425

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) October 15, 2004 (October 14, 2004)

UNITED NATIONAL GROUP, LTD.

(Exact name of registrant as specified in its charter)

Cayman Islands	000-50511	98-0417107
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)

Walker House, 87 Mary Street
P.O. Box 908GT
George Town , Grand Cayman
Cayman Islands

(Address of principal executive offices)

Registrant’s telephone number, including area code (345) 949-0100

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[X]	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ]	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ]	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ]	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

AGREEMENT AND PLAN OF MERGER, DATED OCTOBER 14, 2004

STOCK PURCHASE AGREEMENT, DATED OCTOBER 14, 2004

STOCK PURCHASE AGREEMENT, DATED OCTOBER 14, 2004

STOCK PURCHASE AGREEMENT, DATED OCTOBER 14, 2004

JOINT PRESS RELEASE

ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT

     On October 15, 2004, United National Group, Ltd. (“UNGL”) announced that it entered into an Agreement and Plan of Merger, dated as of October 14, 2004 (the “Merger Agreement”), with Penn-America Group, Inc. (“PNG”), pursuant to which an indirect, wholly-owned subsidiary of UNGL will merge with and into PNG (the “Merger”), and a Stock Purchase Agreement, dated as of October 14, 2004 (the “Stock Purchase Agreement”), with Penn Independent Corporation (“PIC”) and PIC’s shareholders, pursuant to which UNGL will acquire PIC .

     Pursuant to the Merger Agreement, at the effective time of the Merger, each outstanding share of PNG common stock held by public shareholders of PNG will be converted (1) an amount of Class A common shares of UNGL equal to the result obtained by dividing $13.875 by the volume weighted average sales price of a UNGL Class A Common Share during the 20 consecutive trading days ending on and including the trading day immediately preceding the date of the consummation of the Merger and (2) an amount in cash equal to $1.50.

     Pursuant to the Stock Purchase Agreement, UNGL will pay PIC’s shareholders an aggregate of $95 million, subject to adjustments pursuant to the Stock Purchase Agreements.

     The closing of the Merger is subject to the approval of the shareholders of PNG and UNGL, regulatory approvals and other customary conditions. The closing of the purchase of PIC is subject to regulatory approvals and other customary conditions.

     In addition, UNGL entered into stock purchase agreements (the “PNG Stock Agreements”) with Irvin Saltzman, Jon S. Saltzman and Joanne Lynch Saltzman, pursuant to which UNGL will purchase shares of PNG common stock owned, or acquired upon the exercise of PNG stock options, by the Saltzmans.

     The Merger Agreement, the Stock Purchase Agreement, the PNG Stock Agreements and the joint press release announcing the transactions are attached as exhibits hereto and are incorporated herein by reference. This summary is qualified in its entirety by reference to the exhibits attached hereto.

ITEM 8.01 OTHER EVENTS.

     On October 15, 2004, UNGL and PNG issued a joint press release announcing the signing of a the Merger Agreement and the Stock Purchase Agreement. A copy of the press release is attached hereto as Exhibit 99.1.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

c. Exhibits

Exhibit No.	Description
2.1	Agreement and Plan of Merger, dated as of October 14, 2004, by and among Penn-America Group, Inc., United National Group, Ltd., U.N. Holdings II, Inc. and Cheltenham Acquisition Corp.
2.2	Stock Purchase Agreement, dated as of October 14, 2004, by and among United National Group, Ltd., United National Insurance Company, Penn Independent Corporation, the Shareholders Named therein and the Shareholders’ Representative
2.3	Stock Purchase Agreement, dated as of October 14, 2004, by and among United National Group, Ltd., United National Insurance Company and Irvin Saltzman
2.4	Stock Purchase Agreement, dated as of October 14, 2004, by and among United National Group, Ltd., United National Insurance Company, Jon S. Saltzman and Joanne Lynch Saltzman
99.1	Joint press release of United National Group, Ltd. and Penn-America Group, Inc.

3

SIGNATURES

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

	UNITED NATIONAL GROUP, LTD.
Date: October 15, 2004	By:	/s/ David R. Bradley
		Name:	David R. Bradley
		Title:	Chief Executive Officer

EXHIBIT INDEX

Exhibit No.	Description
2.1	Agreement and Plan of Merger, dated as of October 14, 2004, by and among Penn-America Group, Inc., United National Group, Ltd., United National Insurance Company and Cheltenham Acquisition Corp.
2.2	Stock Purchase Agreement, dated as of October 14, 2004, by and among United National Group, Ltd., United National Insurance Company, Penn Independent Corporation, the Shareholders named therein and the Shareholders’ Representative
2.3	Stock Purchase Agreement, dated as of October 14, 2004, by and among United National Group, Ltd., United National Insurance Company and Irvin Saltzman
2.4	Stock Purchase Agreement, dated as of October 14, 2004, by and among United National Group, Ltd., United National Insurance Company, Jon S. Saltzman and Joanne Lynch Saltzman
99.1	Joint press release of United National Group, Ltd. and Penn-America Group, Inc.

3

EX-2.1

                                                                     EXHIBIT 2.1

                                                                  EXECUTION COPY

================================================================================

                          AGREEMENT AND PLAN OF MERGER

                                   DATED AS OF

                                OCTOBER 14, 2004

                                  BY AND AMONG

                            PENN-AMERICA GROUP, INC.,

                          UNITED NATIONAL GROUP, LTD.,

                             U.N. HOLDINGS II, INC.

                                       AND

                          CHELTENHAM ACQUISITION CORP.

================================================================================



                                TABLE OF CONTENTS



                                                                                                               PAGE
                                                                                                               ----
                                                                                                            
ARTICLE I DEFINITIONS...................................................................................          2
   Section 1.1        Definitions.......................................................................          2

ARTICLE II THE MERGER...................................................................................          6
   Section 2.1        The Merger........................................................................          6
   Section 2.2        Conversion of Shares..............................................................          7
   Section 2.3        Surrender and Payment.............................................................          8
   Section 2.4        Stock Options and Other Equity Awards.............................................         10
   Section 2.5        Adjustments.......................................................................         12
   Section 2.6        Fractional Shares.................................................................         12
   Section 2.7        Withholding Rights................................................................         12
   Section 2.8        Lost Certificates.................................................................         12

ARTICLE III CERTAIN GOVERNANCE MATTERS..................................................................         13
   Section 3.1        Articles of Incorporation of the Surviving Corporation............................         13
   Section 3.2        Bylaws of the Surviving Corporation...............................................         13
   Section 3.3        Directors and Officers of the Surviving Corporation...............................         13

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................................         13
   Section 4.1        Organization and Qualification....................................................         13
   Section 4.2        Capitalization....................................................................         14
   Section 4.3        Corporate Authorization; Enforceability; Board Action.............................         15
   Section 4.4        Consents and Approvals; No Violations.............................................         16
   Section 4.5        SEC Filings and Financial Statements..............................................         17
   Section 4.6        Absence of Certain Changes........................................................         19
   Section 4.7        Undisclosed Liabilities...........................................................         19
   Section 4.8        Litigation........................................................................         19
   Section 4.9        Compliance with Laws..............................................................         20
   Section 4.10       Reserves..........................................................................         21
   Section 4.11       Actuarial Analyses................................................................         21
   Section 4.12       Investments.......................................................................         21
   Section 4.13       Employee Benefit Plans............................................................         22
   Section 4.14       Employee Matters..................................................................         23
   Section 4.15       Taxes.............................................................................         24
   Section 4.16       Certain Contracts.................................................................         26
   Section 4.17       Intellectual Property.............................................................         27
   Section 4.18       Properties and Assets.............................................................         29
   Section 4.19       Environmental Matters.............................................................         30
   Section 4.20       Transactions with Affiliates......................................................         30
   Section 4.21       Reinsurance.......................................................................         31
   Section 4.22       Brokers and Agents................................................................         31
   Section 4.23       Producers.........................................................................         31
   Section 4.24       Disclosure Documents..............................................................         32


                                        i



                                                                                                              
   Section 4.25       Opinion of Financial Advisor......................................................         32
   Section 4.26       Finders' or Advisors' Fees........................................................         33
   Section 4.27       Risk Management...................................................................         33
   Section 4.28       Derivatives.......................................................................         33

ARTICLE V REPRESENTATIONS AND WARRANTIES  OF PARENT, BUYER AND MERGER SUBSIDIARY........................         33
   Section 5.1        Organization and Qualification....................................................         33
   Section 5.2        Capitalization....................................................................         34
   Section 5.3        Corporate Authorization; Enforceability; Board Action.............................         35
   Section 5.4        Consents and Approvals; No Violations.............................................         36
   Section 5.5        SEC Filings and Financial Statements..............................................         36
   Section 5.6        Absence of Certain Changes........................................................         38
   Section 5.7        Undisclosed Liabilities...........................................................         38
   Section 5.8        Litigation........................................................................         39
   Section 5.9        Compliance with Laws..............................................................         39
   Section 5.10       Reserves..........................................................................         40
   Section 5.11       Actuarial Analyses................................................................         40
   Section 5.12       Reinsurance.......................................................................         40
   Section 5.13       Disclosure Documents..............................................................         41
   Section 5.14       Finders' or Advisors' Fees........................................................         41
   Section 5.15       Operations of Merger Subsidiary...................................................         41
   Section 5.16       Capital Resources.................................................................         41
   Section 5.17       Taxes.............................................................................         41

