of the $24 million valuation allowance, over a period of time not exceeding the expiration of our operating loss carryforwards. As a result, we determined that it is more likely than not that we will be able to realize the future tax benefit of our net deferred tax asset. In making this determination, we have made reasonable estimates of our future taxable income. If our estimates of future income were to be revised downward and we determined that it was then more likely than not that we would not be able to realize the value of our net deferred tax asset, then this could have a material adverse effect on our results of operations. For additional information see Note 10 to our Consolidated Financial Statements.

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CAUTIONARY STATEMENTS

Except for historical information provided in Management’s Discussion and Analysis and otherwise in this report, statements made throughout are forward-looking and contain information about financial results, economic conditions, trends and known uncertainties. Words such as “believes,” “estimates,” “anticipates,” “expects” or similar words are intended to identify forward-looking statements. These forward-looking statements are based on currently available financial, competitive and economic data and our current operating plans based on assumptions regarding future events. Our actual results could differ materially from those expected by our management. The factors that could cause actual results to vary materially, some of which are described with the forward-looking statements, include, but are not limited to:

• our ability to effect an efficient withdrawal from the reinsurance business, including the consummation of the transaction to sell the renewal rights to PMA Re’s finite business and the amount of consideration that the Company may receive;

• the effect on The PMA Insurance Group's premium writings and profitability due to the downgrade of its financial strength rating by A.M. Best to B++;

• the ability of the Company to have sufficient cash at the holding company to meet its debt service and other obligations, including any restrictions on receiving dividends from its insurance subsidiaries in an amount sufficient to meet such obligations;

• the lowering or loss of one or more of the Company’s debt ratings, and the adverse impact that any such downgrade may have on our ability to raise capital and our liquidity and financial condition;

• adequacy of reserves for claim liabilities;

• adverse property and casualty loss development for events that we insured in prior years;

• adequacy and collectibility of reinsurance that we purchased;

• regulatory or tax changes, including changes in risk-based capital or other regulatory standards that affect the cost of, or demand for, our products or otherwise affect our ability to conduct business, including any future action with respect to our business taken by the Pennsylvania Insurance Department;

• competitive conditions that may affect the level of rate adequacy related to the amount of risk undertaken and that may influence the sustainability of adequate rate changes;

• ability to implement and maintain rate increases;

• the effect of changes in workers’compensation statutes and their administration, which may affect the rates that we can charge and the manner in which we administer claims;

• our ability to predict and effectively manage claims related to insurance and reinsurance policies;

• the uncertain nature of damage theories and loss amounts and the development of additional facts related to the attack on the World Trade Center;

• uncertainty as to the price and availability of reinsurance on business we intend to write in the future, including reinsurance for terrorist acts;

• severity of natural disasters and other catastrophes, including the impact of future acts of terrorism, in connection with insurance and reinsurance policies;

• changes in general economic conditions, including the performance of financial markets, interest rates and the level of unemployment;

• uncertainties related to possible terrorist activities or international hostilities; and

• other factors disclosed from time to time in our most recent Forms 10-K, 10-Q and 8-K filed with the Securities and Exchange Commission.

You should not place undue reliance on any such forward-looking statements. Unless otherwise stated, we disclaim any current intention to update forward-looking information and to release publicly the results of any future revisions we may make to forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

36

Item 3. Quantitative and Qualitative Disclosure About Market Risk

There has been no material change regarding our market risk position from the information provided under the caption “Market Risk of Financial Instruments” on page 43 of the MD&A included in our 2002 Form 10-K.

Item 4. Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of Vincent T. Donnelly, Principal Executive Officer, and William E. Hitselberger, Senior Vice President and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934. Based upon that evaluation, the Principal Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to us (including our consolidated subsidiaries) required to be disclosed in our periodic filings with the Securities and Exchange Commission. During the most recent fiscal quarter, there were no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings

On November 6, 2003, several purported class action lawsuits were filed against PMA Capital Corporation and certain other defendants. A purported class action lawsuit captioned Pitt v. PMA Capital Corporation has been filed in the Eastern District of Pennsylvania by alleged shareholders of PMA Capital who seek to represent a class of purchasers of PMA Capital securities from May 7, 2003 to November 3, 2003. The complaint names PMA Capital Corporation and certain officers as defendants. The complaint alleges, among other things, that the defendants violated Rule 10b-5 of the Securities Exchange Act of 1934 by making materially false and misleading public statements and material omissions during the class period regarding the Company’s loss reserves.

Two other purported class action lawsuits, Augenbaum v. PMA Capital Corporation, et. al., and Klinghoffer v. PMA Capital Corporation, et. al., were filed in the Eastern District of Pennsylvania by alleged purchasers of the Company’s 4.25% Convertible Debentures and 8.50% Monthly Income Senior Notes. The complaints name PMA Capital Corporation, PMA Capital Trust I, PMA Capital Trust II, certain of the Company’s officers and directors and investment banking firms as defendants. The complaints allege, among other things, that the defendants violated Section 11, 12(a)(2) and 15 of the Securities Act of 1933 by making materially false and misleading statements about its reserves in the registration statement, prospectuses and prospectus supplements in connection with the debt.

On November 7, 2003, a purported class action lawsuit captioned Newman v. PMA Capital Corporation, John W. Smithson, Francis W. McDonnell and William E. Hitselberger, was filed in the Eastern District of Pennsylvania by alleged shareholders of PMA Capital who seek to represent a class of purchasers of PMA Capital securities from November 13, 1998 to November 3, 2003. The complaint alleges, among other things, that the defendants violated Rule 10b-5 of the Securities Exchange Act of 1934 by making materially false and misleading public statements and material omissions during the class period regarding the Company’s loss reserves.

Additional lawsuits alleging substantially similar claims may may have been filed at the time of this filing or may be filed in the future. We intend to vigorously defend against the claims asserted in these actions. Although the lawsuits are in their earliest stages, the lawsuits may have a material effect on the Company’s financial condition, result of operations and liquidity.

Item 5. Other Matters

(a) Risk Factors

Our business faces significant risks. The risks described below update the risk factors described in our Form 10-K for the year ended December 31, 2002 on pages 30 through 35, and should be read in conjunction with those risk factors. The risk factors described in this Form 10-Q and the Form 10-K for the year ended December 31, 2002 may not be the only risks we face. Additional risks that we do not yet know of or that we currently think are immaterial may also impair our

37

business operations. If any of the following risks actually occur, our business, financial condition, results of operations or prospects could be affected materially.

Because insurance and credit ratings are important to our policyholders and creditors, downgrades in our ratings may adversely affect us.

On November 4, 2003, we were informed by the nationally recognized ratings agencies that the financial strength ratings of our principal insurance subsidiaries and the debt ratings of PMA Capital Corporation were downgraded to the following:

Financial Strength Ratings:	A. M. Best	S&P	Moody's
PMA Capital Insurance Company	B++  (5th of 16)	BBB-  (10th of 21)	Ba1  (11th of 21)
The PMA Insurance Group	B++  (5th of 16)	BBB     (9th of 21)	Baa2  (9th of 21)

Senior Debt Ratings:	S&P	Moody's
	BB-  (13th of 22)	Ba3  (13th of 21)

As we have stated previously, a downgrade in our insurer financial strength ratings could result in a material loss of business as policyholders move to other companies with higher financial strength ratings. We believe that the aforementioned downgrades, especially the A.M. Best downgrades, may significantly impair the ability of our primary insurance operations to write business. Any further downgrades to our insurer financial strength ratings would have a material adverse effect on our results of operations, liquidity and capital resources.

The downgrade in our debt ratings will affect our ability to raise additional debt with terms and conditions similar to our current debt, and, accordingly, will increase our cost of capital. In addition, this downgrade of our debt ratings will make it more difficult to raise capital to refinance any maturing debt obligations and to maintain or improve the current financial strength ratings of our principal insurance subsidiaries.

If Standard & Poor’s lowers the debt rating assigned to our 4.25% Senior Convertible Debentures due 2022, or the Debentures, below BB- and Moody’s lowers the debt rating assigned to the Debentures below Ba3, or the ratings assigned to the Debentures are suspended or withdrawn, or only one rating agency is rating the Debentures and the rating is below the levels specified in this sentence, then each $1,000 principal amount of the Debentures, of which $86.25 million is outstanding, will become convertible into 61.0948 shares of our Class A common stock at a conversion price of $16.368 per share, subject to adjustment upon certain events as described in the indenture filed as an exhibit to our Form 8-K dated October 16, 2002.

These ratings are subject to revision or withdrawal at any time by the rating agencies, and therefore, no assurance can be given that we or our principal insurance subsidiaries can maintain these ratings. Each rating should be evaluated independently of any other rating.

Because we are heavily regulated by the states in which we do business, we may be limited in the way we operate.

We are subject to extensive supervision and regulation in the states in which we do business. The supervision and regulation relate to numerous aspects of our business and financial condition. The primary purpose of the supervision and regulation is the protection of our insurance policyholders, and not our investors. The extent of regulation varies, but generally is governed by state statutes. These statutes delegate regulatory, supervisory and administrative authority to state insurance departments. This system of supervision and regulation covers, among other things:

38

• standards of solvency, including risk-based capital measurements;

• restrictions on the nature, quality and concentration of investments;

• limitations on the rates that we may charge on our workers' compensation business;

• restrictions on the types of terms and conditions that we can include in the insurance policies offered by our primary insurance operations;

• limitations on the amount of dividends that insurance subsidiaries can pay;

• certain required methods of accounting;

• reserves for unearned premiums, losses and other purposes; and

• potential assessments for the provision of funds necessary for the settlement of covered claims under certain policies provided by impaired, insolvent or failed insurance companies.

The regulations of the state insurance departments may affect the cost or demand for our products and may impede us from obtaining rate increases on insurance policies offered by our primary insurance operations or taking other actions we might wish to take to increase our profitability. Further, we may be unable to maintain all required licenses and approvals and our business may not fully comply with the wide variety of applicable laws and regulations or the relevant authority’s interpretation of the laws and regulations, which may change from time to time. Also, regulatory authorities have relatively broad discretion to grant, renew or revoke licenses and approvals. If we do not have the requisite licenses and approvals or do not comply with applicable regulatory requirements, the insurance regulatory authorities could preclude or temporarily suspend us from carrying on some or all of our activities or impose substantial fines. Further, insurance regulatory authorities have relatively broad discretion to issue orders of supervision, which permit such authorities to supervise the business and operations of an insurance company. As of September 30, 2003, no state insurance regulatory authority had imposed on us any substantial fines or revoked or suspended any of our licenses to conduct insurance business in any state or issued an order of supervision with respect to our insurance subsidiaries, which would have a material adverse effect on our results of operations or financial condition. In light of recent insolvencies of large property and casualty insurers, it is possible that the regulations governing the level of the guaranty fund or association assessments against us may change, requiring us to increase our level of payments.

Our status as an insurance holding company with no direct operations and our agreement with the Pennsylvania Department of Insurance to restrict dividends from our insurance subsidiaries could adversely affect our ability to meet our obligations and pay dividends.

We are a holding company that transacts substantially all of our business directly and indirectly through subsidiaries. Our primary assets are the stock of our operating subsidiaries. Our ability to meet our obligations on our outstanding debt and to pay dividends and our general and administrative expenses depends on the surplus and earnings of our subsidiaries and the ability of our subsidiaries to pay dividends or to advance or repay funds to us. Payments of dividends and advances and repayments by our insurance operating subsidiaries are restricted by state insurance laws, including laws establishing minimum solvency and liquidity thresholds. Further, we have agreed with the Pennsylvania Insurance Department that PMACIC will not pay dividends to us subsequent to November 6, 2003, without the prior approval of the Pennsylvania Insurance Department. As a result, we may not be able to receive dividends from these subsidiaries at times and in amounts necessary to meet our debt obligations.

(b) Management Change

On November 6, 2003, John W. Smithson resigned as our President and Chief Executive Officer. In addition, Frederick W. Anton resigned as Chairman of our Board of Directors. Our Board of Directors has appointed Neal C. Schneider, our Lead Director, as non-executive Chairman of the Board of Directors and has created an interim-Office of the President, to be headed by Vincent T. Donnelly, the current President of The PMA Insurance Group.

39

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

The Exhibits are listed in the Exhibit Index on pages 42 and 43.

(b) Reports on Form 8-K filed during the quarter ended September 30, 2003:

During the quarterly period ended September 30, 2003, we filed the following Reports on Form 8-K:

- dated July 15, 2003, Item 9 – containing a news release announcing the expected release of second quarter 2003 results.

- dated August 5, 2003, Items 9 and 12 – containing an earnings release and information from our second quarter 2003 statistical supplement.

- dated August 8, 2003, Item 12 - containing our second quarter 2003 statistical supplement.

- dated September 11, 2003, Item 9 - containing news releases regarding the participation of Company executives in investor and analyst conferences.

40

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	PMA CAPITAL CORPORATION
Date: November 14, 2003	By: /s/ William E. Hitselberger
	William E. Hitselberger
	Senior Vice President,
	Chief Financial Officer and Treasurer
	(Principal Financial Officer)

41

Exhibit Index

Exhibit No.	Description of Exhibit	Method of Filing
(10)	Material Contracts
10.1	Office Lease by and between Nine Penn Center Associates, L.P., as Landlord and Lorjo Corp., as Tenant, covering premises located at Mellon Bank Center, 1735 Market Street, Philadelphia, Pennsylvania, dated May 26, 1994.	Filed herewith
10.2	First Amendment of Office Lease by and between Nine Penn Center Associates, L.P., as Landlord and Lorjo Corp., as Tenant, covering premises located at Mellon Bank Center, 1735 Market Street, Philadelphia, Pennsylvania, made as of October 30, 1996.	Filed herewith
10.3	Second Amendment of Office Lease by and between Nine Penn Center Associates, L.P., as Landlord and Lorjo Corp., as Tenant, covering premises located at Mellon Bank Center, 1735 Market Street, Philadelphia, Pennsylvania, made as of December 11, 1998.	Filed herewith
10.4	Third Amendment of Office Lease by and between Nine Penn Center Associates, L.P., as Landlord and PMA Capital Insurance Company, as Tenant, covering premises located at Mellon Bank Center, 1735 Market Street, Philadelphia, Pennsylvania, retroactively as of May 16, 2001.	Filed herewith
10.5	Fourth Amendment of Office Lease by and between Nine Penn Center Associates, L.P., as Landlord and PMA Capital Insurance Company, as Tenant, covering premises located at Mellon Bank Center, 1735 Market Street, Philadelphia, Pennsylvania, made and entered into effective as of July 2, 2003.	Filed herewith
(12)	Computation of Ratio of Earnings to Fixed Charges	Filed herewith
(31)	Rule 13a - 14(a)/15d - 14 (a) Certificates
31.1	Certification of Principal Executive Officer Pursuant to Rule 13a -14(a) of the Securities Exchange Act of 1934	Filed herewith
31.2	Certification of CFO Pursuant to Rule 13a -14(a) of the Securities Exchange Act of 1934	Filed herewith

42

Exhibit No.	Description of Exhibit	Method of Filing
(32)	Section 1350 Certificates
32.1	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith
32.2	Certification of CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith

The registrant will furnish to the Commission, upon request, a copy of any of the registrant’s agreements with respect to its long-term debt not otherwise filed with the Commission.

42

EX-10

Exhibit 10.1


                       ----------------------------------

                                  OFFICE LEASE

                                     between

                   NINE PENN CENTER ASSOCIATES, L.P., Landlord

                                       AND

                               LORJO CORP., Tenant


                       -----------------------------------


                               MELLON BANK CENTER

                               1735 MARKET STREET

                           PHILADELPHIA, PENNSYLVANIA



                               Date: May 26, 1994


                       ----------------------------------


                     Guarantor: PMA REINSURANCE CORPORATION






                              SCHEDULE OF EXHIBITS


     Exhibit               Contents                          Section Reference
     -------               --------                          -----------------
       "A"      FLOOR PLAN OF PREMISES                                2.1
       "B"      [INTENTIONALLY OMITTED]
       "C"      RULES AND REGULATIONS                                10.5
       "D"      INDEX OF DEFINED TERMS                                1.0
       "E"      CONTRACTOR INSURANCE REQUIREMENTS                     7.9.2
       "F"      CORE AND SHELL SPECIFICATIONS                         7.1
       "G"      CLEANING SPECIFICATIONS                               8.4
       "H"      NON-DISTURBANCE AGREEMENT                            18.3
       "I"      GUARANTY                                             35.22
       "J"      SALVAGEABLE MATERIALS                                 7.4
       "K"      SITE LOGISTICS AND PROCEDURES                         7.11
       "L"      CONFIRMATION OF LEASE COMMENCEMENT                    3.1.2
       "M"      LANDLORD'S ESTIMATES                                  6.2.3
       "N"      EXPANSION OPTION SPACE                               31.1
       "O"      SUBLEASE                                             12.1
       "P"      SUBLEASE CONSENT                                     12.1





                               AGREEMENT OF LEASE

                THIS IS AN AGREEMENT OF LEASE (hereinafter "Lease") made this
26th day of May, 1994, by and between NINE PENN CENTER ASSOCIATES, L.P., a
Pennsylvania limited partnership (herein called "Landlord") and LORJO CORP., a
Pennsylvania corporation (herein called "Tenant").

                                   BACKGROUND

                A.  Landlord desires to lease to Tenant the premises identified
in this Lease under the terms and conditions herein set forth.

                B.  Tenant desires to lease and accept from Landlord the
premises identified in this Lease under the terms and conditions herein set
forth.

                C.  Tenant intends to sublease the premises to PMA Reinsurance
Corporation, Tenant's guarantor hereunder, in accordance with the terms of this
Lease.

                D.  Landlord has agreed to consent to the Tenant's sublease to
PMA Reinsurance Corporation, so long as such sublease complies with the terms
herein.

                                   AGREEMENTS

                IN CONSIDERATION of the Background, and the mutual covenants and
agreements herein set forth, and other good, valuable and sufficient
consideration received, and intending to be legally bound hereby, the parties
hereto agree as follows, all of the following agreements and covenants being
regarded as strict legal conditions:

                1. Definitions. Exhibit "D" attached to this Lease identifies
the respective Sections of this Lease in which certain terms are defined. When
used in this Lease, the following terms shall have the following meanings:

                              Additional Rent.  The term "Additional Rent" or
"additional rent" shall mean all sums payable under this Lease for any purpose,
whether or not they are expressly designated as "Additional Rent" or "additional
rent" or would otherwise be considered rent, other than Minimum Rent.

                              Affiliate.  The term "affiliate" of any entity,
corporation, or partnership shall mean any other entity, corporation, or
partnership controlling, controlled by, or under common control with the former.


                                       1



                              Agent. The term "Agent" shall mean The Rubin
Organization, having an address at The Bellevue, Third Floor, 200 South Broad
Street, Philadelphia, PA 19102, or such other party or such other address as
Landlord may designate, from time to time, by written notice to Tenant.

                              Building. The term "Building" shall mean that
certain commercial office building and related improvements presently known as
Mellon Bank Center, located at 1735 Market Street in Philadelphia, Pennsylvania.
The Building contains 1,354,725 Rentable Square Feet of space (being the
aggregate Rentable Area of the Office Space, Retail Space, Storage Space and
Garage Space).

                              Business Day. The term "Business Day" shall mean
Monday through Friday, except Holidays. All references to a period of days in
this Lease shall be deemed to refer to calendar days unless the term Business
Day is used.

                              Business Hours. The term "Business Hours" shall
mean 8:00 A.M. to 6:00 P.M., Monday through Friday, and 8:00 A.M. to 1:00 P.M.
on Saturday, Holidays excepted.

                              Construction Allowance. The term "Construction
Allowance" shall mean the sum of One Million Dollars ($1,000,000.00), to be
applied as set forth in Section 7.8 below.

                              Force Majeure. The term "Force Majeure" shall mean
delay, hindrance or prevention of Tenant or Tenant's contractor from the
performance of the Tenant Work, directly resulting from (a) so-called "wild cat"
strikes or other unforeseeable labor walk outs or lock outs, (b) acts of God,
(c) enemy or terrorist act, (d) governmental ordinances, restrictions or
regulations not in effect on the date of this Lease, (e) civil commotion,
insurrection, sabotage, war or other national emergency, (f) accidents, floods,
fires or other casualties not caused by the act or omission of Tenant or
Tenant's employees or contractors, or (g) failure of utility companies to
provide necessary utilities services to the Building.

                              Garage Space. The term "Garage Space" shall mean
the underground parking garage forming a part of the Building, containing 66,367
Rentable Square Feet of space.

                              Holidays. The term "Holidays" shall mean
President's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
Christmas Day and New Year's Day.

                              Land. The term "Land" shall mean those parcels of
real property on which the Building is located.

                              Landlord. The term "Landlord" shall mean that
entity named on page 1 of this Lease and any subsequent owner of such Landlord's
interest in the Property, as well as their respective heirs, personal


                                       2



representatives, successors and assigns, all subject to the provisions of
Section 29 hereof.

                              Landlord Delay. The term "Landlord Delay" shall
mean delay, hindrance or prevention of Tenant or Tenant's contractor from the
performance of the Tenant Work, directly resulting from material interference by
Landlord or Landlord's agents, contractors or employees with Tenant's
contractor's performance of the Tenant Work or Tenants' fixturing of or move
into the Premises (it being agreed that Landlord's reasonable control over
access to and use of the Premises during performance by Landlord of Landlord's
Work shall not be deemed Landlord Delay).

                              Lease Interest Rate. The term "Lease Interest
Rate" shall mean the lesser of (A) the greater of (i) twelve percent (12%) per
annum or (ii) the Prime Rate in effect from time to time plus two percent (2%),
or (B) the maximum amount or rate that Landlord may lawfully charge Tenant in
the circumstances if such a maximum exits.

                              Office Space. The term "Office Space" shall mean
the 1,231,518 Rentable Square Feet of office space contained in the Building.

                              Permitted Use. The term "Permitted Use" shall mean
use only for commercial executive offices (and offices for the clerical and
other staff providing support services necessarily attendant thereto), and for
no other purpose.

                              Prime Rate. The term "Prime Rate" shall mean the
reference rate of interest as announced by Citibank, New York or its successor;
if such reference rate is discontinued or no longer quoted, then such comparable
rate as Landlord reasonably designates by notice to Tenant.

                              Property. The term "Property" shall mean the Land
and the Building together.

                              Rentable Area. The term "Rentable Area" for any
space in the Building shall mean the total Rentable Square Feet included in such
space including office space, retail space, storage space, and garage space.

                              Rentable Square Feet. The terms "Rentable Square
Foot", "Rentable Square Feet" and "Rentable Square Footage" shall refer to the
rentable square footage of any space leased by Tenant hereunder, as calculated
by Landlord.

                              Retail Space. The term "Retail Space" shall mean
the 43,183 Rentable Square Feet of retail space contained in the Building.



                                       3




                              Storage Space. The term "Storage Space" shall mean
the 13,657 Rentable Square Feet of storage space contained in the Building.



                2. Premises; Use

                              2.1 Premises. Landlord, for the Term and subject
to the provisions and conditions hereof, leases to Tenant, and Tenant hereby
leases and rents from Landlord, the space (hereinafter collectively referred to
as the "Premises" and more particularly delineated on the floor plans
constituting "Exhibit A" attached hereto and made a part hereof), aggregating
57,914 Rentable Square Feet, consisting of 22,638 Rentable Square Feet of space
located on and being the entire 28th floor of the Building, 22,330 Rentable
Square Feet of space located on and being the entire 29th floor of the Building,
and 12,946 Rentable Square Feet of space located on and being a portion of the
30th floor of the Building.

                              2.2 Use. Tenant shall not use or occupy, or permit
or suffer to be used or occupied, the Premises or any part thereof, other than
for the Permitted Use.

                 3. Term

                              3.1 Duration

                                  3.1.1 Generally. The term of this Lease (the
"Term") shall commence on that date (the "Lease Commencement Date") which is the
earlier of (a) the one hundred seventy-fifth (175th) calendar day following the
date of full execution of this Lease, or (b) the date Tenant or anyone claiming
under or through Tenant first occupies or takes possession of the Premises or
any portion thereof for purposes of conducting business therein. Notwithstanding
the foregoing, in the event that completion of Tenant's performance of the
Tenant Work shall be delayed in excess of six (6) full days due to Force Majeure
or Landlord Delay, or both (which days of delay shall be measured cumulatively
and not consecutively), then the time period set forth in Section 3.1.1(a) above
shall be extended one day for each full day of such delay in excess of the
aforesaid six (6) days. No day of delay in performance of the Tenant Work shall
be deemed to have occurred by reason of Force Majeure or Landlord's Delay if
performance of the Tenant Work is simultaneously being delayed by causes within
Tenant's control. Tenant shall give Landlord prompt written notice of each day
of delay in performance of the Tenant Work alleged by Tenant to have been caused
by Force Majeure or Landlord Delay. The Term shall continue until the last day
of the first (1st) month of the eleventh (11th) Lease Year (the "Termination
Date") unless sooner terminated.

                                  3.1.2 Lease Periods. The "First Lease Year"
shall be the twelve (12) month period commencing on the Lease Commencement Date,
if the Lease Commencement Date is the first day of a calendar month, or, if the
Lease Commencement Date is other than on the first day of a calendar month then
the period commencing on the Lease Commencement Date and continuing through the

                                       4



last day of the twelfth full calendar month thereafter. Each "Lease Year" after
the First Lease Year shall be a consecutive twelve (12) month period commencing
on the first day of the calendar month immediately following the preceding Lease
Year. Tenant covenants that it shall accept possession of the Premises on the
Lease Commencement Date and thereafter continuously occupy the Premises, subject
only to any rights of sublease or assignment herein contained, during the entire
Term and any exercised renewals thereof. The Lease Commencement Date shall be
confirmed in a confirmation memorandum to be executed by both parties promptly
following the Lease Commencement Date in a form substantially similar to that in
Exhibit "L" attached hereto and made a part hereof.

                4. Rent

                              4.1 Minimum Rent. Annual minimum rent for the
Premises ("Minimum Rent") shall be as follows:

First Lease Year ...................  $7.00 per Rentable Square Foot
                                      ($405,398 per annum, $33,783 per month)

Second Lease Year...................  $9.50 per Rentable Square Foot
                                      ($550,183 per annum, $45,848 per month)

Third and Fourth Lease Years........  $10.50 per Rentable Square Foot
                                      ($608,097 per annum, $50,674.75 per month)

Fifth and Sixth Lease Years.........  $11.00 per Rentable Square Foot
                                      ($637,054 per annum, $53,088 per month)

Seventh and Eighth Lease Years......  $11.50 per Rentable Square Foot
                                      ($666,011 per annum, $55,501 per month)

Ninth and Tenth Lease Years
  and first month of Eleventh ......  $12.50 per Rentable Square Foot
                                      ($723,925 per annum, Lease Year
                                      $60,327 per month)

                All Minimum Rent shall be payable in equal monthly installments
commencing on the Lease Commencement Date and thereafter due on the first day of
each month during the Term without demand, deduction or set-off, at the office
of Agent. Notwithstanding the foregoing, in order partially to reimburse Tenant
for the costs of the Tenant Work, Landlord agrees that no Minimum Rent or


                                       5





payments on account of Real Estate Taxes or Operating Expenses shall be payable
or commence to accrue hereunder during the period commencing with the
Commencement Date and ending one hundred thirty-nine (139) days thereafter (the
"Rent Free Period"). Tenant shall be responsible for payment of charges for
electricity, use and occupancy taxes and other Additional Rent other than the
aforesaid payments on account of Real Estate Taxes and Operating Expenses during
the Rent Free Period.

                              4.2 Partial Month. If the Rent Free Period ends on
a day other than the first or last day of a month, Minimum Rent from such day
until the first day of the following month shall be prorated (on the basis of
the number of days during such month) and shall be payable on the first day of
the following month together with the Minimum Rent payment for that month.

                              4.3 Rent Acceptance. If Landlord, at any time or
times, shall accept Minimum Rent or any other sum due to it hereunder after the
same shall become due and payable, such acceptance shall not excuse delay upon
subsequent occasions, or constitute, or be construed as, a waiver of any of
Landlord's rights hereunder.

                              4.4 Additional Rent. All sums payable by Tenant
under this Lease, whether or not stated to be rent, Minimum Rent or Additional
Rent or otherwise denominated (hereinafter collectively referred to as "Rent"),
shall be collectible by Landlord as rent and upon default in payment thereof
Landlord shall have the same rights and remedies as for a failure to pay Minimum
Rent (without prejudice to any other right or remedy available therefor).
Notwithstanding anything to the contrary elsewhere contained in this Lease, any
payment of Additional Rent other than those payments required to be made on
demand may be paid by Tenant as follows, and such payments shall be considered
timely notwithstanding that any other provision of this Lease stipulates that
payment must be made within a fixed number of days:

                                  4.4.1 If Landlord's bill for the Additional
Rent is received by Tenant prior to the last ten (10) days of a calendar month,
Tenant may pay the Additional Rent together with the payment of Minimum Rent due
on the first day of the next succeeding calendar month.

                                  4.4.2 If Landlord's bill for the Additional
Rent is received by Tenant during the last ten (10) days of a calendar month,
Tenant may pay such Additional Rent together with the payment of Minimum Rent
due on the first day of the second calendar month next following.

                              4.5 Late Charge. If any payment of Rent
(including, without limitation, all Minimum Rent and all Additional Rent) or any
part thereof to be made by Tenant to Landlord pursuant to the terms of this
Lease shall become overdue for a period in excess of ten (10) days, a late
charge equal to the greater of Five Cents ($0.05) for each dollar so overdue or
interest accrued on


                                       6



the overdue payment from the date such payment or part thereof was due until
paid, at the Lease Interest Rate, shall be paid by Tenant together with the
overdue sum for the purpose of defraying the expense incident to handling such
delinquent payment. Nothing herein or in the imposition or acceptance of a late
charge by Landlord shall be construed as a waiver of any rights of Landlord
arising out of any default of Tenant; the right to collect any late charge or
interest is separate and apart from any rights or remedies of Landlord relating
to any default by Tenant.

                              4.6 Independent Covenant; Survival. Tenant's
covenant to pay all Rent hereunder is independent of any other covenant,
agreement, term or condition of this Lease. Without limiting the other
obligations of Tenant which shall survive the expiration of the Term hereof, the
obligation of Tenant to pay Rent shall survive the expiration of the Term
hereof.

                5. Real Estate Taxes

                              5.1 Definitions. As used in this Section 5, the
following terms shall be defined as hereinafter provided:

                                  5.1.1 "Real Estate Taxes" shall mean all taxes
and assessments of every kind and nature, ordinary or extraordinary, general or
special, levied, assessed or imposed by any governmental authority with respect
to the Property, as well as all fees or assessments payable on account of the
Property being located in the Philadelphia Special Services District.
Notwithstanding the foregoing:

                                      5.1.1.1 if at any time during the Term of
this Lease the present system of ad valorem taxation of real property shall be
changed or supplemented so that in lieu of or in addition to the ad valorem tax
on real property there shall be assessed on Landlord or the Property any tax of
any nature which is imposed in whole or in part, in substitution for, addition
to, or in lieu of any tax which would otherwise constitute a Real Estate Tax,
(which tax may include, but shall not be limited to, a state, county, municipal
or other local capital levy or other tax or levy on the gross rents or gross
receipts with respect to the Property, unless Tenant is able to conclusively
establish that such tax, assessment or levy was not intended to be in
substitution for, in addition to, or in lieu of any tax which would otherwise
constitute a Real Estate Tax) such tax shall be included within the term "Real
Estate Taxes," but only to the extent that the same would be payable if the
Property were the only property of Landlord;

                                      5.1.1.2 Real Estate Taxes shall also
encompass all of Landlord's expenses, including but not limited to reasonable
attorney's fees and expenses, incurred by Landlord in any effort to minimize
Real Estate Taxes whether by contesting proposed increases in assessments,
applying for the benefit of any tax abatement program available for the
Property, appealing the denial of any such tax abatement, or contesting any
challenge to the validity of any tax abatement program or its applicability to
the Property or by any other means or procedures appropriate in the
circumstances; provided, however, that under no circumstances shall Landlord
have any obligation to undertake any contest, appeal or other procedure to
minimize Real Estate Taxes or to obtain or maintain the benefits of any tax
abatement program for the Property; further provided that any reduction in Real
Estate Taxes resulting from any such appeal or contest shall inure to the
benefit of Tenant to the extent of Tenant's Tax Share (hereinafter defined) of
such reduction; and

                                     5.1.1.3 except as otherwise provided in
Subsection 5.1.1.1 above, there shall be excluded from Real Estate Taxes all net
income, excess profit, excise, franchise, estate, succession and inheritance
taxes, penalties due to Landlord's lateness or failure to pay taxes when due and
transfer taxes imposed on Landlord.

                                  5.1.2 "Tenant's Tax Share" shall be that
percentage of Real Estate Taxes which is equal to the ratio of the Rentable Area
of the Premises (as the same may change from time to time as a result of the
exercise of expansion or contraction options hereunder) to 1,354,725, the total
Rentable Area contained in the Building (being the Office Space, Garage Space,
Retail Space and Storage Space). As of the date of this Lease, Tenant's Tax
Share is 4.275%.

                                  5.1.3 "Tax Year" shall mean each calendar
year, or such other period of twelve (12) months as now or hereafter may be duly
adopted as the fiscal year for real estate tax purposes of the governmental unit
in which the Property is located, occurring during the Term of this Lease.

                                  5.1.4 "Tax Statement" shall mean a statement
provided by Landlord, setting forth: (a) the Real Estate Taxes for any Tax Year,
(b) Tenant's Tax Share thereof, prorated if only a part of the Tax Year falls
within the Term of this Lease; and (c) the amount by which the Tenant's Tax
Share thereof exceeds (or is less than) payments made by Tenant pursuant to
Sections 5.2.2 and 5.2.3 below for the specified Tax Year or portions thereof.

                              5.2 Payment of Tenant's Tax Share. Commencing on
the Lease Commencement Date, Tenant shall pay to Landlord, as Additional Rent
hereunder, an amount equal to Tenant's Tax Share of Real Estate Taxes with
respect to each Tax Year during the remaining Term of this Lease. If less than a
full twelve (12) month period of a Tax Year is included within the term of this
Lease, Tenant's Tax Share shall be prorated on a per diem basis for such partial
Tax Year. Tenant's Tax Share for each Tax Year shall be paid as follows:

                                  5.2.1 After receipt of a Real Estate Tax bill,
Landlord shall furnish Tenant a Tax Statement as hereinabove defined. Within
twenty-five (25) days following the receipt of such Tax Statement, Tenant shall
pay to Landlord the amount, if any, by which the Tenant's Tax Share for such Tax
Year exceeds the total amount, if any, of payments made pursuant to Subsection
5.2.3 below on account of the Tenant's Tax Share as shown on the Tax Statement.

                                  5.2.2 Notwithstanding the foregoing Section
5.2.1, if at any time after execution of this Lease Landlord receives a Real
Estate Tax bill for taxes in excess of the Real Estate Taxes for the preceding
Tax Year or a notice of any governmental action which could effect an increase
in Real Estate Taxes over the Real Estate Taxes for the preceding Tax Year
including, but not limited to, notice of any increase in assessment or of a
forthcoming increase in the real estate tax rate, or notice, providing that the
Property is not entitled to the benefit of any tax abatement program pursuant to
which Landlord has previously determined the Tenant's Tax Share, or that the
validity of any tax abatement program applicable to the Property has been
challenged by appropriate legal proceedings, Landlord may notify Tenant that
Landlord elects to increase the installments presently being paid by Tenant
pursuant to Subsection 5.2.3 below. Landlord's notice shall be in writing and
shall specify the amount due, or estimated to become due, and the amount of each
installment or increased installment to be paid by Tenant. Payments in the
amount of the installment (or increase in installment) set forth in Landlord's
notice shall be due semi-annually with the payments on account of Tenant's Tax
Share made pursuant to Section 5.2.3.

                                  5.2.3 On or before May 1 of each calendar
year, Landlord will deliver a statement to Tenant specifying the amount of the
installments owing on account of Tenant's Tax Share on or before June 1 and
December 1 of that Tax Year; provided, however, that should Landlord deliver
such statement later than May 1 in any calendar year, Tenant may defer payment
of the installment owing on June 1 of that Tax Year to that date which is thirty
(30) days after Tenant receives Landlord's statement. Subject to the foregoing,
Tenant shall pay one half (1/2) of the Tenant's Tax Share of the Real Estate
Taxes as set forth in Landlord's notice on or before June 1 and the remaining
one-half (1/2) of the Tenant's Tax Share of such Real Estate Taxes on or before
December 1 of each Tax Year, as an estimate and on account of the Tenant's Tax
Share for the current Tax Year, which payments shall be subject to increase upon
receipt by Tenant of a notice from Landlord pursuant to Subsection 5.2.2 above
increasing the amount of semi-annual estimated payments. In the event either
payment is not received by the specified date (subject to extension as
aforesaid), then at Landlord's sole option, for the duration of the Term of this
Lease, as the same may be extended, Tenant shall be required to make monthly
payments, together with payment of Minimum Rent, as an estimate and on account
of the Tenant's Tax Share for the current Tax Year, which payments shall be
subject to increase upon receipt by Tenant of a notice from Landlord pursuant to
subsection 5.2.2 above increasing the amount of monthly estimated payments.

                                  5.2.4 Real Estate Taxes with respect to a Tax
Year which is the subject of an appeal filed by or on behalf of Landlord shall
be paid on the basis of the amount reflected in the tax bill and shall not be
adjusted until the final determination of the appeal. Upon such determination of
any appeal, Landlord will notify Tenant in writing of the actual amount of
Tenant's Tax Share and the amount, if any, remaining due by Tenant in excess of
Tenant's estimated payments. Tenant shall pay such entire amount so due on the
due date for the next installment of Minimum Rent, or if this Lease has
terminated, Tenant shall pay the amount due within fifteen (15) days after
receipt of Landlord's notice. If the actual taxes are less than the amounts upon
which the payments previously made by Tenant were based, Tenant shall receive a
credit against the installment of Minimum Rent next coming due in the amount by
which Tenant's payments on account of Tenant's Tax Share exceeded the payments
actually due for the applicable year, or if the Term of the Lease has expired,
Landlord shall refund to Tenant the amount of any such overpayment within
fifteen (15) days after determination of the amount due to Tenant.

                                  5.2.5 If Tenant shall pay any Tenant's Tax
Share for any periods which were calculated on the basis of the qualification of
the Property for a tax abatement program, and subsequently it is determined that
for such periods or any portion thereof the Property was not entitled to the
benefit of such program or that such program was invalid and a retroactive
assessment is made, then Tenant's Tax Share for such periods shall be recomputed
on the basis of the actual amount of Real Estate Taxes required to be paid in
the absence of abatement, provided such period shall have occurred during the
Term of this Lease. Landlord will notify Tenant in writing both of any
additional amounts due (the "Deficiencies") by Tenant by reason of such
recalculations of Tenant's Tax Share for such periods in excess of Tenant's
previous payments of Tenant's Tax Share and of the amount of any increase in
installments payable by Tenant pursuant to Subsection 5.2.3 above for the
balance of the current Tax Year. Tenant shall pay the entire amount of the
Deficiencies by the due date of the next installment of Minimum Rent due
Landlord.

                                  5.2.6 Pending the resolution of any dispute
between Landlord and Tenant respecting the correctness of any Tax Statement
furnished by Landlord to Tenant hereunder (which dispute shall be undertaken in
accordance with the terms of Section 6.3 below), Tenant shall make payments in
accordance with said Tax Statement or other notice which is the subject of such
dispute.

                              5.3 Real Estate Tax Credit. In the event that the
sum of (a) Tenant's Tax Share of Real Estate Taxes for the twelve (12) month
period following the end of the Rent Free Period, plus (b) Philadelphia Use and
Occupancy Taxes respecting the Premises for the twelve (12) month period
following the end of the Rent Free Period, shall exceed $4.75 per Rentable
Square Foot of the Premises, Tenant shall receive a one-time credit against
Minimum Rent equal to the lesser of (i) the amount of such excess or (ii) $1.50
per Rentable Square Foot of the Premises. Solely by way of example, if Tenant's
Tax Share and Philadelphia Use and Occupancy Taxes for the twelve (12) month
period following the end of the Rent Free Period total $5.50 per Rentable Square
Foot of the Premises, Tenant would receive a Minimum Rent credit equal to $.75


                                       10



per Rentable Square Foot of the Premises ($5.50 - $4.75 = $.75). Such Minimum
Rent credit shall be applied to the installment of Minimum Rent falling due
immediately following the month in which Tenant becomes aware of such excess,
and Tenant shall include a notice to Landlord with its Minimum Rent payment for
that month, stating that such credit is reflected in the payment.

                              5.4 Timely Payment of Real Estate Taxes. Landlord
shall reasonably endeavor to pay all Real Estate Taxes within the time period
(if any) during which the taxing authority affords taxpayers the benefit of a
discount for payment. Any discounts granted by the tax authority shall be
reflected in Tenant's Tax Share of Real Estate Taxes.