ARTICLE VI COVENANTS....................................................................................         42
   Section 6.1        Conduct of the Company............................................................         42
   Section 6.2        Conduct of Parent.................................................................         46
   Section 6.3        Preparation of Proxy Statement; Shareholder Meetings..............................         47
   Section 6.4        Access to Information; Confidentiality............................................         49
   Section 6.5        No Solicitation; Unsolicited Proposals............................................         49
   Section 6.6        Board Recommendation..............................................................         52
   Section 6.7        Regulatory Filings; Reasonable Best Efforts.......................................         53
   Section 6.8        Litigation........................................................................         55
   Section 6.9        Employee Benefits.................................................................         55
   Section 6.10       Public Announcements..............................................................         56
   Section 6.11       Further Assurances................................................................         56
   Section 6.12       Notification of Certain Matters...................................................         56
   Section 6.13       Director and Officer Liability....................................................         57
   Section 6.14       Affiliates........................................................................         59
   Section 6.15       Takeover Statutes.................................................................         59
   Section 6.16       Comfort Letter....................................................................         59
   Section 6.17       Stock Market Quotation............................................................         59

ARTICLE VII CONDITIONS TO THE MERGER....................................................................         60
   Section 7.1        Conditions to the Obligations of Each Party.......................................         60



                                       ii



                                                                                                              
   Section 7.2        Conditions to the Obligations of Parent, Buyer and Merger Subsidiary..............         61
   Section 7.3        Conditions to the Obligations of the Company......................................         61

ARTICLE VIII TERMINATION AND EXPENSES...................................................................         62
   Section 8.1        Termination.......................................................................         62
   Section 8.2        Effect of Termination.............................................................         63
   Section 8.3        Fees and Expenses.................................................................         63

ARTICLE IX MISCELLANEOUS................................................................................         65
   Section 9.1        Non-Survival of Representations and Warranties....................................         65
   Section 9.2        Amendments; No Waivers............................................................         65
   Section 9.3        Notices...........................................................................         65
   Section 9.4        Successors and Assigns............................................................         67
   Section 9.5        Governing Law.....................................................................         67
   Section 9.6        Jurisdiction......................................................................         68
   Section 9.7        Waiver of Jury Trial..............................................................         68
   Section 9.8        Counterparts; Effectiveness.......................................................         68
   Section 9.9        Entire Agreement..................................................................         68
   Section 9.10       Third Party Beneficiaries.........................................................         68
   Section 9.11       Severability......................................................................         68
   Section 9.12       Specific Performance..............................................................         69
   Section 9.13       Construction; Interpretation; Disclosure Letters..................................         69



EXHIBIT A   FORM OF AFFILIATE LETTER

                                       iii



                             INDEX OF DEFINED TERMS



                                                                                                             PAGE
                                                                                                             ----
                                                                                                          
A.M. Best..............................................................................................        58
Acquisition Proposal...................................................................................        51
Action.................................................................................................        19
Actuarial Analyses.....................................................................................        21
Affected Employees.....................................................................................        55
affiliate..............................................................................................        69
Agreement..............................................................................................         1
Average Sales Price....................................................................................         8
Bear Stearns...........................................................................................        32
Books and Records......................................................................................         2
Burdensome Condition...................................................................................        54
Buyer..................................................................................................         1
Certificate............................................................................................         8
Closing................................................................................................         7
Closing Date...........................................................................................         7
Code...................................................................................................         2
Company................................................................................................         1
Company Balance Sheet..................................................................................         3
Company Business Documents.............................................................................        20
Company Change in Recommendation.......................................................................        52
Company Common Stock...................................................................................         2
Company Contracts......................................................................................        27
Company Disclosure Letter..............................................................................        13
Company Employee Plans.................................................................................        22
Company Financial Statements...........................................................................        17
Company Independent Committee..........................................................................         1
Company Intellectual Property..........................................................................        28
Company Options........................................................................................        10
Company Permits........................................................................................         3
Company Recommendation.................................................................................        48
Company SEC Documents..................................................................................        17
Company Shareholder Approval...........................................................................        16
Company Shareholder Meeting............................................................................        48
Company Statutory Financial Statements.................................................................        18
Company Stock Option Plans.............................................................................        10
Company Subsidiary Convertible Security................................................................        15
Company's Current Premium..............................................................................        58
Confidentiality Agreement..............................................................................        49
Contract...............................................................................................         3
Copyrights.............................................................................................        28
Effective Time.........................................................................................         6
End Date...............................................................................................        62


                                       iv



                                                                                                            
Environmental Laws.....................................................................................         3
ERISA..................................................................................................        22
ERISA Affiliate........................................................................................        22
Exchange Act...........................................................................................         3
Exchange Agent.........................................................................................         8
Exchange Ratio.........................................................................................         8
Form S-4...............................................................................................        32
GAAP...................................................................................................        18
Governmental Authority.................................................................................         3
Hazardous Material.....................................................................................         3
HSR Act................................................................................................        16
including..............................................................................................        69
Indemnified Parties....................................................................................        58
Insurance Contract.....................................................................................         3
Insurance Filings......................................................................................        54
Insurance Permit.......................................................................................         3
Insurance Products.....................................................................................         3
Insurance Subsidiaries.................................................................................         4
Intellectual Property..................................................................................        27
Investment Assets......................................................................................         4
IP Licenses............................................................................................        28
Joint Proxy Statement/Prospectus.......................................................................        32
knowledge of Parent....................................................................................         4
knowledge of the Company...............................................................................         4
Law....................................................................................................         4
Leased Real Property...................................................................................        29
Leases.................................................................................................        26
Liability..............................................................................................         4
Lien...................................................................................................         4
Material Adverse Effect................................................................................         4
Material Contracts.....................................................................................        27
Measurement Period.....................................................................................         8
Merger.................................................................................................         1
Merger Consideration...................................................................................         8
Merger Subsidiary......................................................................................         1
Merger Subsidiary Common Stock.........................................................................         7
Notice of Superior Proposal............................................................................        52
NYSE...................................................................................................        16
Option Exchange Ratio..................................................................................        11
P&C Business...........................................................................................         5
Parent.................................................................................................         1
Parent Actuarial Analyses..............................................................................        40
Parent Business Documents..............................................................................        40
Parent Class A Common Shares...........................................................................         8
Parent Disclosure Letter...............................................................................        33
Parent Financial Statements............................................................................        37



                                        v



                                                                                                            
Parent Options.........................................................................................        34
Parent SEC Documents...................................................................................        36
Parent Share Issuance Approval.........................................................................        35
Parent Shareholder Meeting.............................................................................        49
Parent Shareholders....................................................................................         1
Parent Statutory Financial Statements..................................................................        37
Parent Warrants........................................................................................        34
Patents................................................................................................        27
PBCL...................................................................................................         6
Per Share Cash Amount..................................................................................         8
Per Share Stock Amount.................................................................................         8
Permits................................................................................................         5
Permitted Liens........................................................................................         5
Person.................................................................................................         5
PIC....................................................................................................         2
PIC Shareholders.......................................................................................         2
Producer Agreements....................................................................................        32
Qualifying Amendment...................................................................................         5
Release................................................................................................         5
Representative.........................................................................................         5
Requisite Regulatory Approvals.........................................................................        60
Reserves...............................................................................................        21
SAP....................................................................................................         5
Sarbanes-Oxley Act.....................................................................................        18
SEC....................................................................................................         5
Securities Act.........................................................................................         6
Significant Agents.....................................................................................        31
Software...............................................................................................        28
Stock Purchase Agreement...............................................................................         2
Subsidiary.............................................................................................         6
Substitute Option......................................................................................        10
Superior Proposal......................................................................................        51
Surviving Corporation..................................................................................         7
Tax....................................................................................................         6
Tax Return.............................................................................................         6
Taxes..................................................................................................         6
Termination Fee........................................................................................        64
Third Party............................................................................................         6
Trade Secrets..........................................................................................        28
Trademarks.............................................................................................        27
UNIC...................................................................................................         2
Voting Debt............................................................................................        14
WARN Act...............................................................................................        24



                                       vi



                          AGREEMENT AND PLAN OF MERGER

            THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
October 14, 2004, is entered into by and among Penn-America Group, Inc., a
Pennsylvania corporation (the "Company"), United National Group, Ltd., an
exempted company formed with limited liability under the laws of the Cayman
Islands ("Parent"), U.N. Holdings II, Inc., a Delaware corporation and an
indirect, wholly-owned subsidiary of Parent ("Buyer"), and Cheltenham
Acquisition Corp., a newly-formed Pennsylvania corporation and a wholly-owned
subsidiary of Buyer ("Merger Subsidiary").

                                   WITNESSETH:

            WHEREAS, a committee of the Board of Directors of the Company
consisting solely of independent directors (the "Company Independent Committee")
has determined that the merger of Merger Subsidiary with and into the Company on
the terms and conditions set forth in this Agreement (the "Merger") is advisable
and in the best interests of the Company and has recommended that the Board of
Directors of the Company approve and adopt this Agreement and recommend that the
Company's shareholders vote for the adoption of this Agreement;

            WHEREAS, the Board of Directors of the Company has determined that
the Merger is advisable and in the best interests of the Company and has
approved and adopted this Agreement and has resolved to recommend that the
Company's shareholders vote for the adoption of this Agreement;

            WHEREAS, the Board of Directors of Buyer has determined that the
Merger is advisable and in the best interests of Buyer and its shareholder;

            WHEREAS, the Board of Directors of Parent has determined that the
Merger is advisable and in the best interests of Parent and Parent's
shareholders, has approved and adopted this Agreement and has recommended that
Parent's shareholders vote for the approval of the issuance of Parent Class A
Common Shares (as defined below) in the Merger;

            WHEREAS, as a condition and further inducement to the Company to
enter into this Agreement, U.N. Holdings (Cayman), Ltd., U.N. Co-Investment Fund
I (Cayman), L.P., U.N. Co-Investment Fund II (Cayman), L.P., U.N. Co-Investment
Fund III (Cayman), L.P., U.N. Co-Investment Fund IV (Cayman), L.P., U.N.
Co-Investment Fund V (Cayman), L.P., U.N. Co- Investment Fund VI (Cayman), L.P.,
U.N. Co-Investment Fund (Cayman) VII, L.P., U.N. Co-Investment Fund VIII
(Cayman), L.P., and U.N. Co-Investment Fund IX (Cayman), L.P. (the "Parent
Shareholders") have entered into a voting agreement with the Company pursuant to
which the Parent Shareholders have agreed to vote all of their Parent Class A
Common Shares and Parent Class B Common Shares (as defined below) affirmatively
in connection with the Parent Share Issuance Approval (as defined in Section
5.3(a));

            WHEREAS, the Board of Directors of Merger Subsidiary has determined
that the Merger is advisable and in the best interests of Merger Subsidiary and
its



shareholder, has approved and adopted this Agreement and has resolved to
recommend that Merger Subsidiary's shareholder vote for the adoption of this
Agreement;

            WHEREAS, for United States federal income tax purposes, it is
intended that the Merger be treated as a taxable acquisition by Buyer of the
common stock, par value $0.01 per share, of the Company ("Company Common
Stock"), other than Company Common Stock held by a Subsidiary of PIC (as defined
below); and

            WHEREAS, the shareholders of Penn Independent Corporation ("PIC")
have entered into a Stock Purchase Agreement (the "Stock Purchase Agreement"),
dated as of the date hereof, by and among Parent, United National Insurance
Company ("UNIC"), PIC and the shareholders of PIC (the "PIC Shareholders"),
pursuant to which the PIC Shareholders have agreed, among other things, to sell
their shares of PIC to a subsidiary of Parent, upon the terms and subject to the
conditions set forth therein immediately prior to the Effective Time.

            NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the adequacy of which is
hereby acknowledged, and intending to be legally bound hereby, the parties
hereby agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

            Section 1.1 Definitions. When used in this Agreement, the following
terms shall have the respective meanings specified therefore below:

            "Books and Records" shall mean, with regard to any Person, without
limitation, the originals or copies of any customer lists, lists of agents and
brokers, administrative and pricing manuals, records (including, without
limitation, claims records, sales records, underwriting records, financial
records, compliance records, customer complaint logs and other customers
complaint records, and tax records), corporate minute books and other materials
relating, directly or indirectly, to the businesses of such Person and its
Subsidiaries, whether or not in the possession of such Person, its Subsidiaries
or its affiliates or their respective Representatives or stored in hardcopy form
or on magnetic, optical or other media.

            "Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.

            "Company Balance Sheet" means the audited consolidated balance sheet
of the Company as of December 31, 2003 set forth in the Annual Report on Form
10-K filed by the Company with the SEC on March 11, 2004.

            "Company Permits" means all Permits required for any business
operated or services furnished by the Company or its Subsidiaries, including
Insurance Permits.

                                        2



            "Contract" means, with respect to any Person, any agreement,
arrangement, undertaking, contract, commitment, obligation, promise, indenture,
deed of trust or other instrument or agreement (whether written or oral and
whether express or implied) by which that Person is bound or subject.

            "Environmental Laws" means federal, state, local and foreign
statutes, Laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, codes, injunctions, permits and governmental agreements relating to the
environment, or the protection of human health as it relates to the environment
including, but not limited to, those relating to the management or Release of
Hazardous Materials.

            "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.

            "Governmental Authority" means any nation or government, any state
or other political subdivision thereof, including any domestic (federal, state
or local), foreign or supranational governmental or regulatory authority,
agency, department, board, commission, administration or instrumentality, any
court, tribunal or arbitrator or any self-regulatory organization (including but
not limited to state departments or divisions of insurance).

            "Hazardous Material" means all substances or materials regulated as
hazardous, toxic, explosive, dangerous, flammable or radioactive under any
Environmental Law including (i) petroleum, asbestos or polychlorinated
biphenyls, and (ii) in the United States, all substances defined as Hazardous
Substances, Oils, Pollutants or Contaminants in the National Oil and Hazardous
Substances Pollution Contingency Plan, 40 C.F.R. Section 300.5.

            "Insurance Contract" means any of the insurance policies, Contracts
of insurance, policy endorsements, certificates of insurance and application
forms pertaining to the Insurance Products underwritten by the Company or any of
its Subsidiaries, but not including those insurance contracts listed in Section
1.1 of the Company Disclosure Letter.

            "Insurance Permit" means any Company Permit in any jurisdiction to
issue, underwrite, assume, place or otherwise transact the business of
insurance.

            "Insurance Products" means any of the insurance coverage
underwritten in whole or in part by the Company or any of its Subsidiaries.

            "Insurance Subsidiaries" means Penn-America Insurance Company and
Penn-Star Insurance Company.

            "Investment Assets" means, with respect to any Person, all bonds,
stocks, mortgage loans and other investments, together with all bonds, stocks,
mortgage loans and other investments that are carried on the Books and Records
of such Person and its Subsidiaries as of the most recent balance sheet of such
Person included in its SEC filings

                                        3



or that are acquired by such Person and its Subsidiaries between June 30, 2004
and the Closing Date.

            "knowledge of the Company" means the actual knowledge, after
reasonable investigation and inquiry, of the officers of the Company listed on
Section 1.1 of the Company Disclosure Letter.

            "knowledge of Parent" means the actual knowledge, after reasonable
investigation and inquiry, of the officers of Parent listed on Section 1.1 of
the Parent Disclosure Letter.

            "Law" means any law (including common law), ordinance, writ,
directive, judgment, order, decree, injunction, statute, treaty, rule,
regulation, regulatory requirement or determination of (or an agreement with) a
Governmental Authority.

            "Liability" means any debt, liability, commitment, claim or
obligation of any kind whatsoever, whether due or to become due, known or
unknown, accrued or fixed, or absolute or contingent.

            "Lien" means any and all liens, charges, security interests,
options, claims, mortgages, pledges or restrictions on title or transfer of any
nature whatsoever.

            "Material Adverse Effect" means, with respect to any Person, any
fact, event, circumstance, change, condition or effect that individually or
together with other facts, events, circumstances, changes, conditions or effects
has been or would reasonably be expected to be material and adverse to the
business, assets, properties, liabilities, financial condition or results of
operations of such Person and its Subsidiaries, taken as a whole; provided,
however, that (i) the following shall be deemed not to be a Material Adverse
Effect: a change or effect (A) resulting from changes or effects to the U.S. or
global economy in general, (B) resulting from changes or effects to the P&C
Business except to the extent of any disproportionate effect on such Person or
its Subsidiaries taken as a whole (relative to most participants in the P&C
Business), (C) with respect to the Company, resulting primarily from the
identities of the Buyer and its affiliates or statements or other actions by
them taken or made without the prior written consent of the Company, or (D)
resulting from changes in GAAP or SAP after the date hereof, and (ii) a decrease
in the trading or market prices of an entity's capital stock shall not be
considered, by itself, to constitute a Material Adverse Effect (it being
understood that the foregoing shall not prevent any party from asserting that
any fact, event, circumstance, change, condition or effect that may have
contributed to such reduction independently constitutes a Material Adverse
Effect).

            "P&C Business" means the business of writing in the United States
excess and surplus primary property and casualty insurance through general
agents.

            "Permits" means any licenses, franchises, permits, certificates,
approvals, accreditations or other similar authorizations from any Governmental
Authority.

                                        4



            "Permitted Liens" means, collectively, (i) Liens for Taxes not yet
payable or the validity of which are being contested in good faith by
appropriate proceedings and for which adequate reserves are reflected in the
Company SEC Reports, (ii) mechanics', workmen's, repairmen's, warehousemen's,
landlord's, carrier's, materialmen's or other like Liens, including all
statutory Liens arising or incurred in the ordinary course of business
consistent with past practice, which would not reasonably be expected to
materially interfere with the operation of the business of the Company or its
Subsidiaries, (iii) any minor imperfection of title or similar Lien which does
not and would not reasonably be expected to impair in any material respect the
operations of the business of the Company or its Subsidiaries, (iv) Liens to
secure capital lease obligations to the extent the incurrence of such
obligations does not violate this Agreement, (v) any Liens created to secure
purchase money indebtedness, (vi) any Liens incurred pursuant to equipment
leases in the ordinary course of business and (vii) Liens incurred pursuant to
actions of Parent or any of its Affiliates.