                6. Operating Expenses

                              6.2 Definitions

                                  As used in this Section 6 the following terms
shall be defined as hereinafter provided:

                                  6.1.1 "Operating Year" shall mean each
calendar year, or such other period of twelve (12) months as hereafter may be
adopted by Landlord as its fiscal year, occurring either in whole or in part
during the Term of this Lease.

                                  6.1.2 "Tenant's Expense Share" shall be that
percentage of Operating Expenses derived by dividing the Rentable Area contained
within the Premises (as the same may from time to time increase or decrease by
reason of the exercise of any contraction or expansion option provided herein)
by 1,231,518, the Rentable Area contained in the Building excluding the Rentable
Area of the Garage Space, the Retail Space and the Storage Space. As of the date
of this Lease, Tenant's Expense Share is 4.703%.

                                  6.1.3 "Operating Expenses" shall mean the
expenses incurred by Landlord in connection with the operation, repair,
maintenance, protection and management of the Property (subject to allocation as
provided in Section 6.1.3.26 and the exclusions contained in Section 6.1.6),
including by way of example rather than of limitation, the following:

                                      6.1.3.1 Wages, salaries, fees and other
compensation and payments, payroll taxes, contributions to any social security,
unemployment insurance, welfare, pension or similar fund and payments for other
fringe benefits (reasonably and equitably allocated by Landlord among the
Operating Expenses of the Building and the operating expenses of any other
building with respect to which services are performed in the event that an
employee performs services for more than one building) made to or on behalf of
any and all employees of Landlord performing services rendered in connection
with the operation, repair, maintenance, protection and management of the
Property, including, without limitation: elevator operators; elevator starters;
window cleaners; porters; janitors; maids; miscellaneous handymen; watchmen;
persons engaged in patrolling and protecting the Property; carpenters;
engineers; mechanics; electricians; plumbers; landscapers; insurance risk
managers; building superintendent and assistants; building manager; and clerical
and administrative personnel. Landlord may contract for any of the foregoing to
be performed by independent contractors, in which event all sums paid to such
independent contractors shall be included within Operating Expenses pursuant to
Subsection 6.1.3.20 below.

                                     6.1.3.2 The cost of employee uniforms, and
the cleaning, pressing and repair thereof.

                                     6.1.3.3 Cleaning costs for the Property,
including the facade, windows and sidewalks, all costs for snow and rubbish
removal (other than removal of debris associated with tenant alterations or any
work performed by any tenant or Landlord in the Building, the cost of which is
not included in Operating Expenses) and the costs of all labor, supplies,
equipment and materials incidental to such cleaning.

                                     6.1.3.4 Premiums and other charges incurred
by Landlord with respect to all insurance relating to the Property and the
operation and maintenance thereof, including without limitation: all risk of
physical damage or fire and extended coverage insurance; public liability
insurance; elevator insurance; workmen's compensation insurance; boiler and
machinery insurance; sprinkler leakage insurance; rent insurance; and health,
accident and group life insurance for employees (reasonably and equitably
allocated by Landlord among the Operating Expenses of the Building and the
operating expenses of any other building with respect to which services are
performed in the event that an employee performed services for more than one
building).

                                      6.1.3.5 The actual cost of heat, water,
sewer and all other utility services, excluding electricity, servicing the
Building generally, as well as the cost of electricity consumed by central HVAC
equipment serving the Building (such as, but not limited to, the condensor water
system pumps, cooling tower fan and fresh air fans located within the Building
core) (the cost of electricity for non-central HVAC equipment serving leased
portions of the Building being billed directly to the tenant or tenants of such
floor pursuant to Section 8.8, or the equivalent, of their respective leases).

                                      6.1.3.6 Costs (other than utility costs
which are provided for in Subsection 6.1.3.5 above) incurred for operation,
service, maintenance, inspection, repairs and alterations of the Property, and
the heating, air-conditioning, ventilating, plumbing, outdoor underground
heating coils, electrical and elevator systems of the Building and the costs of
labor, materials, supplies and equipment used in connection with all of the
aforesaid items.

                                      6.1.3.7 Sales and excise taxes and the
like upon any of the expenses enumerated herein.


                                       12



                                      6.1.3.8 Management fees of the managing
agent for the Building, if any, which Landlord agrees shall at all times be
competitive with management fees paid to managing agents of similar first class
office buildings in center city Philadelphia.

                                      6.1.3.9 The cost of tools, equipment, and
supplies and any replacement thereof.

                                      6.1.3.10 The cost of repainting or similar
cosmetic redecorating of any part of the Building other than premises demised to
tenants in the Building.

                                      6.1.3.11 Displays or decorations for the
lobby, balconies and other public portions of the Property.

                                      6.1.3.12 Dues paid to associations
representing landlords, in connection with the membership of Landlord or the
Building manager therein.

                                      6.1.3.13 The cost of long distance
telephone charges, telecopier and courier services, postage and delivery
charges, office supplies, maintenance and repair of office equipment, and
similar costs, to the extent incurred in connection with the operation of the
Building management office located at Mellon Bank Center or at another location
as designated by the Landlord in the event that the management office at Mellon
Bank Center is relocated.

                                      6.1.3.14 The cost of licenses, permits and
similar fees and charges, excluding those relating to the Garage Space and
Retail Space.

                                      6.1.3.15 Auditing and accounting fees
including accounting fees incurred in connection with the preparation and
certification of the Tax Statements and the Operating Expense Statements
specified in Sections 5 and 6 of this Lease.

                                      6.1.3.16 All costs incurred by Landlord to
comply with governmental requirements, whether federal, state or municipal; and
all repairs, replacements and improvements which are appropriate in Landlord's
reasonable judgment for the continued operation of the Building as a first class
building, including capital expenditures which under generally accepted
accounting principles are expensed or are regarded as deferred expenses.

                                      6.1.3.17 All costs associated with the
acquisition and installation of any energy or cost saving devices.

                                      6.1.3.18 All costs and expenses relating
to the maintenance, operation and repair of any facilities partially on or
attached to and partially adjacent to the Property used in the operation
thereof, including without limitation the atrium and related facilities which
are partially on and partially adjacent to the Property, but specifically


                                       13



excluding any costs or expenses relating to maintenance, operation and repair of
(a) any portion of such facilities which have been leased to third parties and
(b) that certain adjacent office building and related facilities (other than the
aforesaid atrium) commonly known as Six Penn Center.

                                      6.1.3.19 All that portion of the Business
Privilege Tax of the City of Philadelphia which is based upon gross "receipts"
with respect to the Property and not upon "net income" with respect to the
Property, and any taxes imposed on personal property in the Building owned by
Landlord and used in connection with the Property. For Business Privilege Tax
reporting and payment purposes, the Landlord intends to exclude from its taxable
base the portion of its gross receipts attributable to the distributive share of
its general partner, The Equitable Life Assurance Society of the United States
(a mutual life insurance company incorporated under the laws of the State of New
York), in reliance on the retaliatory-tax-exclusion for foreign insurance
companies set forth in the First Class Cities Business Tax Reform Act and in the
City of Philadelphia Business Privilege Tax Ordinance, and in reliance on the
preferential rate of tax set forth in the First Class Cities Business Tax Reform
Act and in the City of Philadelphia Business Privilege Tax Ordinance for
"regulated industries." It is understood and agreed by the parties hereto that
if it is determined by the City of Philadelphia or a court of appropriate
jurisdiction following all permissible appeals that the Landlord improperly
excluded from its taxable base the portion of its gross receipts attributable to
the distributive share of The Equitable Life Assurance Society of the United
States and assesses deficiencies in such tax as a result of those excluded
amounts, the Tenant shall pay to Landlord Tenant's allocable portion of the tax,
for the period within the Term, with interest (excluding any penalties) assessed
thereon by the City of Philadelphia, if any, upon written notice provided to the
Tenant by the Landlord, as Additional Rent.

                                      6.1.3.20 Cost of independent contractors
performing services, including, but not limited to, cleaning, janitorial,
window-washing, rubbish removal, security, landscaping, snow and ice removal
services, electrical, painting, plumbing, elevator, heating, ventilation and air
conditioning maintenance and repair and all fees due such independent
contractors. Notwithstanding the foregoing, in the event that any services are
provided to the Property by a contractor which is an affiliate of Landlord, such
services shall be provided at a cost which is reasonably competitive with that
which could be obtained from an independent contractor not affiliated with
Landlord.

                                      6.1.3.21 Legal fees with respect to the
Property other than those incurred in the negotiation or enforcement of tenant
leases, which are not reimbursed through other sources.

                                      6.1.3.22 Capital expenditures necessitated
by casualties to the extent of the lesser of the deductible under Landlord's
policy of insurance insuring same, or $50,000.00.



                                       14



                                      6.1.3.23 Any and all other expenditures of
Landlord which are properly expenses in accordance with generally accepted
accounting principles consistently applied with respect to the operation,
repair, maintenance, protection and management of first-class office buildings
in the City of Philadelphia, Pennsylvania.

                                      6.1.3.24 If Landlord shall lease any item
of capital equipment, then, subject to the cap contained in Section 6.1.3.25
below, payments under such lease ("Capital Lease Payments") shall be included in
Operating Expenses for each Operating Year in which they are incurred.


                                      6.1.3.25 Notwithstanding anything to the
contrary herein contained in this Section 6.1.3, if Landlord shall purchase any
item of capital equipment or make any capital expenditure, including without
limitation those described in Subsections 6.1.3.16, 6.1.3.17 or 6.1.3.22 above
(collectively, "Capital Expenditures"), then the costs for same shall be
amortized on a straight line basis beginning in the year of installation and
continuing for the shorter of (a) the useful life thereof as determined in
accordance with the United States Internal Revenue Code or (b) ten (10) years,
with a per annum interest factor equal to the Prime Rate in effect on the date
of purchase thereof. The amount of amortization for such costs shall be included
in Operating Expenses for each Operating Year within the amortization period;
provided, however, that Tenant's Expense Share of Operating Expenses shall not
include Capital Lease Payments and Capital Expenditures aggregating in excess of
Ten Thousand Dollars ($10,000) per Lease Year during the first five (5) Lease
Years, or aggregating more than Twenty Thousand dollars ($20,000) per Lease Year
during the sixth (6th) through tenth (10th) Lease Years.

                                      6.1.3.26 Landlord shall calculate and
reasonably allocate Operating Expenses among the Office Space, Retail Space,
Garage Space and Storage Space, and Tenant's Share shall be applied only against
Operating Expenses which are so allocated to the Office Space, and not to those
portions of the Operating Expenses which are allocated to the Retail Space,
Storage Space and Garage Space. In the event any portion of the Atrium attached
to the Building is leased, that leased space shall be included in the Retail
Space for the purpose of calculating Tenant's Expense Share.

                                  6.1.4 Operating Expenses shall be "net" and,
for that purpose, shall be reduced by the amounts of any reimbursement, discount
or credit received by Landlord with respect to an item of cost that is included
within Operating Expenses (other than reimbursements to Landlord by tenants of
the Property pursuant either to operating expense provisions of any lease or
separate contractual arrangements).

                                  6.1.5 In determining Operating Expenses for
any Operating Year during which less than ninety percent (90%) of the rentable
area of the Building shall have been occupied by tenants for more than thirty
(30) days during such year, that portion of the actual Operating Expenses for
such year which vary with occupancy shall be increased to the amount which
normally would have been incurred for such Operating Year had such occupancy of


                                       15



the Building been ninety percent (90%) throughout such Operating Year, as
reasonably determined by Landlord. Notwithstanding the foregoing, in no event
shall Landlord receive more than one hundred percent (100%) of the Building's
actual Operating Expenses as a result of the operation of this Subsection 6.1.5.

                                  6.1.6 Notwithstanding the provisions of
Section 6.1.3, "Operating Expenses" shall not include expenditures for any of
the following:

                                      6.1.6.1 Any capital addition made to the
Building, including the cost to prepare space for occupancy by a new tenant,
except as set forth in Subsections 6.1.3.16, 6.1.3.17 or 6.1.3.22 above.

                                      6.1.6.2 Repairs or other work occasioned
by fire, water, windstorm or other casualty or hazard, in excess of the lesser
of the deductible under Landlord's policy of insurance insuring such casualty or
hazard, or $50,000.00.

                                      6.1.6.3 Leasing commissions and
advertising expenses incurred in leasing or procuring new tenants.

                                      6.1.6.4 Repairs or rebuilding necessitated
by condemnation.

                                      6.1.6.5 Depreciation and amortization of
the Building, other than as permitted pursuant to Subsection 6.1.3.25.

                                      6.1.6.6 Real Estate Taxes.

                                      6.1.6.7 The salaries and benefits of
executive officers of Landlord, if any.

                                      6.1.6.8 Debt service payments on any
indebtedness applicable to the Property, including any mortgage debt, or ground
rents payable under any ground lease for the Property.

                                      6.1.6.9 Costs of services not generally
provided to all tenants in the Office Space.

                                      6.1.6.10 Capital costs of replacing
Building components which are replaced due to normal wear and tear or sudden
failure shall not be included in Operating Expenses (or amortized under Section
6.1.3.25).

                                       16



                                  6.1.7 "Monthly Operating Expense Estimate"
shall have the meaning specified in Subsection 6.2.1.1 hereof.

                                  6.1.8 "Operating Expense Statement" shall mean
a statement provided by Landlord, setting forth in reasonable detail: (a) the
Operating Expenses for the Operating Year (or portion thereof if less than a
full Operating Year) immediately preceding the Operating Year in which the
statement is issued, reasonably detailed by major categories, (b) the Tenant's
Expense Share for such preceding Operating Year, prorated if only a part of the
Operating Year falls within the Term of this Lease, (c) the amount of payments
made by Tenant on account of the Tenant's Expense Share during such preceding
Operating Year, (d) the amount of payments of the Monthly Operating Expense
Estimate made by Tenant in the Operating Year in which the Expense Statement is
issued, and (e) the Monthly Operating Expense Estimate for the Operating Year in
which the Operating Expense Statement is issued.

                              6.2 Tenant's Expense Share. Commencing with the
Lease Commencement Date, as Additional Rent for each Operating Year or portion
thereof occurring within the remainder of the Term of this Lease, Tenant shall
pay to Landlord (in the manner hereinafter provided) the amount of Tenant's
Expense Share of the Operating Expenses for every Operating Year. For any
portion of an Operating Year less than a full twelve (12) month period occurring
within the Term of this Lease, Tenant's Expense Share shall be prorated on a per
diem basis.

                                  6.2.1 Such Additional Rent shall be paid (or
credited) in the following manner:

                                      6.2.1.1 Beginning with the Lease
Commencement Date and continuing thereafter on the first day of each month until
receipt of the Operating Expense Statement with respect to the Operating Year
during which Lease Commencement Date occurs, Tenant will pay Landlord an amount
set by Landlord sufficient to pay Landlord's estimate (reasonably based on the
actual Operating Expenses for the preceding Operating Year and Landlord's
projections of any anticipated increases or decreases thereof) of Tenant's
Expense Share for the current Operating Year (or remaining portion thereof) (the
"Monthly Operating Expense Estimate"). The Monthly Operating Expense Estimate
for a period less than a full calendar month shall be duly prorated.

                                      6.2.1.2 Following the end of each
Operating Year, Landlord shall furnish Tenant an Operating Expense Statement
setting forth the information described in Subsection 6.1.8 above. Within thirty
(30) days following the receipt of such Operating Expense Statement (the
"Expense Share Date") Tenant shall pay to Landlord: (i) the amount by which the
Tenant's Expense Share for the Operating Year (or portion thereof) covered by
the Operating Expense Statement exceeds the aggregate of Monthly Operating


                                       17




Expense Estimates paid by Tenant with respect to such Operating Year (or portion
thereof); and (ii) the amount by which the Monthly Operating Expense Estimate
for the current Operating Year as shown on the Operating Expense Statement
multiplied by the number of months elapsed in the current Operating Year
(including the month in which payment is made) exceeds the aggregate amount of
payments of the Monthly Operating Expense Estimate theretofore made in the
Operating Year in which the Operating Expense Statement is issued. Landlord
shall diligently endeavor to furnish Tenant an Operating Expense Statement not
later than one hundred and twenty (120) days following the end of each Operating
Year.

                                      6.2.1.3 On the first day of the first
month following receipt by Tenant of any annual Operating Expense Statement and
continuing thereafter on the first day of each succeeding month until the
issuance of the next ensuing Operating Expense Statement, Tenant shall pay
Landlord the amount of the Monthly Operating Expense Estimate shown on the
Operating Expense Statement.

                                      6.2.1.4 If on any Expense Share Date
Tenant's payments of the installments of the Monthly Operating Expense Estimate
for the preceding or current year's Operating Expenses are greater than the
actual Operating Expenses for such preceding Operating Year or Monthly Operating
Expense Estimate for the current year, Landlord shall credit Tenant with any
excess, which credit may be offset by Tenant against next due installments of
Rent. If the Term of the Lease has expired prior to the Expense Share Date for
the applicable Operating Year and if Tenant's payments of Monthly Operating
Expense Estimate either exceed or are less than Tenant's Expense Share, Landlord
shall send the Operating Expense Statement to Tenant, and an appropriate payment
from Tenant to Landlord or refund from Landlord to Tenant shall be made on the
Expense Share Date. The provisions of this Subsection 6.2.1.4 shall remain in
effect notwithstanding any termination of this Lease; provided however, that if
upon termination of this Lease Tenant owes Landlord any sums under this Lease
(for Rent or otherwise), Landlord shall have the right to reduce the amount of
any refund due Tenant under this Section 6.2.1.4 against such sums owed by
Tenant to Landlord.

                                  6.2.2 Notwithstanding any dispute concerning
any Operating Expense Statement or other notice, Tenant shall continue to make
payments in accordance with said Operating Expense Statement or other notice
pending the resolution of such dispute.

                                  6.2.3 Landlord's Estimates. Landlord has
submitted to Tenant, and Tenant has relied upon in entering into this Lease, the
estimates of Real Estate Taxes and Operating Expenses shown on Exhibit "M"
attached hereto and made a part hereof.

                              6.3 Audit of Landlord's Books. Landlord shall keep
at all times during the Term of this Lease, at the office of Landlord or Agent,
full, complete and accurate books of account and records prepared in accordance
with generally accepted accounting principles with respect to Operating Expenses
and Real Estate Taxes, and shall retain such books and records, as well as
contracts, bills, vouchers, and checks, and such other documents as are


                                       18



reasonably necessary to audit properly the Operating Expenses and Real Estate
Taxes for at least one (1) year after the year to which they are applicable, or
if any audit is required or any controversy should arise between the parties
hereto regarding Tenant's Tax Share or Tenant's Expense Share, until such audit
or controversy is resolved or terminated. After one (1) year from the submission
of a given Operating Expense Statement or the Tax Statement, as the case may be,
by Landlord to Tenant, Tenant waives its rights to inspect such books and
records which are applicable to said statements. During such one (1) year period
such books and records shall be open to the inspection of Tenant or its duly
authorized representatives, who shall have full and free access to the same and
the right to require of Landlord, its agents and employees, such information or
explanation with respect to the same as may reasonably be necessary for a proper
examination thereof. Anything herein to the contrary notwithstanding, Tenant
shall have the right to inspect said records only during Business Hours and upon
at least five (5) business days' prior written notice to Landlord and only for
such period as is reasonably required to complete such inspection. Tenant shall
hold all information obtained from such inspection in the strictest confidence.
If it is determined that the Operating Expenses or the Real Estate Taxes shown
in the Operating Expense Statement or the Tax Statement exceed the actual
Operating Expenses or Real Estate Taxes for any period covered by Landlord's
statement by four percent (4%) or more, Landlord shall pay all reasonable
expenses incurred by Tenant in determining the actual Operating Expenses or Real
Estate Taxes for said period; otherwise Tenant shall pay all expenses which it
incurred in making any such audit. In the event that any audit by Tenant reveals
that the actual Operating Expenses and Real Estate Taxes for any period are less
than the sum paid by Tenant for the period, then the amount of the excess shall
be applied on account of the next installment or installments of Rent due under
this Lease unless the Term shall have ended, in which event Landlord shall pay
to Tenant the amount of the excess within thirty (30) days after the parties
have agreed upon the amount of the excess.

                7. Improvement of the Premises

                              7.1 Base Building Plans. Landlord shall make
available to Tenant for use by Tenant or its architect or engineer, such
structural, electrical and mechanical drawings, specifications, and other
information with respect to the Building ("Base Building Plans") reflecting
Landlord's construction of the Core and Shell of the Building described in
Exhibit F attached hereto (the "Core and Shell"). Landlord shall also make
available for Tenant's inspection all shop drawings and submittals respecting
the construction of the Core and Shell. Tenant acknowledges that the Core and
Shell were constructed to construction industry standard tolerances permitting
limited deviations from the requirements of the Base Building Plans.
Accordingly, promptly following execution of the Lease, and prior to
commencement of preparation of the plans and documents which Tenant is obligated
to produce under Section 7.3 below, Tenant will cause its architect or engineer
to conduct a field survey of the Premises to verify critical dimensions and
ascertain any deviation from the Base Building Plans.

                              7.2 Tenant hereby designates Fred Harle as the
"Tenant's Construction Representative," who Tenant agrees shall be available to
meet and consult with Landlord on a continuing basis at the Premises as Tenant's

                                       19




representative concerning the matters which are the subject of this Section 7
and who, as between Landlord and Tenant, shall have the power legally to bind
Tenant in giving direction to Landlord respecting the Construction Documents and
the Tenant Work, in giving approvals of design documents and work, and in making
requests and approval for changes. Tenant may from time to time change the
designation of Tenant's Construction Representative by written notice to
Landlord, so long as there is at all times at least one individual designated to
serve in such capacity.

                              7.3 Preparation, Review and Approval of Tenant's
Schematic Design Documents, Design Development Documents and Construction
Documents. Tenant shall, at its expense, consult with its architect, engineer,
designer and such other consultants as it shall deem necessary for development
and timely completion of certain documents as described in this Section 7, which
documents shall conform to the Base Building Plans.

                                  7.3.1 Schematic Design. Tenant shall prepare
at its expense "Schematic Design Documents" reasonably satisfactory to Landlord
which generally indicate functional and organizational relationships, the
location and size of the Premises, all demising and interior walls, and the
locations and configuration of all offices and conference rooms, libraries, file
rooms and other office areas and improvements to be contained in the Premises.

                                  7.3.2 Design Development. Subject to the
procedural requirements set forth in Subsection 7.3.4 below, Tenant, at its
expense, shall cause to be prepared and delivered to Landlord for its review and
approval, which approval shall not be unreasonably withheld or delayed: one (1)
complete reproducible set and two (2) blue-line print sets of "Design
Development Documents" consisting of: architectural, mechanical, electrical,
plumbing and structural drawings and other documents to fix and describe the
size and character of the space, all commonly called "Space Plans", prepared by
an architect or space planner approved by Landlord. Tenant shall deliver to
Landlord in a timely manner the Schematic Design Documents and the Design
Development Documents for approval, so that the Construction Documents are
timely delivered and approved as set forth below. Tenant shall cause the Design
Development Documents to be prepared in conformity with and consistent with the
Schematic Design Documents.

                                  7.3.3 Construction Documents. Tenant, at its
expense, shall cause to be prepared and delivered to Landlord one (1) complete
reproducible set and two (2) blue-line print sets of complete and final
"Construction Documents" consisting of (a) working drawings; (b) two (2) copies
of specifications, as approved by Landlord for the construction of the Premises
for Tenant's occupancy; and (c) a permit set. Tenant shall deliver the
Construction Documents to Landlord not later than April 18, 1994. Tenant shall
cause the Construction Documents to be prepared in conformity with and
consistent with the Design Development Documents.


                                       20




                                      7.3.3.1 Tenant's Construction Documents
shall be signed and sealed by an architect or professional engineer (where
applicable) licensed and registered in the Commonwealth of Pennsylvania. In
addition to conforming to Landlord's Base Building Plans, Tenant's Construction
Documents shall also conform to all applicable laws, ordinances, building codes
and requirements of public authorities and insurance underwriters. Tenant's
Construction Documents shall contain, at a minimum, floor plans, reflected
ceiling plans, power and telephone plans, mechanical plans, electrical plans,
fire protection plans and all other details and schedules which designate the
locations and specifications for all mechanical, electrical, fire protection and
life safety equipment to be installed in the Premises, and all partitions,
doors, lighting fixtures, electric receptacles and switches, telephone outlets,
special air conditioning, and other improvements to be installed within the
Premises.

                                  7.3.4 Landlord Approval. Tenant shall submit
for Landlord's approval, Schematic Design Documents, Design Development
Documents and Construction Documents, in accordance with guidelines and time
frames described above. The approval by Landlord of Tenant's Schematic Design
Documents, Design Development Documents and Construction Documents shall be
subject to the following procedural requirements:

                                      7.3.4.1 Landlord shall promptly review the
applicable documents or any additional requested information, and either approve
the same or return the same to Tenant with requested modifications.

                                      7.3.4.2 If Landlord shall return the
modified documents to Tenant with requested modifications, Landlord shall
specify a reasonable period of time, not to exceed three (3) Business Days,
within which such modifications shall be made and within which such modified
plans shall be re-submitted to Landlord by Tenant, until the modified documents
are finally approved by Landlord.

                                      7.3.4.3 To the extent the Tenant's
Schematic Design Documents, Design Development Documents or Construction
Documents, as the case may be, in Landlord's sole judgment, involve any
modification of, or impact upon, the Building's structural, mechanical,
electrical or plumbing systems or components, then such approval may be withheld
by Landlord in its absolute and sole discretion.

                                      7.3.4.4 Tenant's Construction Documents,
as approved by Landlord and as modified by Tenant to take account of any changes
reasonably requested by Landlord, are hereinafter considered to be "Approved for
Construction."

                                  7.3.5 Costs of Tenant's Documents. Landlord
grants to Tenant an allowance for reimbursement of Tenant's actual costs of
preparation of its Schematic Design Documents, Design Development Documents and
Construction Documents, including without limitation the cost of any interior
design services, of Two Hundred Eighty-Nine Thousand Five Hundred Seventy


                                       21



Dollars ($289,570.00) (Five Dollars ($5.00) per Rentable Square Foot of the
Premises) ("Plans Allowance"). Tenant may draw upon the Plans Allowance by
submitting to Landlord on or before the twentieth (20th) day of any month, a
voucher for the sum requested executed by Tenant's Construction Representative
and by an officer of Tenant, setting forth in reasonable detail the amount of
the plans costs and identifying the labor, fees, costs and documents to which it
relates. Landlord shall endeavor to pay to Tenant the amount of each Tenant
voucher within twenty (20) days after Landlord shall have received such voucher,
until the Plans Allowance is exhausted. Should the Plans Allowance not be
exhausted in reimbursing Tenant the cost of preparing the Construction
Documents, any portion thereof remaining shall be applied to reimburse Tenant
for the costs of moving into the Premises and shall be payable by Landlord to
the Tenant in one or more installments, each within a reasonable time following
receipt by Landlord of a voucher from Tenant setting forth in reasonable detail
the labor, fees and costs desired to be reimbursed. Notwithstanding the
foregoing, Tenant may submit its first draw request voucher at the time of full
Lease execution, and Landlord shall endeavor to pay same twenty (20) days
thereafter.

                              7.4 Landlords Work. Promptly following full
execution of this Lease, Landlord, in a good and workmanlike manner and at
Landlord's expense, (a) shall undertake demolition of those portions of the
Premises identified on and in accordance with Tenant's demolition plans and
specifications, prepared by Harle Brandt Ginder Architects, dated 2/1/94,
consisting of five (5) sheets numbered D1 through D5 and labelled "PMARE @
MELLON BANK CENTER", a true and correct copy of which has been delivered to and
approved by Landlord (excluding any demolition of areas on the 30th floor of the
Building shown on such plans and specifications but not contained in the
Premises on the 30th floor of the Building), and (b) shall remove and dispose of
the debris resulting from such demolition ("Landlord's Work"). Landlord shall
complete the Landlord's Work within twenty-one (21) days from the date of full
execution of this Lease except with respect to the removal of the stairs between
the floors of the Premises and redecking of the floors, which Landlord shall
complete within forty-two (42) days from the date of full execution of this
Lease; provided, however, that the aforesaid periods for completion of
Landlord's Work shall be extended one day for each day that Landlord is delayed
in the performance of such work by reason of interference by Tenant's
contractors or subcontractors performing work in the Premises. During the period
of Landlord's performance of Landlord's Work, Landlord shall control the hours
and locations at which Tenant's contractors and subcontractors may perform work
within the Premises, but Landlord shall not be responsible for any aspect of the
work performed by Tenant's contractors and subcontractors by reason of such
control. Landlord shall leave in the Premises those salvageable materials listed
on Exhibit "J" attached hereto, in reasonably good and serviceable condition,
for use by Tenant in performance of the Tenant Work.

                              7.5 Tenant Work Defined. Tenant shall, in a good
and workmanlike manner, cause the Premises to be improved and completed at
Tenant's expense (subject to the Construction Allowance hereinafter provided)

                                       22



and in accordance with Tenant's Construction Documents, which work (including
materials, supplies, components, labor and services therefor) is herein referred
to as the "Tenant Work".

                              7.6 Tenant's Contractor

                                  7.6.1 The Tenant Work is to be performed by
Tenant's contractor, selected by Tenant subject to Landlord's written approval.
Landlord will not unreasonably withhold or delay its approval of any contractor
submitted by Tenant, and Landlord's disapproval shall not be considered
unreasonable if the disapproved contractor may, in Landlord's sole opinion,
prejudice Landlord's relationship with Landlord's contractors or subcontractors
or the relationship between such contractors and their subcontractors or
employees, or otherwise disturb harmonious labor relations in or about the
Building.

                                  7.6.2 Upon Landlord's approval of the Tenant's
contractor, Tenant shall enter into a construction contract or construction
management agreement for the Tenant Work (the "Tenant Work Contract"). The
Tenant Work Contract shall require that both Landlord and Tenant must approve
the selection of each subcontractor and supplier furnishing goods or services
costing over Fifty Thousand Dollars ($50,000.00) within three (3) business days
of written request for approval, such approval not to be unreasonably withheld,
and shall require Tenant's contractor to comply with all requirements of Section
7.9 below.

                                  7.6.3 Prior to commencement of that portion of
the Tenant Work which requires a building permit, Tenant will provide Landlord
with a copy of the building permit respecting the Tenant Work. Additionally,
upon completion of the Tenant Work and prior to occupancy of the Premises by
Tenant, Tenant will deliver to Landlord a copy of the temporary or permanent
Certificate of Occupancy respecting the Premises; provided that if Tenant
delivers a temporary Certificate of Occupancy, Tenant shall diligently and
continuously pursue issuance of a permanent Certificate of Occupancy and shall
deliver a copy of same to Landlord upon receipt. Should Tenant so request,
Landlord agrees to provide reasonable assistance to Tenant, at no expense to
Landlord, in Tenant's efforts to obtain a permanent Certificate of Occupancy for
the Premises.

                              7.7 [INTENTIONALLY OMITTED.]

                              7.8 Payment of Construction Allowance

                                  7.8.1 Tenant may draw upon the Construction
Allowance to pay for labor and materials provided for the Tenant Work (and to
pay Tenant's architect's and engineer's and other professional fees incurred in
connection with the design and construction of the Tenant Work as provided in
Section 7.3.5 if the Plans Allowance is exhausted) (herein called "Tenant's
Costs") in accordance with the terms of this Section 7.8. At the time Tenant's
Construction Documents are finalized, Tenant will deliver to Landlord an
estimated budget reasonably detailing the anticipated Tenant's Costs. Tenant


                                       23



shall submit to Landlord on or before the twenty-eighth (28th) day of each
month, a voucher for Tenant's Costs executed by Tenant's Construction
Representative and by a partner or officer of Tenant, setting forth in
reasonable detail the amount of such Tenant's Costs and identifying the
material, labor, fees, and costs to which they relate. Landlord shall pay to
Tenant the amount of each Tenant voucher within thirty (30) days after receipt
of such voucher from Tenant. Notwithstanding anything set forth in this Section
7.8.1, any amounts held back as retainage under contracts for the Tenant Work
shall not constitute a part of Tenant's Costs unless and until paid to the
contractor under the terms of the subject contract.

                                  7.8.2 Each voucher submitted to Landlord by
Tenant (as set forth in Section 7.8.1) shall be accompanied by a certificate
duly executed and sworn to by Tenant's Construction Representative stating that:
(i) based on site inspections and the data comprising the invoice submitted by
Tenant for payment by Landlord, the Tenant Work has progressed to the point
indicated and the quality and condition of the Tenant Work theretofore completed
or in the process of completion as of the date of such certificate is in
accordance with the Construction Documents; and (ii) that Tenant's contractor is
entitled to the amount so certified.

                              7.9 Tenant Contractors. In performing the Tenant
Work or in performing alterations within any Expansion Area prior to Tenant's
beneficial occupancy thereof, the following conditions shall be fulfilled, and
Tenant, by undertaking to have such work performed by its contractor or
contractors, shall be deemed to have agreed to cause such conditions to be
fulfilled:

                                  7.9.1 Prior to commencing any such work, the
Construction Documents shall have been Approved for Construction in accordance
with Section 7.3.

                                  7.9.2 The work shall be performed at Tenant's
expense by responsible contractors and subcontractors approved in advance by
Landlord, who shall not in Landlord's sole opinion, and who in fact do not,
prejudice Landlord's relationship with Landlord's contractors or subcontractors
or the relationship between such contractors and their subcontractors or
employees, or disturb harmonious labor relations. Tenant's contractors and
subcontractors shall comply with all insurance requirements and undertakings set
forth in Exhibit "E" attached hereto, as the same may be changed by written
notice from Landlord to Tenant from time to time during the Term.

                                  7.9.3 Such contractors or Tenant shall, prior
to the commencement of the contractors' work and not later than ten (10) days
after the execution of the contractors' respective contracts, file waivers of
mechanic's liens in the appropriate public office, which waivers shall be
effective to preclude the filing of any mechanic's liens on account of the work


                                       24



to be performed by any of Tenant's contractors, subcontractors or materialmen. A
copy of all such waivers shall be delivered to Landlord by Tenant prior to the
commencement of any such work.

                                  7.9.4 No such work shall be performed in such
manner or at such times as to interfere with any work being done by any of
Landlord's contractors or subcontractors in the Premises or in or about the
Property generally. Tenant's contractors and subcontractors shall be subject to
the decisions of Agent and Landlord's contractor as to such matters and as to
avoidance of interference with other tenants of the Building or the work of
other tenants' contractors and subcontractors, but Agent and Landlord's
contractor shall not be responsible for any aspect of the work performed by
Tenant's contractors or subcontractors.

                                  7.9.5 Except as otherwise set forth in this
Section 7.9, all such work shall be subject to the requirements and provisions
of Sections 10.5, 10.7 and 25 of this Lease.

                                  7.9.6 Tenant and its contractors and
subcontractors shall be solely responsible for the transportation, safekeeping
and storage of materials and equipment used in the performance of their work,
for the removal of waste and debris resulting from the work, and for any damage
caused by them to the Building or to any installations or work performed by
Landlord's or any other tenant's contractors and subcontractors.

                              7.10 Condition of Premises. The taking of
possession of the Premises by Tenant upon completion of the Tenant Work shall be
conclusive evidence, as against Tenant, that the Premises and the Property were
in good and satisfactory condition and that the Landlord's Work was
satisfactorily completed at the time such possession was so taken.

                              7.11. Site Logistics and Procedures. Tenant's
occupancy of the Premises during performance of the Tenant Work shall be subject
to all of the terms and conditions of this Lease, excepting only that no Rent
shall be payable during such period except to the extent specifically required
under this Section 7.11, and except that Landlord shall not be obligated to
provide janitorial services pursuant to Section 8.4. During such period, Tenant
shall comply with the Site Logistics and Procedures set forth on Exhibit "K"
attached hereto and incorporated herein by reference. Any work to be performed
by Tenant in the elevator lobby and common corridors of the 30th floor of the
Building shall be undertaken at such times and in such a manner as will not
unreasonably disturb other tenants of such floor or unreasonably interfere with
the conduct of their respective businesses, as determined by Landlord. Tenant
shall pay to Landlord all of Landlord's costs for electricity consumed by Tenant
and its contractors and subcontractors in the performance of the Tenant Work
including, without limitation, the cost of electricity consumed in the provision
of HVAC service to the Premises during such period, computed at the rate set
forth in Section 8.1 and 8.8. The cost of electricity will be submetered on full
floors of the Premises and shall be reasonably allocated by Landlord on partial
floors of the Premises, based upon usage. The costs of electricity shall be
payable by Tenant to Landlord within fifteen (15) days following receipt of a
bill from Landlord therefor, as Additional Rent.


                                       25



                8. Landlord agrees that in consideration of Tenant's performance
of its obligations under this Lease and so long as no Event of Default
(hereinafter defined) has occurred and is continuing, Landlord shall provide
services after the Lease Commencement Date as follows:

                              8.1 HVAC. Heat or air-conditioning to the Premises
(depending on the season) and ventilation (collectively, "HVAC") as set forth in
the Core and Shell description attached hereto as Exhibit F, during Business
Hours. Heat or air-conditioning and ventilation required by Tenant at other
times shall be available to Tenant at Landlord's then prevailing rates
(presently $20.00 per hour, excluding costs of submetered electricity) with
prior notice to Landlord, and shall be paid for by Tenant as Additional Rent
within thirty (30) days after billing. The cost of electricity consumed in
providing HVAC service to Tenant hereunder shall be billed to and payable by
Tenant in accordance with Section 8.8, below. The furnishing of the foregoing
heating, air-conditioning and ventilation services during the times and in
accordance with the standards hereinabove set forth shall be subject to any
statute, ordinance, rule, regulation, resolution or recommendation for energy
conservation which may be promulgated by any governmental agency or organization
which Landlord shall be required to abide by or in good faith may elect to
observe.

                              8.2 Elevators. Landlord shall provide self-service
passenger elevator service to the Premises during Business Hours, with one
elevator subject to call at all other times. Landlord shall also provide freight
elevator service, subject to such reasonable rules and regulations as to
availability and use as Landlord may hereafter promulgate from time to time,
provided, however, that Tenant shall be required to pay Landlord for any special
services required by Tenant in connection with such use and/or in connection
with its operation of such service during other than Business Hours at such
rates as Landlord shall reasonably establish therefor. Notwithstanding the
foregoing, during Tenants' performance of the Tenant Work and initial move into
the Premises, Tenant shall not be required to pay any charges for use of the
Building freight elevators (even if the initial move occurs on a weekend or
Holiday, or is spread over more than one weekend).

                              8.3 Access. Tenant and its employees shall have
access to the Premises twenty-four hours per day, 365 days per year, subject to
compliance with such security measures as shall from time to time be in effect
for the Building.

                              8.4 Janitorial. Landlord shall provide janitorial
services to the Premises consistent with those set forth in the Cleaning
Specifications attached hereto as Exhibit G. Any and all additional or
specialized janitorial services desired by Tenant shall be contracted for by
Tenant directly with Landlord's independent janitorial contractor and the cost
and payment thereof shall be the sole responsibility of Tenant.

                                       26


                              8.5 Landlord Repairs. Landlord shall make all
necessary structural repairs to the Building, as well as all repairs and
adjustments which may be reasonably requested by Tenant and which Landlord shall
determine may be needed to the mechanical, HVAC, electrical and plumbing systems
(including VAV boxes and their associated thermostats) in and servicing the
Premises and all repairs to exterior windows. In the event that any such repair
is required by reason of the negligence or abuse of Tenant or its agents,
employees, invitees or of any other person using the Premises with Tenant's
consent, express or implied, Landlord may make the repair and charge Tenant for
the costs thereof plus interest thereon at the Lease Interest Rate computed from
the date such costs are incurred by Landlord until paid, which costs and
interest shall be due and payable following completion of the repairs with the
next installment of Minimum Rent thereafter due. Any repairs to any non-building
standard fixtures or other improvements installed or made by or at the request
of Tenant requiring maintenance or repairs of a type or nature not customarily
provided by Landlord to office tenants of the Building, and necessary
replacements of non-building standard fixtures or improvements, shall be made by
Landlord at Tenant's expense or, at Landlord's election, by contractors engaged
by Tenant and approved by Landlord, at Tenant's expense. Notwithstanding the
foregoing, Landlord shall not be responsible for any HVAC repairs or adjustments
during any period of time when the HVAC system is under warranty.

                              8.6 Water. Landlord shall provide water in
reasonable quantities consistent in Landlord's reasonable judgment with
customary office usage for drinking, lavatory and toilet purposes to be drawn
from the bathrooms or other approved fixtures within the Premises.

                              8.7 Public Areas. Landlord shall keep and maintain
the public areas and facilities of the Property reasonably clean and in good
working order, and the sidewalks adjoining the Property in good repair and,
during Business Hours, free from accumulations of snow and ice.

                              8.8 Electricity. Landlord shall furnish, at
Tenant's cost and expense, the Premises with 4.5 watts per square foot (net
usable area) of electric current for lighting and normal office use, and shall
replace light bulbs and tubes when required. The cost of replacement light
bulbs, tubes, lamps, and ballasts, shall be paid by Tenant as Additional Rent.
Tenant's use of electric energy in the Premises shall not at any time exceed the
safe capacity of any of the electric conductors and equipment in or otherwise
serving the Premises. Tenant shall not, without Landlord's prior written
consent, which is not to be unreasonably withheld, in each instance, connect to
the Building's electric distribution system any fixtures, appliances, equipment
or machinery other than lamps, typewriters, desktop computers, xerox machines,
and similar small office machines, as well as food and beverage vending
machines, coffee makers, refrigerators, hot plates and microwave ovens, nor make

                                       27



any alterations or additions to the electric system of the Premises. Should
Landlord grant such consent, all additional lines, risers or other equipment
required therefor shall be provided by Landlord at Tenant's cost and expense.
Tenant agrees that its consumption of electric energy in the Premises shall be
submetered by Landlord at Tenant's expense. The cost of electricity consumed at
the Premises shall be billed to Tenant by Landlord, monthly on the basis of the
rate paid by Landlord for electricity consumed in the Building, being the
Philadelphia Electric Company High Tension Rate (or the replacement rate paid by
Landlord if such rate is discontinued), based on the average cost per kilowatt
hour of electricity consumed in the Building, which bill shall be payable by
Tenant within ten (10) days following receipt as Additional Rent. Tenant agrees
that if, in the future, it is required by the Pennsylvania Public Utility
Commission or by a Federal or state law or by applicable tariff as a necessary
condition to the supply of electric energy to the Premises or any part thereof,
to become the direct customer of the applicable utility, Tenant will do so.

                              8.9 Directory. Landlord shall maintain a static
directory of office tenants in the lobby area of the Building, on which shall be
listed the name of Tenant, and shall maintain an electronic directory of office
tenants in the lobby area of the Building in which shall be listed the name of
Tenant and any sublessee, and Tenant's and such sublessees' executive officers.
Landlord will not impose a charge for preparing and installing Tenant's initial
listings on the lobby directories.

                9. Limitation Regarding Services. Landlord reserves the right,
without any liability to Tenant and without being in breach of any covenant of
this Lease, to interrupt or suspend service of any of the heating, ventilating,
air-conditioning, electric, sanitary, elevator or other Building systems serving
the Premises, or the rendering of any of the other services required of Landlord
under this Lease, whenever and for so long as may be necessary by reason of
accidents, emergencies, strikes or the making of repairs or changes which
Landlord is required by this Lease, by law, or in good faith deems advisable to
make or by reason of difficulty in securing proper supplies of fuel, steam,
water, electricity, labor or supplies, or by reason of any cause beyond
Landlord's reasonable control, including, without limitation, mechanical failure
and governmental restrictions on the use of materials or the use of any of the
Building's systems. In each instance however, Landlord shall exercise reasonable
diligence to eliminate the cause of the interruption and to effect restoration
of service. Tenant shall not be entitled to any diminution or abatement of rent
or other compensation, and this Lease and all of the obligations of Tenant
hereunder shall not be affected or reduced nor shall Landlord be liable to
Tenant in any way, by reason of the interruption, stoppage or suspension of any
of the Building's systems or services arising out of any of the causes set forth
in this Section. Notwithstanding the foregoing, if by virtue of any of the above
circumstances, the Premises or a material portion thereof is rendered
untenantable for a period exceeding five (5) consecutive business days, then the
Minimum Rent and monthly payments on account of Tenant's Expense Share and
semi-annual or monthly (as the case may be) payments on account of Tenant's Tax
Share shall be abated, on a pro rata basis if less than the entire Premises is
so rendered untenantable, from the sixth Business Day of the untenantability
until the condition is remedied.

                10. Care of Premises. Tenant agrees that it shall comply with
the following requirements:

                                       28



                              10.1 Notice of Damage or Accident. Tenant shall
give Landlord prompt written notice of any accident in the Premises and of any
breakage, defect or failure in any of the systems or equipment serving the
Premises.

                              10.2 Access to Landlord. Tenant shall give
Landlord access to the Premises at all reasonable times, without charge or
diminution of Rent and upon twenty-four (24) hours prior notice (or such lesser
time period which the parties may agree upon) and accompanied by Tenant or
Tenant's representative (except that no prior notice or accompaniment shall be
required in an emergency), to enable Landlord:

                                  10.2.1 to examine the same and to take any and
all measures (including inspections, repairs, additions and alterations and
improvements to the Premises or the Property) as Landlord may reasonably deem
necessary or advisable for the preservation of the integrity, safety and good
order of the Property or any part thereof, or of Landlord's interests, or as may
be necessary or desirable in the operation or improvement of the Property or in
order to comply with laws, orders and requirements of governmental or other
authorities; and

                                  10.2.2 to show the Premises to prospective
mortgagees, assignees and purchasers and to others having a legitimate interest
therein (and to prospective tenants of the Premises as well during the one (1)
year period prior to expiration of the Term, if no renewal option has been
exercised by Tenant at the time).

                              10.3 Condition. Tenant at its sole cost and
expense shall maintain the Premises and all fixtures and appurtenances thereto
including, but not limited to, ceilings, partitions, doors, lighting fixtures,
switches, floor coverings, and tenant improvements in good order, condition and
repair during the Term of this Lease, except that the Landlord, at Landlord's
expense (unless caused by the fault or negligence of Tenant, its contractors,
agents or employees, in which event at Tenant's expense) shall keep in repair
those items specified in Section 8.5 hereof. All repairs, replacements and
alterations made by Tenant shall be at least sufficient to maintain the Premises
in as good condition and repair as was the Premises at the beginning of the
Term, reasonable wear and tear, damage by fire or other casualty and repairs
which are Landlord's obligation expected. Tenant shall not overload the Premises
or any of its systems, or damage or deface the Premises nor commit any waste
thereon. In addition, Tenant shall also at all times (subject to Section 8.4
hereof) remove all dirt, rubbish, waste, and refuse from the Premises.

                              10.4 Surrender. Upon the termination of this Lease
for any cause whatsoever, Tenant shall remove Tenant's goods and effects and
those of any other person claiming under Tenant, and quit and deliver up the
Premises to Landlord peaceably and quietly in as good order and condition as at
the inception of the Term of this Lease (or in such condition as the same
hereafter may be improved by Landlord or Tenant), reasonable wear and tear,
damage by fire or other casualty and repairs which are Landlord's obligation

                                       29



excepted. Goods and effects not removed by Tenant at the termination of this
Lease shall be considered abandoned and Landlord may, upon five (5) days notice
to Tenant, dispose of and/or store the same as it deems expedient, the
reasonable cost thereof to be charged to Tenant and payable upon demand. This
Subsection 10.4 shall survive termination of this Lease.

                              10.5 Rules and Regulations. Tenant shall observe
the rules and regulations attached hereto as "Exhibit C" and all additions
thereto and modifications thereof as may be promulgated by Landlord from time to
time by written notice to Tenant and which, in Landlord's reasonable judgment,
are desirable for the general safety, comfort and convenience of occupants and
tenants of the Building. All rules and regulations shall be deemed a part of
this Lease, as conditions, with the same effect as though written herein, and
Tenant covenants that they shall be faithfully observed by Tenant, Tenant's
employees, and all those visiting the Premises or claiming under Tenant.
Landlord shall not be responsible for the failure of any other tenant or
occupant of the Building to observe any of said rules and regulations. Landlord
agrees to enforce such rules and regulations uniformly against all office
tenants of the Building (it being agreed that the Pyramid Club, although a
tenant within the Office Space, will not necessarily be subject to all rules and
regulations applicable to office tenants by virtue of the fact that a private
dining club is operated within its premises).

                              10.6 Compliance with Law. Tenant agrees at all
times to comply promptly and fully at Tenant's sole cost and expense with all
applicable laws, ordinances, regulations and other requirements whatsoever,
including without limitation environmental laws, of any and all Federal,
Commonwealth or local authorities or of the Board of Fire Underwriters or any
insurance organizations, associations or companies (collectively the "Laws"),
relating to Tenant's use and occupancy of the Premises; provided that Tenant
shall have no obligation hereunder with respect to any non-compliance not
attributable to Tenant's particular use of or operations within the Premises.
Landlord shall at its sole cost and expense (which shall be an Operating Expense
to the extent so provided under Section 6 above) comply or cause compliance with
any and all Laws which are not obligations of Tenant under this Section 10.6 and
which are pertinent to Tenant's use and occupancy of the Premises or its use of
the common facilities of the Building. Supplementing the foregoing, Tenant
agrees that it shall not knowingly do or commit, or suffer to be done or
committed anywhere in or on the Property, any act or thing contrary to any of
the Laws. Without limiting the foregoing, Tenant agrees that the Laws include
the federal Americans with Disabilities Act ("ADA") and that Tenant's
responsibilities hereunder include the duty to ensure that the Premises, and all
facilities and improvements therein, comply with the requirements of the ADA
and, if the Premises comprise any full floor of the Building, that all
facilities on such floor of the Building, whether or not technically within the
Premises (such as, but not limited to, restrooms and elevator lobbies) comply
with the ADA; provided that Landlord shall be responsible for causing those
restrooms contained in the Premises on the date of this Lease to comply with the
ADA so long as Tenant has not made any material modifications to the facilities
contained therein (in which event compliance with the ADA shall be Tenant's
responsibility and cost), and Landlord shall be responsible for assuring that


                                       30



the elevator call buttons in the elevator lobbies within the Premises comply
with the ADA, all of the foregoing being at Landlord's sole expense so long as
Tenant has not modified same (in which event compliance with the ADA shall be
Tenant's responsibility and cost). Each of Landlord and Tenant agrees to
indemnify the other and hold the other and the other's agents, officers,
constituent partners, directors and employees harmless of and from all costs and
expenses (including reasonable attorneys' fees) incurred by the other or any of
them as a consequence of any and all claims made against the other or any of
them resulting from or arising out of any failure by the indemnifying party to
perform the obligations contained in this Subsection 10.6.

                              10.7 Alterations; Additions

                                  10.7.1 For each and every alteration, addition
or improvement Tenant wishes to make following completion of the Tenant Work,
excepting alterations, additions or improvements costing less than Ten Thousand
Dollars ($10,000.00) to complete and not involving alteration or modification of
the Building exterior, structural elements or electrical, HVAC or other Building
utilities systems, Tenant shall first (i) submit to Landlord a detailed
description thereof, and (ii) obtain Landlord's written approval thereof.

                                  10.7.2 Provided that the proposed alteration,
addition or improvement does not in Landlord's judgment involve any material
modification to the Building's exterior or its structural, mechanical, HVAC,
electrical, or plumbing systems or components, such approval shall not be
unreasonably withheld or delayed, but may be conditioned upon compliance with
reasonable requirements of Landlord. If Landlord withholds its approval to any
proposed alteration, addition or improvement, Landlord will cooperate in good
faith in Tenant's attempt to develop an alternative proposal acceptable to
Landlord.

                                  10.7.3 Landlord may withhold its approval in
its absolute and sole discretion with respect to each such alteration, addition
or improvement which Landlord determines involves any material modification to
the Building's exterior or its structural, electrical, mechanical, HVAC or
plumbing systems or any components thereof.

                                  10.7.4 Tenant shall not permit any financing
statement or statements to be filed with respect to any of the Tenant Work or
any alterations, additions or improvements made by Tenant, except a financing
statement given to an affiliate of Tenant to secure a loan of funds utilized by
Tenant to complete the Tenant Work and Tenant's initial move into the Premises;
provided, however, that any such permitted financing statement shall be
delivered by Tenant pursuant to a security agreement approved in advance by
Landlord (which approval shall not be unreasonably withheld or delayed), which
security agreement shall provide, inter alia, (i) that such security agreement
and the security interest granted thereunder shall terminate absolutely upon any
termination of this Lease for any reason, (ii) that such security agreement may
not be assigned by the holder thereof, and (iii) that the holder of the security
interest granted thereunder shall not have the right at any time or for any
reason to enter or index a judgment against or to remove or dismantle any
fixtures attached to the Premises (other than Tenant's trade and business
fixtures and equipment) including in connection with any action brought to
enforce or perfect the security interest granted thereunder. All Tenant Work and
fixtures attached to the Premises (other than Tenant's trade and business
fixtures and equipment) shall be the property of Tenant during the Term (but
without the right to encumber or remove same except as expressly provided in
this Lease), and, unless Landlord gives Tenant notice to remove them at the time


                                       31



of installation, shall remain at the Premises at the expiration or sooner
termination of this Lease and thereupon automatically become the property of
Landlord without payment therefor or, at Landlord's option, after notice to
Tenant at the time of installation, any or all of the foregoing which may be
designated by Landlord in such removal notice shall be removed at the sole cost
of Tenant before such expiration or sooner termination and in such event, Tenant
shall repair all damage to the Premises caused by the installation or removal
thereof, and shall restore the Premises to its original improved condition
(ordinary wear and tear excepted), on or before the expiration or termination of
this Lease. Should Tenant fail to remove the same or restore the Premises,
Landlord may cause same to be removed and/or the Premises to be restored at
Tenant's expense, and Tenant hereby agrees to pay Landlord the actual cost of
such removal and/or restoration, together with any and all damages which
Landlord may suffer and sustain by reason of the failure of Tenant to remove the
same and/or restore the Premises as herein provided.

                                  10.7.5 All such alterations, additions or
improvements shall be performed at Tenant's cost (including, without limitation,
the costs of permits therefor) and shall be performed by or for Tenant in
accordance with the following requirements:


                                      (a) If deemed necessary by Landlord in
Landlord's reasonable discretion, prior to commencing any such work, Tenant
shall obtain Landlord's written approval of Tenant's reasonably detailed plans
and specifications respecting the work. Landlord shall provide Tenant with its
written approval or disapproval of Tenant's plans and specifications, together
with any requested modifications in the event of disapproval, within seven (7)
days following receipt of Tenant's written request for approval specifically
referencing such seven (7) day response requirement; provided however, that
notwithstanding the foregoing, such seven (7) day response requirement shall not
be applicable to Tenant's plans and specifications respecting any work involving
modification of the exterior of the Building, any structural elements of the
Building, or any mechanical, HVAC, electrical or plumbing systems or components
serving the Building generally (as opposed to those portions thereof located
exclusively within the Premises), with respect to which Landlord agrees to
respond within a reasonable period of time.

                                      (b) The work shall be performed at
Tenant's expense by responsible contractors and subcontractors approved in
advance by Landlord, who shall not in Landlord's sole opinion, and who in fact
do not, prejudice Landlord's relationship with Landlord's contractors or
subcontractors or the relationship between such contractors and their
subcontractors or employees, or disturb harmonious labor relations. Tenant's
contractors and subcontractors shall comply with all insurance requirements and

                                       32



undertakings set forth in Exhibit "E" attached hereto, as the same may be
changed or waived by written notice from Landlord to Tenant from time to time
during the Term.

                                      (c) Such contractors or Tenant shall,
prior to the commencement of the contractors' work and not later than ten (10)
days after the execution of the contractors' respective contracts, file waivers
of mechanic's liens in the appropriate public office, which waivers shall be
effective to preclude the filing of any mechanic's liens on account of the work
to be performed by any of Tenant's contractors, subcontractors or materialmen. A
copy of all such waivers shall be delivered to Landlord by Tenant prior to the
commencement of any such work.

                                      (d) No such work shall be performed in
such manner or at such times as to interfere with any work being done by any of
Landlord's contractors or subcontractors in the Premises or in or about the
Property generally. Tenant's contractors and subcontractors shall be subject to
the reasonable decisions of Agent as to such matters and as to avoidance of
interference with other tenants of the Building or the work of other tenants'
contractors and subcontractors, but Agent, by virtue of such decisions, or shall
not be responsible for any aspect of the work performed by Tenant's contractors
or subcontractors.

                                      (e) Except as otherwise set forth in this
Section 10.7, all such work shall be subject to the requirements and provisions
of Sections 10.5 and 25 of this Lease.

                                      (f) Tenant and its contractors and
subcontractors shall be solely responsible for the transportation, safekeeping
and storage of materials and equipment used in the performance of their work,
for the removal of waste and debris resulting from the work, and for any damage
caused by them to the Building or to any installations or work performed by
Landlord's or any other tenant's contractors and subcontractors.

                                  10.7.6 Tenant shall not place, or cause or
allow to be placed, any sign, advertising matter, lettering, stand, booth,
showcase or other article or matter outside of the Premises without the prior
written consent of Landlord which may be withheld in its sole discretion.

                11. Negative Covenants of Tenant

                                  11.1 System Changes. Supplementing the
provisions of Sections 7 and 10.7.2 above, Tenant shall not install any
equipment of any kind or nature whatsoever which would or could, in Landlord's
judgment, necessitate any material change, replacement or addition to (or which
might cause damage to) the plumbing, heating, air-conditioning or electrical
systems serving the Premises or any other portion of the Building without the
prior written consent of Landlord. In the event such consent is granted, all
costs in connection with such changes, replacements or additions shall be paid

                                       33




for by Tenant in advance. If Landlord withholds its approval to any proposed
equipment installation, Landlord will cooperate in good faith in Tenant's
attempt to develop an alternative proposal acceptable to Landlord.

                              11.2 Sales. Without the prior written consent of
Landlord, Tenant shall not exhibit, sell or offer for sale (or permit the
exhibition, sale or offering for sale) in the Premises, or at the Property, any
tangible article or thing. The parties intend the foregoing prohibition to apply
solely to sales activities on the order of those carried on at retail
establishments, which would generate a steady flow of persons entering into or
leaving the premises, and do not intend such prohibition to extend to such
activities as the offering for sale in the Premises of investment contracts,
insurance or securities to clients of Tenant.

                              11.3 Prohibited Uses. Tenant will not make or
permit to be made any use of the Premises or any part thereof which would
violate any of the covenants, agreements, terms, provisions and conditions of
this Lease or which directly or indirectly is forbidden by public law, ordinance
or governmental regulation or which may be dangerous to life, limb or property
or which may invalidate or increase the premium cost of any policy of insurance
carried on the Property or covering its operation or which will suffer or permit
the Premises or any part thereof to be used in any manner or which would permit
anything to be brought into or kept therein which, in the reasonable judgment of
Landlord, would in any way impair or tend to impair the character, reputation or
appearance of the Building as a high quality office building or which would
impair or interfere with or tend to impair or interfere with any of the services
performed by Landlord for the Building or which could threaten the safety of the
Building or any of its occupants.

                              11.4 Signs. Tenant shall not display, inscribe,
print, paint, maintain or affix on any place in or about the Premises or the
Property any sign, notice, legend, direction, figure or advertisement, except on
the doors of the Premises and on the directory board of the Building and then
only such name(s) and matter, and in such color, size, style, place and
materials, as shall first have been approved in writing by Landlord, which
approval shall not be unreasonably withheld or delayed but may be conditioned
upon Tenant utilizing Landlord's Building standard signage on the exterior doors
of the Premises in any portion of the Premises occupying less than a full floor
of the Building. Notwithstanding the foregoing, on any full floor of the
Building comprising a portion of the Premises, Tenant or PMA Reinsurance
Corporation (if a subtenant) may prominently display identification signage in
the elevator lobbies of that floor. The listing by Landlord of any name other
than that of Tenant, whether on the doors of the Premises, on the directory
board of the Building or otherwise, shall not operate to vest any right or
interest in this Lease or in the Premises or be deemed to be the written consent
of Landlord mentioned in Section 12 hereof, it being expressly understood that
any such listing is a privilege extended by Landlord and revocable at will by
written notice to Tenant.

                              11.5 Advertising. Without Landlord's prior written
consent in each instance, which consent shall not be unreasonably withheld or

                                       34




delayed in the case of item (1) following but may be withheld Landlord's sole
discretion as to either item (2) or item (3) following, Tenant shall not: (1)
advertise the business, profession or activities of Tenant conducted at the
Premises in any manner which violates the letter or spirit of any code of ethics
adopted by any recognized association or organization pertaining to such
business, profession or activities; or (2) use the name of the Building for any
purpose other than that of the business address of Tenant; or (3) use any
picture or likeness of the Building in any circulars, notices, advertisements or
correspondence.

                              11.6 Locks. Locks or similar devices may only be
attached to or removed from any door or window in the Premises with Landlord's
prior written consent, which consent shall not be unreasonably withheld or
delayed but may be conditioned upon Landlord's receipt of a copy of the key,
combination or other means of unlocking same, and in compliance with the terms
of Section 21.4 below.

                              11.7 Compatible Labor. Tenant shall not contract
for any work or service which might involve the employment of labor incompatible
with the employees of the Building or with employees of contractors doing work
or performing services by or on behalf of the Landlord, or which would otherwise
disturb harmonious labor relations at the Building.


                              11.8 Hazardous Substances

                                  11.8.1 Tenant Warranty. Tenant represents,
warrants and covenants that (1) the Premises will not be used for any dangerous,
noxious or offensive trade or business and that it will not cause or maintain a
nuisance there, (2) it will not bring, generate, treat, store or dispose of
Hazardous Substances (as hereinafter defined) at the Premises, (3) it shall at
all times comply with all applicable Environmental Laws (as hereinafter defined)
and shall cause the Premises to comply, and (4) Tenant will keep the Premises
free of any lien imposed pursuant to any Environmental Laws and not the result
of any acts or omissions of Landlord or any other tenant or occupant of the
Property. "Premises" for purposes of this Section shall include the Building and
the Property including parking areas. Notwithstanding the foregoing, Landlord
acknowledges that Tenant will, from time to time, keep upon the Premises certain
products and materials used in the normal conduct of Tenant's business therein
which would technically constitute a violation of the terms of this subsection,
and Landlord agrees that, with regard to such products and materials Tenant
shall not be in violation hereof so long as such products and materials are (a)
used at all times for the purpose for which and in the manner in which they are
intended to be used by their respective manufacturers, (b) not kept upon the
Premises in any greater quantities than necessary for the normal conduct of
Tenant's business and (c) used and disposed of by Tenant and Tenant's employees,
contractors and agents in a lawful manner evidencing reasonable care under the
circumstances, given the toxicity thereof.

                                  11.8.2 Reporting Requirements. Tenant warrants
that it will promptly deliver to the Landlord, (i) copies of any documents
received from the United States Environmental Protection Agency and/or any

                                       35



state, county or municipal environmental or health agency concerning the
Tenant's operations upon the Premises, (ii) copies of any documents submitted by
the Tenant to the United States Environmental Protection Agency and/or any
state, county or municipal environmental or health agency concerning its
operations on the Premises, including but not limited to copies of permits,
licenses, annual filings and registration forms, and (iii) after the occurrence
of an Environmental Default (as hereinafter defined) and upon the request of
Landlord, Tenant shall provide Landlord with evidence of compliance with
applicable Environmental Laws.

                                  11.8.3 Termination, Cancellation, Surrender.
At the expiration or earlier termination of this Lease, Tenant shall surrender
the Premises to Landlord free of any and all Hazardous Substances and in
compliance with all applicable Environmental Laws.

                                  11.8.4 Environmental Defaults. In the event of
(1) a violation of an applicable Environmental Law, (2) a release, spill or
discharge of a Hazardous Substance on or from the Premises, or (3) the discovery
of an environmental condition requiring response which violation, release, or
condition is attributable to the acts or omissions of Tenant, its agents,
employees, representatives, invitees, licensees, subtenants, customers, or
contractors, (together "Environmental Defaults"), Landlord shall have the right,
but not the obligation, to enter the Premises upon twenty-four (24) hours prior
notice (except in an emergency), to supervise and approve any actions taken by
Tenant to address the violation, release, or environmental condition, or if the
Landlord deems it necessary, then Landlord may perform, at Tenant's expense, any
lawful actions reasonably necessary to address the violation, release, or
environmental condition.

                                  11.8.5 Mutual Indemnification

                                      11.8.5.1 Tenant shall indemnify, defend
(with counsel approved by Landlord, which approval shall not be unreasonably
withheld or delayed) and hold Landlord and Landlord's affiliates, shareholders,
directors, constituent partners, officers, employees and agents harmless from
and against any and all claims, judgments, damages (including consequential
damages), penalties, fines, liabilities, losses, suits, administrative
proceedings, costs and expenses of any kind or nature, known or unknown,
contingent or otherwise, which are caused by or arise out of one or more
Environmental Defaults caused by the acts or omissions of Tenant, its agents,
employees, representatives, invitees, licensees, subtenants, customers or
contractors during or after the Term of this Lease (including, but not limited
to, reasonable attorneys', consultant, laboratory and expert fees and including
without limitation, diminution in the value of the Building or Property, damages
for the loss or restriction on use of rentable space or of any amenity of the
Building or Property and damages arising from any adverse impact on marketing of
space in the Building).

                                      36




                                      11.8.5.2 Landlord shall indemnify, defend
(with counsel approved by Tenant, which approval shall not be unreasonably
withheld or delayed) and hold Tenant and Tenant's affiliates, shareholders,
directors, officers, employees and agents harmless from and against any and all
claims, judgments, damages (excluding consequential damages), penalties, fines,
liabilities, losses, suits, administrative proceedings, costs and expenses of
any kind or nature, known or unknown, contingent or otherwise which are caused
by or arise out of any breach by Landlord of its warranty contained in Section
11.8.7 below during the Term of this Lease (including, but not limited to,
reasonable attorneys', consultants', laboratory and expert fees). Landlord's
indemnification obligation contained in this Section 11.8.5.2 shall be expressly
limited by the terms of Section 29.3 below.

                                  11.8.6 Definitions

                                      (a) "Hazardous Substances" means, (i)
asbestos and any asbestos containing material and any substance that is then
defined or listed in, or otherwise classified pursuant to, any Environmental
Laws or any applicable laws or regulations as a "hazardous substance",
"Hazardous Material", "hazardous waste," "infectious waste", "toxic substance",
"toxic pollutant" or any other formulation intended to define, list, or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity, or
Toxicity Characteristic Leaching Procedure (TCLP) toxicity, (ii) any petroleum
and drilling fluids, produced waters, and other wastes associated with the
exploration, development or production of crude oil, natural gas, or geothermal
resources and (iii) petroleum products, polychlorinated biphenyls, urea
formaldehyde, radon gas, radioactive material (including any source, special
nuclear, or by-product material), and medical waste.

                                      (b) "Environmental Laws" collectively
means and includes all present and future laws and any amendments thereto
(whether common law, statute, rule, order, regulation or otherwise), permits,
and other requirements or guidelines of governmental authorities applicable to
the Premises and relating to the environment and environmental conditions or to
any Hazardous Substance (including, without limitation, CERCLA, 42 U.S.C {9601,
et seq, the Resource Conservation and Recovery Act of 1976, 42 U.S.C {6901, et
seq, the Hazardous Materials Transportation Act, 49 U.S.C. {1801, et seq, the
Federal Water Pollution Control Act, 33 U.S.C. {1251, et seq, the Clean Air Act,
33 U.S.C. {7401, et seq, the Clean Air Act, 42 U.S.C. {741, et seq, the Toxic
Substances Control Act, 15 U.S.C. {2601-2629, the Safe Drinking Water Act, 42
U.S.C. {300f-300j, the Emergency Planning and Community Right-to-Know Act, 42
U.S.C. {1101, et seq, and any so-called "Super Fund" or "Super Lien" law, any
law requiring the filing of reports and notices relating to hazardous
substances, environmental laws administered by the Environmental Protection
Agency, and any similar state and local laws and regulations, all amendments
thereto and all regulations, orders, decisions, and decrees now or hereafter
promulgated thereunder concerning the environment, industrial hygiene or public
health or safety).

                                       37



                                  11.8.7 Landlord's Warranty. Landlord
represents and warrants to Tenant that, to the best of Landlord's knowledge, in
the construction of the Building no Hazardous Substances were incorporated in
the Building in violation of any applicable Environmental Laws. Landlord further
represents and warrants to Tenant that during the Term Landlord will not bring,
generate, treat, store or dispose of Hazardous Substances at the Property and
shall at all times comply with all applicable Environmental Laws.
Notwithstanding the foregoing, Tenant acknowledges that Landlord will, from time
to time, keep upon the Property certain products and materials used in the
normal operation of the Property which would technically constitute a violation
of the foregoing representation and warranty, and Tenant agrees that, with
regard to such products and materials, Landlord shall not be deemed to have
breached the foregoing representation and warranty so long as such products and
materials are (a) used at all times for the purpose for which and in the manner
in which they are intended to be used by their respective manufacturers, (b) not
kept upon the Premises in any greater quantities than necessary for the normal
operation of the Property and (c) used and disposed of by Landlord and
Landlord's employees, contractors and agents in a lawful manner evidencing
reasonable care under the circumstances.

                              11.9 Floor Load. Tenant shall not place or permit
to be placed upon any floor of the Premises any item of any nature the weight of
which shall exceed such floor's rated floor load limit of seventy (70) pounds
per square foot live load (including partitions) unless additional floor loads
are approved in writing by Landlord in advance. In the event Landlord
disapproves an additional floor load requested by Tenant, Landlord will
cooperate in good faith with Tenant in Tenant's efforts to find a satisfactory
alternative to such floor load.

                12. Subletting and Assigning

                              12.1 General Restriction

                                  12.1.1 As a material condition to this Lease,
Tenant covenants that it shall deliver to Landlord within three (3) Business
Days following Tenant's execution of this Lease a sublease of the entire
Premises to PMA Reinsurance Corporation (the "Subtenant") in the form attached
to this Lease as Exhibit "O" and made a part hereof (the "Sublease"), duly
executed by both Tenant and Subtenant. Simultaneously with the execution of this
Lease, Landlord, Tenant and Subtenant shall duly execute and deliver to one
another a Sublease Consent, Subordination, Nondisturbance and Attornment
Agreement in the form attached hereto as Exhibit "P" (the "Consent Agreement"),
evidencing Landlord's consent to the Sublease. Failure of Tenant to timely
sublease the Premises to Subtenant and deliver a fully executed original copy of
the Sublease to Landlord as herein provided shall entitle Landlord to terminate
this Lease upon written notice to Tenant (notwithstanding anything to the
contrary contained in Section 17 below), it being agreed that execution and
delivery of the Sublease as aforesaid is a material inducement to Landlord to
enter into this Lease. Other than the Sublease to Subtenant, Tenant may not
assign this Lease or sublet or all or any portion or portions of the Premises
without first obtaining Landlord's prior written consent thereto, which consent
may be withheld in Landlord's sole discretion. The Sublease shall at all times
provide that (a) Subtenant shall not assign the Sublease without first obtaining
Landlord's prior written consent thereto, which consent may be withheld in
Landlord's sole discretion, and (b) Subtenant shall not further sublet all or
any portion or portions of the Premises (such further subletting by Subtenant
being herein referred to as a "sublease") without first obtaining Landlord's
prior written consent thereto, which consent shall not be unreasonably withheld


                                      38



or delayed. Any consent by Landlord to an assignment or sublease, if given, will
not release Tenant from its obligations hereunder and will not be deemed a
consent to any further subletting or assignment. Neither Tenant nor Subtenant
shall convey, pledge, mortgage, encumber or otherwise transfer other than by
permitted sublease or assignment (collectively "Pledge") (whether voluntarily or
otherwise) this Lease, the Sublease or any interest in or under either of them.
For purposes of this Section, an assignment shall include any direct or indirect
transfer of fifty percent (50%) or more of the stock of a corporate tenant, or
fifty percent (50%) or more of the equitable or other interests of a
partnership, individual, or other non-corporate tenant. Any attempt by Tenant or
Subtenant to assign or Pledge this Lease or the Sublease or sublet the Premises
in contravention of the terms of this Lease shall constitute an Event of Default
(as hereinafter defined) hereunder.


                                      12.1.1.1 It shall be reasonable for
Landlord to withhold its consent to a sublease proposed by Subtenant for any of
the following reasons:

                                      A. the business use of the Premises to be
made by the proposed sublessee:

                                          (a) would constitute a breach of any
of the terms or conditions of this Lease;

                                          (b) would constitute a breach by
Landlord of any lease restrictions binding on Landlord and any tenant in the
Building and such tenant does not consent to such proposed sublease;

                                          (c) is one of the following uses, as a
principal use: (i) employment agency; (ii) telephone answering service; (iii)
barber or beautician services; (iv) medical offices where patients are examined
or treated (other than a medical infirmary for use by employees); (v) school or
training center; (vi) governmental offices (other than solely as senior
management or executive level offices and necessary support staff); (vii)
commercial real estate brokerage services (unless part of a use, the dominant
character of which is financial services, investments and/or investment
banking); or (viii) distribution or sale of sexually explicit, lewd (in
Landlord's reasonable judgment) or illegal-drug-related materials or products;

                                      B. the proposed sublessee:

                                          (a) is insolvent or in bankruptcy;

                                       39



                                          (b) either refuses to present a
current financial statement to Landlord or presents a financial statement
indicating, in Landlord's reasonable judgment, that it is likely that it would
not be able to perform the economic obligations of its sublease or this Lease
required to be performed by it;

                                          (c) is an existing tenant in the
Building and would be vacating space then leased and occupied by such tenant
(whether or not at the end of the term of such tenant's lease) in the Building
to move into the portion or portions of the Premises to be occupied by such
tenant under the proposed sublease or assignment unless such existing tenant is
vacating its space in the Building at the end of the term of its lease and
Landlord is unable to allow such tenant to renew its lease and is unable to
offer such tenant a lease of other space within the Building; or

                                          (d) is (or its business is) subject to
compliance with additional requirements of the ADA (including related
regulations) beyond those requirements which are applicable to the Tenant,
unless the proposed assignee or sublessee shall (i) first deliver plans and
specifications for complying with such additional requirements and obtain
Landlord's consent thereto, and (ii) comply with all Landlord's conditions for
or contained in such consent, including without limitation, requirements for
security to assure the lien-free completion of such improvements at the sole
cost of such expense of such sublessee, or Subtenant; or

                                      C. the length of the term of any proposed
sublease extends beyond the end of the term of this Lease and beyond the end of
the renewal option terms contained in this Lease, if such renewal option terms
have been exercised by the Tenant.

                                  12.1.2 Notwithstanding the foregoing: (i) no
prior approval of the Landlord shall be required for the subletting by Subtenant
of all or a portion of the Premises to any corporation or other entity which is
a parent or wholly-owned subsidiary of, or under common majority control with,
Subtenant (a "Related Party"), except that no subletting to a Related Party
shall be made unless the Tenant shall have provided to the Landlord such
information as the Landlord shall reasonably require such as, but not limited
to, satisfactory evidence as to the relationship as parent, affiliate or
subsidiary of the proposed subtenant or assignee, and evidence as to its legal
existence and corporate (or other) authority to enter into the sublease or
assignment; and (ii) the foregoing prohibition shall not apply to any assignment
of the Sublease which would occur as a result of a merger, consolidation or
reorganization of the Subtenant's corporate structure, provided the Tenant shall
have first provided to the Landlord such information as the Landlord may
reasonably require relating to the merger, consolidation or reorganization, such
as, but not limited to, satisfactory evidence of the relationship as a result of
any merger, consolidation or reorganization of the proposed assignee, evidence
as to its legal existence and its corporate authority to enter into the
assignment, and further provided that Tenant provides to Landlord evidence
satisfying to Landlord in Landlord's reasonable discretion that Subtenant's net
worth will not be diminished thereby.

                                       40




                              12.2 Landlord's Costs; Forms. Tenant shall
reimburse Landlord for Landlord's reasonable expenses, including reasonable
attorneys' fees, in reviewing and approving (or disapproving) any documents
relating to any proposed Pledge, sublease or assignment other than Tenant's
initial sublease of the entire Premises to Subtenant. All forms of consents and
agreements relating to or effecting any sublease or assignment shall be supplied
or approved (as Landlord shall elect) by counsel to Landlord.

                              12.3 Rent Collection. If this Lease is assigned or
if the Premises or any part thereof is sublet or occupied by a person or entity
other than Tenant, Landlord may, after the occurrence of an Event of Default,
collect Rent from the assignee, subtenant or occupant and apply the net amount
collected to the Rent herein reserved, but no such assignment, subletting,
occupancy or collection shall be deemed a waiver of any of Tenant's covenants
contained in this Lease or the acceptance by Landlord of the assignee, subtenant
or occupant as Tenant, or a release of Tenant from further performance by Tenant
of the covenants of Tenant herein contained.

                              12.4 Sublet Notice. Notwithstanding anything
contained in this Lease to the contrary, if at any time during the Term of this
Lease Tenant or Subtenant desires to sublet or assign all or part of the
Premises, Tenant shall advise Landlord in writing (such notice being hereinafter
referred to as a "Sublet Notice") of the identity of the proposed assignee or
subtenant and its business and of the terms of the proposed subletting or
assignment and the area proposed to be sublet. Tenant shall also transmit
therewith the most recent financial statement or other evidence of financial
responsibility of such assignee or subtenant and a certification executed by
Tenant or Subtenant (whichever desires to effect such sublease or assignment)
stating whether or not any premium or other consideration is being paid for the
proposed sublease or assignment.

                              12.5 Receipt of Sublet Notice. Upon receipt of a
Sublet Notice Landlord shall have the right to: (1) approve or withhold approval
of the proposed sublease or assignment in its reasonable discretion; or (2)
sublet from Tenant or Subtenant such space (hereinafter referred to as the
"Sublet Space") as Tenant or Subtenant proposed to lease to the proposed
subtenant; or (3) terminate this Lease if the Sublet Notice contains a proposal
to assign all of Tenant's rights under this Lease, to assign all of Subtenant's
rights under the Sublease, or to sublease the entire Premises for the remainder
of the Term.

                              12.6 Option to Approve or Reject Sublease. The
option to approve or reject any proposed sublease or assignment or to terminate
this Lease, as specified in Section 12.5 above shall be exercisable by Landlord
sending Tenant a written notice specifying the exercise of any such right within
nine (9) Business Days after receipt of a Sublet Notice from Tenant.

                                  12.6.1 If Landlord exercises its option to
sublease the Sublet Space, the term of the subletting from Tenant to Landlord
for the Sublet Space shall be the term set forth in the Sublet Notice and

                                       41



Landlord shall pay the same Minimum Rent and Additional Rent as Tenant is
required to pay to Landlord under this Lease for the same space and shall be
upon such other terms and conditions as are contained in this Lease to the
extent applicable. If the Sublet Space does not constitute the entire Premises,
the Minimum Rent for the Sublet Space and sublessee's share of Operating
Expenses and Real Estate Taxes under the sublease shall equal the product
derived by multiplying the Minimum Rent and Tenant's Expense Share and Tenant's
Tax Share by the fraction, the numerator of which is the the Rentable Area of
the Sublet Space and the denominator of which is the Rentable Area of the
Premises. Landlord and Tenant or Subtenant (as the case may be) shall enter into
a sublease of the Sublet Space on such terms.

                                  12.6.2 If the Sublet Space does not constitute
the entire Premises and Landlord exercises its option to terminate this Lease
with respect to the Sublet Space pursuant to Section 12.5(3) above, then as to
that portion of the Premises which is not part of the Sublet Space, this Lease
shall remain in full force and effect except that the Minimum Rent, Tenant's Tax
Share and Tenant's Expense Share shall be reduced by the amount each bears to
the fraction, the numerator of which shall be the Rentable Area of the Sublet
Space and the denominator of which shall be the Rentable Area of the Premises.

                                  12.6.3 If Landlord elects to terminate this
Lease pursuant to Section 12.5(3), this Lease shall terminate on a date set
forth in Landlord's notice to Tenant described above in this Section 12.6,
provided such date shall not be less than thirty (30) days after the date
Landlord delivers such notice to Tenant.

                                  12.6.4 If Landlord withholds approval to the
proposed subletting or assignment, this Lease (and the Sublease) shall remain in
full force and effect.

                                  12.6.5 In the event Landlord does not exercise
any of its rights specified in Section 12.5 within the time period specified in
this Section 12.6, Landlord shall be deemed to have withheld approval of the
sublease or assignment. Upon Landlord's failure to exercise any of its rights in
writing, Tenant may again request Landlord's approval which approval shall be
deemed given unless Landlord responds to the contrary within five (5) days of
Tenant's second request.

                              12.7 Premium for Sublease

                                  12.7.1 As a condition to Landlord's consent to
any proposed assignment or sublease under this Section 12 (other than the
Sublease but including any further sublease by Subtenant to any third party),
Tenant shall pay to Landlord the amount of any Profit received by Tenant or
Subtenant in connection with the proposed assignment or sublease. For purposes
hereof the term "Profit" shall mean the amount by which the Premium (as defined
in Section 12.7.3 below) payable to Tenant or Subtenant by any third party
(other than an affiliate of Subtenant which does not itself further sublease the
Premises to an entity unaffiliated with Subtenant) in connection with the
proposed assignment or sublease exceeds the sum of (a) the Rent due under this
Lease plus (b) Tenant's Expenses (as defined in Section 12.7.2 below). Tenant's
Expenses shall be deemed amortized on a straight line basis over the remainder
of the Term of this Lease or the term of the assignment or sublease, if shorter,

                                       42



commencing on the effective date of the assignment or sublease, for purposes of
this Section. Commencing with the first month in which Tenant receives a payment
from any third party on account of the assignment or sublease, and each month
thereafter during the term of such assignment or sublease, Tenant shall pay to
Landlord on or before the first day of the next following calendar month, in
arrears and as Additional Rent, the amount of Profit received by Tenant in such
calendar month, computed as follows: Tenant shall pay the amount of any Premium
received by Tenant or Subtenant in the month in question, reduced by the sum of
(i) the Rent due under this Lease for such month (pro rated based upon the
Rentable Area covered by the assignment or sublease if the assignment or
sublease relates to less than the entire Premises) plus (ii) the amortized
portion of Tenant's Expenses attributable to such month.