            "Person" means and includes an individual, a partnership, a joint
venture, a corporation, a limited liability company, a trust, an association, an
unincorporated organization, a Governmental Authority and any other entity or
group (as defined in the Exchange Act).

            "Qualifying Amendment" means an amendment or supplement to the Joint
Proxy Statement/Prospectus or Form S-4 (including by incorporation by reference)
to the extent it contains only (a) a Company Change in Recommendation, (b) a
statement of the reasons of the Board of Directors of the Company for making
such Company Change in Recommendation, and (c) additional information reasonably
related to the foregoing.

            "Release" means any release, spill, emission, discharge, leaking,
pumping, injection, deposit, disposal, dispersal, leaching or migration into the
indoor or outdoor environment (including ambient air, surface water,
groundwater, and surface or subsurface strata) or into or out of any property.

            "Representative" means, with respect to any Person, (a) its
Subsidiaries and affiliates, and (b) its, and its Subsidiaries' and affiliates'
respective officers, directors, employees, auditors, financial advisors,
attorneys, accountants, consultants, agents, advisors or representatives.

            "SAP" means, with respect to any Person, the statutory accounting
principles and practices prescribed or permitted by the state or states in which
the relevant Person conducts business.

            "SEC" means the United States Securities and Exchange Commission.

            "Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.

            "Subsidiary" when used with respect to any Person means another
Person, an amount of the voting securities, other voting ownership or voting
partnership interests of which is sufficient to elect at least a majority of its
board of directors or similar

                                        5



governing body (or if there are no such voting interests, 50% or more of the
equity interest of which) is owned directly or indirectly by such first Person
or by another Subsidiary of such Person.

            "Tax Return" means any return, report or similar statement
(including any attachment or supplements thereto) supplied to or required to be
supplied to any taxing authority, including, any information return, claim for
refund, amended return or declaration of estimated Tax.

            "Tax" or "Taxes" means any and all federal, state, local, foreign or
other taxes of any kind (together with any and all interest, penalties,
additions to tax and additional amounts imposed with respect thereto) imposed by
any taxing authority, including, taxes, fees, duties, levies, customs, tariffs,
imposts, assessments, obligations or other similar charges of any kind on or
with respect to income, franchises, premiums, windfall or other profits, gross
receipts, property, sales, use, transfer, capital stock, payroll, employment,
social security, workers' compensation, unemployment compensation or net worth,
and taxes or other similar charges of any kind in the nature of excise,
withholding, ad valorem or value added.

            "Third Party" means any Person (or group of Persons) other than
Parent and its Subsidiaries.

                                   ARTICLE II

                                   THE MERGER

            Section 2.1 The Merger.

            (a)   As soon as reasonably practicable on the Closing Date, the
Company and Merger Subsidiary shall execute and file articles of merger with the
Secretary of State of the Commonwealth of Pennsylvania and make all other
filings or recordings required by the Business Corporation Law of the
Commonwealth of Pennsylvania (the "PBCL") to be made in connection with the
Merger. The Merger shall become effective at such time as articles of merger are
duly filed with the Secretary of State of the Commonwealth of Pennsylvania or,
if agreed to by the Company and Parent, at such later time as is specified in
the articles of merger (such time, the "Effective Time").

            (b)   Upon the terms and subject to the conditions set forth in this
Agreement, at the Effective Time, Merger Subsidiary shall be merged with and
into the Company in accordance with the requirements of the PBCL, whereupon the
separate existence of Merger Subsidiary shall cease. The Company shall be the
surviving corporation in the Merger (the "Surviving Corporation").

            (c)   The Merger will have the effects set forth in the PBCL,
including, without limitation, the effects set forth in Section 1929 of the
PBCL. Without limiting the generality of the foregoing, and subject thereto,
from and after the Effective Time, the Surviving Corporation shall possess all
the rights, privileges, immunities, powers and

                                        6



purposes and assume and be liable for all the liabilities, obligations and
penalties of the Company and Merger Subsidiary.

            (d)   The closing of the transactions contemplated hereby (the
"Closing") shall take place at the offices of Skadden, Arps, Slate, Meagher &
Flom LLP, Four Times Square, New York, NY 10036, at 10:00 a.m. local time, as
soon as reasonably practicable, but in any event within two (2) business days,
after the satisfaction or waiver of the conditions set forth in Article VII
(other than those conditions that are to be satisfied at the Closing) (the
actual time and date of the Closing being referred to herein as the "Closing
Date").

            Section 2.2 Conversion of Shares.

            (a)   At the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof:

                  (i)   each share of Company Common Stock held by the Company
      as treasury stock or held by Parent or any of its Subsidiaries (other than
      Buyer, UNIC, PIC and PIC's Subsidiaries) immediately prior to the
      Effective Time shall be canceled, and no payment shall be made with
      respect thereto; provided, that shares of Company Common Stock held by the
      Company, Parent or any of their Subsidiaries in trust accounts, managed
      accounts, investment accounts and the like shall not be cancelled and
      shall be treated in accordance with Section 2.2(a)(iv);

                  (ii)  each share of common stock, par value $0.01 per share,
      of Merger Subsidiary ("Merger Subsidiary Common Stock") outstanding
      immediately prior to the Effective Time shall be converted into and become
      one share of common stock of the Surviving Corporation with the same
      rights, powers and privileges as the share so converted and the shares so
      converted, together with the shares remaining outstanding pursuant to
      Section 2.2(a)(iii), shall constitute the only outstanding shares of
      capital stock of the Surviving Corporation;

                  (iii) each share of Company Common Stock held by Buyer, UNIC,
      PIC or any of PIC's Subsidiaries shall remain outstanding and shall be
      unaffected by the Merger and shall represent shares of common stock of the
      Surviving Corporation; provided, that shares of Company Common Stock held
      by PIC or any of its Subsidiaries in trust accounts, managed accounts,
      investment accounts and the like shall not remain outstanding and shall be
      treated in accordance with Section 2.2(a)(iv); and

                  (iv)  each share of Company Common Stock outstanding
      immediately prior to the Effective Time shall, except as otherwise
      provided in Sections 2.2(a)(i) and 2.2(a)(iii), be converted into the
      right to receive (A) an amount of Class A common shares, $0.0001 par value
      per share, of Parent ("Parent Class A Common Shares") equal to the
      Exchange Ratio (the "Per Share Stock Amount") and (B) an amount in cash
      equal to $1.50 (the "Per Share Cash

                                        7



      Amount"), issuable and payable, without interest, upon surrender of the
      certificate that formerly evidenced such share of Company Common Stock (a
      "Certificate") in the manner provided in Section 2.3. For the purposes of
      this Agreement, the "Exchange Ratio" shall be equal to the result obtained
      by dividing $13.875 by the Average Sales Price. For the purposes of this
      Agreement, the "Average Sales Price" shall be the volume weighted average
      sales price of a Parent Class A Common Share, as reported on the Nasdaq
      Stock Market by The Wall Street Journal (or in the absence thereof, by
      another authoritative source) during the twenty (20) consecutive trading
      days ending on and including the trading day immediately preceding the
      date of the Effective Time (the "Measurement Period")). For the purposes
      of this Agreement, the "Merger Consideration" means the right to receive
      the Per Share Stock Amount and the Per Share Cash Amount pursuant to the
      Merger with respect to each share of Company Common Stock (together with
      any cash in lieu of fractional shares as specified in Section 2.6 below).

            (b)   From and after the Effective Time, all shares of Company
Common Stock canceled pursuant to Section 2.2(a)(i) and all shares of Company
Common Stock converted in accordance with Section 2.2(a)(iv) shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of a Certificate shall cease to have any rights with
respect thereto, except, in the case of shares of Company Common Stock canceled
pursuant to Section 2.2(a)(iv), the right to receive the Merger Consideration to
which such holder is entitled and any dividends payable pursuant to Section
2.3(f) with respect to the shares of Company Common Stock represented by the
Certificate(s) surrendered by such holder pursuant to Section 2.3(b). From and
after the Effective Time, all certificates representing Merger Subsidiary Common
Stock shall be deemed for all purposes to represent only the number of shares of
common stock of the Surviving Corporation into which they were converted in
accordance with Section 2.2(a)(ii).

            Section 2.3 Surrender and Payment.