                                  12.7.2 For purposes of this Lease, the term
"Tenant's Expenses" shall mean the aggregate of the following costs and expenses
paid by Tenant or Subtenant on account of the assignment or sublease: reasonable
advertising costs, reasonable brokerage commissions, allowances or free rent
provided to an assignee or subtenant, Tenant's or Subtenant's reasonable legal
fees incurred in negotiating the assignment or sublease and the reasonable cost
of any construction required to permit the operation of any Sublet Space as a
premises separate from the balance of the Premises.

                                  12.7.3 For purposes of this Lease, the term
"Premium" shall mean any cash or other consideration which any third party
agrees to pay to Tenant or Subtenant on account of an assignment or sublease,
whether in the form of all Rent payable under this Lease or under the Sublease
(as the case may be), an increased monthly or annual rental, a lump sum payment,
or otherwise. If Tenant or Subtenant enters into a separate agreement for the
lease of personal property, at reasonable rates, to any sublessee, such
reasonable rates shall not be included in determining the Premium.

                              12.8 Liability of Assignee. Each assignee of this
Lease shall assume and be deemed to have assumed this Lease and shall be and
remain liable jointly and severally with Tenant for all payments and for the due
performance of all terms, covenants, conditions and provisions herein contained
on Tenant's part to be observed and performed. No assignment shall be binding
upon Landlord unless the assignee shall deliver to Landlord an instrument in
form reasonably satisfactory to Landlord containing a covenant of assumption by
the assignee. The failure or refusal of assignee to execute the same shall not
release an assignee from its liability as set forth herein.

                              12.9 Rental Basis. All the foregoing
notwithstanding, neither Tenant nor Subtenant shall enter into any lease,
sublease, license, concession or other agreement for the use, occupancy or
utilization of the Premises or any portion thereof which provides for a rental
or other payment for such use, occupancy or utilization based in whole or in
part on the income or profits derived by any person from the property leased,


                                       43



used, occupied or utilized (other than an amount based on a fixed percentage or
percentages of receipts or sales). Any such purported lease, sublease, license,
concession or other agreement shall be absolutely void and ineffective as a
conveyance of any right or interest in the possession, use or occupancy of any
part of the Premises.

                              12.10 Future Compliance. Any consent by Landlord
hereunder shall not constitute a waiver of strict future compliance by Tenant or
Subtenant of the provisions of this Section 12 or a release of Tenant from the
full performance by Tenant of any of the terms, covenants, provisions, or
conditions in this Lease contained.

                13. Fire or Other Casualty

                              13.1 Repair Obligations. In the event of damage to
the Premises by fire or other casualty Landlord shall at its expense cause the
damage to the Premises, exclusive of the Tenant Work and other improvements made
by or for Tenant or any prior tenant, to be repaired to a condition as nearly as
practicable to that required by the Base Building Plans, with reasonable
promptness and due diligence. Landlord shall not, however, be obligated to
restore or rebuild the Premises to a condition in excess of that required by the
Base Building Plans, nor in any event to repair, restore or rebuild any of
Tenant's property, the Tenant Work, or any other alterations or additions made
by or for Tenant or any prior tenant. In no event shall Landlord be obligated to
repair, restore, or replace any furniture, furnishings or equipment. Tenant
shall p thereafter, at its own cost and with reasonable promptness and due
diligence, repair and restore the Tenant Work and any other improvements to the
Premises made by or for Tenant or any prior tenant at least to the extent of the
value and as nearly as possible to the character of the property involved as it
was immediately before the loss.

                              13.2 Abatement of Rent. To the extent the Premises
are rendered untenantable by a casualty not caused by the gross negligence or
willful misconduct of Tenant, the Minimum Rent and Additional Rent shall
proportionately abate from the date of the casualty until the first to occur of
(a) one hundred and five (105) days after Landlord has tendered to Tenant the
damaged portion of the Premises, restored by Landlord to the extent required
hereunder, or (b) Tenant's resumed occupancy thereof for the purposes of
conducting its business therein. Landlord shall endeavor to provide Tenant with
thirty (30) days notice of its intent to tender to Tenant the restored Premises.

                              13.3 Landlord's Termination Right. In the event
the damage shall involve the Building generally and shall be so extensive that
Landlord shall decide not to repair or rebuild the Building, or if available
insurance proceeds for the Building are insufficient to repair or rebuild the
damage, or if any mortgagee shall not permit the application of adequate
insurance proceeds for repair or restoration, or if the casualty to the Building
shall not be of a type insured against under all-risk fire and extended coverage
insurance, this Lease shall, at the option of Landlord, exercisable by written
notice to Tenant given within


                                       44



one hundred eighty (180) days after the date of the casualty, be terminated as
of a date specified in such notice (which shall not be more than sixty (60) days
thereafter) and the Minimum Rent and Additional Rent (taking into account any
abatement as aforesaid) shall be adjusted proportionately as of the date of the
termination and Tenant shall thereupon promptly vacate the Premises. Landlord
agrees that it shall not exercise its rights to terminate the Lease enumerated
within this Section 13.3, unless it also exercises its rights to terminate the
leases of all other Office Space tenants.

                              13.4 Tenant's Termination Rights

                                  13.4.1 If fire or other casualty not caused by
the gross negligence or willful misconduct of Tenant damages the Premises
rendering more than fifty percent (50%) of the Premises untenantable, or causes
damage to the Building which precludes access to the Premises from the Building
lobby, and the completion of the repairs to the Premises or the repairs
necessary to restore access thereto which Landlord is required to perform
hereunder will require a period of in excess of two hundred forty (240) days
days following the commencement of construction (as reasonably estimated by
Landlord or its experts, of which Tenant shall receive notice within one hundred
eighty (180) days after the date of the casualty), then Tenant may terminate
this Lease by written notice given to Landlord within thirty (30) days after
Landlord's notice to Tenant thereof (such termination to occur as of a date
specified in such notice which shall not be more than sixty (60) days
thereafter), and Minimum Rent and Additional Rent (taking into account any
abatement as aforesaid) shall be adjusted proportionately from the date of the
termination.

                                  13.4.2 Notwithstanding the foregoing, in the
event Landlord shall elect to repair or rebuild following a casualty not caused
by the gross negligence or wilful misconduct of Tenant, but the time to repair
or rebuild as reasonably estimated by Landlord or its experts, as aforesaid, is
such that the repairs or rebuilding are expected to be completed during the last
Lease Year of the Term (as the Term may have been extended by Tenant's exercise
of any renewal option pursuant to Section 30 hereof prior to the casualty), then
Tenant may elect to terminate this Lease by written notice given to Landlord
within thirty (30) days after Landlord's notice to Tenant thereof (such
termination to occur as of a date specified in such notice which shall not be
more than sixty (60) days thereafter), and Minimum Rent and Additional Rent
(taking into account any abatement as aforesaid) shall be adjusted
proportionately as of the date of the termination.

                14. Release and Indemnity

                              14.1 Mutual Release

                                  14.1.1 Tenant agrees that Landlord, Agent and
their respective agents, employees, officers, directors, shareholders and
constituent partners shall not be liable to Tenant and Tenant hereby releases
said parties from any liability, for any personal injury, loss of income or


                                       45



damage to or loss of persons or property, or loss of use of any property, in or
about the Premises or Property from any cause whatsoever unless such damage,
loss or injury results from the negligence or willful misconduct of Landlord,
its officers, employees, contractors or agents. Landlord, Agent and their
respective agents, employees, officers, directors and partners shall not be
liable to Tenant for any such damage or loss, whether or not such damage or loss
so results from such negligence or willful misconduct, to the extent Tenant is
compensated therefor by Tenant's insurance. The release contained in this
Section 14.1 shall apply, by way of example and not limitation, to damage, loss
or injury resulting directly or indirectly from any existing or future
condition, matter or thing in the Premises, the Building or any part thereof, or
from equipment or appurtenances becoming out of repair, or from accident, or
from the flooding of basements or other subsurface areas or from refrigerators,
sprinkling devices, air-conditioning apparatus, water, snow, frost, steam,
excessive heat or cold, falling plaster, broken glass, sewage, gas, odors, or
noise, or the bursting or leaking of pipes or plumbing fixtures, and shall apply
equally whether any such damage, loss or injury results from the act or omission
of other tenants or occupants in the Building or any other persons, and whether
such damage be caused by or result from any thing or circumstance, whether of a
like or wholly different nature.

                                  14.1.2 Landlord agrees that Tenant and its
agents, employees, officers and shareholders shall not be liable to Landlord and
Landlord hereby releases said parties from any liability, for any personal
injury, loss of income or damage to or loss of persons or property or loss of
use of any property in or about the untenanted portions of the Property from any
cause whatsoever unless such damage, loss or injury results from the negligence
or willful misconduct of Tenant, its officers, employees, contractors or agents.
Tenant and its agents, employees, officers and directors shall not be liable to
Landlord for any such damage or loss, whether or not such damage or loss so
results from such negligence or willful misconduct, to the extent Landlord is
compensated therefor by Landlord's insurance.

                              14.2 Tenant's Indemnity. Tenant shall defend,
indemnify, save and hold harmless ("Indemnify") Landlord, Agent and their
respective agents, employees, officers, directors, shareholders, and constituent
partners from and against all liabilities, obligations, damages, penalties,
claims, causes of action, costs, charges and expenses, including reasonable
attorneys' fees, court costs, administrative costs, and costs of appeals which
may be imposed upon or incurred by or asserted against any of them by reason of
any of the following which shall occur during the Term of this Lease, or during
any period of time prior to the Lease Commencement Date when Tenant may have
been given access to or possession of all or any portion of the Premises:

                                  (1) any work or act done in, on or about the
Premises or the Building or any part thereof at the direction of or caused by
Tenant, its agents, contractors, subcontractors, servants, employees, licensees
or invitees, unless such work or act is done or performed by Landlord or its
agents, employees or contractors;

                                       46



                                  (2) any negligence or other wrongful act or
omission on the part of Tenant or any of its agents, contractors,
subcontractors, servants, employees, subtenants, licensees or invitees; and

                                  (3) any accident, injury or damage to any
persons or property occurring in, on or about the Premises or any part thereof,
unless caused by the negligence of Landlord, its employees, agents or
contractors

                                  The obligation of Tenant to Indemnify
contained in this Section 14.2 shall not be limited by any limitation on the
amount or type of damages, compensation or benefits payable by or for Tenant,
its agents or contractors under workers' or workman's compensation acts,
disability benefit acts or other employee benefits acts, or under any other
insurance coverage Tenant may obtain.

                              14.3 Landlord's Indemnity. Landlord shall defend,
indemnify, save and hold harmless ("Indemnify") Tenant and Tenant's employees,
officers, directors and shareholders from and against all liabilities,
obligations, damages, penalties, claims, causes of action, costs, charges and
expenses, including reasonable attorneys' fees, court costs, administrative
costs and costs of appeals which may be imposed upon or incurred by or asserted
against any of them by reason of any of the following which shall occur during
the Term of this Lease or during any period of time prior to the Lease
Commencement Date when Tenant may have been given access to or possession of all
or any portion of the Premises.

                                  (1) any work or act done in, on or about the
Premises or the Building or any part thereof at the direction of or caused by
Landlord or its agents, employees, unless such work or act is done or performed
by Tenant or its agents, employees or contractors; and

                                  (2) any negligence or any wrongful act or
omission on the part of Landlord or any of its agents, contractors,
subcontractors, servants, employees, subtenants, licensees or invitees; and

                                  (3) any accident, injury or damage to any
persons or property occurring in, on or about those areas of the Building and
Property intended for the common use of all tenants and their employees and
invitees, unless caused by the negligence of Tenant, its employees, agents or
contractors.

                                  The obligation of Landlord to Indemnify
contained in this Section 14.3 shall not be limited by any limitation on the
amount or type of damages, compensation or benefits payable by or for Landlord,
its agents or contractors under workers' or workman's compensation acts,
disability benefit acts or other employee benefits acts or under any other
insurance coverage Landlord may obtain, but shall be expressly limited by the
terms of Section 29.3, below.

                                       47




                15. Insurance

                              15.1 Insurance Coverage. Tenant, at its expense,
shall maintain during the Term commercial general liability insurance, primary
and/or excess combination, and property damage insurance under policies issued
by insurers having a combined single limit for any one (1) occurrence of not
less than Three Million Dollars ($3,000,000.00) for personal injury, bodily
injury, death, disease and damage or injury to or destruction of property
(including the loss of use thereof) occurring upon, in, or about the Premises
and for: products liability; liability relating to the sale or distribution of
food and/or alcoholic beverages in the Premises; punitive damages awarded by
virtue of the conduct of the Tenant (to the full extent insurable and reasonably
available); and contractual liability assumed under this Lease. To satisfy the
liability insurance requirements of this Section 15.1, the Tenant must obtain an
endorsement which applies the aggregate limits separately to the Premises (ISO
Endorsement CG-25-05-11-85, Amendment-Aggregate Limits of Insurance [Per
Location] or an equivalent endorsement satisfactory to Landlord). The
certificate of insurance evidencing such policy must evidence that the limits of
the Tenant's liability insurance required hereunder apply solely to the Premises
and not to other locations. Tenant shall also maintain such other insurance in
form and amount as Landlord may reasonably require, so long as such coverage is
also required of other Office Space tenants within the Building (other than the
Pyramid Club).

                              15.2 Improvements Coverage. Tenant agrees to carry
all risk property insurance on a repair and replacement basis and in form and
amount satisfactory to Landlord on all improvements to the Premise, including
all Tenant Work or other improvements then under construction (including without
limitation Builder's Risk coverage during construction of the Tenant Work or any
other permitted alterations). Tenant also agrees to carry such all risk
insurance in form and amount mutually satisfactory to Landlord and Tenant on
Tenant's fixtures, furnishings, wall coverings, carpeting, drapes, equipment and
all other items of personal property of tenant located on or within the
Premises. Tenant agrees that Landlord, any ground lessor and Landlord's secured
lenders with respect to the Property, shall be named as additional insureds
under all such policies.

                              15.3 Worker's Compensation and Employer's
Liability Insurance. Tenant shall carry worker's compensation insurance
containing statutory limits covering Tenant's employees and business operations
in the Premises, as well as employer's liability insurance providing coverage of
not less than five hundred thousand dollars ($500,000.00). Tenant shall submit
to Landlord evidence of such coverage satisfactory to Landlord.

                              15.4 Extra Expense Insurance. Tenant shall, during
the Term hereof, keep in full force and effect extra expense insurance providing
limits in an amount not less than two million dollars ($2,000,000.00).


                                       48




                              15.5 Form of Insurance. All insurance policies
obtained by Tenant pursuant to this Section 15 shall be issued by companies with
a rating of not less than "A-" and of not less than "Class VIII" in financial
size as rated in the most current available "Best's" Insurance Reports and which
are qualified to do business in the Commonwealth of Pennsylvania. Such policies
(exclusive of the worker's compensation policy) shall name Landlord and Agent as
additional insureds and Tenant shall furnish Landlord with a certificate (or
certificates) respecting such policies which specifies that Landlord shall
receive thirty (30) days prior written notice of any proposed cancellation,
non-renewal of or material change in any such policy. Originals, certified
policy copies or certificates, as Landlord shall elect, of all policies of
insurance obtained by Tenant shall be provided to Landlord.

                              15.6 Insurance Violations. Tenant will not do,
fail to do, suffer to be done, or keep or suffer to be kept anything in, upon or
about the Premises which will violate the provisions of Landlord's policies
insuring against loss or damage by fire or other hazards (including, but not
limited to, public liability) or which would adversely affect Landlord's fire or
liability insurance premium rating or which would increase premiums being paid
by Landlord for any such coverage, or which would prevent Landlord from
procuring such policies from companies acceptable to Landlord. If anything is
done, omitted to be done or suffered to be done by Tenant, or kept or suffered
to be kept in, upon or about the Premises which shall cause the premium rate of
fire or other insurance on the Premises or other property in the Building, with
companies acceptable to Landlord, to be increased beyond the established rate
fixed by the appropriate underwriters from time to time applicable to the
Premises for use for the purpose permitted under this Lease, Tenant shall pay
the amount of such increase. Tenant's payment of the amount of such increase
shall not preclude or limit Landlord's ability to exercise its remedies under
this Lease for a violation of Tenant's obligations set forth in the first
sentence of this Section 15.6.

                              15.7 "Claims Made" Policies. Tenant shall not
obtain any of the above insurance through policies written on a "claims made"
basis without Landlord's prior express written consent, which consent may be
conditioned upon any requirements which Landlord may impose. In all events,
should Landlord consent to such a policy, then the policy shall satisfy all of
the following requirements:

                                  (1) the policy retroactive date shall coincide
with or precede the Tenant's occupancy or use of any portion of the Property;
and

                                  (2) the Tenant shall maintain such policy for
at least three (3) years following the termination or expiration of this Lease
(whichever is later); and

                                  (3) if such insurance is terminated for any
reason, Tenant shall purchase an extended reporting provision of at least three
(3) years duration to report claims arising from this Lease or Tenant's
occupancy; and

                                       49



                                  (4) the policy shall allow for the report of
circumstances or incidents which might give rise to future claims.

                              15.8 Flammable and Hazardous Materials

                                  15.8.1 Neither Tenant nor Tenant's servants,
employees, contractors, agents, visitors, or licensees may use, bring or keep
upon the Premises, the Building, or the Property any highly flammable,
combustible, caustic, poisonous or explosive fluid, chemical or substance, or
any chemicals except reasonable quantities of such as are components of
commercial products not regulated by law in their use or disposal and are
normally used by occupants of office buildings for ordinary cleaning and office
related activities.

                                  15.8.2 Landlord shall utilize flammable,
explosive or caustic materials upon the Property only in such quantities and in
such manner as Landlord reasonably deems necessary for the ordinary and normal
maintenance, repair and operation of the Property and its systems.

                              15.9 Landlord Purchase. At Landlord's option,
Landlord may, after eight (8) days notice to Tenant, elect to obtain for itself
any or all of the forms of insurance required to be obtained by Tenant pursuant
to this Section if Tenant fails to procure same. In the event Landlord shall so
elect, Tenant shall reimburse Landlord upon demand for the cost of all insurance
so obtained by Landlord.

                              15.10 Waiver of Subrogation. Landlord and Tenant
hereby release each other from any and all liability or responsibility to each
other or anyone claiming through or under them by way of subrogation or
otherwise for any loss or damage to property covered by any fire and extended
coverage insurance then in force, even if such fire or other casualty shall have
been caused by the fault or negligence of the other party, or anyone for whom
such party may be responsible, provided, however, that this release shall be
applicable and in force and effect only to the extent of and with respect to any
loss or damage occurring during such time as the policy or policies of insurance
covering said loss shall contain a provision to the effect that this release
shall not adversely affect or impair said insurance or prejudice the right of
the insured to recover thereunder. Landlord and Tenant shall each cause their
respective insurers to include such a provision in their respective policies,
subject, however, to the following provisions: If at any time the fire insurance
carriers issuing fire insurance policies to Landlord or Tenant shall exact an
additional premium for the inclusion of such or similar provisions, the party
whose insurance carrier has demanded the premium (the "Notifying Party") shall
five the other party hereto notice thereof. In such event, if the other party
requests, the Notifying Party shall require the inclusion of such or similar
provisions by its fire insurance carrier, and the requesting other party shall
reimburse the Notifying Party for any such additional premiums as they become
due for the remainder of the term of this Lease. If at any time any such
insurance carrier shall not include such or similar provisions in any fire or


                                       50



extended coverage insurance policy, then, as to loss covered by that policy, the
release set forth in this Section 15.10 shall be deemed of no further force or
effect. The party whose policy no longer contains such provision shall notify
the other party that the provision is no longer included in the policy, but a
failure or delay in giving such notice shall not affect such termination of the
release set forth in this Section. During any period while the foregoing waivers
of right of recovery are in effect, the party hereto as to whom such waivers are
in effect shall look solely to the proceeds of such policies to compensate
itself for any loss occasioned by fire or other casualty which is an insured
risk under such policies.

                              15.11 Landlord's Insurance. During the Term of
this Lease, Landlord covenants and agrees to maintain the following insurance,
all of which shall be in amounts which are commercially reasonable in light of
the types and amounts of insurance customarily maintained at any given time by
the owners of other first class office buildings in center city Philadelphia:

                                  (a) Commercial general liability insurance
relating to the Building and the common areas thereof having a combined single
limit of at least $5,000,000.00;

                                  (b) all risk fire and extended coverage
insurance in an amount equal to the full replacement value of the Building;

                                  (c) boiler and machinery insurance coverage
(if necessary); and

                                  (d) such insurance as Landlord's mortgagee(s)
may from time to time require.

                16. Eminent Domain

                              16.1 Total or Partial Taking. In the event of
exercise of the power of eminent domain whereby:

                                  (1) such portion of the Property is taken that
access to the Premises is permanently impaired thereby and reasonable alternate
access is not provided by Landlord within one hundred twenty (120) days of such
taking; or

                                  (2) all or substantially all of the Premises
or the Property is taken; or

                                  (3) less than substantially all of the
Property is taken but Landlord, acting in good faith, determines that it is
economically unfeasible to continue to operate the uncondemned portion of the
Building as a first-class office building; or

                                  (4) less than substantially all of the
Premises is taken, but Tenant, acting in good faith, determines that because of
such taking it is economically unfeasible to continue to conduct its business in

                                       51



the uncondemned portion of the Premises, then in the case of (1) or (2), either
party, and in the case of (3), Landlord, and in the case of (4), Tenant, shall
have the right to terminate this Lease as of the date when possession of that
part which was taken is required to be delivered or surrendered to the
condemning authority; and in such case all Rent and other charges shall be
adjusted to the date of termination. A "taking" as such term, is used in this
Section 16 shall include a transfer of title or of any interest in the Property
by deed or other instrument in settlement of or in lieu of transfer by operation
of law incident to condemnation proceedings.

                              16.2 Temporary Taking. Notwithstanding anything
hereinabove provided, in the event of a taking of only the right to or for
possession of the Premises for a fixed period of time or for the duration of an
emergency or other temporary condition, then this Lease shall continue in full
force and effect with the abatement of Minimum Rent and Additional Rent for the
duration of such taking, and all amounts payable by the condemnor with respect
to such taking to Landlord. The above notwithstanding, if any such temporary
taking shall continue for a period in excess of 180 days, Tenant shall have the
right to terminate this Lease upon 10 days written notice to Landlord.

                              16.3 Tenant's Waiver. Regardless of whether this
Lease shall terminate, Tenant shall have no right to participate or share in any
condemnation claim, damage award or settlement in lieu thereof with respect to
any taking of any nature; provided, however, that Tenant shall not be precluded
from independently claiming or receiving payment for Tenant's relocation and
moving expenses and the value of Tenant's improvements as may be permitted under
applicable law.

                17. Default and Remedies

                              17.1 Defaults. The occurrence of any one or more
of the following shall constitute an "Event of Default" under this Lease:

                                  17.1.1 Tenant does not pay in full when due
any installment of Rent or any other charge or payment whether or not herein
included as Rent, and such failure to pay is not cured within ten (10) days
following Tenant's receipt of notice from Landlord thereof (it being agreed that
Landlord's bill for Rent sent in the ordinary course of business shall not
constitute notice for purposes of this subsection); provided, however, that
Landlord shall only be obligated to give Tenant notice of failure to pay Rent
two (2) times during any twelve (12) consecutive calendar months. Thereafter,
for the duration of such twelve (12) calendar months, Tenant shall be in default
upon Tenant's failure to pay in full, within ten (10) days after due, any
installment of Rent, without benefit of such notice.

                                  17.1.2 Tenant violates or fails to perform or
otherwise breaks any covenant, agreement or condition contained in this Lease,
other than those specifically addressed elsewhere in this Section 17.1, or any
other obligation of Tenant to Landlord, and such violation or failure continues

                                       52



for thirty (30) days after receipt of notice thereof from Landlord, provided
that if such violation or failure is not susceptible of being cured or corrected
within the aforesaid thirty (30) day period, then if Tenant shall have commenced
such cure within the aforesaid thirty (30) day period and diligently and
continuously prosecutes same to completion, Tenant shall have such additional
time as Tenant may reasonably require to complete such cure, unless, Landlord
reasonably determines that such additional time would materially jeopardize the
Premises, the Property or any tenants of the Building, in which event Landlord
may require Tenant to complete such cure within the aforesaid thirty (30) day
period.

                                  17.1.3 Tenant does not occupy the Premises
within sixty (60) days after the Lease Commencement Date.

                                  17.1.4 Tenant removes or attempts to remove
Tenant's property from the Premises other than in the ordinary course of
business or upon termination of this Lease, without having first paid to
Landlord in full all Rent and any other charges that may have become due;
provided however, that so long as Tenant is current in its obligations to pay
Rent and other charges that may be due, such removal or attempt to remove shall
not constitute an Event of Default.

                                  17.1.5 Tenant becomes the subject of
commencement of an involuntary case under the federal bankruptcy law as now or
hereafter constituted, or there is filed a petition against Tenant seeking
reorganization, arrangement, adjustment or composition of or in respect of
Tenant under the federal bankruptcy law as now or hereafter constituted, or
under any other applicable federal or state bankruptcy, insolvency,
reorganization or other similar law, or seeking the appointment of a receiver,
liquidator or assignee, custodian, trustee, sequestrator (or similar official)
of Tenant or any substantial part of the property of either Tenant or seeking
the winding-up or liquidation of its affairs and such involuntary case or
petition is not stayed or dismissed within sixty (60) days after the filing
thereof, or if Tenant commences a voluntary case or institutes proceedings to be
adjudicated a bankrupt or insolvent, or consents to the institution of
bankruptcy or insolvency proceedings against it, under the federal bankruptcy
laws as now or hereafter constituted, or any other applicable federal or state
bankruptcy, reorganization or insolvency or other similar law, or consents to
the appointment of or taking possession by a receiver or liquidator or assignee,
trustee, custodian, sequestrator (or other similar official) of Tenant or of any
substantial part of its property, or makes any assignment for the benefit of
creditors, or admits in writing its inability to pay its debts generally as they
become due, or fails to generally pay its debts as they become due, or if Tenant
takes any action in contemplation of any of the foregoing.

                                  17.1.6 Any guarantor of Tenant hereunder
becomes the subject of commencement of an involuntary case under the federal
bankruptcy law as now or hereafter constituted, or there is filed a petition
against any guarantor of Tenant hereunder seeking reorganization, arrangement,
adjustment or composition of or in respect of any guarantor of Tenant hereunder

                                       53




under the federal bankruptcy law as now or hereafter constituted, or under any
other applicable federal or state bankruptcy, insolvency, reorganization or
other similar law, or seeking the appointment of a receiver, liquidator or
assignee, custodian, trustee, sequestrator (or similar official) of any
guarantor of Tenant hereunder or any substantial part of the property of any
guarantor of Tenant hereunder, or seeking the winding-up or liquidation of its
affairs and such involuntary case or petition is not stayed or dismissed within
sixty (60) days after the filing thereof, or if any guarantor of Tenant
hereunder commences a voluntary case or institutes proceedings to be adjudicated
a bankrupt or insolvent, or consents to the institution of bankruptcy or
insolvency proceedings against it, under the federal bankruptcy laws as now or
hereafter constituted, or any other applicable federal or state bankruptcy,
reorganization or insolvency or other similar law, or consents to the
appointment of or taking possession by a receiver or liquidator or assignee,
trustee, custodian, sequestrator (or other similar official) of any guarantor of
Tenant hereunder or of any substantial part of its property, or makes any
assignment for the benefit of creditors, or admits in writing its inability to
pay its debts generally as they become due, or fails to generally pay its debts
as they become due, or if any guarantor of Tenant hereunder takes any action in
contemplation of any of the foregoing.

                                  17.1.7 Tenant fails to deliver a requested
estoppel statement within the time period required following Landlord's second
request for same pursuant to Section 26.2 below.

                                  17.1.8 Tenant or Subtenant makes an assignment
of its rights under this Lease or enters into any sublease (or purports to do
so) in violation of the terms of Section 12, above.

                              17.2 Landlord's Remedies. Upon the occurrence of
an Event of Default, and at the sole option of Landlord, in addition to all
remedies Landlord may have at law or in equity,

                                  17.2.1 the whole balance of Rent and any other
charges, whether or not payable as Rent, for the entire balance of the Term and
any renewal or extension thereof for which Tenant has become bound, discounted
to present value at the rate of 6.5% per annum, and also all or any costs and
sheriff's, marshall's, constable's or other officials' commissions, whether
chargeable to Landlord or Tenant, including watchman's wages, shall be taken to
be due and payable and in arrears as if by the terms of this Lease said balance
of Rent and such other charges and expenses were on that date payable in
advance, and/or

                                  17.2.2 the Term of this Lease shall terminate
and become absolutely void, without notice and without any right on the part of
Tenant to save the forfeiture by payment of any sum due or by other performance
of any condition, term, agreement or covenant broken, and/or

                                  17.2.3 any prothonotary or attorney of any
court of record is hereby irrevocably authorized and empowered to appear for
Tenant in any action to confess judgment against Tenant, and may sign for Tenant

                                       54



an agreement, for which this Lease shall be his sufficient warrant, for entering
in any competent court an action or actions in ejectment, and in any suits or in
said actions to confess judgment against Tenant as well as all persons claiming
by, through or under Tenant for the recovery by Landlord of possession of the
Premises. Such authority shall not be exhausted by any one or more exercises
thereof, but judgment may be confessed from time to time as often as any event
set forth in Subsection 17.1 hereof shall have occurred or be continuing. Such
powers may be exercised during as well as after the expiration or termination of
the original Term and during and at any time after any extension or renewal of
the Term, and/or

                                  17.2.4 [INTENTIONALLY OMITTED.]

                                  17.2.5 In any confession of judgment for
ejectment, Landlord shall cause to be filed in such action an affidavit setting
forth the facts necessary to authorize the entry of judgment and if a true copy
of this Lease (and of the truth of the copy, such affidavit shall be sufficient
proof) be filed in such action, it shall not be necessary to file the original
as a warrant of attorney, notwithstanding any law, rule of court, custom or
practice to the contrary. Tenant releases to Landlord, and to any and all
attorneys who may appear for Tenant, all procedural errors in any proceedings
taken by Landlord, whether by virtue of the powers of attorney contained in this
Lease or not, and all liability therefor. Tenant expressly waives the benefits
of all laws, now or hereafter in force, exempting any property within the
Premises or elsewhere from distraint, levy or sale. Tenant further waives the
right to any notice to remove as may be specified in the Pennsylvania Landlord
and Tenant Act of April 6, 1951, as amended, or any similar or successor
provision of law, and agrees that five (5) days notice shall be sufficient in
any case where a longer period may be statutorily specified, and/or

                                  17.2.6 After re-entry or retaking or
recovering of the Premises, whether by way of termination of this Lease or not,
Landlord may lease the Premises or any part or parts thereof to such person or
persons and upon such terms as may in Landlord's reasonable discretion seem best
for a term within or beyond the Term of this Lease, and Tenant shall be liable
for any loss of Rent for the balance of the Term and any renewal or extension
for which Tenant has become bound plus the costs and expenses of reletting and
of making repairs and alterations to the Premises. Further, Tenant, for itself
and its successors and assigns, hereby irrevocably constitutes and appoints
Landlord as Tenant's agent to collect the rents due and to become due from all
subleases and apply the same to the Rent due hereunder without in any way
affecting Tenant's obligation to pay any unpaid balance of Rent due or to become
due hereunder not covered by such application of sublease rent, and/or

                                  17.2.7 Landlord may (but shall not be
obligated to do so), in addition to any other rights it may have in law or
equity, cure such Event of Default on behalf of Tenant, and Tenant shall
reimburse Landlord upon demand for all costs incurred by Landlord in curing such
Event of Default, including, without limitation, reasonable attorneys' fees and


                                       55



other legal expenses, together with interest thereon at the Lease Interest Rate,
which costs and interest thereon shall be deemed Additional Rent hereunder.

                              17.3 Remedies Cumulative. All remedies available
to Landlord hereunder and at law and in equity shall be cumulative and
concurrent. No termination of this Lease nor taking or recovering possession of
the Premises shall deprive Landlord of any remedies or actions against Tenant
for Rent, for charges or for damages for the breach of any covenant, agreement
or condition herein contained, nor shall the bringing of any such action for
Rent, charges or breach of covenant, agreement or condition, nor the resort to
any other remedy or right for the recovery of Rent, charges or damages for such
breach be construed as a waiver or release of the right to insist upon the
forfeiture and to obtain possession. No re-entering or taking possession of the
Premises, or making of repairs, alterations or improvements thereto, or
reletting thereof, shall be construed as an election on the part of Landlord to
terminate this Lease unless written notice of such election be given by Landlord
to Tenant. The failure of Landlord to insist upon strict and/or prompt
performance of the terms, agreements, covenants and conditions of this Lease or
any of them, and/or the acceptance of such performance thereafter shall not
constitute or be construed as a waiver of Landlord's right to thereafter enforce
the same strictly according to the terms thereof in the event of a continuing or
subsequent default.

                              17.4 Expenses of Enforcement. In the event of any
litigation between Landlord and Tenant, the prevailing party shall be entitled
to receive from the other the amount of its reasonable out-of-pocket legal fees
and out-of-pocket expenses of counsel incurred in connection therewith.

                              17.5 Nonwaiver. Any failure of Landlord to enforce
any remedy allowed for the violation of any provision of this Lease shall not
imply the waiver of any such provision, even if such violation is continued or
repeated, and no express waiver shall affect any provision other than the one(s)
specified in such waiver and only for the time and in the manner specifically
stated. No receipt of monies by Landlord from Tenant after the termination of
this Lease shall in any way (i) alter the length of the Term or of Tenant's
right of possession hereunder, or (ii) after the giving of any notice,
reinstate, continue or extend the Term or affect any notice given to Tenant
prior to the receipt of such moneys, it being agreed that after the service of
notice or the commencement of a suit or after final judgment for possession of
the Premises, Landlord may receive and collect any Rent due, and the payment of
said Rent shall not waive or affect said notice, suit or judgment.

                              17.6 Tenant's Remedies. If after the Commencement
Date Landlord shall be in default for 5 consecutive days in the performance of
any of its obligations to provide any service to the Premises and shall
thereafter be in default for 30 consecutive days after written notice thereof
from Tenant (unless the default is not susceptible of cure within 30 days after
such notice, in which event Landlord shall have failed to commence curing the
default within such 30-day period after written notice thereof and to diligently
prosecute such cure until completion), and provided such default does not arise
as a result of Force Majeure, then in addition to any other rights Tenant may
have at law or in equity, Tenant may (but shall not be obligated to) cure such
default on behalf of Landlord, and Landlord shall reimburse Tenant upon demand
for all reasonable out-of-pocket costs incurred by Tenant in curing such


                                       56



default, together with interest thereon at the Lease Interest Rate.
Notwithstanding the foregoing, Tenant shall not have any right in exercising its
remedies under the preceding sentence (i) to make any repairs or modifications
to areas outside the Premises or to Building systems except (and subject to
Sections 10.7 and 11.1) those within and solely affecting the Premises, (ii) to
provide any services for the benefit of any occupants of the Property other than
Tenant, or (iii) to retain any contractors or subcontractors to perform such
services which are not responsible contractors and subcontractors which, in
Landlord's reasonable judgment, may prejudice Landlord's relationship with
Landlord's contractors or subcontractors or the relationship between such
contractors and their subcontractors or employees, or
may disturb harmonious labor relations.

                18. Subordination

                              18.1 Generally. This Lease is and shall be subject
and subordinate to all ground or underlying leases of the Property and to all
mortgages which may now or hereafter be secured upon such leases or the Property
and to any and all renewals, modifications, consolidations, replacements and
extensions thereof so long as any subsequent mortgagee and Tenant execute and
deliver to one another a non-disturbance agreement in a form substantially
similar to that attached as Exhibit H, subject only to the requirements of
Section 4 of the non-disturbance agreement attached as Exhibit H (or any
equivalent section) if same is contained in a non-disturbance agreement executed
by Tenant hereunder which is then in effect. This Section shall be
self-operative and no further instrument of subordination shall be required by
any lessor or mortgagee, but in confirmation of such subordination, Tenant shall
execute, within fifteen (15) days after being so requested, any certificate that
Landlord may reasonably require, in a form reasonably acceptable to Tenant,
acknowledging such subordination. If Landlord shall so request, Tenant shall
send to any mortgagee or ground lessor of the Property designated by Landlord, a
copy of any notice thereafter given by Tenant to Landlord alleging a material
breach by Landlord of its obligations under this Lease.

                              18.2 Rights of Mortgagee. In the event of any act
or omission of Landlord which would give Tenant the right, immediately or after
lapse of a period of time, to cancel or terminate this Lease, or to claim a
partial or total eviction, Tenant shall not exercise such right:

                                  (1) until it has given written notice of such
act or omission to the holder of each such mortgage or ground lease whose name
and address shall previously have been furnished to Tenant in writing; and

                                  (2) until a reasonable period for remedying
such act or omission not to exceed thirty (30) days shall have elapsed following
the giving of such notice (which reasonable period shall in no event be less


                                       57




than the period to which Landlord would be entitled under this Lease or
otherwise, after similar notice, to effect such remedy).

                              18.3 Non-Disturbance. Landlord shall deliver to
Tenant for execution a non-disturbance agreement from Landlord's present
mortgagee substantially in the form attached hereto as Exhibit "H" on the date
of Tenant's execution of this Lease. As a condition to the subordination of this
Lease to any future mortgage or ground lease under Section 18.1 above, Landlord
agrees to obtain for the benefit of Tenant a subordination, nondisturbance and
attornment agreement substantially in the same form as that attached hereto as
Exhibit "H" from every mortgagee to which Landlord grants a mortgage of the
Property hereafter, and from every ground lessor which may hereafter acquire fee
title to the Land.

                19. Holding Over. Should Tenant continue to occupy the Premises
after the expiration of the Term of this Lease or any renewal or renewals
thereof, or after a forfeiture incurred, such tenancy shall (without limiting
any of Landlord's rights or remedies concerning an Event of Default) be one at
sufferance from month to month at a minimum monthly rent equal to two (2) times
the total of the Minimum Rent payable for the last month of the Term of this
Lease prior to the holdover and, in addition thereto, Tenant shall pay to
Landlord all other Rent falling due during the holdover period (without
increase), as if the Term had been extended. Neither Landlord's demand nor
Landlord's receipt of the aforesaid compensation for use and occupancy shall be
deemed to provide Tenant with any right to any use, occupancy, or possession of
the Premises either for the period for which such compensation has been demanded
or paid, or for any time before or after such period. The provisions of this
Section 19 shall not be deemed to limit or constitute a waiver of any other
rights or remedies of Landlord provided herein or at law or in equity.

                20. Notices. All bills, statements, notices or other
communications given hereunder shall be deemed sufficiently given or rendered
only if in writing and sent to Tenant or Landlord by certified or registered
mail, return receipt requested, postage prepaid, by commercial overnight
delivery service (such as Federal Express), or by hand delivery against signed
receipt, as follows:

                If to Tenant:

                Prior to the Commencement Date:

                              Lorjo Corp.
                              c/o PMA Reinsurance Corporation
                              925 Chestnut Street
                              Philadelphia, PA 19107
                              Attn: Steve Tirney


                                       58


                With a copy to:

                              Lorjo Corp.
                              c/o PMA Reinsurance Corporation
                              925 Chestnut Street
                              Philadelphia, PA  19107
                              Attn:  Paul T. Luber

                After the Commencement Date:

                              Lorjo Corp.
                              c/o PMA Reinsurance Corporation
                              Suite 2800
                              1735 Market Street
                              Mellon Bank Center
                              Philadelphia, PA  19103
                              Attn:  Steve Tirney

                With a copy to:


                              The PMA Building
                              380 Sentry Parkway
                              Blue Bell, PA  19422
                              Attn:  Paul T. Luber

                If to Landlord:

                              c/o The Rubin Organization
                              The Bellevue, 3rd Floor
                              200 S. Broad Street
                              Philadelphia, PA. 19102
                              Attn:  Director of Leasing

                With a copy to:

                              Richard I. Rubin & Co., Inc.
                              Management Office
                              Concourse Level, Mellon Bank Center
                              1735 Market Street
                              Philadelphia, PA  19103
                              Attention:  Building Manager


                                       59



                If to Landlord's mortgagee:

                              Banque Paribas
                              The Equitable Tower
                              787 Seventh Avenue
                              New York, New York 10019
                              Attention:  Douglas Veasey

                With a copy to:

                              Winston & Strawn
                              175 Water Street
                              New York, New York 10038
                              Attention:  Douglas L. Wisner, Esq.

or such other person or place as either party hereto may designate by notice
given as aforesaid. Notice shall be deemed received as of the date set forth on
the return receipt, the date of delivery reflected in the records of the
overnight delivery service, or the date set forth on the hand delivery receipt,
as the case may be.


                21. Certain Rights Reserved to the Landlord. Landlord waives no
rights except those that may be specifically waived in this Lease, and
explicitly retains all other rights including, without limitation, the following
rights, the exercise of which shall not be deemed to constitute an eviction or
disturbance of Tenant's use or possession of the Premises and shall not give
rise to any claim for set-off or abatement of Rent or any other claim:

                              21.1 Building Name. To change the name of the
Building, presently Mellon Bank Center, and to change the street address of the
Building, presently 1735 Market Street.

                              21.2 Exterior Signs. To install and maintain a
sign or signs on the exterior of the Building.

                              21.3 Decoration. To decorate or to make repairs,
alterations, additions or improvements, whether structural or otherwise, in or
about the Property, or any part thereof, and for such purposes to temporarily
close doors, entry ways, public space and corridors in and about the Property
and to interrupt or temporarily suspend services or use of facilities, all
without affecting any of Tenant's obligations hereunder, so long as the Premises
are reasonably accessible and usable.

                              21.4 Keys. To furnish, at Landlord's expense, 10
door keys, and 100 pass cards for the entry door(s) in the Premises at the
commencement of the Lease and to retain at all times, and to use in appropriate
instances, keys and pass cards to all doors within


                                       60




and into the Premises. Tenant agrees to (i) purchase, only from Landlord,
additional duplicate keys or pass cards as required, (ii) change no locks or
other security devices and (iii) not to affix locks on doors without the prior
written consent of the Landlord, which consent shall not be unreasonably
withheld or delayed but may be conditioned upon Landlord's receipt of a key,
combination or other means of unlocking any new or replacement lock or security
device installed by Tenant. Upon the expiration of the Term or Tenant's right to
possession, Tenant shall return all keys and pass cards to Landlord and shall
disclose to Landlord the combination of any safes, cabinets or vaults left in
the Premises.

                              21.5 Window Coverings. To designate and approve
all window coverings used on the Property or any part thereof.

                              21.6 Placement of Loads. To approve the weight,
size and location of safes, vaults and other heavy equipment and articles in and
about the Premises and the Property so as not to exceed the legal load per
square foot designated by the structural engineers for the Property (presently
70 pounds), and to require all such items and furniture and similar items to be
moved into or out of the Property and Premises only at such times and in such
manner as Landlord shall direct in writing. Tenant shall not install or operate
machinery or any mechanical devices of a nature not directly related to Tenant's
ordinary use, as limited by the Permitted Use, of the Premises without the prior
written consent of Landlord, which shall not be unreasonably withheld or
delayed. Movements of Tenant's property into or out of the Property or Premises
are entirely at the risk and responsibility of Tenant, except as to damage
caused solely by the negligence of Landlord or its agents.

                              21.7 Deliveries. To regulate delivery of supplies
and the usage of the loading docks, receiving areas and freight elevators.

                              21.8 Entry to Premises. To enter the Premises in
accordance with the terms of this Lease, and in the last year of the Term of
this Lease, to show the Premises to prospective tenants at reasonable times upon
twenty-four (24) hours prior notice (unless the parties agree to a shorter time)
and accompanied by Tenant or Tenant's representative (provided that no such
advance notice or accompaniment shall be required in an emergency) and, if
vacated or abandoned, to view the Premises at any time.

                              21.9 Pipes, Conduits, and Wiring. To erect, use
and maintain pipes, ducts, wiring and conduits, and appurtenances thereto, in
and through the Premises at reasonable and concealed locations existing in the
Premises or, if necessary, constructed by Landlord in reasonably inconspicuous
locations having no material adverse effect upon Tenant's use of the Premises or
the aesthetics thereof. If Landlord undertakes such construction, Landlord
agrees to reasonably cooperate with Tenant or its design experts as to the
location and finish of the work, to use materials comparable to and compatible
with those adjacent to such new construction, and to perform all such
construction at Landlord's sole cost and expense.


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                              21.10 Inspection and Repair. To enter the Premises
at any reasonable time upon twenty-four (24) hours prior written notice (unless
the parties agree to a shorter time) and accompanied by Tenant or Tenant's
representative (provided that no such advance notice or accompaniment shall be
required in an emergency), to inspect the Premises and to make repairs or
alterations as Landlord reasonably deems necessary, with due diligence and
minimum disturbance.

                              21.11 Conduct of Other Business on the Property.
To grant to any person or to reserve unto itself the exclusive right to conduct
any business other than reinsurance or render any service in or on the Property.

                              21.12 Alterations to Property. To alter the
layout, design and/or use of the Property (excluding the Premises) in such
manner as Landlord, in its sole discretion, deems appropriate, so long as the
character of the Property as a first-class office property is maintained.

                              21.13 Adjoining Areas. The use of and reasonable
access thereto through the Premises, for the purposes of operation, maintenance,
and repair, of (a) all walls, windows and doors bounding the Premises (including
exterior walls of the Building, core corridor walls and doors and any core
corridor entrance) except the surfaces thereof within the Premises , (b) any
terraces or roofs adjacent to the Premises and (c) any space in or adjacent to
the Premises used for shafts, pipes, conduits, fan rooms, ducts, electric or
other utilities, sinks or other facilities.

                22. Landlord's Security Interest. As additional security for the
faithful performance and observance by Tenant of all of the terms, provisions
and conditions of this Lease, Tenant hereby grants to and creates on behalf of
Landlord a security interest in all of Tenant's equipment, fixtures,
decorations, alterations, furniture, machinery, installations, additions, and
improvements in the Premises. The security interest herein granted and any
security interest of Landlord granted by statute shall be subordinate to any
security interest given by Tenant in connection with the financing of the
purchase or installation of the item in question. Upon the occurrence of any
Event of Default Landlord may, at its option, foreclose on said security through
judicial action and apply the proceeds of the sale of the property covered
thereby for the payment of all Rent owing under this Lease or any other sum
owing by Tenant under the terms of Section 17, above, including but not limited
to any damages or deficiencies resulting from any reletting of the Premises,
whether said damage or deficiency accrued before or after summary proceedings or
other reentry by Landlord. Tenant covenants that it shall keep and maintain all
fixtures, machinery, equipment, furnishings and other personalty at the
Premises, whether or not the property of Tenant, in good, substantial and
efficient operating condition (including replacement of same when necessary) at
Tenant's sole cost and expense, at all times during the Term of this Lease.


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                23. Use and Occupancy Tax and Miscellaneous Taxes. Tenant shall
pay prior to delinquency all taxes assessed against or levied upon its occupancy
of the Premises or upon the fixtures, furnishings, equipment and all other
personal property of Tenant located in the Premises and when possible Tenant
shall cause said fixtures, furnishings, equipment and other personal property to
be assessed and billed separately from the property of Landlord. In the event
any or all of Tenant's fixtures, furnishings, equipment or other personal
property or its occupancy of the Premises shall be assessed and taxed with the
property of Landlord, Tenant shall pay to Landlord its share of such taxes, as
reasonably and equitably allocated by Landlord if but not separately allocated
on the face of the tax bill, within twenty (20) days after delivery to Tenant by
Landlord of a statement in writing setting forth the amount of such taxes
applicable to Tenant's fixtures, furnishings, equipment, personal property or
occupancy. If, during the Term of this Lease or any renewal or extension
thereof, any tax is imposed upon the privilege of renting or occupying the
Premises, Tenant will pay each month, as Additional Rent, a sum equal to such
tax or charge that is imposed for such month, but nothing herein shall be taken
to require Tenant to pay any income, estate, inheritance or franchise tax
imposed upon Landlord. In addition, Tenant will pay as additional rent all
Philadelphia School District Business Use and Occupancy Tax applicable to Tenant
and the Premises (if any) within the time set forth in any bill rendered by the
City of Philadelphia or Landlord for said tax.

                24. Excepted from Premises. Any hallways, passageways,
stairways, elevators, or other means of access to and from the Premises or the
Property, or the space occupied by the said hallways, passageways, stairways,
elevators and other means of access, although such may be within the Premises as
described hereinabove, shall be taken to be excepted therefrom, without being
deemed to reduce the Rentable Area thereof, and reserved to Landlord or to the
tenants of the Property in common and the same shall not be considered an
exclusive portion of the Premises. All ducts, pipes, wires or other equipment
used in the operation of the Property, or any part thereof, and any space
occupied thereby, whether or not within the Premises description, shall also be
excepted and reserved from the Premises, without being deemed to reduce the
Rentable Area thereof, and Tenant shall not remove or tamper with or use the
same and will permit Landlord to enter the Premises to service, replace, remove
or repair the same in accordance with the provisions of this Lease.

                25. Mechanics' and Other Liens.

                              25.1 Tenant covenants that it shall not (and has
no authority to) create or allow any encumbrance against the Premises, the
Property, or any part of any thereof or of Landlord's interest therein.

                              25.2 Tenant covenants that it shall not suffer or
permit to be created, or to remain, any lien or claim thereof (arising out of
any work done or services, material, equipment or supplies furnished for or at
the request of Tenant or by or for any contractor or subcontractor of Tenant,
other than work, materials, equipment or supplies


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furnished by Landlord) which is or may become a lien upon the Premises, the
Property, or any part of any thereof or the income therefrom or any fixture,
equipment or similar property therein.

                              25.3 If any lien or claim shall be filed, Tenant
shall within twenty (20) days after receiving notice of the filing thereof,
cause the same to be discharged of record by payment, deposit, bond or
otherwise. If Tenant shall fail to cause such lien or claim to be discharged and
removed from record within that period, then, without obligation to investigate
the validity thereof and in addition to any other right or remedy Landlord may
have, Landlord may, but shall not be obligated to, contest the lien or claim or
discharge it by payment, deposit, bond or otherwise; and Landlord shall be
entitled, if Landlord so decides, to compel the prosecution of an action for the
foreclosure of such lien by the lienor and to pay the amount of the judgment in
favor of the lienor with interest and costs. Any amounts so paid by Landlord and
all of Landlord's actual costs and expenses, including reasonable attorneys'
fees, incurred by Landlord in connection therewith, together with interest at
the Lease Interest Rate from the respective dates of Landlord's making of the
payment or incurring of the cost or expense, shall constitute Additional Rent
payable by Tenant under this Lease and shall be paid by Tenant to Landlord
promptly on demand.

                              25.4 Notwithstanding anything to the contrary in
this Lease or in any other writing signed by Landlord, neither this Lease nor
any other writing signed by Landlord shall be construed as evidencing,
indicating, or causing an appearance that any erection, construction, alteration
or repair to be done, or caused to be done, by Tenant is or was in fact for the
immediate use and benefit of Landlord. Further, notwithstanding anything
contained herein to the contrary, nothing contained in or contemplated by this
Lease shall be deemed or construed in any way to constitute the consent or
request on the part of Landlord for the performance of any work or services or
the furnishing of any materials for which any lien could be filed against the
Premises or the Property or any part of any thereof, nor as giving Tenant any
right, power, or authority to contract for or permit the performance of any work
or services or the furnishing of any materials for which any lien could be filed
against the Premises, the Property or any part of any thereof.

                26. Estoppel Statement

                              26.1 Tenant from time to time, within ten (10)
Business Days after request by Landlord, shall execute, acknowledge and deliver
to Landlord a statement in a form reasonably acceptable to the Tenant, which may
be relied upon by Landlord or any proposed assignee of Landlord's interest in
this Lease or any existing or proposed mortgagee or ground lessor or purchaser
of the Property or any interest therein, certifying (i) that this Lease is
unmodified and in full force and effect (or that the same is in full force and
effect as modified and listing the instruments of modification); (ii) the dates
to which Minimum Rent and all other charges have been paid; (iii) whether or not
Landlord is in default hereunder or whether Tenant has any claims or demands
against Landlord (and, if so, the default, claim and/or demand shall be
specified); (iv) if applicable, that Tenant has accepted possession and has
entered into


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occupancy of the Premises; (v) the Lease Commencement Date and the Termination
Date; and (vi) certifying as to such other matters as Landlord may reasonably
request. Tenant may reasonably modify the requested form of estoppel statement
to the extent necessary to meaningfully address all matters intended to be
responded to or certified therein, but shall not fail to respond to or certify
any of such matters. Tenant acknowledges that any such statements so delivered
by Tenant may be relied upon by Landlord, any landlord under any ground or
underlying lease, or by any prospective partner, purchaser, mortgagee, lender,
or any assignee of any mortgage.

                                 26.2 Should Tenant fail to execute, acknowledge
and deliver to Landlord a requested estoppel statement within the time required
under Section 26.1 following Landlord's first request therefor, Landlord may
deliver to Tenant a second request for such estoppel statement on or after the
tenth (10th) Business Day following Tenant's receipt of the first such request.
Should Tenant fail to execute, acknowledge and deliver to Landlord the requested
estoppel statement within eight (8) days following receipt of Landlord's second
request therefor, such failure shall constitute an Event of Default under this
Lease.

                27. Covenant of Quiet Enjoyment. Landlord covenants that Tenant
shall, during the Term, peaceably and quietly have, hold and enjoy the Premises
subject to the terms, covenants, conditions, provisions and agreements contained
in this Lease on the part of Tenant to be kept, observed and performed
(including, without limitation, the obligation to pay all Rent when due).

                28. Brokers. Each of Landlord and Tenant represents and warrants
to the other that it has not dealt with any broker, agent, finder or other
person in the negotiation for or the obtaining of this Lease other than
Binswanger Company ("Binswanger") and Agent, and each agrees to indemnify and
hold the other harmless from any and all costs (including reasonable attorney's
fees) and liability for commissions or other compensation claimed by any such
broker, agent, finder or other person other than Binswanger and Agent, employed
by the indemnifying party or claiming to have been engaged by the indemnifying
party in connection with this Lease. Tenant acknowledges that Agent has acted
only as an agent with respect to the procurement and negotiation of this Lease
and agrees that Agent shall not be responsible or liable for any term, provision
or condition of this Lease. Landlord agrees to pay any fee or commission owing
Binswanger or Agent on account of this Lease.

                29. Limitations on Liability.

                              29.1 The liabilities of the parties described
below shall be qualified in accordance with this Section 29.

                              29.2 Tenant Liability. The word "Tenant" as used
in this Lease shall be construed in the plural in all cases where there is more
than one tenant (and in such cases the liability of such tenants shall be joint
and several) and the necessary grammatical changes


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required to make the provisions hereof apply to corporations, partnerships, or
individuals, men or women, shall in all cases be assumed to have been made. Each
provision hereof shall extend to and as the case may require, shall bind and
inure to the benefit of Tenant and its successors and assigns, provided that
this Lease shall not inure to the benefit of any assignee or successor of Tenant
except upon the express written consent of Landlord pursuant to Section 12
hereof (unless not required pursuant to Subsection 12.1 above).

                              29.3 Landlord Liability

                                  29.3.1 It is expressly understood and agreed
by Tenant that none of Landlord's covenants, undertakings or agreements are made
or intended as personal covenants, undertakings or agreements by Landlord or its
partners, and any liability for damage or breach or nonperformance by Landlord
shall be collectible only out of Landlord's interest in the Property and no
personal liability is assumed by, nor at any time may be asserted against,
Landlord or its partners or any of its or their officers, agents, employees,
legal representatives, successors or assigns, if any, all such liability, if
any, being expressly waived and released by Tenant, and in any proceeding or in
the case of any judgment against Landlord, Tenant shall concurrently file a
Praecipe to Limit Judgment Lien to reflect the exclusion from liability herein
set forth .

                                  29.3.2 The Landlord named on page 1 of this
Lease and any subsequent owners of such Landlord's interest in the Property, as
well as their respective heirs, personal representatives, successors and assigns
shall each have the same rights, remedies, powers, authorities and privileges as
it would have had it originally signed this Lease as Landlord, including the
right to proceed in its own name to enter judgment by confession or otherwise,
but any such person, whether or not named herein, shall have no liability
hereunder after it ceases to hold such interest.

                                  29.3.3 In the event of any sale or other
conveyance or transfer of Landlord's interest in the Property, the transferor
shall be and hereby is entirely free and relieved of all covenants and
obligations of Landlord hereunder, and it shall be deemed and construed without
further agreement between the parties or their successors in interest, or
between the parties and the transferee at any such sale or conveyance or
transfer that (subject to the limitation of Landlord's liability in this Section
29) the transferee has assumed and agreed to carry out any and all covenants and
obligations of Landlord hereunder, including, without limitation, obligations
for all defaults and claims (if any) arising prior to the date of such transfer.

                              29.4 Mortgagee Liability. No mortgagee or ground
lessor which shall succeed to the interest of Landlord hereunder (either in
terms of ownership or possessory rights) (a "Successor") shall be:

                                  (a) subject to any prepayments of Rent (except
to the extent that any such prepayment is subject to clause (b) below, credits,
offsets, prior defenses or claims or counterclaims which the Tenant may have
against any prior Landlord including, without


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limitation, claims against any such prior Landlord based upon the indemnities of
such Landlord under this Lease and/or any other agreement, as the case may be;
or

                                  (b) bound by any prepayment of Rent more than
one month in advance (except for any such prepayment which is expressly
permitted to be made under this Lease) and not actually delivered to the
Successor; or

                                  (c) bound by an amendment or modification of
this Lease made without its prior written consent, other than an amendment or
modification of this Lease reflecting the exercise of options set forth in this
Lease or acknowledging and/or confirming agreements and/or understandings
between Landlord and Tenant as long as any such acknowledgement and/or
confirmation does not have the effect of materially varying the obligations of
the parties under this Lease or operate or purport to operate as a waiver,
forbearance, satisfaction, discharge or compromise of such obligations; or

                                  (d) liable for any act, omission,
misrepresentation or breach of any prior Landlord; provided, however, such
Successor shall be obligated to perform the executory obligations of the
Landlord under this Lease (subject to the terms of this Section 29.4) arising
from and after the date that such Successor obtains title to and possession of
the Property and becomes the Landlord under this Lease and, subject to the terms
of this Section 29.4, to use reasonable efforts to perform the existing material
obligations of the Landlord under this Lease relating to the occupancy of the
Premises by the Tenant without any obligation, however, to expend funds or incur
any liability or obligation beyond that required in order to perform such
existing material obligations in accordance with this Lease; or

                                  (e) required to account for any security
deposit other than any security deposit actually delivered to the Successor; or

                                  (f) liable for any payment to the Tenant of
any sums, or the granting to the Tenant of any credit, in the nature of a
contribution towards the cost of preparing, furnishing or moving into the
Premises or any portion thereof; or

                                  (g) bound by any covenant to undertake or
complete any improvement to the Premises or the Property.

                30. Renewal Options.

                              30.1 Renewal Terms. Tenant is hereby granted the
options to extend the initial Term of this Lease, with respect to all of the
Premises as then constituted, for two (2) consecutive additional periods of five
(5) years each (each of which periods is hereinafter referred to as a "Renewal
Term"), provided that an Event of Default shall not have occurred and be
continuing either at the time of exercising any such option or at the
commencement of the respective Renewal Term. Tenant shall exercise the aforesaid
options to renew, in each instance,


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by giving Landlord written notice at least twelve (12) months prior to the
Termination Date or at least twelve (12) months prior to the last day of the
Renewal Term then in effect, as applicable. Each Renewal Term shall begin on the
day immediately following either the Termination Date or the last day of the
prior Renewal Term, as applicable. Each such renewal shall be on the same terms
and conditions as specified for the initial Term of this Lease, except that (i)
the Minimum Rent during each Renewal Term shall be as specified in Subsection
30.2 below, and (ii) Landlord shall have no obligation to improve or otherwise
perform any work in the Premises, or to pay any allowances, unless explicitly
required to do so during such Renewal Term elsewhere in this Lease or any
amendment hereto. In the event that Tenant shall fail to timely exercise its
option with regard to any Renewal Term, or an Event of Default shall have
occurred and be continuing either at the time of exercising its option or at the
commencement of any Renewal Term, Tenant's rights hereunder with regard to both
that Renewal Term and any subsequent Renewal Term shall immediately and
irrevocably terminate.

                              30.2 Renewal Rental. If Tenant exercises an option
to extend the Term of this Lease as set forth in Subsection 30.1 hereof, the
Minimum Rent for the Premises throughout a given Renewal Term shall equal
ninety-five percent (95%) of the Market Rental Rate (as hereinafter defined) in
effect at the commencement of that Renewal Term. For purposes of this Lease, the
term "Market Rental Rate" shall be defined as the rate of annual minimum rent
being quoted by Landlord to prospective tenants of the Building or being charged
to tenants whose leases have commenced within the preceding six months, for
terms of similar length for comparable space (considering size and location) in
the Building (or which would be quoted if comparable space were available).
Landlord shall determine the Market Rental Rate for the Renewal Term in question
and give Tenant notice thereof (a "Rental Notice") in each case following
Tenant's exercise of its option to renew (and not later than thirty (30) days
following receipt of written request from Tenant following Tenant's exercise of
its option to renew). Should Tenant disagree with Landlord's determination,
Landlord and Tenant agree to negotiate reasonably and in good faith to attempt
to reach agreement for a period of seventy five (75) days following Tenant's
receipt of the Rental Notice; provided, however, that Tenant may elect, by
written notice delivered to Landlord within seventy-five (75) days after receipt
of the Rental Notice, to either rescind its election to enter into a Renewal
Term or to have the Market Rental Rate for such Renewal Term determined by
appraisal in accordance with the following procedures, the results of which
shall be binding upon both Landlord and Tenant. Should Landlord and Tenant not
reach agreement as to the Market Rental Rate, and Tenant fails to deliver
written notice of such election to Landlord within such seventy-five (75) day
period, Tenant shall be deemed to have irrevocably elected to rescind its
election to enter into the Renewal Term. Within ten (10) days after Tenant
notifies Landlord of Tenant's election to determine Market Rental Rate by
appraisal, each of Landlord and Tenant shall, by written notice to the other,
designate an appraiser having at least ten (10) years experience as a licensed
Pennsylvania real estate broker or MAI appraiser doing a substantial amount of
business in the Center City, Philadelphia area. Within ten (10) days following
the appointment of the second of such appraisers, the two appraisers so
appointed shall select a third appraiser meeting the same requirements as to
experience. In the event that the two appraisers are unable timely to agree


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upon the third appraiser, then Landlord and Tenant shall attempt to agree upon
the third appraiser within ten (10) days thereafter, and if they fail to do so
the third appraiser shall be an appraiser meeting the qualifications herein set
forth and appointed under the commercial arbitration rules of the American
Arbitration Association relating to appointment of arbitrators. The three
appraisers so chosen shall render their decision as to the Market Rental Rate
(as such term is hereinafter defined) within thirty (30) days following the
appointment of the third appraiser. Should the three appraisers be unable to
agree on the Market Rental Rate, the Market Rental Rate shall be the average of
the three respective Market Rental Rates determined by the three appraisers,
excluding from such computation, however, any Market Rental Rate which deviates
by more than fifteen percent (15%) from the median of the three Market Rental
Rates so determined. Landlord and Tenant shall each bear their own costs of such
appraisal and equally share the cost of the third appraiser and any arbitration
hereunder. Notwithstanding anything to the contrary hereinabove set forth in
this Section 30.2, in the event Tenant shall elect the aforesaid appraisal
determination of the Market Rental Rate for any Renewal Term, the term "Market
Rental Rate" shall be defined as the rate of annual minimum rent being charged
or quoted by Landlord for office space in the Building and by Landlord and other
landlords for office space in those buildings commonly known as One Liberty
Place, Two Liberty Place, Two Logan Square, One Commerce Square, Two Commerce
Square, Bell Atlantic Tower and 1901 Market Street, to tenants whose leases have
commenced within the six months preceding the time of appraisal, for terms
similar in length to the Renewal Term in question, for comparable space
(considering size and location) in such buildings (or which would be so charged
if comparable space were available), taking into account "free rent" and other
lease concessions then being commonly offered in such buildings.

                31. Expansion Options

                              31.1 Third Year Option. Landlord hereby grants to
Tenant an exclusive first option to lease from Landlord either (a) the 1,656
Rentable Square feet of space on the thirtieth (30th) floor of the Building
shown cross-hatched on Exhibit N attached hereto ("Option Space A") or (b) that
portion of the thirtieth (30th) floor of the Building not theretofore leased by
Tenant, consisting of 9,705 Rentable Square Feet of space ("Option Space B"), on
the terms herein set forth. Tenant shall exercise such option by delivery to
Landlord of a written notice of such exercise not later than the first to occur
of (a) October 31, 1996 or (b) the first day of the third Lease Year, and
Landlord shall deliver possession of such space to Tenant on or about the first
day of the fourth Lease Year, but in no event earlier than September 1, 1997.

                              31.2 Fifth Year Option. Landlord hereby grants to
Tenant an exclusive first option to lease from Landlord either (a) Option Space
B if not previously leased by Tenant pursuant to Section 31.1 above, or (b) if
Tenant shall have leased Option Space A pursuant to Section 31.1 above, the
remaining portion of the thirtieth (30th) floor of the Building not theretofore
leased by Tenant, consisting of 8,049 Rentable Square Feet of space ("Option
Space C"), on the terms herein set forth. Tenant shall exercise such option by
delivery to Landlord of a written notice of such exercise not later than the
first to occur of (a) October 31,


                                       69




1998 or (b) the first day of the fifth Lease Year, and Landlord shall deliver
possession of such space to Tenant on or about the first day of the sixth Lease
Year, but in no event earlier than September 1, 1999.

                              31.3. Eighth Year Option. Landlord hereby grants
to Tenant an exclusive first option to lease from Landlord either (a) Option
Space B if not previously leased by Tenant pursuant to Sections 31.1 or 31.2
above, or (b) if Tenant shall have leased Option Space A pursuant to Section
31.1 above, and shall not have leased Option Space C pursuant to Section 31.2
above, Option Space C, on the terms herein set forth. Tenant shall exercise such
option by delivery to Landlord of a written notice of such exercise not later
than the first day of the eighth Lease Year, and Landlord shall deliver
possession of such space to Tenant on or about the first day of the ninth Lease
Year.

                              31.4 Option Terms

                                  31.4.1 The respective space leased to Tenant
pursuant to its exercise of any one of the options contained in Subsections 31.1
through 31.3, inclusive, hereof shall be referred to as an "Expansion Area". In
the event that Tenant shall exercise an option granted to it under the terms of
this Section 31, the Expansion Area shall be delivered to Tenant in "as is"
condition, except that Landlord shall undertake demolition of partitions and
other tenant improvements contained within the Expansion Area in accordance with
Tenant's reasonable specifications, at Landlord's expense prior to delivering
the Expansion Area to Tenant. Upon the date on which Landlord delivers
possession of each Expansion Area to Tenant, the Expansion Area shall constitute
a portion of the Premises (and Landlord shall inform Tenant in writing of the
then current Rentable Area of the Premises, including the Expansion Area, and
Tenant's Tax Share and Expense Share), Tenant shall promptly commence occupancy
thereof and the Expansion Area shall be fully subject to the terms, conditions
and agreements set forth in this Lease, including, without limitation, the
payment of Minimum Rent, other Rent and all other charges payable on account of
the Premises calculated as for the Premises, excepting only that the annual rate
of Minimum Rent payable for the Expansion Area shall equal the Minimum Rent
payable for the remainder of the Premises (as the same shall increase from time
to time during the remainder of the Term) plus One Dollar Fifty Cents ($1.50)
per Rentable Square Foot of the Expansion Area. Notwithstanding the foregoing,
Landlord agrees that no Minimum Rent or monthly payments on account of Tenant's
Tax Share or Tenant's Expense Share shall be payable or otherwise accrue on
account of a given Expansion Area following the date on which Landlord delivers
possession of such Expansion Area to Tenant until the first to occur of (a) the
first day of the eighth (8th) week thereafter or (b) the date on which Tenant
commences occupancy of the Premises for purposes of conducting its business
therein. Landlord shall provide Tenant with an allowance equal to $22.00 per
Rentable Square Foot of the Expansion Area, reduced in the amount of $2.20 for
each Lease Year elapsed at the time Tenant takes possession of the Expansion
Area (for example, if Tenant exercises the option contained in Section 31.2,
above, such allowance shall equal $11.00 per Rentable Square Foot of the


                                       70




Expansion Area), which allowance shall be payable to Tenant in the same manner
and for the same purposes as the Construction Allowance and the Plans Allowance.

                                  31.4.2 Failure of Tenant to deliver the
prescribed notice of election to exercise its option to lease any Expansion Area
on or before the date herein specified shall irrevocably and automatically
extinguish any such option to lease the Expansion Area in question but shall not
prejudice Tenant's rights respecting any other option to lease the Expansion
Area. The exercise of an option to lease any Expansion Area shall not be
effective or permissible if an Event of Default shall have occurred and be
continuing either at the time such option is exercised or at the time possession
of the Expansion Area is delivered, and in such event Tenant's option to lease
the Expansion Area in question shall cease and be deemed rescinded by Tenant,
and Landlord may freely lease such space to a third party of Landlord's
choosing, subject to Tenant's subsequent options hereunder.

                                  31.4.3 In the event that Landlord shall be
unable to deliver possession of any Expansion Area to Tenant due to: the holding
over of any other tenant, subtenant, licensee, or other person or entity
claiming possession of all or any part of the Expansion Area, or any other
reason beyond the control of Landlord, then Landlord shall not be liable in
damages to the Tenant, and during the period that the Landlord is unable to give
possession all rights and remedies of both parties hereunder shall be suspended
insofar as they relate to the Expansion Area and the Expansion Area shall not be
deemed to be a portion of the Premises; provided, however, that in the event
that Landlord shall be able to deliver possession of the Expansion Area
thereafter, then Tenant agrees that the exercise of its option shall be
effective as of the date Landlord delivers possession of the Expansion Area to
Tenant, and that the term of this Lease shall not be or be deemed to have been
extended by virtue of such delay. Notwithstanding the foregoing, if Landlord is
unable to deliver any Expansion Area on or before the ninetieth (90th) day of
the Lease Year at the commencement of which Landlord is obligated to deliver
such Expansion Area pursuant to this Section 31, Tenant may elect by notice
delivered to Landlord prior to Landlord's delivery of such Expansion Area to
Tenant to rescind Tenant's election to lease such Expansion Area. Such
rescission shall not affect any of Tenant's subsequent options with respect to
the Expansion Area hereunder, if any, and Landlord may thereupon freely lease
the Expansion Area in question to a third party of Landlord's choosing subject
to Tenant's subsequent options (if any) hereunder.

                32. Right of First Refusal. Landlord hereby grants to Tenant,
effective as of the Lease Commencement Date (but not before), a right of first
refusal to lease from Landlord during the Term of this Lease, as extended, all
(but not less than all) rentable space that becomes available for tenancy and
for which Landlord has an Offer (as hereinafter defined) on the 27th and 30th
floors of the Building during the Term of this Lease, as extended, excluding
only rentable space (a) with respect to which the then existing tenant occupying
same desires to exercise a renewal option or negotiate a new lease and (b) with
respect to which a presently existing tenant of the Building on the date of this
Lease has an expansion option, which shall be deemed to include, without
limitation, a right of first refusal or a right of first offer pre-dating


                                       71




this Lease, entitling it to lease such space (such rentable space being herein
referred to as the "Available Space"), in "as is" condition, on the following
terms and conditions: In the event that Landlord should receive a bona fide
offer from any third party to rent all or any portion of the Available Space (an
"Offer"), Landlord shall deliver a copy of the offer to Tenant. If Tenant does
not execute and return to Landlord a letter agreeing to lease the Available
Space on all the terms and conditions contained in the Offer within fifteen (15)
Business Days following Tenant's receipt of the Offer, Landlord may thereafter
complete the leasing of the Available Space to any third party in accordance
with the terms of the Offer within a period not to exceed 180 days. If Landlord
does not complete such leasing within one hundred eighty (180) days, Tenant's
right of first refusal with respect to such portion of the Available Space shall
be reinstated. Notwithstanding anything to the contrary contained herein, in the
event that Landlord shall receive and present to Tenant Offers respecting more
than one portion of the Available Space at the same time, Tenant may elect to
accept any number or none of the Offers and shall not be deemed obligated to
accept all of such Offers. Landlord hereby advises Tenant, for informational
purposes only, that the leases of the tenants on the 27th floor of the Building
on the date of this Lease do not contain any renewal or expansion rights.

                33. Contraction Option. Landlord hereby grants to Tenant the
option to terminate this Lease with respect to up to a maximum of seven thousand
five hundred (7,500) Rentable Square Feet of space contained within the then
current Premises on the 30th floor of the Building ("Contraction Space"),
subject to Landlord's reasonable approval of the area, location and
configuration of the space with respect to which this Lease is so terminated in
order to insure the reasonable marketability thereof to third parties for office
purposes, on the terms and subject to the conditions herein set forth. By
written notice to Landlord on or before the first day of the fifth Lease Year,
Tenant may terminate this Lease with respect to the Contraction Space effective
at the close of the last day of the fifth Lease Year. In the event Tenant fails
to exercise such option then Tenant shall also have the option, exercisable by
written notice delivered to Landlord on or before the first day of the eighth
Lease Year, to terminate this Lease with respect to the Contraction Space
effective at the close of the last day of the eighth Lease Year. Failure to give
timely notice of election shall be deemed a waiver of the respective option
herein contained, but a waiver of or failure to timely exercise the first such
option shall not preclude the timely exercise of the second such option.
Tenant's exercise of the options herein contained shall be irrevocable and shall
be absolutely subject to satisfaction of the following terms and conditions:

                              33.1 Contraction Fee. Tenant's notice of
contraction must be accompanied by Tenant's good bank check or other payment
acceptable to Landlord in an amount equal to the aggregate of (i) three monthly
payments of Minimum Rent for the portion of the Premises with respect to which
Tenant is terminating this Lease (pro rated on a per Rentable Square Foot basis)
(which sum shall not be credited to Minimum Rent owing under this Lease), plus
(ii) three monthly payments on account of Tenant's Tax Share and Tenant's
Expense Share in the amounts Tenant is then paying as additional rent for the
portion of the Premises with respect to which Tenant is terminating this Lease
(pro rated on a per Rentable Square Foot basis) (which payments shall not be
credited to Tenant's Tax Share or Tenant's Expense Share), plus


                                       72




(iii) the sum derived by multiplying the then unamortized Landlord's Cost of
Leasing (hereinafter defined) (assuming straight line amortization at a rate of
8% per annum over the Term, except with respect to the Construction Allowance,
which shall be amortized at 6.5% per annum over the Term), by the percentage
derived by dividing the Rentable Square Footage of the Contraction Space by the
Rentable Square Footage of the entire Premises prior to such termination. The
term "Landlord's Cost of Leasing" shall mean the aggregate cost to Landlord of
Landlord's Work performed under Section 7.4, above, the Construction Allowance,
the Plans Allowance, the Minimum Rent and additional rent Tenant was excused
from paying under Section 4.1, above, and all real estate brokerage fees and
commissions paid to Binswanger and Agent by Landlord and all reasonable legal
fees paid by Landlord in connection with Tenant's execution of this Lease.

                              33.2 Vacation. Upon election hereunder to
terminate this Lease with respect to the Contraction Space, Tenant shall vacate
the Contraction Space on or before the effective date of the termination of this
Lease with respect thereto, and such space shall be left in the condition in
which the Premises is required to be left at the time of the termination of this
Lease.

                34. Termination Option. Notwithstanding anything to the contrary
elsewhere contained in this Lease, Tenant is hereby given the option to
terminate the Term effective at the close of the last day of the seventh Lease
Year, the last day of the eighth Lease Year or the last day of the ninth Lease
Year, as Tenant shall elect, provided Tenant gives Landlord at least twelve (12)
months prior written notice of such election. Failure to give timely notice of
termination shall be deemed a waiver of the option in question, but a waiver of
or failure to timely exercise any single option shall not preclude the timely
exercise of any subsequent option. Such termination shall be with respect to the
entire Premises shall be irrevocable, and shall be absolutely subject to
satisfaction of the following terms and conditions:

                              34.1 Termination Payment. Tenant's notice of
termination must be accompanied by Tenant's good bank check or other payment
acceptable to Landlord in an amount equal to the aggregate of (i) two monthly
payments of Minimum Rent for the entire Premises as then constituted (which sum
shall not be credited to Minimum Rent owing under this Lease), plus (ii) two
monthly payments on account of Tenant's Tax Share and Tenant's Expense Share in
the amounts Tenant is then paying as additional rent with respect to the entire
Premises (which payments shall not be credited to Tenant's Tax Share or Tenant's
Expense Share), plus (iii) the then unamortized Landlord's Cost of Leasing
(assuming straight line amortization at a rate of 8% per annum over the Term,
except with respect to the Construction Allowance, which shall be amortized at
6.5% per annum over the Term).

                              34.2 Vacation. Upon election hereunder to
terminate this Lease, Tenant shall vacate the Premises on or before the
effective date of the termination of this Lease, and shall leave same in the
condition in which the Premises is required to be left on the Termination Date.


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                35. Miscellaneous

                              35.1 [INTENTIONALLY OMITTED.]

                              35.2 No Reservation or Option. The submission of
this Lease for examination does not constitute an offer to lease, or a
reservation of or option for the Premises, and this Lease becomes effective only
upon execution and delivery thereof by both Landlord and Tenant. In
consideration of Landlord's administrative expense in considering this Lease and
the term of Tenant's proposed tenancy hereunder, Landlord's reservation of the
leased Premises pending such consideration and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Tenant's submission to Landlord of this Lease, duly executed by Tenant, shall
constitute Tenant's irrevocable offer to continue for twelve (12) Business Days
from and after receipt by Landlord of the said Lease duly executed by Tenant or
until Landlord shall deliver to Tenant written notice of rejection of Tenant's
offer, whichever shall first occur. If within said twelve (12) Business Day
period Landlord shall neither return the Lease duly executed by Landlord nor so
advise Tenant of Landlord's rejection of Tenant's offer, then after said twelve
(12) Business Day period Tenant shall be free to revoke its offer, provided,
however, Tenant's offer shall continue until (a) ten (10) days after revoked by
Tenant in writing or (b) accepted or rejected by Landlord, whichever shall first
occur.

                              35.3 Non Waiver. The failure of either party
hereto in any one or more instances to insist upon the strict performance of any
one or more of the agreements, terms, covenants, conditions or obligations of
this Lease, or to exercise any right, remedy or election herein contained, shall
not be construed as a waiver or relinquishment of the right to insist upon such
performance or exercise in the future, and such right shall continue and remain
in full force and effect with respect to any subsequent breach, act or omission.

                              35.4 Partial Payment. No payment by Tenant or
receipt by Landlord of a lesser amount than the correct Minimum Rent or
Additional Rent due hereunder shall be deemed to be other than a payment on
account, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment be deemed to effect or evidence an accord and
satisfaction and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance or pursue any other remedy in this Lease
or at law provided.

                              35.5 Prior Agreements; Amendments. This Lease
constitutes the entire agreement between the parties relating to the subject
matter contained herein. Neither party hereto has made any representations or
promises to the other except as expressly contained herein. This Lease
supersedes all prior negotiations, agreements, informational brochures, letters,
promotional information and other statements and materials made or furnished by
Landlord or its agents. No rights, easements or licenses are acquired in the
Property or in any land adjacent thereto, by Tenant by implication or otherwise,
except as expressly set forth in this


                                       74




Lease. No agreement hereinafter made shall be effective to change, modify,
discharge or effect an abandonment of this Lease, in whole or in part, unless
such agreement is in writing and signed by the party against whom enforcement of
the change, modification, discharge or abandonment is sought.

                              35.6 [INTENTIONALLY OMITTED]

                              35.7 Partial Invalidity. If any of the provisions
of this Lease, or the application thereof to any person or circumstances, shall,
to any extent, be invalid or unenforceable, the remainder of this Lease, or the
application of such provision or provisions to persons or circumstances other
than those as to whom or which it is held invalid or unenforceable, shall not be
affected thereby, and every provision of this Lease shall be valid and
enforceable to the fullest extent permitted by law.

                              35.8 Common Facilities. Tenant and its agents,
employees and invitees, shall have the right to use, in common with all others
granted such rights by Landlord, in a proper and lawful manner, the common
walkways and sidewalks on the Property, the common entranceways, lobbies,
elevators and stairways, furnishing access to the Premises, and (if the Premises
includes less than a full floor) the common lobbies, hallways and toilet rooms
on the floor on which the Premises is located. Such use shall be subject to such
reasonable rules, regulations and requirements as Landlord may from time to time
prescribe with respect thereto.

                              35.9 Choice of Law. This Lease has been executed
and delivered in the Commonwealth of Pennsylvania and shall be construed in
accordance with the laws of the Commonwealth of Pennsylvania. Any action brought
to enforce or interpret this Lease shall be brought in the court of appropriate
jurisdiction in the county in which the Building is located. Should any
provision of this Lease require judicial interpretation, it is agreed that the
court interpreting or considering same shall not apply the presumption that the
terms hereof shall be more strictly construed against a party by reason of the
rule or conclusion that a document should be construed more strictly against the
party who itself or through its agent prepared the same. It is agreed and
stipulated that all parties hereto have participated equally in the preparation
of this Lease and that legal counsel was consulted by each responsible party
before the execution of this Lease.