            (a)   Prior to the Effective Time, Buyer shall appoint an exchange
agent (the "Exchange Agent") for the purpose of exchanging Certificates for the
Merger Consideration. At or promptly following the Effective Time, Buyer shall
deposit, or cause to be deposited, with the Exchange Agent (i) certificates
representing the Parent Class A Common Shares issuable pursuant to Section
2.2(a)(iv), (ii) cash sufficient to make the cash payments payable pursuant to
Section 2.2(a)(iv), and (iii) from time to time as needed, cash sufficient to
pay cash in lieu of fractional shares to the extent required by Section 2.6.
Promptly after the Effective Time, Buyer will send, or cause the Exchange Agent
to send, to each holder of record of shares of Company Common Stock as of the
Effective Time, a letter of transmittal for use in such exchange (which shall
specify that the delivery shall be effected, and risk of loss and title shall
pass, only upon proper delivery of the Certificates to the Exchange Agent),
which letter shall be in such form as the Company and Buyer may reasonably agree
to use in effecting delivery of shares of Company Common Stock to the Exchange
Agent.

                                        8



            (b)   Each holder of shares of Company Common Stock that have been
converted into the right to receive the Merger Consideration as provided herein
will be entitled to receive the Merger Consideration in respect of the shares of
Company Common Stock represented by such Certificate only upon surrender to the
Exchange Agent of such Certificate, together with a properly completed letter of
transmittal. Until so surrendered, each such Certificate so converted shall,
after the Effective Time, represent for all purposes only the right to receive
such Merger Consideration. No interest will be paid or accrued on any cash
payable as part of the Merger Consideration or in lieu of fractional shares
pursuant to Section 2.6.

            (c)   If any portion of the Merger Consideration is to be registered
in or paid to the name of a Person other than the Person in whose name the
applicable surrendered Certificate is registered, it shall be a condition to the
registration or payment of such Merger Consideration that (i) the surrendered
Certificate shall be properly endorsed or otherwise be in proper form for
transfer, and (ii) the Person requesting such registration or payment of the
Merger Consideration shall (A) pay to the Exchange Agent any transfer or other
Taxes required as a result of such registration or payment in the name of a
Person other than the registered holder of such Certificate, or (B) establish to
the satisfaction of Parent that such Tax either has been paid or is not payable.

            (d)   After the Effective Time, there shall be no further
registration of transfers of shares of capital stock of the Company on the stock
records of, or relating to, the Company. If, after the Effective Time,
Certificates are presented to the Exchange Agent, the Surviving Corporation or
Buyer, they shall be canceled and, if applicable, exchanged for the Merger
Consideration provided for, and in accordance with the procedures and
limitations set forth, in this Article II.

            (e)   Any portion of the Merger Consideration made available to the
Exchange Agent pursuant to Section 2.3(a) that remains unclaimed by the holders
of shares of Company Common Stock twelve (12) months after the Effective Time
shall be returned to Buyer and any such holder who has not exchanged such
holder's shares of Company Common Stock for the Merger Consideration in
accordance with this Section 2.3 prior to that time shall thereafter look only
to Buyer for delivery of the Merger Consideration in respect of such holder's
shares without any interest thereon. Notwithstanding the foregoing, Buyer shall
not be liable to any Person for any Merger Consideration delivered to a public
official pursuant to applicable abandoned property, escheat or similar Laws. If
any Certificate shall not have been surrendered immediately prior to such date
on which any Merger Consideration, any dividends or distributions payable to the
holder of such Certificate or any cash payable to the holder of such Certificate
pursuant to this Section 2.3 would otherwise escheat to or become the property
of any Governmental Authority, any such Merger Consideration, dividends or
distributions in respect of such Certificate or such cash shall, to the extent
permitted by applicable Law, become the property of the Surviving Corporation,
free and clear of all claims or interests of any Person previously entitled
thereto.

            (f)   No dividends or other distributions with respect to Parent
Class A Common Shares shall be paid to the holder of any unsurrendered
Certificates until such

                                        9



Certificates are surrendered as provided in this Section 2.3. Subject to the
effect of applicable Laws, following such surrender, there shall be paid,
without interest, to the record holder of the Parent Class A Common Shares
issued in exchange therefor (i) at the time of such surrender, all dividends and
other distributions payable in respect of such Parent Class A Common Shares with
a record date after the Effective Time and a payment date on or prior to the
date of such surrender and not previously paid, and (ii) at the appropriate
payment date, the dividends or other distributions payable with respect to such
Parent Class A Common Shares with a record date after the Effective Time but
with a payment date subsequent to such surrender. For purposes of dividends or
other distributions in respect of Parent Class A Common Shares, all Parent Class
A Common Shares to be issued pursuant to the Merger shall be entitled to
dividends pursuant to the immediately preceding sentence as if issued and
outstanding as of the Effective Time.

            (g)   The Exchange Agent shall invest any cash made available to the
Exchange Agent pursuant to Section 2.3(a) as directed by Buyer on a daily basis.
Any interest and other income resulting from such investments shall promptly be
paid to Buyer.

            Section 2.4 Stock Options and Other Equity Awards.

            (a)   All options to acquire Company Common Stock (the "Company
Options") outstanding, whether or not exercisable and whether or not vested, at
the Effective Time under the Company's 1993 Stock Incentive Plan and the
Company's 2002 Stock Incentive Plan, each as amended (collectively, the "Company
Stock Option Plans"), shall remain outstanding following the Effective Time
notwithstanding anything to the contrary set forth in the Company Stock Option
Plans. At the Effective Time, all of the Company Options shall, by virtue of the
Merger and without any further action on the part of the Company or the holder
thereof, be assumed in full by Parent, and, solely to the extent provided for in
the applicable Company Stock Option Plan and/or the related Company Option
agreements, shall vest and become fully exercisable. Parent, Buyer and the
Company acknowledge that the Merger constitutes a "Change of Control" pursuant
to each of the Company Stock Option Plans. From and after the Effective Time,
all references to the Company in the Company Stock Option Plans and the
applicable stock option agreements issued thereunder shall be deemed to refer to
Parent, which shall have assumed the Company Stock Option Plans as of the
Effective Time by virtue of this Agreement and without any further action by
Parent. Each Company Option assumed by Parent (each, a "Substitute Option")
shall be converted automatically into options to purchase Parent Class A Common
Shares upon the same terms and conditions as are in effect immediately prior to
the Effective Time with respect to such Company Option, except that (A) each
such Substitute Option shall be exercisable for, and represent the right to
acquire, that whole number of Parent Class A Common Shares (rounded to the
nearest whole share) equal to the number of shares of Company Common Stock
subject to such Company Option multiplied by a fraction, the numerator of which
is 15.375 and the denominator of which is the Average Sales Price (without
reference to the dollar sign) (such fraction, the "Option Exchange Ratio") and
(B) the exercise price per Parent Class A Common Share under each Substitute
Option shall be an amount equal to the exercise price per share of Company
Common Stock subject to the related Company Option in

                                       10



effect immediately prior to the Effective Time divided by Option Exchange Ratio
(the exercise price per share, as so determined, being rounded to the nearest
full cent). Except as set forth above, such Substitute Option shall otherwise be
subject to the same terms and conditions as such Company Option. Section 2.4(a)
of the Company Disclosure Letter (as defined below) sets forth a list of all
Company Options as of the date hereof, including the name of the holder and date
of grant of each such Company Option, the number of shares of Company Common
Stock subject thereto and the exercise price thereof.

            (b)   As soon as practicable after the Effective Time, Parent shall
deliver, or cause to be delivered, to each holder of a Substitute Option an
appropriate notice setting forth such holder's rights pursuant thereto, and such
Substitute Option shall continue in effect on the same terms and conditions,
subject to the adjustments required by this Section 2.4 after giving effect to
the Merger. Parent shall comply with the terms of all such Substitute Options
and ensure that the conversion and assumption provided in this Section 2.4 with
respect to any Company Option that qualifies as an "incentive stock option" (as
defined in Section 422 of the Code) shall be effected in a manner consistent
with the requirements of Section 424(a) of the Code. The Company has heretofore
taken or shall take all actions with respect to the Company Stock Option Plans
and the Company Options that are necessary to implement the provisions of this
Section 2.4. Parent has heretofore taken or shall take all actions with respect
to the Company Stock Option Plans and the Company Options that are necessary to
implement the provisions of this Section 2.4, including, without limitation, all
corporate action necessary to reserve for issuance a sufficient number of Parent
Class A Common Shares for delivery upon exercise of Substitute Options pursuant
to the terms set forth in this Section 2.4. As soon as practicable, but in no
event later than ten (10) business days after the Effective Time, Parent shall
file an effective Registration Statement on Form S-8 (or any successor or other
appropriate forms) with respect to the Parent Class A Common Shares subject to
the Substitute Options and use its reasonable best efforts to maintain the
effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses associated
therewith) for so long as such Substitute Options remain outstanding.

            (c)   On or after the date of this Agreement and prior to the
Effective Time, each of Parent and the Company shall take all reasonable and
customary actions requested by the Company to seek that, with respect to each
member of the Board of Directors of the Company and each employee of the Company
(including each such person who will become a director or officer of Parent) who
is subject to Section 16 of the Exchange Act, the acquisition by such person of
Parent Class A Common Shares or Substitute Options pursuant to the transactions
contemplated by this Agreement and the disposition by any such person of Company
Common Stock or Company Options pursuant to the transactions contemplated by
this Agreement be exempt from the short-swing profit liability rules of Section
16(b) of the Exchange Act pursuant to Rule 16b-3 promulgated thereunder. Such
requested actions shall be consistent with all current applicable interpretation
and guidance of the SEC, including, but not limited to, the No-Action Letter
dated January 12, 1999, issued by the SEC to Skadden, Arps, Slate,

                                       11



Meagher & Flom LLP. The parties acknowledge that all such above referenced
dispositions and acquisitions are compensatory in nature.