                              35.10 No Recordation. This Lease shall not be
recorded in whole or in memorandum form by either party hereto without the prior
written consent of the other.

                              35.11 Receipt of Money. No receipt of money by
Landlord from Tenant after the termination of this Lease or after the service of
any notice or after the commencement of any suit, or after final judgment for
the possession of the Premises, shall reinstate, continue or extend the Term of
this Lease or affect any such notice, demand or suit or imply consent for any
action for which Landlord's consent is required.


                                       75




                              35.12 No Joint Venture. This Lease shall create
only the relationship of Landlord and Tenant between Landlord and Tenant and no
fee estate shall pass out of Landlord. Nothing herein is intended to be
construed as creating a joint venture or partnership relationship between the
parties hereto.

                              35.13 No Third Party Beneficiaries.
Notwithstanding anything to the contrary contained herein, no provision of this
Lease is intended to benefit any party other than the signatories hereto and
their permitted heirs, personal representatives, successors and assigns, and no
provision of this Lease shall be enforceable by any other party.

                              35.14 Exhibits. All exhibits referred to in this
Lease are attached hereto and shall be deemed an integral part hereof.

                              35.15 Captions. The captions included in this
Lease, whether for sections, subsections, paragraphs, Table of Contents,
Exhibits, or otherwise, are inserted and included solely for convenience and
shall not be considered or given any effect in construing the provisions hereof,
and are not to be used in interpreting this Lease or for any other purpose in
the event of any controversy.

                              35.16 Representations. Landlord and Agent have
made no representation, agreement, condition, warranty, understanding, or
promise, either oral or written, other than as set forth herein, with respect to
this Lease, the Property, the Premises, or otherwise.

                              35.17 Gender; Plural Terms; Persons. The
masculine, feminine, or neuter pronoun shall each include the masculine,
feminine, and neuter genders. A reference to person shall mean a natural person,
a trustee, a corporation, a partnership and any other form of legal entity. All
references (including pronouns) in the singular or plural number shall be deemed
to have been made, respectively, in the plural or singular number as well, as
the context may require.

                              35.18 Time. Time is of the essence of this Lease
and all of its provisions.

                              35.19 Waiver of Jury Trial. It is mutually agreed
by and between Landlord and Tenant that they hereby waive trial by jury in any
action proceeding or counter-claim brought by either of the parties hereto
against the other on any matter whatsoever arising out of or in any way
connected with this Lease, the relationship of Landlord and Tenant, Tenant's use
or occupancy of the Premises or claim of injury or damage.

                              35.20 Parking Spaces. Landlord shall make
available to Tenant within 30 days of the Lease Commencement Date eighteen (18)
monthly contract parking spaces on a non-reserved basis in the Garage Space.
Thereupon, if Tenant so elects, Tenant may


                                       76




contract at Tenant's expense with the Garage Space operator for the use of such
spaces throughout the Term and any renewals thereof, or for such lesser period
as Tenant may elect, and shall abide by all reasonable rules and regulations
uniformly applicable to users of parking spaces in the Garage Space. Such
parking spaces shall be for use solely by Tenant and Tenant's sublessees, agents
and invitees.

                              35.21 Survival Notwithstanding any termination of
the Term of this Lease for any reason, obligations of the parties hereunder
which arose prior to such termination (such as the payment of Rent) or relate
back to an event which occurred during the Term (such as releases and
indemnities herein contained) shall survive such termination and remain fully
enforceable thereafter for the period of the applicable statute of limitations.

                              35.22 Guaranty. As a material inducement to
Landlord to enter into this Lease, Tenant agrees to cause PMA Reinsurance
Corporation, a Pennsylvania corporation, to execute and deliver to Landlord an
unconditional agreement to guarantee and become surety for the full performance
of Tenant's obligations under this Lease, said agreement to be in the form
attached hereto as Exhibit "I" and incorporated herein by reference, and to be
delivered to Landlord, duly executed by said guarantor, simultaneously with
Tenant's execution and delivery of this Lease to Landlord.

                              35.23 Time for Performance. In the event any
performance of the obligations imposed by this Lease is required on a Saturday,
Sunday or Holiday the time for such performance shall automatically extend until
the next following Business Day.

                              35.24 Fire Stair Access. Notwithstanding anything
contained in this Lease to the contrary, Tenant may utilize the fire stairways
connecting the several floors of the Building on which the Premises are located
for purposes of access between floors of the Premises by Tenant's employees and
invitees, in the same manner as if such fire stairways were part of the
Premises, on the following terms and conditions:

                                  35.24.1 Subject to Tenant's compliance with
the requirements of Sections 10.7 and 11.6 of this Lease and receipt of all
necessary permits, licenses and approvals from governmental entities and
agencies having jurisdiction, including without limitation the Philadelphia Fire
Marshall's office (copies of which permits, licenses and approvals shall be
delivered to Landlord prior to the commencement of any work in the fire
stairways), Tenant may paint and install lighting in that portion of the fire
stairways beginning on and including the landing serving the lowest floor of the
Premises and ending on and including the landing serving the highest floor of
the Premises (excluding any non-contiguous floors of the Premises), at Tenant's
sole expense, provided that Tenant may not carpet such portion of the fire
stairways. In connection with such work, and subject as aforesaid, Tenant shall
install Weigand card readers compatible with the existing Building card access
system and the Building fire alarm system in the stairwells to permit access
through the fire stairway doors to the Premises.


                                       77





                                  35.24.2 Solely for purposes of Sections 10.6,
10.7, 14 and 15 of this Lease, those portions of the fire stairways so painted
and lit by Tenant shall be deemed part of the Premises. Likewise, all rules and
regulations applicable to the Premises shall be applicable to Tenant's use of
the fire stairways. For all other purposes, the fire stairways shall not be part
of the Premises. Tenant shall not be obligated to pay any Rent on account of its
use of the fire stairways.

                                  35.24.3 Tenant's use of the fire stairways
shall be in common with Landlord and all other tenants of the Building, and
their respective employees, agents, contractors and invitees.

                                  35.24.4 The parties intend that the portion of
the fire stairways decorated by Tenant hereunder shall not receive janitorial
services of a different type or with greater frequency than the remainder of the
fire stairways of the Building.

                                  35.24.5 Tenant shall not allow Tenant's
employees and invitees to utilize the remainder of the fire stairways in the
Building except in the event of an emergency or Building fire drill.

                IN WITNESS WHEREOF, and intending to be legally bound hereby,
the parties hereto have caused this Lease to be executed by their duly
authorized representatives as of the day and year first above written.


                                          TENANT

                                            LORJO CORP.

Attest:

/s/ Paul T. Luber                           By: /s/ John W. Smithson
- -----------------------------                   -------------------------------
Name: Paul T. Luber                             Name:  John W. Smithson
Title: Assistant Secretary                      Title: Vice President

[Corporate Seal]


                                          LANDLORD

Witness:                                    NINE PENN CENTER ASSOCIATES, L.P.

                                            By Transportation Associates, a
                                            Pennsylvania limited partnership,
                                            its managing general partner


                                       78




                                            By: /s/ Ronald Rubin
                                                --------------------------------
                                                Name:  Ronald Rubin
                                                Title: Managing General Partner


                                            By The Equitable Life Assurance
                                            Society of the United States,
                                            general partner


                                            By: /s/ Frederick F. Buchholz
                                                --------------------------------
                                                Name:  Frederick F. Buchholz
                                                Title: Investment Officer


                                       79




                                    EXHIBIT B

                             [INTENTIONALLY OMITTED]


                                      -i-




                                    EXHIBIT C

                                       To
                            Mellon Bank Center Lease


                               MELLON BANK CENTER
                              RULES AND REGULATIONS


                1. The entrances, sidewalks, halls, passages, concourses, plaza,
elevators, lobbies, stairways, and driveways shall not be obstructed by Tenant
or used for any purpose other than for ingress to and egress from the Premises.
The halls, passages, entrances, elevators, stairways, balconies and roof are not
for the use of the general public, and Landlord shall in all cases retain the
right to control and prevent access thereto of all persons whose presence in the
judgment of Landlord shall be prejudicial to the safety, or interest of the
Building or its tenants, provided that nothing herein contained shall be
construed to prevent such access to persons with whom Tenant normally deals in
the ordinary course of its business including Tenant's employees, agents,
contractors, guests and invitees, unless such persons are engaged in illegal
activities.

                2. Tenant, its employees, contractors, agents, servants,
visitors, and licensees shall not go upon the roof or mechanical floors of the
Building without the written consent of Landlord which consent shall not be
unreasonably withheld or delayed during the course of the Tenant Work.

                3. The exterior windows and doors that reflect or admit light or
air into the Premises or the halls, passageways or other public places in the
Building or the Property, shall not be covered or obstructed by Tenant. No
showcase or other articles shall be put in front or affixed to any part of the
exterior of the Building or the Property, nor placed in the halls, corridors or
vestibules, nor shall any article obstruct any air-conditioning supply or
exhaust.

                4. No awnings, air conditioning units, fans, aerials, antennas,
or other projections or similar devices shall be attached to the Building,
regardless of whether inside the Building or on its facade or its roof, without
the prior written consent of Landlord. No curtains, blinds, shades or screens
shall be attached to or hung in, or used in connection with, any window, transom
or door of the Premises or the Building without the prior written consent of
Landlord. All curtains, blinds, shades, screens, and other fixtures must be of a
quality, type, design and color, and attached in the manner approved by
Landlord. All electrical fixtures shall be fluorescent, of a quality, type,
design, and color approved by Landlord unless the prior consent of Landlord has
been obtained for any other lighting or lamping.

                5. No Tenant or employees, contractors, agents, servants,
visitors, or licensees of Tenant shall sweep or throw or permit to be placed,
left or discarded from the Premises any


                                      -i-




rubbish, paper, articles, objects or other substances into any of the corridors
or halls, elevators, or out of the doors or stairways of the Building.

                6. Tenant shall at all times keep the Premises neat and orderly.

                7. Tenant shall not mark or in any other way deface any part of
the Premises, Building or Property. The ceiling shall not be used for the
suspension of any item or fixture, including, without limitation, plants and
decorative items. No boring, drilling of nails or screws, cutting or stringing
of wires shall be permitted within the Building or the Property (excluding the
Premises), except with the prior written consent of Landlord and as Landlord may
direct. Tenant shall not lay floor tile or other similar floor covering in the
Premises, except with the prior approval of Landlord which approval shall not be
unreasonably withheld, conditioned or delayed. Floor covering shall be affixed
to the floor in a manner which permits easy removal and shall be subject to
approval by Landlord prior to installation.

                8. No freight, furniture of bulky matter of any description
shall be received into the Building or carried into the passenger or service
elevators except during hours and in a manner approved by Landlord. Any hand
trucks, carryalls, or similar appliances used for delivery or receipt of
merchandise or equipment shall be equipped with rubber tires, side guards and
such other safeguards as Landlord shall reasonably require.

                9. Tenant shall not permit any work to be done or service to be
rendered in the Premises, including moving of goods into or out of the Premises,
involving the employment of labor incompatible with the employees or contractors
doing work or performing services by or on behalf of Landlord.

                10. Any tenant deciding to move any equipment or office
furniture into, out of, or within the Building, requiring more than two (2)
elevator trips, must notify Landlord at least one (1) week in advance of
intended move. Any move involving lesser use of the freight elevators or use on
Saturday or Sunday shall require twenty-four (24) hours notice. Such
notification shall include: (i) the date of the move, (ii) the time of move
(which shall not be during normal working hours on Business Days without
Landlord's consent), (iii) the number of elevators and operators required for
the move, and (iv) an agreement by the Tenant to pay the then prevailing charge
for the use of the elevators and operators. Upon receipt of the above
information, Landlord, or its agent, will issue a letter of authorization to the
Tenant to arrange for elevator operators.

                11. The freight elevator shall not be used by Tenant without
Landlord's prior approval.

                12. Tenant shall not alter any lock or install a new or
additional lock or any bolt or other security device on any door of the Premises
without prior written consent of Landlord.


                                      -ii-




If Landlord shall give its consent, Tenant shall in each case furnish Landlord
with two keys for each such lock and security device.

                13. Dock facilities are to be used only for loading and
unloading procedures. No parking or storage privileges are extended.

                14. No dumpsters are to be placed at the loading dock without
prior notification and approval by Landlord which approval shall not be
unreasonably withheld, conditioned or delayed.

                15. If Tenant desires telecommunications signalling, telephonic,
protective alarm, connections, or other such wires, apparatus, or devices,
Landlord will direct electricians as to where and how the wires are to be
introduced. No boring or cutting for wires or otherwise shall be made without
directions and approval from Landlord, which shall not be unreasonably withheld,
conditioned or delayed. All wires must be clearly tagged at the distributing
boards and junction boxes, and elsewhere as reasonably required by Landlord,
with the number of the office to which said wires lead, the purpose of the
wires, and the name of the concern, if any, operating or servicing the same.

                16. The electrical, mechanical, and telephone closets, water and
wash closets, drinking fountains and other plumbing, electrical and mechanical
fixtures shall not be used for any purposes other than those for which they were
constructed, and no sweepings, rubbish, rags, coffee grounds, acids or other
substances shall be deposited therein. No access to the electrical, mechanical
and telephone closets will be permitted without the prior consent of Landlord
which consent shall not be unreasonably withheld, conditioned or delayed. All
damages resulting from any misuse of the fixtures shall be borne by the Tenant
who, or whose servants, employees, agents, visitors or licensees, shall have
caused the same. No person shall waste water by interfering or tampering with
the faucets or otherwise.


                17.Tenant shall not create, execute, or deliver any financing or
security agreement of any kind that may be considered or give rise to any lien
upon the Premises, the Building, or the Property.

                18. No portion of the Premises, Building, or Property shall be
used or occupied at any time for manufacturing, for the storage of merchandise,
for the sale of merchandise, goods or property of any kind at auction or at
retail, or as sleeping or lodging quarters.

                19. In the design, layout, construction, renovation, and/or
installation of Tenant's demising walls, partitions, furniture, fixtures,
equipment, and all other improvements and betterments of or in the Premises, the
live load of seventy (70) pounds per square foot shall not be exceeded at any
time.


                                     -iii-




                20. Tenant shall not engage or pay any employees on the
Premises, except those actually working for such Tenant on said Premises, and
Tenant shall not advertise for labor giving an address at said Premises.

                21. No bicycles, vehicles, animals, or birds of any kind (other
than a seeing-eye dog for a blind person), shall be brought into or kept by
Tenant in or about the Premises, the Building, or the Property.

                22. Tenant shall not do or commit, or suffer to be done or
committed, any act or thing whereby, or in consequence whereof, the rights of
other tenants will be materially obstructed or interfered with, or other tenants
will in any other way be injured or annoyed, or whereby the Building will be
damaged, nor shall Tenant cause or suffer to be caused any noise, vibrations,
obnoxious odors, or electronic interference which disturbs other tenants, the
operation of their equipment or the operation of any equipment in the Building
(including, without limitation, radio, television reception). Tenant shall not
suffer nor permit the Premises or any part thereof to be used in any manner or
anything to be done therein nor suffer nor permit anything to be brought into or
kept in the Premises which, in the reasonable judgment of Landlord, shall in any
way impair or tend to materially impair the appearance of the Building.

                23. Tenant shall not serve, nor permit the serving of alcoholic
beverages in the Premises unless Tenant shall have procured Host Liquor
Liability Insurance, issued by companies and in amounts reasonably satisfactory
to Landlord, naming Landlord as an additional party insured.

                24. Except as otherwise explicitly permitted in its lease,
Tenant shall not allow any open flames, cooking, the operation or conduct of any
restaurant, luncheonette or cafeteria for the sale or service of food or
beverages to its employees or to others, except for food and beverage vending
machines, microwave ovens and hot plates and, at catered affairs only, chafing
dishes, or install or permit the installation or use of any cigarette, cigar or
stamp dispensing machine.

                25. Any person in the Building will be subject to identification
by employees and agents of Landlord. All persons in or entering Building shall
be required to comply with the security policies of the Building. Tenant shall
keep doors to unattended areas locked, and shall otherwise exercise reasonable
precautions to protect property from theft, loss or damage.

                26. In case of invasion, mob, riot, public excitement, or other
commotion, Landlord reserves the right to prevent access to the Building during
the continuance of the same by closing the doors or otherwise for the safety of
Tenants or Landlord and protection of property in the Building.

                27. Landlord shall, in no case, be responsible for the admission
or exclusion of any person to or from the Building for access or for invasion,
hostile attack, insurrection, mob violence, riot, public excitement or other
commotion.


                                      -iv-




                28. Tenant shall immediately notify Landlord of any injury to a
person or damage to property regardless of cause within the Premises and all
public areas within the Building.

                29. Canvassing, soliciting, and peddling in the Building is
prohibited and Tenant shall cooperate in preventing the same, and report all
such activity to Landlord.

                30. Tenant, upon the termination of the tenancy, shall deliver
to Landlord all of the keys, combinations to all locks, of offices, rooms and
toilet rooms which shall have been furnished Tenant or which Tenant shall have
made.

                31. These Rules and Regulations shall be read in conjunction
with the Lease and the Exhibits thereto. To the extent these Rules and
Regulations are inconsistent with the remainder of the Lease and Exhibits, the
Lease and other Exhibits shall control.

                32. Landlord may, by ten (10) days written notice to Tenant,
promulgate additional rules and regulations, and/or modifications of the rules
and regulations which are, in Landlord's reasonable judgment, desirable for the
general safety, comfort and convenience of occupants and tenants in the
Building. All such rules and regulations shall be deemed a part of this Lease,
with the same effect as though written herein. Landlord shall enforce all rules
and regulations uniformly against all Office Space tenants in the Building
(except the Pyramid Club).


                                      -v-




                                   EXHIBIT "D"
                                       To
                            Mellon Bank Center Lease

                             Index of Defined Terms


             Term                                      Section in Which Defined
             ----                                      ------------------------

             Additional Rent                                       1
             Affiliate                                             1
             Agent                                                 1
             Application for Payment                               7.7.2
             Base Building Plans                                   7.1
             Building                                              2.1
             Business Hours                                        1
             Capital Expenditures                                  6.1.3.24
             Confirmation Memorandum                               3.6
             Construction Allowance                                1
             Construction Documents                                7.3.3
             Deficiencies                                          5.2.5


                                      -i-




             Design Development Documents                          7.3.2
             Expansion Area                                        31.3.1
             Expense Share Date                                    6.2.1.2
             First Lease Year                                      3.1
             HVAC                                                  8.1
             Indemnify                                             14.2
             Issued for Construction                               7.3.4.4
             Land                                                  1
             Landlord                                              1
             Landlord's Cost                                       7.8.1
             Lease Commencement Date                               3.1
             Lease Interest Rate                                   1
             Lease Year                                            3.1
             Minimum Rent                                          4
             Monthly Operating Expense Estimate                    6.2.1.1
             Notifying Party                                       15.10
             Office Space                                          2.1
             Operating Expenses                                    6.1.3
             Operating Expense Statement                           6.1.8
             Operating Year                                        6.1.1
             Permitted Use                                         1
             Pledge                                                12.1
             Premises                                              2.1
             Prime Rate                                            1
             Profit                                                12.7
             Property                                              1
             Real Estate Taxes                                     5.1.1
             Renewal Term                                          30.1
             Rent                                                  4.4
             Rentable Area                                         1
             Rentable Square Feet                                  1
             Schematic Design Documents                            7.3.1
             Sublet Notice                                         12.4
             Sublet Space                                          12.5
             Tax Statement                                         5.1.5
             Tax Year                                              5.1.4
             Tenant                                                29.2
             Tenant Work                                           7.5
             Tenant's Construction Representative                  7.2
             Tenant's Expense Share                                6.1.2
             Tenant's Tax Share                                    5.1.3
             Term                                                  3.1.1
             Termination Date                                      3.1


                                      -ii-




                                    EXHIBIT E

                                       To
                            Mellon Bank Center Lease

                         TENANT'S CONTRACTORS' INSURANCE


                Prior to approving any contractor or subcontractor, Landlord may
require each contractor and subcontractor to obtain the following insurance, at
its own expense, in amounts not less than those specified below:

                1.  Worker's Compensation insurance in accordance with the laws
                    of the Commonwealth of Pennsylvania.

                2.  Employer's Liability insurance in an amount not less than
                    $1,000,000.

                3.  Commercial General Liability insurance on an occurrence form
                    for: (a) bodily injury, and (b) property damage liability,
                    with limits of $1,000,000 combined single limit, each
                    occurrence. Such insurance policy shall include, but shall
                    not be limited to: CGL Form, Premises - Operation,
                    Explosion, Collapse, Underground Hazard, Products/Completed
                    Operations Hazard , Blanket Contractual Coverage (including
                    coverage for the Indemnity Clauses provided under this
                    Contract), Broad Form Property Damage, Independent
                    Contractors, Personal Injury.

                4.  Business Automobile Liability covering owned, hired, and
                    non-owned vehicles with limits of $1,000,000 combined single
                    limit each occurrence.

                The above insurances (#3 through #4) shall, without liability on
the part of Landlord(s) and Agent for premiums thereof include the following:

                A.  Endorsement as Additional Insureds of:

                    a.  Landlord(s) and Agent and their partners, directors,
officers, employees, agents and representatives; and

                B.  Thirty (30) day prior notice of cancellation to each named
                    insured.


                                      -i-




                                   EXHIBIT "G"
                                       TO
                            MELLON BANK CENTER LEASE

                             CLEANING SPECIFICATIONS

IT IS THE INTENT OF THIS EXHIBIT THAT THE BUILDING BE KEPT NEAT AND CLEAN AT ALL
TIMES. THE SPECIFICATIONS OUTLINED BELOW SHOULD, THEREFORE, BE REFERRED TO AS A
MINIMUM STANDARD.

- - - - --------------------------------------------------------------------------

General Cleaning five (5) nights per week, Sunday through Thursday nights,
unless excluded by Union contract, and further, excluding Union Holidays.

NIGHTLY

     1.   Empty and damp wipe all ash trays.

     2.   Empty and dust wipe all waste receptacles.

     3.   Place waste in bags and leave in designated area off Tenant's
          premises.

     4.   Empty, clean and refill smoking urns as needed.

     5.   Dust all areas within hand high reach; this includes window sills,
          wall ledges, chairs, desks, tables, baseboards, file cabinets,
          radiators, pictures and all manner of office furniture.

     6.   Damp wipe all glass top desks and tables.

     7.   Damp wipe spillage on furniture in lounges and lunch room areas.

     8.   Sweep with treated cloths all composition tile flooring.

     9.   Vacuum all carpeted areas and remove spots. Spot vacuum one night,
          full vacuum every other night.

    10.   Sweep and wash rubber mats as necessary.


                                      -i-




GENERAL OFFICE AREAS

Quarterly

          Strip, scrub and wash all composition tile flooring.

HIGH DUSTING

Monthly

     1.   High dust all walls, ledges, pictures, anemostats and registers of
          public areas not reached in normal nightly cleaning.

     2.   High dust all walls, ledges, pictures, files, anemostats and registers
          of office areas not reached in normal nightly cleaning.


LIGHTS

Quarterly

          Dust all lighting fixtures in public areas.

Yearly

     1.   Wash all lighting fixtures in public areas. (*)

     2.   Wash all lighting fixtures in office areas. (*)

          (*) We would expect lighting fixtures to be dusted on tube
              replacement.


STAIRWAYS

Weekly

          Sweep and dust stairways.

Monthly

     1.   Wash all stairways other than fire tower.

     2.   Sweep and dust fire tower stairways.


                                      -ii-




Semi-Annually

          Wash fire tower stairways.


ELEVATOR & ESCALATORS

Weekly

     1.   Clean Passenger elevator saddles.

     2.   Clean Freight elevator saddles.


MISCELLANEOUS

Yearly

          Wash marble walls.


AS NECESSARY

          Snow removal.


DAY PORTER SERVICE

     1.   Police all public areas and men's toilets in Tenant's Premises twice
          daily.

     2.   Refill toilet room dispensers in Tenant's Premises as needed twice
          daily.

     3.   Sweep sidewalks.

     4.   Remove fingermarks from entrance doors.

     5.   Set out foul weather mats when necessary.


DAY MATRON SERVICES (Twice during daily working hours)

     1.   Police ladies' restrooms in Tenant's Premises.


                                     -iii-




     2.   Refill all toilet room dispensers in Tenant's Premises, including
          sanitary napkins.


WINDOW CLEANING SERVICES (Weather and access permitting)

Daily

     1.   Clean entrance doors.

     2.   Clean glass in directors.

Every Three Months

     1.   Clean all windows inside and out.

     2.   Clean clear interior partition glass. (*)

Every Six Months

          Clean frosted interior partition glass. (*)

          (*) Spot clean all glass, if needed, by night cleaning crew.


                                      -iv-




                                    EXHIBIT I
                                       To
                            Mellon Bank Center Lease

                                GUARANTY OF LEASE

                WHEREAS, a certain Lease of even date herewith has been or will
be executed by and between Nine Penn Center Associates, L.P. ("Landlord"), and
LORJO CORP., a Pennsylvania corporation ("Tenant"), covering certain premises in
the building known as Mellon Bank Center, Philadelphia, Pennsylvania (the
"Lease"); and

                WHEREAS, the Landlord requires as a condition to its execution
of the Lease, that the undersigned unconditionally becomes a surety to Landlord
for the obligations of Tenant under the Lease; and

                WHEREAS, the undersigned is a principal of Tenant and as such is
desirous that Landlord enter into the Lease with Tenant.


                                      -i-




                NOW THEREFORE, in consideration of the execution of the Lease by
Landlord and other good and valuable consideration and intending to be legally
bound hereby, the undersigned hereby unconditionally becomes surety to Landlord,
its successors and assigns for the full, faithful and punctual performance of
each and all of the covenants, agreements and conditions of the Lease to be kept
and performed by Tenant, in accordance with and within the times, terms and
conditions prescribed by the Lease as well as all other liabilities now or
hereafter contracted by Tenant with Landlord together with all reasonable costs
and expenses (including reasonable attorney's fees) incurred by Landlord in
connection with the enforcement or collection of any of the foregoing
(hereinafter collectively referred to as the "Liabilities"). The undersigned
further agrees as follows:

                1. Landlord shall have the right from time to time, and at any
time in its sole discretion, without notice to or consent from the undersigned,
or without affecting, impairing or discharging in whole or in part, the
Liabilities of the Tenant or the obligations of the undersigned hereunder, to
modify, change, extend, alter, amend, or supplement in any respect whatever, the
Lease, or any agreement or transaction between Landlord and Tenant or between
Landlord and any other party liable for the Liabilities, or any portion or
provision thereof; to grant extensions of time and other indulgences of any kind
to Tenant; to compromise, release, substitute, exercise, enforce or fail to
refuse to exercise or enforce any claims, rights, or remedies of any kind which
Landlord may have at any time against Tenant or any other party liable for the
Liabilities, or any thereof, or with respect to any security of any kind held by
Landlord at any time under any agreement or otherwise. The obligations of the
undersigned hereunder shall not be affected, impaired or discharged. in whole or
in part, by reason of any action whatsoever taken by Landlord, including,
without limitation, any sale, lease, disposition, liquidation or other
realization (which may be negligent, willful or otherwise with respect to any
security in which Landlord may at any time have any interest or against any
other party liable for all or any part of the Liabilities).

                2. The undersigned waives: (a) all notices, including but not
limited to (i) notice of acceptance of this Guaranty; (ii) notice of
presentment, demand for payment, or protest of any of the Liabilities, or the
obligation of any person, firm, or corporation held by Landlord as collateral
security; (b) all defenses, offsets and counterclaims which the undersigned may
at any time have to any of the Liabilities; (c) trial by jury and the right
thereto in any proceeding of any kind, whether arising on or out of, under or by
reason of this Guaranty, or any other agreement or transaction between the
undersigned, Landlord and/or Tenant; and (d) all notices of the financial
condition or of any adverse or other change in the financial condition of
Tenant.

                3. Landlord may, without notice, assign this Guaranty in whole
or in part, and no assignment of this Guaranty or assignment or transfer of the
Lease or subletting of the Demised Premises shall operate to extinguish or
diminish the liability of the undersigned hereunder.


                                      -ii-




                4. The liability of the undersigned under this Guaranty shall be
primary under any right of action which shall accrue to Landlord under the Lease
and Landlord may, at its option, proceed against the undersigned without having
to commence any action, or having obtained any judgment against Tenant.

                5. All of the Liabilities and the obligations of the undersigned
hereunder shall be immediately due and payable by the undersigned, anything
contained herein to the contrary notwithstanding, immediately upon the
occurrence of an Event of Default (as defined in the Lease) whether or not
Landlord has exercised any option which it may have to require payment in full
or acceleration of payment of the Liabilities from any other person liable for
payment of the Liabilities.

                6. The undersigned agrees and consents to the exclusive
jurisdiction of the Courts of Common Pleas of Pennsylvania and/or the United
States District Court for the Eastern District of Pennsylvania in any and all
actions and proceedings whether arising hereunder or under any other agreement
or undertaking between the undersigned, Landlord and/or Tenant and irrevocably
agrees to service of process by certified mail, return receipt requested, to its
address set forth herein.

                7. The obligations of the undersigned hereunder shall not be
affected, impaired or discharged, in whole or in part, by reason of: (a) the
entry of an order for relief pursuant to the United States Bankruptcy Code by or
against Tenant or the undersigned; (b) the proposal of or the consummation of a
plan of reorganization concerning Tenant or the undersigned; or (c) the
assignment of Tenant's obligations pursuant to (i) the Lease; (ii) an order of
court; or (iii) by operation of law.

                8. The waiver of any right by Landlord or its failure to
exercise promptly any right shall not be construed as the waiver of any other
right including the right to exercise the same at any time thereafter. No waiver
of modification of any of the terms or conditions of this Guaranty shall be
binding against Landlord unless such waiver or modification is in a writing
signed by Landlord.

                9. Any acknowledgement, new promise, payment of rent or other
sums by Tenant or others with respect to the Liabilities of Tenant, shall be
deemed to be made as agent of the undersigned for the purposes hereof, and
shall, if the statute of limitations in favor of the undersigned against
Landlord shall have commenced to run, toll the running of such statute of
limitations, and if such statute of limitations shall have expired, prevent the
operation of such statute.

                10. The provisions of this Guaranty shall bind the successors
and assigns of the undersigned and shall inure to the benefit of Landlord, its
successors and assigns.


                                     -iii-




                11. All rights and remedies of Landlord are cumulative and not
alternative. This Guaranty is, and shall be deemed to be, a contract entered
into under and pursuant to the laws of the Commonwealth of Pennsylvania and
shall be in all respects governed, construed, applied and enforced in accordance
with the laws of said Commonwealth. No defense given or allowed by the laws of
any other state or country shall be interposed in any action or proceeding
hereunder unless such defense is also given or allowed by the laws of the
Commonwealth of Pennsylvania.

                12. The undersigned represents that at the time of the execution
and delivery of this Guaranty nothing exists to impair the effectiveness of the
obligations of the undersigned to Landlord hereunder, or the immediate taking
effect of this Guaranty between the undersigned and Landlord with respect to the
undersigned becoming a surety for the Liabilities.

                13. If less than all persons who were intended to sign this
Guaranty do so, the same shall nevertheless be binding upon those who do sign
and if one person shall sign, all plural references shall be read as singular.
In the event the undersigned consists of more than one person or entity, the
obligations of such persons and entities hereunder shall be joint and several.

                14. Any notice or demand given or made under this Guaranty shall
be given or made by mailing the same by certified mail to the party to whom the
notice or demand is given or made at the following address of such party set
forth in this Guaranty or at such other address as may be stipulated by notice
given as aforesaid:

                If to Landlord:

                         c/o The Rubin Organization
                         The Bellevue, 3rd Floor
                         200 S. Broad Street
                         Philadelphia, PA  19102
                         Attn: Director of Leasing

                With a copy to:

                         Richard I. Rubin & Co., Inc.
                         Management Office
                         Concourse Level, Mellon Bank Center
                         1735 Market Street
                         Philadelphia, PA  19103
                         Attn: Building Manager


                                      -iv-




                With a copy to:

                         Banque Paribas
                         The Equitable Tower
                         787 Seventh Avenue
                         New York, New York 10019
                         Attention:  Douglas Veasey

                With a copy to:

                         Winston & Strawn
                         175 Water Street
                         New York, New York 10038
                         Attention:  Douglas L. Wisner, Esq.

                If to the undersigned:

                         PMA Reinsurance Corporation
                         Suite 2800
                         1735 Market Street
                         Mellon Bank Center
                         Philadelphia, PA  19103
                         Attn: Steve Tirney

                With a copy to:

                         The PMA Building
                         380 Sentry Parkway
                         Blue Bell, PA  19422
                         Attn: Paul T. Luber

                         Banque Paribas
                         The Equitable Tower
                         787 Seventh Avenue
                         New York, New York 10019
                         Attention:  Douglas Veasey

                With a copy to:

                         Winston & Strawn
                         175 Water Street
                         New York, New York 10038
                         Attention:  Douglas L. Wisner, Esq.


                                      -v-




                IN WITNESS WHEREOF, the undersigned has caused this Guaranty to
be executed and sealed this ____ day of ________________, 1994.


Attest:                                     PMA REINSURANCE CORPORATION



_____________________________               By: _______________________________
Name:                                           Name:
Title:                                          Title:

(Corporate Seal)


                                      -vi-




                                    EXHIBIT J

                                Salvaged Material



1.   All 2x4 light fixtures to be removed from the ceiling, and stored in an
     area determined by Landlord.

2.   All wood and hollow metal doors to be removed prior to the demolition of
     the walls and stored in an area determined by Landlord. All hardware i.e.:
     locksets, latchsets, hinges and closures designated by Tenant prior to
     demolition, will remain on the doors.

3.   Flexible duct is to be removed and stacked on floor. All VAV boxes and
     supplemental air conditioning units are to remain in their existing
     Allocations.

4.   All plumbing fixtures i.e.: sinksand faucets, are to be removed and stored
     in an area determined by Landlord.

5.   All fire alarm equipment and devices i.e.: smoke detectors, fire horns,
     strobe lights, warden pull stations, etc., are to be tied up to the
     existing structure.

6.   All decorative light fixtures to be removed and stored in an area
     determined by Landlord.

7.   All french doors in elevator lobbies in the Premises to be removed and
     stored in an area determined by Landlord.


                                      -i-




                                    EXHIBIT L
                                       To
                            Mellon Bank Center Lease

                           CONFIRMATION OF LEASE TERM


                THIS IS AN AGREEMENT dated as of the _____ day of ______________
, 19__ by and between NINE PENN CENTER ASSOCIATES, L.P. ("Landlord") and
("Tenant").

                              W I T N E S S E T H:

                WHEREAS, by a lease dated as of ____________ , 1994, between the
parties hereto (the "Lease") Landlord leased to Tenant and Tenant leased and
took from Landlord, certain premises at Mellon Bank Center in Philadelphia,
Pennsylvania for the term and upon the terms and conditions more specifically
set forth therein (the "Premises");

                WHEREAS, the Lease provides that the parties shall execute a
confirmation of certain terms of the Lease when the Lease Commencement Date (as
defined in the Lease) occurred;

                NOW THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:

                A. The Lease has not been amended except as follows:

                B. The Tenant is now in possession of the Premises.

                C. The Tenant acknowledges that the Lease is in full force and
effect.

                D. The Lease Commencement Date of the Lease and the Termination
Date of the term of the Lease are as follows:

                E. Tenant's obligation to pay Rent commences on _________, being
the first day after the Rent Free Period (as defined in the Lease).

                F. Nothing in this Agreement is intended to change or modify the
rights of the parties under the Lease.


                                      -i-




                IN WITNESS WHEREOF, the parties hereto have caused these
presents to be executed by their duly authorized representatives the day and
year first above written.

                                    LANDLORD

Witness:                                    NINE PENN CENTER ASSOCIATES, L.P.
                                            By Transportation Associates, a
                                            Pennsylvania limited partnership,
                                            its managing general partner


__________________________________          By: _______________________________
                                                Name:  Ronald Rubin
                                                Title: Managing General Partner


                                     TENANT

Attest:


__________________________________          By: _______________________________
                                                Name:
                                                Title:


                                      -ii-

EX-10

Exhibit 10.2


                           FIRST AMENDMENT OF OFFICE LEASE


                THIS FIRST AMENDMENT OF OFFICE LEASE (this "Amendment") is made
as of the 30th day of October, 1996, by and between NINE PENN CENTER ASSOCIATES,
a Pennsylvania limited partnership (herein called "Landlord") and LORJO CORP., a
Pennsylvania corporation (herein called "Tenant").

                                   BACKGROUND


                A. Pursuant to that certain Office Lease dated as of May 26,
1994 (herein called the "Lease"), Landlord leased to Tenant, which rented from
Landlord, approximately 57,914 Rentable Square Feet of office space located on
the 28th, 29th and 30th floors of Mellon Bank Center, 1735 Market Street,
Philadelphia, Pennsylvania.

                B. The parties now desire to amend the Lease as hereinafter
provided.

                                    AGREEMENT

                NOW, THEREFORE, in consideration of the Background, the mutual
covenants and agreements herein set forth, and other good, valuable and
aufficient consideration received, and intending to be legally bound hereby, the
parties hereto agree as follows:

                1. Definitions. Unless otherwise herein defined, all terms
defined in the Lease shall have the meanings ascribed to them in the Lease when
used in this Amendment.

                2. Expansion. Landlord hereby demises and leases unto Tenant,
and Tenant hereby takes, leases and hires from Landlord, (a) all that certain
portion of the 27th floor of the Building comprising 16,284 Rentable Square Feet
of space, as shown on the floor plan attached hereto and marked Exhibit "A" (the
"27th Floor Space"), and (b) that certain portion of the P-2 level of the
Building comprising 3,362 Rentable Square Feet of space, being shown on the
floor plan attached hereto and marked Exhibit "B" (the "P-2 Space"), on the
terms and conditions hereinafter set forth. The 27th Floor Space and the P-2
Space are sometimes herein jointly referred to as the "Expansion Space".

                3. Term. Except as otherwise provided in this Amendment,
effective on the date of this Amendment the Expansion Space shall form a part of
the Premises for all purposes under the Lease.

                4. Rent.

                              4.1 Rent Commencement Date. Tenant shall commence
to pay Rent with respect to the Expansion Space on January 1, 1997. Prior to
January 1, 1997, Tenant shall not be obligated to pay Rent with respect to its
use or occupancy of the Expansion Space, excepting only that (a) commencing on





the date on which Landlord tenders possession of the Expansion Space, or any
portion thereof, to Tenant, and continuing until completion of the Tenant Work,
Tenant shall pay to Landlord the Additional Rent provided for in Section 7.11
below, and (b) upon Tenant's occupancy of any portion of the Expansion Space for
purposes of conducting the Permitted Use therein following completion of the
Tenant Work, through December 31, 1996, Tenant shall be obligated to pay all
Rent on account of such space, excepting only Minimum Rent, payments on account
of Tenant's Tax Share, and payments on account of Tenant's Expense Share.

                              4.2 Minimum Rent. Minimum Rent for the P-2 space
shall be Two Dollars ($2.00) per Rentable Square Foot ($6,724 per annum, $560.34
per month). Minimum Rent for the 27th Floor Space shall be as follows:


January 1, 1997 through December 31, 1998       $13.00 per Rentable Square Foot
                                                ($211,692 per annum, $17,641
                                                per month)

January 1, 1999 through December 31, 2000       $13.50 per Rentable Square Foot
                                                ($219,834 per annum, $18,319.50
                                                per month)

January 1, 2001 through December 31, 2002       $14.50 per Rentable Square Foot
                                                ($236,118 per annum, $19,676.50
                                                per month)

January 1, 2003 through December 31, 2004       $15.00 per Rentable Square Foot
                                                ($244,260 per annum, $20,355
                                                per month)

Minimum Rent shall be payable in equal monthly installments commencing on
January 1, 1997 and thereafter due on the first day of each month during the
Term without demand, deduction or set-off, at the offfice of Agent.

                              4.3 Real Estate Taxes. Effective January 1, 1997,
and thereafter during the Term until the Expansion Area Termination Date, the
Rentable Area of the Expansion Space shall be included in the Rentable Area of
the Premises for purposes of computing Tenant's Tax Share. As of January 1,
1997, Tenant's Tax Share shall be 5.725%.

                              4.4 Operating Expenses. Effective January 1, 1997,
and thereafter during the Term until the Expansion Area Termination Date, the
Rentable Area of the Expansion Space shall be included in the Rentable Area of
the Premises for purposes of computing Tenant's Expense Share. As of January 1,
1997, Tenant's Expense Share shall be 6.298%.

                5. Permitted Use. The 27th Floor Space shall be used by Tenant
solely for the Permitted Use. The P-2 Space shall be utilized by Tenant solely
for storage purposes, mail handling and other administrative functions.


                                       2




                6. Expansion Construction Allowance. Landlord agrees to pay to
Tenant, in accordance with the terms and conditions set forth in Section 7.8
below, the sum of $162,840 (the "Expansion Construction Allowance") in order to
assist Tenant in defraying the cost of constructing the Tenant Work (hereinafter
defined) within the Expansion Space. The Expansion Construction Allowance shall
be Landlord's sole contribution to Tenant's cost of constructing such Tenant
Work.

                7. Improvement of Expansion Space. Except as otherwise herein
specifically provided, the terms of this Section 7, and not the terms of Section
7 of the Lease, shall apply in connection with Tenant's initial improvement of
the Expansion Space.

                              7.1 Base Building Plans. Landlord shall make
available to Tenant for use by Tenant or its architect or engineer, such
structural, electrical and mechanical drawings, specifications, and other
information with respect to the Building ("Base Building Plans") reflecting
Landlord's construction of the Core and Shell. Landlord shall also make
available for Tenant's inspection all shop drawings and submittals respecting
the construction of the Core and Shell. Tenant acknowledges that the Core and
Shell were constructed to construction industry standard tolerances permitting
limited deviations from the requirements of the Base Building Plans.
Accordingly, promptly following the execution of this Amendment, and prior to
commencement of preparation of the plans and documents which Tenant is obligated
to produce under Section 7.3 below, Tenant will cause its architect or engineer
to conduct a field survey of the Expansion Space to verify critical dimensions
and ascertain any deviation from the Base Building Plans.

                              7.2 Tenant's Construction Representative. Tenant
hereby designates Fred Harle as the "Tenant's Construction Representative," who
Tenant agrees shall be available to meet and consult with Landlord on a
continuing basis at the Expansion Space as Tenant's representative concerning
the matters which are the subject of this Section 7 and who, as between Landlord
and Tenant, shall have the power legally to bind Tenant in giving direction to
Landlord respecting the Construction Documents and the Tenant Work, in giving
approvals of design documents and work, and in making requests and approval for
changes. Tenant may from time to time change the designation of Tenant's
Construction Representative by written notice to Landlord, so long as there is
at all times at least one individual designated to serve in such capacity.

                              7.3 Preparation, Review and Approval of Tenant's
Schematic Design Documents, Design Development Documents and Construction
Documents. Tenant shall, at its expense, consult with its architect, engineer,
designer and such other consultants as it shall deem necessary for development
and timely completion of certain documents as described in this Section 7, which
documents shall conform to the Base Building Plans.


                                       3




                                  7.3.1 Schematic Design. Tenant shall prepare
at its expense "Schematic Design Documents" reasonably satisfactory to Landlord
which generally indicate functional and organizational relationships, the
location and size of the Expansion Space, all demising and interior walls, and
the locations and configurations of all offices and conference rooms, libraries,
file rooms and other office areas and improvements to be contained in the
Expansion Space.

                                  7.3.2 Design Development. Subject to the
procedural requirements set forth in Subsection 7.3.4 below, Tenant, at its
expense, shall cause to be prepared and delivered to Landlord for its review and
approval, which approval shall not be unreasonably withheld or delayed: one (l)
complete reproducible set and two (2) blue-line print sets of "Design
Development Documents" consisting of: architectural, mechanical, electrical,
plumbing and structural drawings and other documents to fix and describe the
size and character of the space, all commonly called "Space Plans", prepared by
an architect or space planner approved by Landlord. Tenant shall deliver to
Landlord in a timely manner the Schematic Design Documents and the Design
Development Documents for approval, so that the Construction Documents are
timely delivered and approved as set forth below. Tenant shall cause the Design
Development Documents to be prepared in conformity with and consistent with the
Schematic Design Documents.

                                  7.3.3 Construction Documents. Tenant, at its
expense, shall cause to be prepared and delivered to Landlord one (l) complete
reproducible set and two (2) blue-line print sets of complete and final
"Construction Documents" consisting of (a) working drawings; (b) two (2) copies
of specifications, as approved by Landlord for the construction of the Expansion
Space for Tenant's occupancy; and (c) a permit set. Tenant shall deliver the
Construction Documents to Landlord not later than October 1, 1996. Tenant shall
cause the Construction Documents to be prepared in conformity with and
consistent with the Design Development Documents.

                                      7.3.3.l Tenant's Construction Documents
shall be signed and sealed by an architect or professional engineer (where
applicable) licensed and registered in the Commonwealth of Pennsylvania. In
addition to conforming to Landlord's Base Building Plans, Tenant's Construction
Documents shall also conform to all applicable laws, ordinances, building codes
and requirements of public authorities and insurance underwriters. Tenant's
Construction Documents shall contain, at a minimum, floor plans, reflected
ceiling plans, power and telephone plans, mechanical plans, electrical plans,
fire protection plans and all other details and schedules which designate the
locations and specifications for all mechanical, electrical, fire protection and
life safety equipment to be installed in the Expansion Space, and all
partitions, doors, lighting fixtures, electric receptacles and switches,
telephone outlets, special air conditioning, and other improvements to be
installed within the Expansion Space.

                                  7.3.4 Landlord Approval. Tenant shall submit
for Landlord's approval, Schematic Design Documents, Design Development
Documents and Construction Documents, in accordance with the guidelines and time
frames described above. The approval by Landlord of


                                       4




Tenant's Schematic Design Documents, Design Development Documents and
Construction Documents shall be subject to the following procedural
requirements:


                                      7.3.4.1 Landlord shall promptly review the
applicable documents or any additional requested information, and either approve
the same or return the same to Tenant with requested modifications.

                                      7.3.4.2 If Landlord shall return the
modified documents to Tenant with requested modifications, Landlord shall
specify a reasonable period of time, not to exceed three (3) Business Days,
within which such modifications shall be made and within which such modified
plans shall be re-submitted to Landlord by Tenant, until the modified documents
are finally approved by Landlord.

                                      7.3.4.3 To the extent the Tenant's
Schematic Design Documents, Design Development Documents or Construction
Documents, as the case may be, in Landlord's sole judgment, involve any
modification of, or impact upon, the Building's structural, mechanical,
electrical or plumbing systems or components, then such approval may be withheld
by Landlord in its absolute and sole discretion.

                                      7.3.4.4 Tenant's Construction Documents,
as approved by Landlord and as modified by Tenant to take account of any changes
reasonably requested by Landlord, are hereinafter considered to be "Approved for
Construction."

                              7.4 [INTENTIONALLY OMITTED].

                              7.5 Tenant Work Defined. Tenant shall, in a good
and workmanlike manner, cause the Expansion Space to be improved and completed
at Tenant's expense (subject to the Expansion Construction Allowance hereinafter
provided) and in accordance with Tenant's Construction Documents, which work
(including materials, supplies, components, labor and services therefor) is
herein referred to as the "Tenant Work".

                              7.6 Tenant's Contractor.

                                  7.6.1 The Tenant Work is to be performed by
Tenant's contractor, selected by Tenant subject to Landlord's written approval.
Landlord will not unreasonably withhold or delay its approval of any contractor
submitted by Tenant, and Landlord's disapproval shall not be considered
unreasonable if the disapproved contractor may, in Landlord's sole opinion,
prejudice Landlord's relationship with Landlord's contractors or subcontractors
or the relationship between such contractors and their subcontractors or
employees, or otherwise disturb harmonious labor relations in or about the
Building.

                                  7.6.2 Upon Landlord's approval of the Tenant's
contractor, Tenant shall enter into a construction contract or construction
management agreement for the Tenant Work


                                       5




(the "Tenant Work Contract"). The Tenant Work Contract shall require that both
Landlord and Tenant must approve the selection of each subcontractor and
supplier furnishing goods or services costing over Fifty Thousand Dollars
($50,000.00) within three (3) Business days of written request for approval,
such approval not to be unreasonably withheld, and shall require Tenant's
contractor to comply with all requirements of Section 7.9 below.

                                  7.6.3 Prior to commencement of that portion of
the Tenant Work which requires a building permit, Tenant will provide Landlord
with a copy of the building permit respecting the Tenant Work. Additionally,
upon completion of the Tenant Work and prior to occupancy of the Expansion Space
by Tenant, Tenant will deliver to Landlord a copy of the temporary or permanent
Certificate of Occupancy respecting the Expansion Space; provided that if Tenant
delivers a temporary Certificate of Occupancy, Tenant shall diligently and
continuously pursue issuance of a permanent Certificate of Occupancy and shall
deliver a copy of same to Landlord upon receipt. Should Tenant so request,
Landlord agrees to provide reasonable assistance to Tenant, at no expense to
Landlord, in Tenant's efforts to obtain a permanent Certificate of Occupancy for
the Expansion Space.

                              7.7 [INTENTIONALLY OMITTED.]

                              7.8 Payment of Expansion Construction Allowance.

                                  7.8.1 Tenant may draw upon the Expansion
Construction Allowance to pay for labor and materials provided for the Tenant
Work (and to pay Tenant's architect's and engineer's fees and other professional
fees incurred in connection with the design and construction of the Tenant Work)
(herein called "Tenant's Costs") in accordance with the terms of this Section
7.8. At the time Tenant's Construction Documents are finalized, Tenant will
deliver to Landlord an estimated budget reasonably detailing the anticipated
Tenant's Costs. Tenant shall submit to Landlord on or before the twenty-eighth
(28th) day of each month, a voucher for Tenant's Costs executed by Tenant's
Construction Representative and by a partner or officer of Tenant, setting forth
in reasonable detail the amount of such Tenant's Costs and identifying in
reasonable detail the material, labor, fees, and costs to which they relate.
Landlord shall pay to Tenant the amount of each Tenant voucher within thirty
(30) days after receipt of such voucher from Tenant. Notwithstanding anything
set forth in this Section 7.8.1, any amounts held back as retainage under
contracts for the Tenant Work shall not constitute a part of Tenant's Costs
unless and until paid to the contractor under the terms of the subject contract.

                                  7.8.2 Each voucher submitted to Landlord by
Tenant (as set forth in Section 7.8.1) shall be accompanied by a certificate
duly executed and shown to by Tenant's Construction Representative stating that:
(i) based on site inspections and the data comprising the invoice submitted by
Tenant for payment by Landlord, the Tenant Work has progressed to the point
indicated and the quality and condition of the Tenant Work theretofore completed
or in the process of completion as of the date of such certificate is in
accordance with the Construction Documents; and (ii) that Tenant's contractor is
entitled to the amount so certified.


                                       6




                              7.9 Tenant's Contractors. In performing The Tenant
Work or in performing alterations within any Expansion Area prior to to Tenant's
beneficial occupancy thereof, the conditions set forth in Section 7.9 of the
Lease shall be fulfilled, and Tenant, by undertaking to have such work performed
by its contractor or contractors, shall be deemed to have agreed to cause such
conditions to be fulfilled.

                              7.10 Condition of Expansion Space. Tenant accepts
the Expansion Space in its "AS-IS" condition on the date of this Amendment.

                              7.11 Site Logistics and Procedures. Tenant's
occupancy of the Expansion Space during performance of the Tenant Work shall be
subject to all of the terms and conditions of the Lease, excepting only that no
Rent shall be payable during such period except to the extent specifically
required under this Section 7.11, and except that Landlord shall not be
obligated to provide janitorial services pursuant to Section 8.4 of the Lease.
During such period, Tenant shall comply with the Site Logistics and Procedures
set forth on Exhibit "K" of the Lease. Any Tenant Work to be performed by
Tenant in the elevator lobby and common corridors of the 27th floor of the
Building shall be at Tenant's expense, shall be subject to Tenant's obtaining
the prior approval of the other tenants of the 27th floor as to the nature and
scope of such work, and shall be undertaken at such times and in such a manner
as will not unreasonably disturb other tenants of such floor or unreasonably
interfere with the conduct of their respective businesses, as reasonably
determined by Landlord. Landlord shall bear the cost of electricity consumed by
Tenant's contractors and subcontractors in the performance of the Tenant Work,
as well as the cost of electricity consumed in the provision of HVAC service to
the Expansion Space during such period.


                8. P-2 Services. Landlord will furnish the P-2 Space with
janitorial service and with heat, ventilation and electric lighting (the cost of
which services and utilities shall be billed to Tenant as Additional Rent as
provided in Section 8 of the Lease), but will not furnish any other utilities or
services to the P-2 Space, notwithstanding anything to the contrary set forth in
the Lease.

                9. Brokers. Each of Landlord and Tenant represents and warrants
to the other that it has not dealt with any broker, agent, finder or other
person in the negotiation for or the obtaining of this Amendment other than
Agent, and each agrees to indemnify and hold the other harmless from any and all
costs (including reasonable attorneys' fees) and liability for commissions or
other compensation claimed by any such broker, agent, finder or other person
other than Agent, employed by the indemnifying party or claiming to have been
engaged by the indemnifying party in connection with this Amendment. Tenant
acknowledges that Agent has acted only as an agent with respect to the
procurement and negotiation of this Amendment and agrees that Agent shall not be
responsible or liable for any term, provision or condition of this Amendment.
Landlord agrees to pay any fee or commission owing to Agent on account of this
Amendment.


                                       7




                10. Effect of Amendment. As amended hereby, the Lease continues
in full force and effect. In the event of any inconsistency between the terms of
this Amendment and the terms of the Lease, the terms of this Amendment shall
govern and control. Without limiting the generality of the foregoing, Tenant
hereby ratifies and confirms the warrant of attorney set forth in Section 17.2
of the Lease to the same extent as if such warrant were fully set forth herein.
Time remains of the essence of the Lease.

         IN WITNESS WHEREOF, this Amendment has been duly executed by the
parties hereto as of the date first above written.

                                              TENANT

                                              LORJO CORP.

                                              By: /s/ John W. Smithson
                                                 -------------------------------
                                                 Name: John W. Smithson
                                                 Title: Vice President

                                              LANDLORD

                                              NINE PENN CENTER ASSOCIATES,
                                              a Pennsylvania limited partnership

                                              By Transporatation Associates, a
                                              Pennsylvania limited partnership,
                                              general partner

                                              By: /s/ Ronald Rubin
                                                 -------------------------------
                                                 Name: Ronald Rubin
                                                 Title: General Partner

                                              By The Equitable Life Assurance
                                              Society of the United States,
                                              general partner

                                              By: /s/ Dana J. Harrell
                                                 -------------------------------
                                                 Name: Dana J. Harrell
                                                 Title: Investment Officer


                                       8




                               First Amendment to Sublease

                THIS FIRST AMENDMENT TO SUBLEASE (this "Amendment") is made as
of the 30th day of October 1996, by and between Lorjo Corp., a Pennsylvania
corporation (the "Sublandlord") and PMA Reinsurance Corporation, a Pennsylvania
corporation (the "Subtenant").

                                    Recitals

A. Pursuant to that certain Sublease dated as of May 26, 1994 (herein called the
"Sublease"), Sublandlord leased to Subtenant 57,914 Rentable Square Feet of
space in the building (the "Building") known as Mellon Bank Center situated at
1735 Market Street, Philadelphia, Pennsylvania.

B. Subtenant desires to sublease additional space in the Building from
Sublandlord.

C. Unless otherwise defined herein, all defined terms shall have the meanings
ascribed to them in the Master Lease (as "Master Lease" is defined in the
Sublease).

D. The parties now desire to amend the Sublease as hereinafter provided.

                                   Agreements

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
set forth, and other good, valuable and sufficient consideration received, and
intending to be legally bound hereby, the parties hereto agree as follows:

1. Expansion. Sublandlord hereby demises and subleases unto Subtenant, and
Subtenant hereby takes, subleases and hires from Sublandlord, (a) all that
certain portion of the 27th floor of the Building comprising 16,284 Rentable
Square Feet of space and (b) that certain portion of the P-2 level of the
Building comprising 3,362 Rentable Square Feet of space (herein called the
"Expansion Space").

2. Premises. Pursuant to this Amendment, the Premises shall consist of a total
of 77,560 Rentable Square Feet.

3. Term. Effective on the date of this Amendment, the Expansion Space shall form
a part of the Premises for all purposes under the Sublease; provided, however,
that the term of this Sublease shall terminate one (1) day prior to the
Termination Date under


                                       1




the Master Lease or on such earlier date upon which this Sublease may expire or
be terminated pursuant to any of the conditions of limitation or other
provisions of the Sublease, the Master Lease, or pursuant to law.

4. Rent. Subtenant shall commence to pay Rent with respect to the Expansion
Space on January 1, 1997 at the rates set forth in the Master Lease and the
First Amendment thereto dated simultaneously herewith.

5. Incorporation by Reference. All of the terms, covenants and conditions of the
Sublease are incorporated herein by reference so that, except to the extent that
they are inapplicable or modified by the provisions of this First Amendment to
Sublease, each and every term, covenant and condition of the Sublease shall be
binding upon Sublandlord and Subtenant in relation to Subtenant's lease of the
Expansion Space.

IN WITNESS WHEREOF the parties hereto have duly executed this First Amendment to
Sublease as of the date written above.


                                         SUBLANDLORD:

                                         LORJO CORP., a Pennsylvania corporation

                                         By: /s/ John W. Smithson
                                             -----------------------------------

                                         SUBTENANT:

                                         PMA REINSURANCE CORPORATION, a
                                         Pennsylvania corporation

                                         By: /s/ Stephen Tirney
                                             -----------------------------------

EX-10

SECOND AMENDMENT OF OFFICE LEASE

        THIS SECOND AMENDMENT OF OFFICE LEASE (this “Amendment”) is made as of the 11th day of December, 1998, by and between NINE PENN CENTER ASSOCIATES, a Pennsylvania limited partnership (herein called “Landlord”) and LORJO CORP., a Pennsylvania corporation (herein called “Tenant”).

BACKGROUND

        A. Pursuant to that certain Office Lease dated as of May 26, 1994, as amended by that certain First Amendment of Office Lease dated October 30, 1996 (the “First Amendment”; said Office Lease, as amended by the First Amendment, being herein called the “Lease”), Landlord leases to Tenant, which rents from Landlord, approximately 74,198 Rentable Square Feet of office space located on the 27^th, 28th, 29^thand 30^thfloors, and approximately 3,362 Rentable Square Feet of storage space on the P-2 level, of Mellon Bank Center, 1735 Market Street, Philadelphia, Pennsylvania.

        B. The parties now desire to amend the Lease as hereinafter provided.

AGREEMENTS

        NOW, THEREFORE, in consideration of the Background, the mutual covenants and agreements herein set forth, and other good, valuable and sufficient consideration received, and intending to be legally bound hereby, the parties hereto agree as follows:

        1. Definitions. Unless otherwise herein defined, all terms defined in the Lease shall have the meanings ascribed to them in the Lease when used in this Amendment.

        2. Expansion. Landlord hereby demises and leases unto Tenant, and Tenant hereby takes, leases and hires from Landlord, all that certain portion of the 30^thfloor of the Building comprising 9,705Rentable Square Feet of space, as shown on the floor plan attached hereto and marked Exhibit “A”(the “Fifth Year Expansion Space”), pursuant to Tenant’s exercise of the expansion option set forth in Section 31.2 of the Lease.

        3. Delivery. Landlord shall deliver the Fifth Year Expansion Space to Tenant on or about the first day of the sixth Lease Year, but in no event earlier than September 1, 1999 (the “Delivery Date”). Prior to the Delivery Date, Landlord shall undertake demolition of partitions and other tenant improvements contained within the Fifth Year Expansion Space at Landlord’s expense in accordance with reasonable specifications prepared by Tenant and approved by Landlord. Tenant shall deliver to Landlord Tenant’s draft specifications concerning such demolition for approval by not later than February 1, 1999. On the Delivery Date, Tenant shall accept the Fifth Year Expansion Space in its “as is”condition (subject to Landlord having completed the demolition required to be undertaken hereunder), and the Expansion Area shall constitute a part of the Premises for all purposes under the Lease

        4. Rent.

               4.1 Minimum Rent. Minimum Rent for the Fifth Year Expansion Space shall be as follows:

Delivery Date through end of Sixth Lease Year	$ 12.50 per Rentable Square Foot ($ 121,312.50 per annum, $10,109.38 per month)
Seventh and Eighth Lease Years	$13.00 per Rentable Square Foot ($126,165 per annum, $10,513.75 per month)
Ninth and Tenth Lease Years and first month of Eleventh Lease Year	$ 14.00 per Rentable Square Foot ($ 135,870 per annum, $11,322.50 per month)

Notwithstanding the foregoing, Landlord agrees that no Minimum Rent or monthly payments on account of Tenant’s Tax Share or Tenant’s Expense Share shall be payable or otherwise accrue on account of the Fifth Year Expansion Space during the period commencing on the Delivery Date and ending on the first to occur of (a) the fifty-seventh (57^th) consecutive day thereafter or (b) the date on which Tenant commences occupancy of the Premises for purposes of conducting its business therein (the “Expansion Rent Commencement Date”).

Minimum Rent shall be payable in equal monthly installments (pro rated for any partial month based on the actual number of days in such month) commencing on the Expansion Rent Commencement Date and thereafter due on the first day of each month during the Term without demand, deduction or set-off, at the office of Agent.

        4.2 Real Estate Taxes. Effective on the Delivery Date, and thereafter during the Term, the Rentable Area of the Fifth Year Expansion Space shall be included in the Rentable Area of the Premises for purposes of computing Tenant’s Tax Share (subject to the abatement referenced in Section 4.1 above) As of the Delivery Date, Tenant’s Tax Share shall be 6.442%.

        4.3 Operating Expenses. Effective on the Delivery Date, and thereafter during the Term, the Rentable Area of the Fifth Year Expansion Space shall be included in the Rentable Area of the Premises for purposes of computing Tenant’s Expense Share (subject to the abatement referenced in Section 4.1 above As of the Delivery Date, Tenant’s Expense Share shall be 7.086%.

2

        5. Permitted Use. The Fifth Year Expansion Space shall be used by Tenant solely for the Permitted Use.

        6. Expansion Construction Allowance. Landlord agrees to pay to Tenant, in accordance with the terms and conditions set forth in Section 7.8 of the First Amendment, the sum of $106,755 (the “Expansion Construction Allowance”) in order to assist Tenant in defraying the cost of constructing the Tenant Work (hereinafter defined) within the Fifth Year Expansion Space. The Expansion Construction Allowance shall be Landlord’s sole contribution to Tenant’s cost of constructing such Tenant Work.

        7. Improvement of Fifth Year Expansion Space. Except as otherwise herein specifically provided, the terms of Section 7 of the First Amendment shall apply in connection with Tenant's initial improvement of the Fifth Year Expansion Space.

        8. Brokers. Each of Landlord and Tenant represents and warrants to the other that it has not dealt with any broker, agent, finder or other person in the negotiation for or the obtaining of this Amendment other than Agent, and each agrees to indemnify and hold the other harmless from any and all costs (including reasonable attorneys’fees) and liability for commissions or other compensation claimed by any such broker, agent, finder or other person other than Agent, employed by the indemnifying party or claiming to have been engaged by the indemnifying party in connection with this Amendment. Tenant acknowledges that Agent has acted only as an agent with respect to the procurement and negotiation of this Amendment and agrees that Agent shall not be responsible or liable for any term, provision or condition of this Amendment. Landlord agrees to pay any fee or commission owing to Agent on account of this Amendment.

        9. Confirmation of Remedy. In order to preserve for Landlord the benefit of the remedy of confession of judgment for ejectment contained in the Lease, Sections 17.2.3 and 17.2.5 of the Lease are hereby restated and ratified as follows:

17.2.3 any prothonotary or attorney of any court of record is hereby irrevocably authorized and empowered to appear for Tenant in any action to confess judgment against Tenant, and may sign for Tenant an agreement, for which this Lease shall be his sufficient warrant, for entering in any competent court an action or actions in ejectment, and in any suits or in said actions to confess judgment against Tenant as well as all persons claiming by, through or under Tenant for the recovery by Landlord of possession of the Premises. Such authority shall not be exhausted by any one or more exercises thereof, but judgment may be confessed from time to time as often as any event set forth in Subsection 17.1 hereof shall have occurred or be continuing. Such powers may be exercised during as well as after the expiration or termination of the original Term and during and at any time after any extension or renewal of the Term, and/or

3

17.2.5 In any confession of judgment for ejectment, Landlord shall cause to be filed in such action an affidavit setting forth the facts necessary to authorize the entry of judgment and if a true copy of this Lease (and of the truth of the copy, such affidavit shall be sufficient proof) be filed in such action, it shall not be necessary to file the original as a warrant of attorney, notwithstanding any law, rule of court, custom or practice to the contrary. Tenant releases to Landlord, and to any and all attorneys who may appear for Tenant, all procedural errors in any proceedings taken by Landlord, whether by virtue of the powers of attorney contained in this Lease or not, and all liability therefor. Tenant expressly waives the benefits of all laws, now or hereafter in force, exempting any property within the Premises or elsewhere from distraint, levy or sale. Tenant further waives the right to any notice to remove as may be specified in the Pennsylvania Landlord and Tenant Act of April 6, 1951, as amended, or any similar or successor provision of law, and agrees that five (5) days notice shall be sufficient in any case where a longer period may be statutorily specified, and/or

        10. Effect of Amendment. As amended hereby, the Lease continues in full force and effect. In the event of any inconsistency between the terms of this Amendment and the terms of the Lease, the terms of this Amendment shall govern and control. Without limiting the generality of the foregoing, Tenant hereby ratifies and confirms the warrant of attorney set forth in Section 17.2 of the Lease to the same extent as if such warrant were fully set forth herein. Time remains of the essence of the Lease.

        SECTIONS 17.2.3 AND 17.2.5 OF THE LEASE, RESTATED IN SECTION 9 HEREOF, PROVIDE FOR THE CONFESSION OF JUDGMENT AGAINST TENANT FOR EJECTMENT. IN CONNECTION THEREWITH, TENANT, KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND UPON ADVICE OF SEPARATE COUNSEL, UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY FOR HEARING UNDER THE RESPECTIVE CONSTITUTIONS AND LAWS OF THE UNITED STATES AND THE COMMONWEALTH OF PENNSYLVANIA. WITHOUT LIMITATION OF THE FOREGOING, TENANT HEREBY SPECIFICALLY WAIVES ALL RIGHTS TENANT HAS OR MAY HAVE TO NOTICE AND OPPORTUNITY FOR A HEARING PRIOR TO EXECUTION UPON ANY JUDGMENT CONFESSED AGAINST TENANT BY LANDLORD HEREUNDER.

        TENANT (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF LANDLORD HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT LANDLORD WILL NOT SEEK TO EXERCISE OR ENFORCE ITS RIGHTS TO CONFESS JUDGMENT HEREUNDER, AND (II) ACKNOWLEDGES THAT THE EXECUTION OF THIS LEASE BY LANDLORD HAS BEEN MATERIALLY INDUCED BY, AMONG OTHER THINGS, THE INCLUSION IN THIS LEASE OF SAID RIGHTS TO CONFESS JUDGMENT AGAINST TENANT. TENANT FURTHER ACKNOWLEDGES THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS SAID

4

PROVISIONS WITH TENANT’S INDEPENDENT LEGAL COUNSEL AND THAT THE MEANING AND EFFECT OF SUCH PROVISIONS HAVE BEEN FULLY EXPLAINED TO TENANT BY SUCH COUNSEL, AND AS EVIDENCE OF SUCH FACT AN AUTHORIZED OFFICER OF TENANT SIGNS HIS OR HER INITIALS IN THE SPACE PROVIDED BELOW.

/s/ JWS

(Initials)

        IN WITNESS WHEREOF, this Amendment has been duly executed by the parties hereto as of the date first above written.

	TENANT
	LORJO CORP.
By:	/s/ John W. Smithson
	Name: John W. Smithson
	Title: Vice President

	LANDLORD
	NINE PENN CENTER ASSOCIATES, L.P., a Pennsylvania limited partnership
	By Nine Penn Center Properties Trust, a Maryland real estate investment trust, general partner
By:	/s/ David M Lepore
	Name: David M Lepore
	Title: Senior Vice President

5

EX-10

THIRD AMENDMENT OF OFFICE LEASE

        This Third Amendment (this “Amendment”) is made and entered into effective retroactively as of May 16, 2001 by and between NINE PENN CENTER ASSOCIATES, L.P., a Pennsylvania limited partnership (“Landlord”) and PMA CAPITAL INSURANCE COMPANY (“Tenant”).

BACKGROUND

        A. Pursuant to that certain Office Lease dated as of May 26, 1994, as amended by that certain First Amendment of Office Lease dated October 30, 1996, by that certain Second Amendment of Office Lease dated as of December 1, 1998, and by that certain Assignment and Assumption of Lease and Consent dated as of December 29, 2000 (as so amended, the “Lease”), Landlord leased to Lorjo Corp. (the “Original Lessee”) certain premises (the “Premises”) consisting approximately 83,903 Rentable Square Feet of office space located on the 27^th, 28th, 29^th and 30^thfloors, and approximately 3,362 Rentable Square Feet of space on the P-2 level, of the building presently known as Mellon Bank Center, located at 1735 Market Street in Philadelphia, Pennsylvania (the “Building”).

        B. Pursuant to that certain Assignment and Assumption of Lease and Consent dated as of December 29, 2000, the Original Lessee assigned to Tenant, which assumed, all of the Original Lessee’s right, title and interest as tenant under the Lease.

        C. Landlord and Tenant now desire to further amend the Lease as hereinafter set forth.

AGREEMENTS

        NOW, THEREFORE, intending to be legally bound hereby and in exchange for good, valuable and sufficient consideration received, Landlord and Tenant agree that the Lease is hereby amended as follows:

               1.Definitions. Unless otherwise herein defined, all terms defined in the Lease shall have the meanings ascribed to them in the Lease when used in this Amendment.

               2. 2001 P-2 Space. Landlord hereby leases to Tenant, and Tenant hereby rents from Landlord, that certain space on the P-2 level of the Building containing approximately 1,022 Rentable Square Feet, as shown on Exhibit “A”attached hereto (the “2001 P-2 Space), for a term commencing on May 1, 2001 and coterminous with the Term of the Lease, and otherwise on the terms set forth in this Amendment and the Lease. The 2001 P-2 Space shall form a part of the P-2 Space for all purposes under the Lease, except as otherwise expressly provided in this Amendment. Tenant accepts the 2001 P-2 Space in its “as is”condition. Landlord shall not otherwise be obligated to improve the 2001 P-2 Space, and the Rentable Area of the 2001 P-2 Space shall not be included in the Rentable Area of the Premises for purposes of computing any allowances payable by Landlord under the Lease.

        3. Rent.

               3.1 Minimum Rent. Tenant shall pay Minimum Rent for the 2001 P-2 Space at the rate of $15,330.00 per annum, payable in equal monthly installments of $1,277.50 which shall be due and owing on the first day of each calendar month commencing May 1, 2001.

               3.2 Real Estate Taxes. As of May 1, 2001, Tenant's Tax Share is amended to be as follows:

        Tenant's Tax Share      6.5170%

Tenant’s Tax Share shall continue to be adjustable to reflect the size of the Premises, as the same may change from time to time, as set forth in Sections 5.1.2 and 6.1.2 of the Lease.

        4. Brokers. Each of Landlord and Tenant represents and warrants to the other that it has not dealt with any broker, agent, finder or other person in the negotiation for or the obtaining of this Amendment, and each agrees to indemnify and hold the other harmless from any and all costs (including reasonable attorneys’fees) and liability for commissions or other compensation claimed by any such broker, agent, finder or other person employed by the indemnifying party or claiming to have been engaged by the indemnifying party in connection with this Amendment.

        5. Confirmation of Remedy. In order to preserve for Landlord the benefit of the remedy of confession of judgment for ejectment contained in the Lease, Sections 17.2.3 and 17.2.5 of the Lease are hereby restated and ratified as follows:

17.2.3  any prothonotary or attorney of any court of record is hereby irrevocably authorized and empowered to appear for Tenant in any action to confess judgment against Tenant, and may sign for Tenant an agreement, for which this Lease shall be his sufficient warrant, for entering in any competent court an action or actions in ejectment, and in any suits or in said actions to confess judgment against Tenant as well as all persons claiming by, through or under Tenant for the recovery by Landlord of possession of the Premises. Such authority shall not be exhausted by any one or more exercises thereof, but judgment may be confessed from time to time as often as any event set forth in Subsection 17.1 hereof shall have occurred or be continuing. Such powers may be exercised during as well as after the expiration or termination of the original Term and during and at any time after any extension or renewal of the Term, and/or

17.2.5  In any confession of judgment for ejectment, Landlord shall cause to be filed in such action an affidavit setting forth the facts necessary to authorize the entry of judgment and if a true copy of this Lease (and of the truth of the copy, such affidavit shall be sufficient proof) be filed in such action, it shall not be

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necessary to file the original as a warrant of attorney, notwithstanding any law, rule of court, custom or practice to the contrary. Tenant releases to Landlord, and to any and all attorneys who may appear for Tenant, all procedural errors in any proceedings taken by Landlord, whether by virtue of the powers of attorney contained in this Lease or not, and all liability therefor. Tenant expressly waives the benefits of all laws, now or hereafter in force, exempting any property within the Premises or elsewhere from distraint, levy or sale. Tenant further waives the right to any notice to remove as may be specified in the Pennsylvania Landlord and Tenant Act of April 6, 1951, as amended, or any similar or successor provision of law, and agrees that five (5) days notice shall be sufficient in any case where a longer period may be statutorily specified, and/or

        6. Effect of Amendment. As amended hereby, the Lease remains in full force and effect. In the event of any conflict or inconsistency between the terms of this Amendment and the remaining terms of the Lease, the terms of this Amendment shall govern and control.

        SECTIONS 17.2.3 AND 17.2.5 OF THE LEASE, RESTATED IN SECTION 5 HEREOF, PROVIDE FOR THE CONFESSION OF JUDGMENT AGAINST TENANT FOR EJECTMENT. IN CONNECTION THEREWITH, TENANT, KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND UPON ADVICE OF SEPARATE COUNSEL, UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY FOR HEARING UNDER THE RESPECTIVE CONSTITUTIONS AND LAWS OF THE UNITED STATES AND THE COMMONWEALTH OF PENNSYLVANIA. WITHOUT LIMITATION OF THE FOREGOING, TENANT HEREBY SPECIFICALLY WAIVES ALL RIGHTS TENANT HAS OR MAY HAVE TO NOTICE AND OPPORTUNITY FOR A HEARING PRIOR TO EXECUTION UPON ANY JUDGMENT CONFESSED AGAINST TENANT BY LANDLORD HEREUNDER.

        TENANT (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF LANDLORD HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT LANDLORD WILL NOT SEEK TO EXERCISE OR ENFORCE ITS RIGHTS TO CONFESS JUDGMENT HEREUNDER, AND (II) ACKNOWLEDGES THAT THE EXECUTION OF THIS LEASE BY LANDLORD HAS BEEN MATERIALLY INDUCED BY, AMONG OTHER THINGS, THE INCLUSION IN THIS LEASE OF SAID RIGHTS TO CONFESS JUDGMENT AGAINST TENANT. TENANT FURTHER ACKNOWLEDGES THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS SAID PROVISIONS WITH TENANT’S INDEPENDENT LEGAL COUNSEL AND THAT THE MEANING AND EFFECT OF SUCH PROVISIONS HAVE BEEN FULLY EXPLAINED TO TENANT BY SUCH COUNSEL, AND AS EVIDENCE OF SUCH FACT AN AUTHORIZED OFFICER OF TENANT SIGNS HIS OR HER INITIALS IN THE SPACE PROVIDED BELOW.

/s/ ST

(Initials)

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        IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties hereto have caused this Amendment to be executed by their duly authorized representatives as of the day and year first above written.

	PMA CAPITAL INSURANCE COMPANY
By:	/s/ Stephen G. Tirney
	Name: Stephen G. Tirney
	Title: Executive Vice President

	NINE PENN CENTER ASSOCIATES, L.P.
	By NINE PENN CENTER PROPERTIES TRUST, a Maryland real estate investment trust, its general partner
By:	/s/ Jennifer B. Clark
	Name: Jennifer B. Clark
	Title: Senior Vice President

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Exhibit “A”

Floor Plan of 2001 P-2 Space

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EX-10

FOURTH AMENDMENT OF OFFICE LEASE

        This Fourth Amendment (this “Amendment”) is made and entered into effective as of July 2, 2003 by and between NINE PENN CENTER ASSOCIATES, L.P., a Pennsylvania limited partnership (“Landlord”) and PMA CAPITAL INSURANCE COMPANY (“Tenant”).

BACKGROUND

        A. Pursuant to that certain Office Lease dated as of May 26, 1994, as amended by that certain First Amendment of Office Lease dated October 30, 1996, by that certain Second Amendment of Office Lease dated as of December 1, 1998, by that certain Assignment and Assumption of Lease and Consent dated as of December 29, 2000, and by that certain Third Amendment of Office Lease dated as of May 16, 2001 (as so amended, the “Lease”), Landlord leased to Lorjo Corp. (the “Original Lessee”) certain premises (the “Premises”) agreed to contain (i) 83,903 Rentable Square Feet of office space (being the entire Rentable Area of each of the 28th, 29^thand 30^th floors, and 16,284 Rentable Square Feet on the 27^thfloor), and (ii) 4,384 Rentable Square Feet of space used solely for storage, mail handling and other administrative functions on the P-2 level (which P-2 Space is not included in the Rentable Area of the Premises for purposes of computing any allowances payable by Landlord), in the building presently known as Mellon Bank Center, located at 1735 Market Street in Philadelphia, Pennsylvania (the “Building”).

        B. Pursuant to that certain Assignment and Assumption of Lease and Consent dated as of December 29, 2000, the Original Lessee assigned to Tenant, which assumed, all of the Original Lessee’s right, title and interest as tenant under the Lease.

        C. Landlord and Tenant now desire to further amend the Lease as hereinafter set forth.

AGREEMENTS

        NOW, THEREFORE, intending to be legally bound hereby and in exchange for good, valuable and sufficient consideration received, Landlord and Tenant agree that the Lease is hereby amended as follows:

                1. Definitions. Unless otherwise herein defined, all terms defined in the Lease shall have the meanings ascribed to them in the Lease when used in this Amendment.

                2. 27^th Floor Expansion Option.

                     2.1 2003 Option.

                             2.1.1 Landlord hereby grants to Tenant an exclusive first option to lease from Landlord, on the terms and conditions set forth in this Section 2.1, all that certain

portion of the 27^th floor of the Building agreed to contain 5,907 Rentable Square Feet of space, as shown on the floor plan attached hereto and marked Exhibit “A”(the “Expansion Space”). Tenant shall exercise such option by delivery to Landlord of a written notice of such exercise not later than December 31, 2003. Upon receipt of Tenant’s notice exercising this option, Landlord shall negotiate in good faith with the present tenants occupying the Expansion Space in an effort to obtain the agreement of both such tenants (the “Contingent Agreements”) either (a) to terminate their respective leases on terms acceptable to Landlord or (b) to extend the terms of their respective leases for at least five (5) years beyond the present termination dates of such leases and to relocate to another floor or floors of the Building on terms acceptable to Landlord. Landlord shall bear the cost of relocating any existing tenant occupying the Expansion Space. If Landlord is unable to enter into Contingent Agreements with such tenants on terms acceptable to Landlord that will allow Landlord to deliver possession of the Expansion Space to Tenant within approximately one hundred fifty (150) days after the date of Landlord’s receipt of Tenant’s notice exercising this option, then Tenant’s exercise of this option shall be null and void and Tenant shall continue to have an option to lease the Expansion Space on the terms provided in Section 2.2 hereof. Likewise, if Tenant fails to exercise this option in a timely manner Tenant shall continue to have an option to lease the Expansion Space on the terms provided in Section 2.2 hereof.

                             2.1.2 If Tenant timely exercises this option and Landlord is successful in entering into the Contingent Agreements, then Tenant shall commence to lease the Expansion Space from Landlord, for the remainder of the Term, effective upon Tenant’s receipt of written notice from Landlord that the Expansion Space is vacant and ready for occupancy (the “Effective Date”). As of the Effective Date, the Expansion Space shall form a part of the Premises (which shall thereupon contain 89,810 Rentable Square Feet, exclusive of the P-2 Space) for all purposes under the Lease and, except as expressly set forth herein, shall be governed by the terms of the Lease. Tenant shall pay Minimum Rent for the Expansion Space at the same rate per Rentable Square Foot as Tenant pays for the Premises under this Lease at that time (subject to the same increases at the same time or times as Minimum Rent for the Premises increases hereunder during the Term); provided, however, notwithstanding the foregoing, no Minimum Rent shall be payable or otherwise accrue on account of the Expansion Space during the period commencing on the Effective Date and ending December 31, 2004. In addition, as of the Effective Date Landlord grants to Tenant a construction allowance in the sum of up to $206,745.00, to be disbursed in accordance with the terms of Section 6 hereof (with all references therein to the “Premises”being deemed to include the Expansion Space for purposes hereof) in reimbursement of costs incurred by Tenant in altering or refurbishing the Expansion Space or other areas of the Premises. The Expansion Space shall be provided to Tenant in its “as is”condition as of the Effective Date. Landlord shall not be obligated to make any improvements to the Expansion Space prior to Tenant’s occupancy thereof. Upon Tenant’s timely exercise of this option and Landlord’s execution of the Contingency Agreements, Landlord and Tenant shall promptly execute an amendment of this Lease reflecting the terms of Tenant’s Lease of the Expansion Space, including confirmation of Tenant’s Tax Share and Tenant’s Expense Share.