            Section 2.5 Adjustments. If, at any time during the period between
the date of this Agreement and the Effective Time, any change in the outstanding
shares of capital stock of Parent or the Company shall occur by reason of any
reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, or any similar transaction, or any stock dividend
thereon with a record date during such period, the Merger Consideration shall be
appropriately adjusted to provide the holders of shares of Company Common Stock
or Company Options the same economic effect, in the aggregate, as contemplated
by this Agreement prior to such event.

            Section 2.6 Fractional Shares.

            (a)   No fractional Parent Class A Common Shares shall be issued in
connection with the Merger and no dividend or distribution with respect to
Parent Class A Common Shares shall be payable on or with respect to any
fractional share, and such fractional share interests shall not entitle the
owner thereof to any rights as a shareholder of Parent.

            (b)   Buyer shall pay to the Exchange Agent an amount in cash
sufficient for the Exchange Agent to pay each holder of Company Common Stock an
amount in cash equal to the product of (A) the fractional share interest of a
Parent Class A Common Share to which such holder otherwise would be entitled
(after taking into account all shares of Company Common Stock held at the
Effective Time by such holder) multiplied by (B) the Average Sales Price.

            (c)   As soon as practicable after the determination of the amount
of cash, if any, to be paid to holders of Company Common Stock with respect to
any fractional share interests, the Exchange Agent shall promptly request such
amount from Parent and promptly upon receipt thereof pay such amounts to such
holders of Company Common Stock.

            Section 2.7 Withholding Rights. Each of the Surviving Corporation,
Parent, Buyer and Exchange Agent shall be entitled to deduct and withhold from
the consideration otherwise payable to any Person pursuant to this Article II
such amounts as it is required to deduct and withhold with respect to the making
of such payment under any provision of federal, state, local or foreign Tax Law
including any withholding from any payment that is treated as wages or
compensation for the performance of services. To the extent that amounts are so
withheld, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the Person in respect of which such deduction
and withholding was made.

            Section 2.8 Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming the Certificate to be lost, stolen or destroyed and, if required
by Parent or the Surviving Corporation, the posting by that Person of a bond, in
such reasonable amount as Parent or

                                       12



the Surviving Corporation may direct, as indemnity against any claim that may be
made against it with respect to such Certificate, the Exchange Agent shall issue
in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration to be paid in respect of the shares represented by such
Certificate as contemplated by this Article II.

                                   ARTICLE III

                           CERTAIN GOVERNANCE MATTERS

            Section 3.1 Articles of Incorporation of the Surviving Corporation.
The articles of incorporation of the Company in effect immediately prior to the
Effective Time shall become the articles of incorporation of the Surviving
Corporation (until amended in accordance with applicable Law).

            Section 3.2 Bylaws of the Surviving Corporation. The bylaws of the
Company in effect immediately prior to the Effective Time shall become the
bylaws of the Surviving Corporation (until amended in accordance with applicable
Law).

            Section 3.3 Directors and Officers of the Surviving Corporation.
From and after the Effective Time, until successors are duly elected or
appointed and qualified in accordance with the bylaws and applicable Law, (a)
the directors of Merger Subsidiary immediately prior to the Effective Time shall
become the directors of the Surviving Corporation, and (b) the officers of the
Company immediately prior to the Effective Time shall be the officers of the
Surviving Corporation.

                                   ARTICLE IV

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

            Except as expressly disclosed in the most recent Annual Report on
Form 10-K and Quarterly Reports on Form 10-Q since such Annual Report on Form
10-K (including, in each case, to the extent included in any document filed or
incorporated by reference as an exhibit thereto), in each case included in the
Company SEC Documents filed and publicly available prior to the date hereof (it
being understood that express disclosure requires specific disclosure of the
individual matter or item in question and is not satisfied by any form of
generalized, boiler-plate or other generic disclosure) and except as set forth
in the disclosure letter delivered by the Company to Parent simultaneously with
the execution of this Agreement (the "Company Disclosure Letter"), the Company
represents and warrants to Parent, Buyer and Merger Subsidiary as follows:

            Section 4.1 Organization and Qualification. Each of the Company and
its Subsidiaries is duly organized, validly existing and in good standing under
the Laws of its jurisdiction of incorporation or organization. Each of the
Company and its Subsidiaries has the requisite power and authority and any
necessary Company Permit to own, operate and lease the properties that it
purports to own, operate or lease and to carry on its business as it is now
being conducted, and is duly qualified as a foreign entity to do business, and
is in good standing in each jurisdiction where the character of its properties

                                       13



owned, operated or leased or the nature of its activities makes such
qualification necessary, except for such failures to be so qualified and in good
standing that have not had, and would not reasonably be expected to, have,
individually or in the aggregate, a Material Adverse Effect on the Company.
Section 4.1 of the Company Disclosure Letter sets forth a complete list of the
Company's Subsidiaries and for each such Subsidiary indicates its ownership and
the jurisdictions in which it is organized and qualified to do business as a
foreign corporation. Except for the Subsidiaries set forth in Section 4.1 of the
Company Disclosure Letter, neither the Company nor any of its Subsidiaries is
the record or beneficial owner, directly or indirectly, of any capital stock or
other equity ownership interest of any kind whatsoever in any other Person.

            Section 4.2 Capitalization.

            (a)   The authorized capital stock of the Company consists of (i)
30,000,000 shares of Company Common Stock, of which, as of October 8, 2004,
14,778,504 shares (including shares of restricted stock) were issued and
outstanding, and (ii) 2,000,000 shares of preferred stock, par value $0.01 per
share, none of which, as of October 8, 2004, are issued and outstanding. As of
October 8, 2004, there were no shares of Company Common Stock held in treasury.
As of October 8, 2004, (I) Company Options to purchase in the aggregate 624,548
shares of Company Common Stock are outstanding, all of which were granted under
Company Stock Option Plans, and (II) there are 20,000 shares of restricted stock
granted pursuant to Company Stock Option Plans. All the outstanding shares of
the Company's capital stock are, and all shares that may be issued pursuant to
the exercise of outstanding Company Options or pursuant to the Company Stock
Option Plans will be when issued in accordance with the respective terms
thereof, duly authorized, validly issued, fully paid and non-assessable. There
are no bonds, debentures, notes or other indebtedness having voting rights (or
convertible into securities having such rights) ("Voting Debt") of the Company
or any of its Subsidiaries issued and outstanding. Except as set forth above or
in Section 4.2(a) of the Company Disclosure Letter and except for the
transactions provided for in this Agreement, as of the date hereof, (i) there
are no shares of capital stock of the Company authorized, issued or outstanding,
and (ii) there are no existing options, warrants, calls, pre-emptive rights,
subscriptions or other rights, convertible securities, agreements, arrangements
or commitments of any character, relating to the issued or unissued capital
stock of the Company or any of its Subsidiaries, obligating the Company or any
of its Subsidiaries to issue, transfer or sell or cause to be issued,
transferred or sold any shares of capital stock or Voting Debt of, or other
equity interest in, the Company or any of its Subsidiaries or securities
convertible into or exchangeable for such shares or equity interests or
obligations of the Company or any of its Subsidiaries to grant, extend or enter
into any such option, warrant, call, subscription or other right, convertible
security, agreement, arrangement or commitment. There are no outstanding
contractual obligations of the Company or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any Company Common Stock or other capital stock of
the Company or any of its Subsidiaries or affiliates of the Company or to
provide funds to make any investment (in the form of a loan, capital
contribution or otherwise) in any of its Subsidiaries or any other entity nor
has the Company or any of its Subsidiaries granted or agreed to grant to any
Person any stock appreciation rights or similar equity-based rights. Except as

                                       14



permitted by this Agreement, following the Merger, neither the Company nor any
of its Subsidiaries will have any obligation to issue, transfer or sell any
shares of its capital stock pursuant to any employee benefit plan or otherwise.

            (b)   Except as set forth in Section 4.2(b) of the Company
Disclosure Letter, all of the outstanding capital stock of, or other ownership
interests in, each Subsidiary of the Company is, directly or indirectly, owned
by the Company, and all such capital stock has been validly issued and is fully
paid and nonassessable and owned by either the Company or one of its
Subsidiaries free and clear of all Liens (other than Permitted Liens) and free
of any other limitation or restriction (including any restriction on the right
to vote, sell or otherwise dispose of such capital stock or other ownership
interests) other than any restrictions imposed under applicable federal and
state securities Laws. There are no outstanding options, warrants or other
rights to acquire from the Company or any of its Subsidiaries, and no preemptive
or similar rights, subscriptions or other rights, or convertible or exchangeable
securities, agreements, arrangements or commitments of any character, relating
to the capital stock of any Subsidiary of the Company, obligating the Company or
any of its Subsidiaries to issue, transfer or sell, any capital stock, voting
securities or other ownership interests in, or any securities convertible into
or exchangeable for any capital stock, voting securities or ownership interests
in, any Subsidiary of the Company or obligating the Company or any Subsidiary of
the Company to grant, extend or enter into any such option, warrant,
subscription or other right, convertible or exchangeable security, agreement,
arrangement or commitment (each of the foregoing, a "Company Subsidiary
Convertible Security"). There are no outstanding obligations of the Company or
any of its Subsidiaries to repurchase, redeem or otherwise acquire from any
Person (other than the Company or a wholly-owned Subsidiary of the Company) any
outstanding shares of capital stock of any Subsidiary of the Company or any
Company Subsidiary Convertible Securities. No Subsidiary of the Company owns,
either directly or indirectly, any shares of capital stock of the Company.