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                     2.2 2004 Option. In the event that Tenant does not lease the Expansion Space pursuant to the terms of Section 2.1 hereof, then Tenant shall have a further first right and option to lease the Expansion Space on the terms and conditions herein set forth, exercisable by Tenant delivering to Landlord written notice electing to exercise such option on or before June 1, 2004. If Tenant timely exercises this option, Landlord shall deliver the Expansion Space to Tenant on or about June 1, 2005, whereupon the Expansion Space shall form a part of the Premises for all purposes under the Lease and shall be governed by the terms of the Lease except to the extent inconsistent with the terms of this Section 2. Tenant shall pay Minimum Rent for the Expansion Space commencing on the date on which Landlord tenders possession thereof to Tenant at the same rate per Rentable Square Foot as Tenant pays for the Premises under this Lease at that time (subject to the same increases at the same time or times as Minimum Rent for the Premises increases hereunder during the Term), and with a Construction Allowance of Thirty-five Dollars ($35.00) per Rentable Square Foot of the Expansion Space, but without the benefit of a Minimum Rent-free period or other concessions or inducements, and otherwise on the terms and conditions contained in the Lease. In the event that Tenant does not exercise this option in a timely fashion, then Landlord shall be free to lease the Expansion Space to any other person or entity and this Section 2 shall be of no further force or effect. Upon Tenant’s timely exercise of this option, Landlord and Tenant shall promptly execute an amendment of this Lease reflecting the terms of Tenant’s Lease of the Expansion Space, including confirmation of Tenant’s Tax Share and Tenant’s Expense Share.

                     2.3 Conditions to Exercise. Notwithstanding anything to the contrary contained in Section 2.1 and Section 2.2 hereof, (a) Tenant’s right to exercise its options under this Section 2 shall be contingent upon no Event of Default existing at the time of such exercise or at the time Landlord intends to tender possession of the Expansion Space to Tenant hereunder and (b) Landlord’s delivery of the Expansion Space to Tenant shall be subject to Landlord’s regaining possession thereof from the tenant then occupying same and Landlord shall not be liable to Tenant if Landlord is unable to obtain possession of the Expansion Space in a timely fashion for any reason.

        3. Extension of Term; Renewal Options.

               3.1 Extension. The Term of the Lease is hereby extended for the period commencing January 1, 2005 and ending December 31, 2019 (the “Extended Term”). The term “Termination Date”, as used in the Lease, is amended to mean December 31, 2019.

               3.2 Renewal Options. Tenant is granted the option to extend the term of the Lease, with respect to all of the Premises as then constituted, for two (2) consecutive additional periods of five (5) years each, the first commencing on January 1, 2020 and ending December 31, 2024 (the “First Renewal Expiration Date”), and the second commencing on January 1, 2025 and ending December 31, 2029 (each a “Renewal Term”), on the following terms and conditions:

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                     3.2.1 No event of default shall exist under the Lease, either at the time of Tenant's giving of its renewal notice to Landlord or at the commencement of the Renewal Term (unless Landlord elects, in its sole discretion, to waive such condition);

                     3.2.2 At the time of Tenant’s giving of its renewal notice, Tenant shall not be subleasing more than either (a) one full floor of the Premises or (b) portions of floors of the Premises aggregating more than 22,000 Rentable Square Feet;

                     3.2.4 Tenant shall have delivered to Landlord written notice of Tenant’s election to exercise its option respecting the first Renewal Term on or before September 30, 2018; and Tenant shall have delivered to Landlord written notice of Tenant’s election to exercise its option respecting the second Renewal Term on or before September 30, 2023;

                     3.2.5 All lease terms for each Renewal Term shall be the same as specified for the initial Term of this Lease, except that (a) there shall be no further option to renew or extend the Term of this Lease beyond the second Renewal Term, (b) there shall be no allowances or inducements payable by Landlord during either Renewal Term, and (c) minimum annual rent payable during a given Renewal Term shall be the greater of (1) ninety-five percent (95%) of the Market Rental Rate (as defined in Section 3.2.8 hereof) in effect at the commencement of the applicable Renewal Term, or (2) (i) with respect to the first Renewal Term, the minimum annual rent payable by Tenant during 2019, and (ii) with respect to the second Renewal Term, the minimum annual rent payable by Tenant during 2024;

                     3.2.6 With respect to the second Renewal Term, Tenant shall have timely and effectively exercised its renewal option for the first Renewal Term; and

                     3.2.7 At Landlord’s election, Landlord and Tenant shall promptly execute and deliver to one another an amendment to the Lease, in reasonable form prepared by Landlord, confirming Tenant’s exercise of its option hereunder and the minimum annual rent payable during the Renewal Term in question.

                     3.2.8 For purposes of this Section 3.2, the term “Market Rental Rate”shall be defined as the rate of annual minimum rent being quoted by Landlord to prospective tenants of the Building or being charged to tenants whose leases have commenced within the preceding six months, for terms of length similar to the Renewal Term for comparable space (considering size and location) in the Building (or which would be quoted if comparable space were available), to be determined as follows:

                             3.2.8.1 Landlord shall determine the Market Rental Rate for the Renewal Term in question and give Tenant notice thereof (a “Rental Notice”) in each case following Tenant’s exercise of its option to renew (and not later than thirty (30) days following receipt of Tenant’s notice exercising its option to renew). Should Tenant disagree with Landlord’s determination, Tenant shall so notify Landlord within fifteen (15) days after Tenant’s receipt of the Rental Notice (failure of Tenant to timely notify Landlord of Tenant’s disagreement shall

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conclusively constitute Tenant’s acceptance of Landlord’s determination), and Landlord and Tenant shall negotiate reasonably and in good faith to attempt to reach agreement for a period of thirty (30) days following Landlord’s receipt of such notice. If Landlord and Tenant are unable to agree on the Market Rental Rate within such thirty (30) day period, Tenant may elect, by notice delivered to Landlord within ten (10) days after the expiration of such thirty (30) day period, to either rescind its election to enter into a Renewal Term or to have the Market Rental Rate for such Renewal Term determined by appraisal in accordance with the procedures set forth in Subsection 3.2.8.2 hereof, the results of which shall be binding upon both Landlord and Tenant (failure of Tenant to timely notify Landlord of Tenant’s election shall conclusively constitute Tenant’s acceptance of Landlord’s determination of the Market Rental Rate set forth in the Rental Notice).

                             3.2.8.2 Within ten (10) days after Tenant notifies Landlord of Tenant's election to determine Market Rental Rate by appraisal, each of Landlord and Tenant shall, by written notice to the other, designate an appraiser having at least ten (10) years experience as a licensed Pennsylvania real estate broker or MAl appraiser doing a substantial amount of business in the Center City, Philadelphia area. Within ten (10) days following the appointment of the second of such appraisers, the two appraisers so appointed shall select a third appraiser meeting the same requirements as to experience. In the event that the two appraisers are unable timely to agree upon the third appraiser, then Landlord and Tenant shall attempt to agree upon the third appraiser within ten (10) days thereafter, and if they fail to do so the third appraiser shall be an appraiser meeting the qualifications herein set forth and appointed under the commercial arbitration rules of the American Arbitration Association relating to appointment of arbitrators. The three appraisers so chosen shall render their decision as to the Market Rental Rate (as such term is hereinafter defined) within thirty (30) days following the appointment of the third appraiser. Should the three appraisers be unable to agree on the Market Rental Rate, the Market Rental Rate shall be the average of the three respective Market Rental Rates determined by the three appraisers, excluding from such computation, however, any Market Rental Rate which deviates by more than fifteen percent (15%) from the median of the three Market Rental Rates so determined. Landlord and Tenant shall each bear their own costs of such appraisal and shall equally share the cost of the third appraiser and any arbitration hereunder.

                             3.2.8.3 Notwithstanding anything to the contrary hereinabove set forth in this Section 3, in the event Tenant shall elect the aforesaid appraisal determination of the Market Rental Rate for any Renewal Term, the term “Market Rental Rate”shall be defined as the rate of annual minimum rent being charged or quoted by Landlord for office space in the Building and by Landlord and other landlords for office space in those buildings commonly known as “trophy buildings” (including, without limitation, One Liberty Place, Two Liberty Place, Two Logan Square and Bell Atlantic Tower) to tenants whose leases have been executed within the six months preceding the time of appraisal, for terms similar in length to the Renewal Term in question, for comparable space (considering size and location) in such buildings (or which would be so charged if comparable space were available), taking into account “free rent”and other lease concessions then being commonly offered in such buildings.

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        4. Rent.

               4.1 Minimum Rent.

                     4.1.1 Section 4.1 of the Lease is amended to provide that during the Extended Term Tenant shall pay Minimum Rent for the Premises, exclusive of the P-2 Space, as follows (as used in this chart, “RSF”means “Rentable Square Foot”):

        1/01/05 - 12/31/08     $1,111,714.75 per annum; $92,642.90 per month ($13.25/RSF)

        1/01/09 - 12/31/12     $1,321,472.25 per annum; $110,122.69 per month ($15.75/RSF)

        1/01/13 - 12/31/16     $1,531,229.75 per annum; $127,602.48 per month ($18.25/RSF)

        1/01/17 - 12/31/19     $1,740,987.25 per annum; $145,082.27 per month ($20.75/RSF)

                     4.1.2 The Lease is amended to provide that during the Extended Term Tenant shall pay Minimum Rent for the P-2 Space as follows:

        1/01/05 - 12/31/19     $21,920.00 per annum; $1,826.67 per month

               4.2 Operating Expenses. The parties confirm that during the Term Tenant’s Expense Share shall be derived by dividing the Rentable Area of the Premises (including the P-2 Space) by 1,245,175 Rentable Square Feet (being the aggregate of the Rentable Area of the Office Space (1,231,518 Rentable Square Feet) and the Rentable Area of the Storage Space (13,657 Rentable Square Feet)).

        5. Storage Space First Offer Right. Provided that this Lease is in full force and effect, with at least twenty-four (24) months then remaining in the Term (including any Renewal Term as to which Tenant has theretofore exercised a renewal option), Landlord grants to Tenant a single right of first offer to lease from Landlord on the terms herein set forth those certain portions of the P-2 level of the Building which are shown and marked “Option Space A” (comprising approximately 800 Rentable Square Feet of space) and “Option Space B” (comprising approximately 1,159 Rentable Square Feet of space) on the floor plan attached hereto and marked Exhibit “B”(the “P-2 Option Spaces”, each a “P-2 Option Space”)). Upon either of the P-2 Option Spaces becoming available during the Term for lease to a tenant other than the entity leasing such space on the date of this Lease (or any successor of such tenant), Landlord shall give Tenant written notice that Tenant may lease such P-2 Option Space for a term which is coterminous with the Term, for a rate of Minimum Rent which is the same rate per Rentable Square Foot as Landlord is then charging for Storage Space and otherwise on the same terms as those on which Tenant leases the P-2 Space under the Lease. Landlord’s notice shall state the date on which the P-2 Option Space in question is anticipated to become available. In the event that Tenant does not accept Landlord’s offer in writing and without modification within thirty (30) days after the date on which Tenant receives Landlord’s notice, then Landlord shall be

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free to lease such P-2 Option Space to any other person or entity and this Section 5 shall be of no further force or effect. If Tenant timely accepts Landlord’s offer, Landlord and Tenant shall promptly execute an amendment of this Lease reflecting the terms of Tenant’s lease of the P-2 Option Space in question. Notwithstanding the foregoing, (a) Tenant’s right to lease the P-2 Option Spaces hereunder shall be contingent upon no Event of Default existing either at the time a given P-2 Option Space becomes available for lease or at the time Landlord intends to tender possession of a given P-2 Option Space to Tenant, and (b) Landlord’s delivery of a given P-2 Option Space to Tenant shall be subject to Landlord’s regaining possession thereof from the tenant then occupying same and Landlord shall not be liable to Tenant if Landlord is unable to obtain possession of such P-2 Option Space in a timely fashion for any reason.

        6. Tenant Work and Renovations; Allowance.

               6.1 Tenant may renovate and improve the Premises, in accordance with the terms of Sections 7.1, 7.2, 7.3 (exclusive of Section 7.3.4), 7.5, 7.6 and 7.9 of the Lease (with all references therein to the Construction Allowance being deemed references to the 2003 Allowance as hereinafter defined). Landlord agrees to disburse, in accordance with the terms and conditions set forth in Section 6.2, below, up to $2,936,605.00 (the “2003 Allowance”) in order to assist Tenant in defraying (a) the hard construction costs incurred in undertaking the Tenant Work, (b) architectural and engineering fees and costs incurred in designing the Tenant Work and preparing construction documents and specifications relating thereto, (c) cabling costs and (d) moving costs. The 2003 Allowance shall be Landlord’s sole contribution to Tenant’s cost of constructing the Tenant Work. Landlord shall not charge Tenant a fee in connection with Landlord’s review and approval of the Construction Documents or other Landlord involvement with Tenant’s construction of the Tenant Work. In order to secure to Tenant payment of the 2003 Allowance, Landlord shall cause HRPT Properties Trust to execute the Guaranty appearing at the end of this Amendment.

               6.2 Until the 2003 Allowance is exhausted, each draw requested by Tenant shall be paid by Landlord within thirty (30) days following receipt by Landlord of (i) Tenant’s voucher, which shall be in the standard American Institute of Architects form, accompanied by (ii) invoices or other evidence reasonably satisfactory to Landlord that Tenant either owes to its contractor or has incurred and paid the costs desired to be reimbursed and (iii) a lien release executed by Tenant’s contractor (solely if the request relates to reimbursement of costs of installation or construction of improvements). Tenant shall submit no more than one (1) voucher per month. Notwithstanding anything set forth herein to the contrary, any amounts held back as retainage under contracts for work or improvements for which reimbursement is requested shall not be reimbursable to Tenant unless and until paid or owing to the contractor under the terms of the subject contract. If Tenant submits a voucher requesting the payment of sums owing to Tenant’s contractor, Landlord shall pay the approved disbursement directly to such contractor, conditioned upon such contractor executing and delivering to Landlord a lien release for the sum so paid. All such vouchers must be submitted on or before December 31, 2007.

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        7. Right of First Offer. Provided that this Lease is in full force and effect, with at least twenty-four (24) months then remaining in the Term (including any Renewal Term as to which Tenant has theretofore exercised a renewal option), Landlord hereby grants to Tenant a right of first offer to lease from Landlord, on the terms and conditions herein set forth, all rentable space on the 25^th, 26^th, 31^stand 32^ndfloors of the Building (“Offer Space”). In addition, if Tenant fails to exercise either of its options to lease the 27^thfloor Expansion Space pursuant to Section 2 hereof, then after Landlord thereafter enters into a lease of all or any portion of the Expansion Space to a third party for a term commencing on or after January 1, 2005, such portion of the Expansion Space shall also be included within the meaning of the term “Offer Space”, effective at such time as such portion of the Expansion Space next becomes available for lease. Upon any portion of the Offer Space hereafter becoming available during the Term for lease to a tenant other than the entity leasing such space on the date of this Lease (or any successor of such tenant but not an assignee of a tenant whose lease does not, as of the date of this Amendment, have an extension right), Landlord shall give Tenant written notice that Tenant may lease the available Offer Space for a term which is coterminous with the Term, for a rate of Minimum Rent which is the same rate per Rentable Square Foot as Tenant pays for the Premises under this Lease (subject to the same increases at the same time or times as Minimum Rent for the Premises increases hereunder), and with a construction allowance per Rentable Square Foot of the Offer Space leased by Tenant hereunder equal to the product derived by multiplying thirty-five dollars ($35.00) by a fraction, the numerator of which shall be the number of months of the Term remaining on the date Landlord delivers such portion of the Offer Space to Tenant for improvement and the denominator of which shall be one hundred eighty (180), but without the benefit of a Minimum Rent-free period or other concessions or inducements, and otherwise on the terms and conditions contained in the Lease. Landlord’s notice shall state the Rentable Area of the available Offer Space and the date on which the Offer Space is anticipated to become available. In the event that Tenant does not accept Landlord’s offer in writing and without modification within thirty (30) days after the date on which Tenant receives Landlord’s notice, then Landlord shall be free to lease such portion of the Offer Space to any other person or entity and this Section 7 shall be of no further force or effect with respect to the space in question until the first to occur of (i) one hundred eighty (180) days after the last day of such thirty (30) day period if Landlord fails to lease such space to a third party within such period, or (ii) if Landlord enters into a lease with a third party for such space within such one hundred eighty (180) day period, then when such space again becomes available for lease under the terms above provided. If Tenant timely accepts Landlord’s offer, Landlord and Tenant shall promptly execute an amendment of this Lease reflecting the terms of Tenant’s lease of such portion of the Offer Space. Notwithstanding the foregoing, (a) Tenant’s right to lease the Offer Space hereunder shall be contingent upon no Event of Default existing either at the time the Offer Space becomes available for lease or at the time Landlord intends to tender possession of the Offer Space to Tenant, and (b) Landlord’s delivery of the Offer Space to Tenant shall be subject to Landlord’s regaining possession thereof from the tenant then occupying same and Landlord shall not be liable to Tenant if Landlord is unable to obtain possession of the Offer Space in a timely fashion for any reason.

        8. Contraction Option. Provided PMA Capital Insurance Company or its affiliate (as defined in the Lease) or corporate successor remains the “Tenant” under the Lease at the time of Tenant’s exercise of the option herein granted, Tenant shall have the option to reduce the Premises by one-half (1/2) of a full floor on the following terms and conditions.

               8.1 Landlord hereby grants to Tenant a single option to terminate this Lease solely with respect to one half (1/2) of the Rentable Area contained on either the uppermost or the lowermost floor on which the Premises (exclusive of the P-2 Space) is located at the time of Tenant’s exercise of such option (the “Contraction Space”), subject to Landlord’s approval (not to be unreasonably withheld) of the location and configuration of the Contraction Space on the floor

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in question in order to insure the reasonable marketability thereof to third parties for office purposes. Provided no Event of Default then exists under the Lease, by written notice to Landlord on or before December 31, 2014 Tenant may terminate this Lease with respect to the Contraction Space effective twelve (12) months after the date on which Landlord receives such notice (the “Contraction Date”). Any such exercise by Tenant of the option herein contained shall be irrevocable and shall be absolutely subject to satisfaction of the following terms and conditions:

                     8.1.1 As a condition to the validity of Tenant’s notice of contraction, such notice must be accompanied by Tenant’s good bank check or other payment acceptable to Landlord in an amount equal to the sum derived by multiplying the then unamortized Landlord’s Cost of Leasing (hereinafter defined) as of the Contraction Date (assuming straight line amortization at a rate of 10% per annum over the entire Extended Term, except with regard to the Refurbishment Allowance (defined in Section 11.1 hereof), which shall be amortized over that period of the Extended Term commencing on January 1, 2011 and ending on the Contraction Date), by the percentage derived by dividing the Rentable Square Footage of the Contraction Space by the Rentable Square Footage of the entire Premises (exclusive of the P-2 Space) prior to such termination. The term “Landlord’s Cost of Leasing”shall mean the sum of the following: (i) the 2003 Allowance to the extent advanced under Section 6, (ii) all leasing commissions paid by Landlord in connection with this Amendment, (iii) Landlord’s reasonable legal costs incurred and paid in negotiating and preparing this Amendment, and (iv) the Refurbishment Allowance, to the extent theretofore advanced under Section 11 hereof.

                     8.1.2 On or before the Contraction Date, Tenant shall construct at Tenant’s expense and in accordance with plans and specifications approved in advance by Landlord (a) such demising walls as are necessary to separate the portion of the Contraction Space with respect to which the Lease is so terminated from the remainder of the Premises (drywall, taped and spackled, to code), as well as (b) any multi-tenant corridor that may be required by applicable laws, codes or regulations in the event that the Contraction Space is located on a floor leased entirely by Tenant, to a level of fit and finish consistent with that of typical multi-tenant corridors in the Building. The foregoing obligation shall include Tenant’s duty to separate at Tenant’s expense those mechanical systems (including, without limitation, all electrical, plumbing and HVAC systems) serving both the Contraction Space and the remainder of the Premises that Landlord reasonably determines require separation in connection with the

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separation of the Contraction Space from the Premises and construction of any multi-tenant corridor as contemplated hereunder, including, without limitation, the obligation to purchase and install such additional equipment as is reasonably necessary to continue the same level and quality of service from such mechanical systems to the Contraction Space, the remainder of the Premises and any multi-tenant corridor constructed hereunder after completion of the separation as existed prior to Tenant’s exercise of the option contained in this Section 8, all to Landlord’s reasonable satisfaction.

                     8.1.3 On or before the Contraction Date, Tenant shall vacate the Contraction Space, leaving same in broom clean condition and otherwise in the condition in which the Premises is required to be left at the end of the Term under the Lease. In the event that Tenant holds over in the Contraction Space thereafter then, notwithstanding anything contained in Section 8.1 hereof, Minimum Rent shall commence to be payable for the Contraction Space monthly, in advance, at the same rate of Minimum Rent per Rentable Square Foot as is payable with respect to the Premises, Tenant shall occupy the Contraction Space as a Tenant at sufferance, and Landlord shall have all available rights and remedies on account of such holdover.

               8.2 In the event that Tenant exercises the contraction option herein set forth, then from and after the date of Tenant’s notice of such exercise, Section 7 of this Amendment shall automatically be amended, without the need of further action by either Landlord or Tenant, to provide that (a) available Offer Space thereafter shall be offered to Tenant on the same terms and conditions (including, without limitation, length of term and rate of Minimum Rent) as Landlord would propose to an unrelated third party for such space for a lease commencing at or approximately at the time the Offer Space will be available for lease, and not at the same rate of escalating Minimum Rent as Tenant then pays for the Premises or with the benefit of a construction allowance (except such construction allowance as Landlord would then propose to an unrelated third party, if any), and (b) if Tenant fails to elect to lease any portion of the Offer Space offered to Tenant thereunder, then Section 7 of this Amendment shall cease to be applicable to such portion of the Offer Space for the duration of the Term of this Lease (as the same may be extended or renewed).

        9. Temporary Space.

               9.1 2003 Temporary Space. Tenant hereby leases from Landlord certain office space to be designated by Landlord containing between 10,000 and 12,000 Rentable Square Feet, located on the 13^thfloor of the Building (consisting of either a single suite or two (2) contiguous suites) (the “2003 Temporary Space”), subject to and in accordance with the terms of this Section 9. Landlord shall tender possession of the 2003 Temporary Space to Tenant within thirty (30) days after the date of full execution of this Lease. Tenant’s lease of the 2003 Temporary Space shall terminate on the earlier of (a) December 31, 2004 or (b) the date of completion of the Tenant Work under Section 6 hereof, and Tenant shall give Landlord ninety (90) days advance written notice of the intended termination date.

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               9.2 Temporary Space Options.

                     9.2.1 Tenant is granted two (2) options to lease from Landlord, subject to and in accordance with the terms of this Section 9, office space within the Building to be designated by Landlord (consisting of either a single suite or two (2) contiguous suites) containing between 10,000 and 12,000 Rentable Square Feet (each an “Option Temporary Space”). Tenant shall exercise its option to lease an Option Temporary Space by delivery of written notice to Landlord at least ninety (90) days prior to the date on which Tenant desires to commence occupancy thereof. The term of Tenant’s lease of each Option Temporary Space shall be for up to ten (10) months following the date on which Landlord delivers possession of the Option Temporary Space to Tenant; provided, however, that (a) the term of Tenant’s lease of any Option Temporary Space shall not commence prior to January 1, 2005, (b) the term of Tenant’s lease of any Option Temporary Space shall in no event extend beyond December 31, 2007 and (c) Tenant may only lease a single Option Temporary Space at any time (the terms may not overlap).

                     9.2.2 Notwithstanding the foregoing, Tenant's option to lease Option Temporary Space under this Section 9.2 is expressly subject to there being available in the Building the Minimum Vacant Space (hereinafter defined) at the time that Tenant delivers notice to Landlord exercising such option. As used herein, the term “Minimum Vacant Space” means at least 10,000 Rentable Square Feet of vacant office space, consisting of either a single suite or two (2) contiguous suites on the same floor, but excluding (i) any space that Landlord is then marketing for lease as part of a larger block of vacant space consisting of at least one full floor, and (ii) any space that Landlord then intends to lease to a third party pursuant to a letter of intent that Landlord has theretofore entered into with such third party, and (iii) any space subject to an expansion right under another tenant’s lease which expansion right either has been exercised or may be exercised during the expected term of Tenant’s lease of the Option Temporary Space, and (iv) any space that Landlord has theretofore agreed to lease to a third party and with respect to which Landlord is then in the process of preparing and negotiating a lease or a lease amendment. In the event that, at the time Landlord receives Tenant’s notice exercising its option hereunder, the Minimum Vacant Space is not available in the Building, Landlord shall give Tenant written notice of such fact within thirty (30) days after receipt of Tenant’s notice, whereupon (i) Tenant’s notice exercising such option shall be of no further force or effect and neither party shall have any liability to the other hereunder, and (ii) Landlord shall, for a period of sixty (60) days after delivery of such notice to Tenant, exercise reasonable and diligent efforts to cause an entity affiliated with Nine Penn Center Properties Trust that owns a first class office property located in the Center City Philadelphia Business District (an “Affiliated Building”) that then contains the Minimum Vacant Space (if any such building then exists), to enter into a lease with Tenant on substantially the terms contained in this Section 9, providing the Option Temporary Space to Tenant on the terms herein set forth; provided, however, that Landlord shall have no liability to Tenant if the Minimum Vacant Space is not available either in the Building or in any Affiliated Building.

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               9.3 Terms. The following terms shall govern Tenant’s lease of the 2003 Temporary Space and any Option Temporary Space leased by Tenant (each a “Temporary Space”):

                     9.3.1 The Temporary Space shall be accepted by Tenant in "as-is" condition, and shall be used by Tenant solely for office purposes. The Temporary Space shall be deemed part of the Premises for all purposes of this Lease, except to the extent inconsistent with the terms of this Section 9, and except that the Temporary Space shall not be deemed part of the Premises for purposes of Sections 5, 6 or 7 of the Lease. No Minimum Rent or monthly payments on account of Real Estate Taxes or Operating Expenses shall be payable by Tenant for the Temporary Space. Notwithstanding the preceding sentence, Landlord shall provide to the Temporary Space all of the services that Landlord is obligated to provide pursuant to Sections 8.1, 8.2, 8.3, 8.5 and 8.6 to the Premises; and Tenant agrees that (a) Landlord shall furnish the Temporary Space with janitorial service as provided in Section 8.4 of the Lease, the cost of which, as reasonably computed by Landlord, shall be payable by Tenant monthly within thirty (30) days after billing, and (b) Landlord shall furnish electricity to the Temporary Space in the same manner as electricity is provided to the Premises under Section 8.8 of the Lease, the cost of which shall be payable by Tenant as and when provided in said Section 8.8. Tenant shall not construct alterations within the Temporary Space.

                     9.3.2 Upon termination of Tenant's lease of any Temporary Space, Tenant shall vacate the Temporary Space, leaving same in broom clean condition. In the event that Tenant holds over in the Temporary Space thereafter then, notwithstanding anything contained in Section 9.1 or Section 9.2 hereof, Minimum Rent shall commence to be payable for the Temporary Space monthly, in advance, at the same rate of Minimum Rent per Rentable Square Foot as is payable with respect to the Premises (exclusive of the P-2 Space), Tenant shall occupy the Temporary Space as a Tenant at sufferance, and Landlord shall have all available rights and remedies on account of such holdover.

                     9.3.3 Tenant's right to lease Temporary Space hereunder shall be contingent upon no Event of Default existing either at the time Tenant elects to lease the Temporary Space or at the time Landlord intends to tender possession of the Temporary Space to Tenant, and Landlord’s delivery of the Temporary Space to Tenant shall be subject to Landlord’s regaining possession thereof from the tenant then occupying same (if any) and Landlord shall not be liable to Tenant if Landlord is unable to obtain possession of the Temporary Space in a timely fashion for any reason.

        10. Sublease Profit. Section 12.7.1 of the Lease is amended and restated as follows:

12.7.1 As a condition to Landlord’s consent to any proposed assignment or sublease under this Section 12 (other than the Sublease but including any further sublease by Subtenant to any third party), Tenant shall pay to Landlord one half (1/2) of the amount of any Profit received by Tenant or Subtenant in connection with the proposed assignment or sublease. For

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purposes hereof the term “Profit”shall mean the amount by which the Premium (as defined in Section 12.7.3 below) paid to Tenant or Subtenant by any third party (other than an affiliate of Subtenant which does not itself further sublease the Premises to an entity unaffiliated with Subtenant) in connection with the proposed assignment or sublease in any given month exceeds the Rent due under this Lease for the Sublet Space for the same month. Commencing with the first month in which Tenant receives a payment from any third party on account of the assignment or sublease, and each month thereafter during the term of such assignment or sublease, Tenant shall pay to Landlord on or before the first day of the next following calendar month, in arrears and as Additional Rent, one half (1/2) of the amount of Profit received by Tenant in such calendar month.

        11. Refurbishment Allowance.

               11.1 Landlord hereby grants to Tenant an allowance in the sum of up to $6.00 per Rentable Square Foot of all office space contained in the Premises as of December 31, 2010 (the “Refurbishment Allowance”), payable as hereinafter set forth, to reimburse Tenant for the costs of refurbishment of the Premises incurred by Tenant after January 1, 2011. Provided no Event of Default then exists under the Lease, the Refurbishment Allowance shall be disbursed to Tenant, until exhausted, in installments, in payment of costs incurred by Tenant with respect to the construction or refurbishment of permanent improvements and fixtures (including, without limitation, any equipment constituting fixtures which Tenant intends to leave in the Premises at the end of the Term) and the undertaking of finishes, wallcoverings, carpeting and painting within the Premises, as well as the fees and charges of architects, interior designers, engineers and other related consultants and professionals providing design services in connection therewith, but may not be applied toward payment of Tenant’s costs of purchase or installation of non-permanent improvements, equipment (excepting any equipment constituting fixtures which Tenant intends to leave in the Premises at the end of the Term), trade fixtures, furniture or other personalty.

               11.2 Until the Refurbishment Allowance is exhausted, each draw requested by Tenant shall be paid by Landlord within thirty (30) days following receipt by Landlord of (i) Tenant’s voucher, which shall be in the standard American Institute of Architects form, accompanied by (ii) invoices or other evidence reasonably satisfactory to Landlord that Tenant either owes to its contractor or has incurred and paid the costs desired to be reimbursed and (iii) a lien release executed by Tenant’s contractor (solely if the request relates to reimbursement of costs of installation or construction of improvements). Tenant shall submit no more than one (1) voucher per month. Notwithstanding anything set forth herein to the contrary, any amounts held back as retainage under contracts for work or improvements for which reimbursement is requested shall not be reimbursable to Tenant unless and until paid or owing to the contractor under the terms of the subject contract. If Tenant submits a voucher requesting the payment of sums owing to Tenant’s contractor, Landlord shall pay the approved disbursement directly to

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such contractor, conditioned upon such contractor executing and delivering to Landlord a lien release for the sum so paid. All such vouchers must be submitted on or before March 31, 2014.

        12. Brokers. Each of Landlord and Tenant represents and warrants to the other that it has not dealt with any broker, agent, finder or other person in the negotiation for or the obtaining of this Amendment other than Grubb and Ellis Company and Beacon Commercial Real Estate (“Brokers”), and each agrees to indemnify and hold the other harmless from any and all costs (including reasonable attorneys’ fees) and liability for commissions or other compensation claimed by any such broker, agent, finder or other person other than Brokers employed by the indemnifying party or claiming to have been engaged by the indemnifying party in connection with this Amendment. Landlord agrees to pay a fee or commission owing to Brokers on account of this Amendment pursuant to a separate written agreement with Brokers.

        13. Confirmation of Remedy. In order to preserve for Landlord the benefit of the remedy of confession of judgment for ejectment contained in the Lease, Sections 17.2.3 and 17.2.5 of the Lease are hereby restated and ratified as follows:

17.2.3 any prothonotary or attorney of any court of record is hereby irrevocably authorized and empowered to appear for Tenant in any action to confess judgment against Tenant, and may sign for Tenant an agreement, for which this Lease shall be his sufficient warrant, for entering in any competent court an action or actions in ejectment, and in any suits or in said actions to confess judgment against Tenant as well as all persons claiming by, through or under Tenant for the recovery by Landlord of possession of the Premises. Such authority shall not be exhausted by any one or more exercises thereof, but judgment may be confessed from time to time as often as any event set forth in Subsection 17.1 hereof shall have occurred or be continuing. Such powers may be exercised during as well as after the expiration or termination of the original Term and during and at any time after any extension or renewal of the Term, and/or

17.2.5 In any confession of judgment for ejectment, Landlord shall cause to be filed in such action an affidavit setting forth the facts necessary to authorize the entry of judgment and if a true copy of this Lease (and of the truth of the copy, such affidavit shall be sufficient proof) be filed in such action, it shall not be necessary to file the original as a warrant of attorney, notwithstanding any law, rule of court, custom or practice to the contrary. Tenant releases to Landlord, and to any and all attorneys who may appear for Tenant, all procedural errors in any proceedings taken by Landlord, whether by virtue of the powers of attorney contained in this Lease or not, and all liability therefor. Tenant expressly waives the benefits of all laws, now or hereafter in force, exempting any property within the Premises or elsewhere from distraint, levy or sale. Tenant

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further waives the right to any notice to remove as may be specified in the Pennsylvania Landlord and Tenant Act of April 6, 1951, as amended, or any similar or successor provision of law, and agrees that five (5) days notice shall be sufficient in any case where a longer period may be statutorily specified, and/or

        14. Limitation of Liability. Section 29.3.1 of the Lease is amended by adding the following language at the end of the paragraph; provided, however, that nothing contained in the following language shall be construed to limit the liability of HRPT Properties Trust under the Guaranty to be delivered to secure Landlord’s performance under Section 6.1 and Section 9.2 hereof:

In addition to all other limitations contained in this Lease, Landlord hereby notifies Tenant that the Declaration of Trust of Nine Penn Center Properties Trust provides, and Tenant agrees, that no trustee, officer, director, general or limited partner, member, shareholder, beneficiary, employee or agent of Nine Penn Center Properties Trust (including any person or entity from time to time engaged to supervise and/or manage the

operation of Landlord) shall be held to any liability, jointly or severally, for any debt, claim, demand, judgment, decree, liability or obligation of any kind (in tort, contract or otherwise) of, against or with respect to Landlord or arising out of any action taken or omitted for or on behalf of Landlord.

        15. Effect of Amendment. As amended hereby, the Lease remains in full force and effect. In the event of any conflict or inconsistency between the terms of this Amendment and the remaining terms of the Lease, the terms of this Amendment shall govern and control.

        SECTIONS 17.2.3 AND 17.2.5 OF THE LEASE, RESTATED IN THIS AMENDMENT, PROVIDE FOR THE CONFESSION OF JUDGMENT AGAINST TENANT FOR EJECTMENT. IN CONNECTION THEREWITH, TENANT, KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND UPON ADVICE OF SEPARATE COUNSEL, UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY FOR HEARING UNDER THE RESPECTIVE CONSTITUTIONS AND LAWS OF THE UNITED STATES AND THE COMMONWEALTH OF PENNSYLVANIA. WITHOUT LIMITATION OF THE FOREGOING, TENANT HEREBY SPECIFICALLY WAIVES ALL RIGHTS TENANT HAS OR MAY HAVE TO NOTICE AND OPPORTUNITY FOR A HEARING PRIOR TO EXECUTION UPON ANY JUDGMENT CONFESSED AGAINST TENANT BY LANDLORD HEREUNDER.

        TENANT (I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF LANDLORD HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT LANDLORD WILL NOT SEEK TO EXERCISE OR ENFORCE ITS RIGHTS TO CONFESS JUDGMENT HEREUNDER, AND (II) ACKNOWLEDGES THAT THE EXECUTION OF THIS AMENDMENT BY LANDLORD HAS BEEN MATERIALLY INDUCED BY, AMONG OTHER

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THINGS, THE INCLUSION IN THIS AMENDMENT OF SAID RIGHTS TO CONFESS JUDGMENT AGAINST TENANT. TENANT FURTHER ACKNOWLEDGES THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS SAID PROVISIONS WITH TENANT’S INDEPENDENT LEGAL COUNSEL AND THAT THE MEANING AND EFFECT OF SUCH PROVISIONS HAVE BEEN FULLY EXPLAINED TO TENANT BY SUCH COUNSEL, AND AS EVIDENCE OF SUCH FACT AN AUTHORIZED OFFICER OF TENANT SIGNS HIS OR HER INITIALS IN THE SPACE PROVIDED BELOW.

/s/ WEH

(Initials)

        IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties hereto have caused this Amendment to be executed by their duly authorized representatives as of the day and year first above written.

	PMA CAPITAL INSURANCE COMPANY
By:	/s/ William E. Hitselberger
	Name: William E. Hitselberger
	Title: Senior Vice President and CFO

	NINE PENN CENTER ASSOCIATES, L.P.
	By NINE PENN CENTER PROPERTIES TRUST, a Maryland real estate investment trust, its general partner
By:	/s/ Jennifer B. Clark
	Name: Jennifer B. Clark
	Title: Senior Vice President

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GUARANTY

As an inducement to Tenant to execute the within Amendment (the “Amendment”), HRPT Properties Trust (the “Guarantor”), being affiliated with Nine Penn Center Properties Trust and anticipating to receive benefits from the execution of the Amendment, hereby guarantees to PMA Capital Insurance Company, its successors and its assigns as Tenant under the Lease, payment when due and in full of the sums owing on account of the 2003 Allowance, in accordance with the terms set forth in Section 6 of the Amendment. The obligation of Guarantor under the preceding sentence shall expire absolutely upon the payment in full to Tenant of all sums owing on account of the 2003 Allowance under Section 6 of the Amendment. Guarantor also guarantees the obligations of Nine Penn Center Properties Trust under Section 9.2 of the Amendment with regard to causing Minimum Vacant Space available in any Affiliated Building to be made available to Tenant for Option Temporary Space (as such terms are defined in Section 9.2 of the Amendment) in accordance with such Section 9.2.

This Guaranty shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania without reference to conflicts of laws principles, and shall be binding upon Guarantor and its successors and assigns. All terms used in this Guaranty that are defined in the Amendment shall have the meanings ascribed to them in the Amendment.

IN WITNESS WHEREOF, this Guaranty has been duly executed as of July 2, 2003.

	HRPT PROPERTIES TRUST
By:	/s/ Jennifer B. Clark
	Name: Jennifer B. Clark
	Title:

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Exhibit "A"

Floor Plan of Expansion Space

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Exhibit "B"

Floor Plan of P-2 Option Spaces

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EX-12

EXHIBIT 12

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollar amounts in thousands)

	For the nine months ended September 30,
(dollar amounts in thousands)	2003			2002
EARNINGS
Pre-tax loss	$	(75,764	)	$	(57,306	)
Fixed charges		7,928			2,684
Total	$	(67,836	)	$	(54,622	)
FIXED CHARGES
Interest expense and amortization of debt discount
and premium on all indebtedness	$	6,936		$	1,618
Interest portion of rental expenses		992			1,066
Total fixed charges	$	7,928		$	2,684
Ratio of earnings to fixed charges		(a)			(a)

(a) Earnings were insufficient to cover fixed charges by $75.8 million and $57.3 million for the nine months ended September 30, 2003 and 2002.

EX-31

EXHIBIT 31.1

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

        I, Vincent T. Donnelly, Principal Executive Officer of PMA Capital Corporation, certify that:

1. I have reviewed this quarterly report on Form 10-Q of PMA Capital Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 14, 2003	/s/ Vincent T. Donnelly
	Vincent T. Donnelly Principal Executive Officer

EX-31

EXHIBIT 31.2

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

        I, William E. Hitselberger, Senior Vice President, Chief Financial Officer and Treasurer of PMA Capital Corporation, certify that:

1. I have reviewed this quarterly report on Form 10-Q of PMA Capital Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and

c) Disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 14, 2003	/s/ William E. Hitselberger
	William E. Hitselberger Senior Vice President, Chief Financial Officer and Treasurer

EX-32

EXHIBIT 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        I, Vincent T. Donnelly, Principal Executive Officer of PMA Capital Corporation, do hereby certify, to the best of my knowledge, that, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, the information contained in the Quarterly Report of PMA Capital Corporation on Form 10-Q for the quarter ended September 30, 2003, filed with the Securities and Exchange Commission, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of PMA Capital Corporation. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

/s/ Vincent T. Donnelly

Vincent T. Donnelly
Principal Executive Officer

November 14, 2003

EX-32

EXHIBIT 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        I, William E. Hitselberger, Senior Vice President, Chief Financial Officer and Treasurer of PMA Capital Corporation, do hereby certify, to the best of my knowledge, that, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, the information contained in the Quarterly Report of PMA Capital Corporation on Form 10-Q for the quarter ended September 30, 2003, filed with the Securities and Exchange Commission, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of PMA Capital Corporation. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

/s/ William E. Hitselberger

William E. Hitselberger,
Senior Vice President,
Chief Financial Officer and Treasurer

November 14, 2003