            (c)   Except as set forth in Section 4.2(c) of the Company
Disclosure Letter, there are no voting trusts or other agreements or
understandings to which the Company or any of its Subsidiaries is a party with
respect to the voting of the capital stock of the Company or any of its
Subsidiaries. None of the Company or its Subsidiaries is required to redeem,
repurchase or otherwise acquire shares of capital stock of the Company, or any
of its Subsidiaries, respectively, as a result of the transactions contemplated
by this Agreement.

            Section 4.3 Corporate Authorization; Enforceability; Board Action.

            (a)   The Company has the requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated hereby
(including the Merger). The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company and no other
corporate proceedings on the part of the Company are necessary to authorize the
execution and delivery of this Agreement or to consummate the Merger and the
other transactions contemplated hereby, subject in the case of the consummation
of the Merger to the

                                       15



affirmative vote of a majority of the votes cast by all shareholders of the
Company entitled to vote thereon in favor of the adoption of this Agreement in
accordance with the PBCL (the "Company Shareholder Approval"). This Agreement
has been duly executed and delivered by the Company and, assuming due
authorization, execution and delivery of this Agreement by the other parties
hereto, constitutes a valid and binding agreement of the Company enforceable
against the Company in accordance with its terms, except to the extent that such
enforcement may be subject to applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar Laws, now or hereafter in
effect, affecting creditors' rights generally, and to general equity principles.

            (b)   The Company Independent Committee, at a meeting duly called
and held on October 14, 2004, unanimously (i) determined that this Agreement and
the transactions contemplated hereby (including the Merger) are advisable and in
the best interests of the Company, and (ii) recommended that the Board of
Directors of the Company approve and adopt this Agreement, and, subject to
Section 6.6, recommended that the holders of Company Common Stock vote for
adoption of this Agreement.

            (c)   The Board of Directors of the Company, at a meeting duly
called and held on October 14, 2004, (i) determined that this Agreement and the
transactions contemplated hereby (including the Merger) are advisable and in the
best interests of the Company, (ii) approved and adopted this Agreement, and
(iii) resolved, subject to Section 6.6, to recommend that the holders of Company
Common Stock vote for the adoption of this Agreement. The Company has furnished
to Parent a certified copy of the aforementioned resolutions of the Board of
Directors of the Company.

            (d)   No restrictive provision of any "fair price," "merger
moratorium," "control share acquisition" or other similar anti-takeover statute
or regulation (including the provisions of Subchapters E, F, G and H of Chapter
25 of the PBCL) applies to this Agreement, the Merger or the other transactions
contemplated hereby.

            Section 4.4 Consents and Approvals; No Violations.

            (a)   The execution, delivery and performance by the Company of this
Agreement and the consummation by the Company and its Subsidiaries of the
transactions contemplated hereby (including the Merger) require no action by or
in respect of, or notice to or filing with, any Governmental Authority
(including with respect to any Subsidiary of the Company) other than (i) the
filing of articles of merger in connection with the Merger in accordance with
the PBCL, (ii) compliance with any applicable requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (iii) compliance with any applicable requirements of the Exchange Act and
the rules and regulations promulgated thereunder, (iv) compliance with any
applicable requirements of the Securities Act, (v) compliance with the rules and
regulations of the New York Stock Exchange ("NYSE"), (vi) those set forth in
Section 4.4(a) of the Company Disclosure Letter that are required under federal
and state Laws governing insurance and insurance companies, (vii) consents,
approvals, authorizations, declarations, filings and registrations required
solely by the nature of the business or ownership of Parent and Buyer, and
(viii) any other approvals the absence of which

                                       16



would not reasonably be expected to be, individually or in the aggregate,
material to the business of the Company or Parent after giving effect to the
consummation of the transactions contemplated hereby.

            (b)   Except as set forth in Section 4.4(b) of the Company
Disclosure Letter, neither the execution, delivery or performance by the Company
of this Agreement nor the consummation by the Company and its Subsidiaries of
the transactions contemplated hereby (including the Merger) nor compliance by
the Company with any of the provisions hereof will (i) conflict with or result
in any breach of any provisions of the articles of incorporation or bylaws of
the Company or the similar organizational and governing documents of any of its
Subsidiaries, (ii) assuming compliance with the matters referred to in Section
4.4(a), conflict with or result in any violation of any provision of any Law
binding upon or applicable to the Company or any of its Subsidiaries, (iii)
require the consent, approval or authorization of, or notice to or filing with,
any Third Party with respect to, result in any violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation, amendment, or acceleration
of any right or obligation of the Company or any of its Subsidiaries or to a
loss of any benefit to which the Company or any of its Subsidiaries is entitled)
under, any provision of any Contract by which any of the Company and its
Subsidiaries is bound or subject or any Company Permit, or (iv) result in the
creation or imposition of any Lien (other than Permitted Liens) on any asset of
the Company or any of its Subsidiaries, except in the case of (ii), (iii) and
(iv) for such conflicts, violations, breaches, defaults, rights or losses, or
the failure to obtain any such consents or approvals or to provide such notices
or make such filings, that would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company.

            Section 4.5 SEC Filings and Financial Statements.

            (a)   The Company has filed with the SEC all forms, reports,
schedules, statements and other documents required to be filed or furnished by
it and its Subsidiaries since January 1, 2001 under the Exchange Act or the
Securities Act (as such documents have been amended since the time of their
filing prior to the date hereof, collectively, the "Company SEC Documents"). As
of their respective dates or, if amended prior to the date hereof, as of the
date of the last such amendment, the Company SEC Documents, including any
financial statements or schedules included therein (i) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading, and (ii)
complied in all material respects with the applicable requirements of the
Exchange Act and the Securities Act, as the case may be, and the applicable
rules and regulations of the SEC thereunder. Each of the consolidated financial
statements included in the Company SEC Documents (the "Company Financial
Statements") has been prepared in accordance with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
presents in all material respects, as applicable, the consolidated financial
position and the consolidated results of operations and cash flows (and changes
in financial position, if

                                       17



any) of the Company and its consolidated Subsidiaries as at the dates thereof or
for the periods presented therein (subject, in the case of any unaudited interim
financial statements, to normal year-end adjustments and for the absence of
footnotes).

            (b)   The audited balance sheets of the Company's Subsidiaries as of
December 31, 2003 and the related audited statements of income and cash flows
for each of the years ended December 31, 2003 and December 31, 2002, and the
unaudited interim balance sheet as of June 30, 2004 and the related unaudited
interim statements of income and cash flows for the six months ended June 30,
2004, and their respective annual statements for the fiscal years ended December
31, 2003 and December 31, 2002 filed with the insurance regulatory authorities
(or other comparable state regulatory agencies), copies of which have been
delivered to Parent prior to the date hereof present each such Subsidiary's
respective statutory financial conditions as of the dates thereof and their
respective results of operations and cash flows for the periods then ended in
conformity with SAP. The other information contained in such annual statements
presents the information required to be contained therein in conformity with SAP
consistently applied. The balance sheets of the Company's Subsidiaries in
respect of any period ending after June 30, 2004 but before the date of this
Agreement, and the related statements of income and cash flows, which have been
filed with insurance regulatory authorities (or other comparable state
regulatory agencies), copies of which have been delivered to Parent prior to the
date hereof, fairly present in all material respects each such Subsidiary's
respective statutory financial conditions as of the dates thereof and their
respective results of operations and cash flows for the periods then ended in
conformity with SAP consistently applied. The financial statements referred to
in this Section 4.5(b) are the "Company Statutory Financial Statements."

            (c)   The Company has established and maintained disclosure controls
and procedures (as such term is defined in Rule 13a-15(e) under the Exchange
Act), as required by Rule 13a-15(a) under the Exchange Act. The Company is in
compliance in all material respects with the Sarbanes-Oxley Act of 2002 (the
"Sarbanes-Oxley Act"). The Company and each of its Subsidiaries maintains a
system of internal accounting controls sufficient to comply with all legal and
accounting requirements applicable to the Company and such Subsidiary and has
previously disclosed to Parent its work plan, budget and timetable for
compliance with the SEC rules promulgated under Section 404 of the
Sarbanes-Oxley Act. The Company has disclosed in the Company SEC Documents,
based on its most recent evaluation thereof, any significant deficiencies in its
internal accounting controls which would reasonably be expected to adversely
affect in any material respect the Company's ability to record, process,
summarize and report financial data.

            (d)   To the knowledge of the Company, neither the Company nor any
of its Subsidiaries nor any Representative of the Company or any of its
Subsidiaries has received or otherwise had or obtained knowledge of any material
complaint, allegation, assertion or claim, whether written or oral, regarding
the accounting or auditing practices, procedures, methodologies or methods of
the Company or any of its Subsidiaries or their respective internal accounting
controls, including any material complaint, allegation,

                                       18



assertion or claim that the Company or any of its Subsidiaries has engaged in
questionable accounting or auditing practices.

            Section 4.6 Absence of Certain Changes. Except (x) as set forth in
Section 4.6 of the Company Disclosure Letter, (y) as disclosed in the Company
SEC Documents filed prior to the date hereof, or (z) for actions or inactions
after the date hereof in compliance with Section 6.1, (1) since December 31,
2003, the Company and its Subsidiaries have conducted their respective
businesses and operations consistent with past practice only in the ordinary and
usual course thereof and there has not occurred (i) any fact, event,
circumstance, change, condition or effect (including the incurrence of any
Liabilities of any nature, whether or not accrued, contingent or otherwise) that
has had, or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company, (ii) any declaration or
payment of any dividend or other distribution (whether in cash, stock or
property) with respect to the equity interests of the Company or of any of its
Subsidiaries other than regular quarterly cash dividends and dividends paid to
the Company or any of its wholly-owned Subsidiaries by a wholly-owned
Subsidiary, or (iii) any material change by the Company or any of its
Subsidiaries in accounting principles or methods other than those required by
Law, GAAP or SAP; and (2) since June 30, 2004, neither the Company nor any of
its Subsidiaries has taken any action or made any omission that, if taken or
made after the date of this Agreement, would be prohibited by Section 6.1

            Section 4.7 Undisclosed Liabilities. Except for Liabilities (a) set
forth in Section 4.7 of the Company Disclosure Letter or reflected, disclosed or
reserved for in the Company Financial Statements (including the footnotes
thereto) included in the Company SEC Documents filed prior to the date of this
Agreement, (b) incurred (i) in the ordinary course of business and consistent
with past practice, (ii) pursuant to policies written by the Company's
Subsidiaries, or (iii) pursuant to this Agreement, or (c) which are not,
individually or in the aggregate, material to the Company and its Subsidiaries
taken as a whole, neither the Company nor any of its Subsidiaries has incurred
any Liabilities of any nature that would be required to be reflected or reserved
against on a consolidated balance sheet of the Company and its Subsidiaries
(including the notes thereto) prepared in accordance with GAAP as applied in
preparing the Company Balance Sheet or that have had or would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company.

            Section 4.8 Litigation.

            (a)   As of the date hereof, (i) there is no litigation, suit,
action, claim, charge or other proceeding (each, an "Action") by or before any
Governmental Authority pending or, to the knowledge of the Company, threatened,
against, by or affecting the Company or any of its Subsidiaries (other than
insurance claims litigation in the ordinary course of business for which claims
reserves that are adequate in the aggregate have been established), except for
such Actions as have not and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company, and
(ii) no investigation or inquiry by or before any Governmental Authority is
pending or, to

                                       19



the knowledge of the Company, threatened against the Company or any of its
Subsidiaries.

            (b)   Except as set forth in Section 4.8(b) of the Company
Disclosure Letter or in the Company SEC Documents filed prior to the date of
this Agreement, there are no judgments, injunctions, writs, orders or decrees
binding on the Company or any of its Subsidiaries that (i) have had, or would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company, or (ii) would be binding upon Parent or any of
its Subsidiaries (other than the Company and its Subsidiaries) following
consummation of the Merger.

            Section 4.9 Compliance with Laws.

            (a)   Except as set forth in Section 4.9(a) of the Company
Disclosure Letter, the Company and each of its Subsidiaries are, and since
January 1, 2001 have been, in compliance in all material respects with all
applicable Laws.

            (b)   Except as set forth in Section 4.9(b) of the Company
Disclosure Letter , (i) all material Company Permits are valid and in full force
and effect, and (ii) the business of the Company and each of its Subsidiaries is
being conducted in compliance in all material respects with the terms of all
applicable Company Permits.

            (c)   Except as set forth in Section 4.9(c) of the Company
Disclosure Letter or as would not reasonably be expected to result in a Material
Adverse Effect on the Company, since January 1, 2001, (i) neither the Company
nor any of its Subsidiaries nor, to the knowledge of the Company, any Third
Party service provider acting on behalf of the Company, has received, nor
otherwise has any knowledge of, any written or oral notice from any Governmental
Authority that (x) alleges any noncompliance (or that the Company or any of its
Subsidiaries or any such Third Party service provider is under investigation or
the subject of an inquiry by any such Governmental Authority for such alleged
noncompliance) with any applicable Law, or (y) would reasonably be expected to
result in a fine or assessment, or a cease and desist order, or the suspension,
revocation or limitation or restriction of any Company Permit, and (ii) neither
the Company nor any of its Subsidiaries has entered into any agreement or
settlement with any Governmental Authority with respect to its non-compliance
with, or violation of, any applicable Law.

            (d)   Except as set forth in Section 4.9(d) of the Company
Disclosure Letter or as would not reasonably be expected to result in a Material
Adverse Effect on the Company, since January 1, 2001, the Company and each of
its Subsidiaries has timely filed all regulatory reports, schedules, statements,
documents, filings, submissions, forms, registrations and other documents,
together with any amendments required to be made with respect thereto, that was
required to be filed with any Governmental Authority (the "Company Business
Documents"), including state insurance regulatory authorities and any applicable
federal regulatory authorities, and have timely paid all fees due and payable in
connection therewith. All Company Business Documents were true, correct and
complete in all material respects when filed, complied in all material respects
with applicable Law in effect when filed, and no material deficiencies have been
asserted by

                                       20



any such Governmental Authority with respect to Company Business Documents that
have not been satisfied. There is no material unresolved violation or exception
by any such Governmental Authority with respect to any of the Company Business
Documents. The Company has delivered or made available to Parent a true and
complete copy of each material Company Business Document.

            (e)   Except as set forth in Section 4.9(e) of the Company
Disclosure Letter or as has not and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company, all
premium rates, rating plans and policy terms established or used by the Company
or any of its Subsidiaries that are required to be filed with or approved by
Governmental Authorities have been so filed or approved, the premiums charged
conform to the premiums so filed or approved and comply in all material respects
with the insurance Laws applicable thereto, and to the Company's knowledge, no
such premiums are subject to any review or investigation by any insurance
regulatory authority.

            Section 4.10 Reserves. All reserves ("Reserves") carried on the
Company Statutory Financial Statements (a) were determined, to the knowledge of
the Company, in all material respects in accordance with generally accepted
actuarial principles (except as set forth therein), consistently applied, (b)
comply in all material respects with the requirements of applicable Law and (c)
were made with the good faith intention and belief that they made reasonable
provision in the aggregate to cover the total amount of Liabilities under
outstanding policies and contracts of insurance of the Company and its
Subsidiaries as of the dates of such Company Statutory Financial Statements (it
being understood that no representation or warranty is made in this Agreement to
the effect that such Reserves were or will be in fact adequate to cover the
actual amount of such Liabilities that are eventually paid after the date
thereof).

            Section 4.11 Actuarial Analyses. Section 4.11 of the Company
Disclosure Letter sets forth a list of all Third Party actuarial reports with
respect to the Company or any of its Subsidiaries relied upon by the Company or
any of its Subsidiaries or provided by the Company or any of its Subsidiaries to
any Governmental Authority since December 31, 2002, and all attachments,
addenda, supplements and modifications thereto (copies of which the Company has
made available to Parent) (the "Actuarial Analyses"). To the knowledge of the
Company, the information and data furnished by the Company or any of its
Subsidiaries to its independent actuaries in connection with the preparation of
the Actuarial Analyses were, at the time furnished, accurate in all material
respects for the periods covered in the Actuarial Analyses. Furthermore, to the
knowledge of the Company, each Actuarial Analysis was, at the relevant time of
preparation, prepared using appropriate modeling procedures accurately applied
and in conformity with generally accepted actuarial principles consistently
applied and was properly prepared in accordance with the assumptions stated
therein. To the knowledge of the Company, the assumptions used in making the
projections contained in the Actuarial Analyses were arrived at in good faith
and were reasonable when made.

            Section 4.12 Investments. The Company has provided Parent with a
correct and complete list of all Investment Assets that are carried on the Books
and

                                       21



Records of the Company and its Subsidiaries as of June 30, 2004. Except as set
forth in Section 4.12 of the Company Disclosure Letter and except for Investment
Assets sold in the ordinary course of business consistent with past practice or
as contemplated by this Agreement, each of the Company and its Subsidiaries, as
applicable, has good and marketable title to all of the Investment Assets it
purports to own, free and clear of all Liens (other than Liens imposed by
securities Laws).

            Section 4.13 Employee Benefit Plans.

            (a)   Section 4.13(a) of the Company Disclosure Letter sets forth a
true and complete list of each deferred compensation and each bonus or other
incentive compensation, stock purchase, stock option or other equity
compensation plan, program, agreement or arrangement, each severance or
termination pay, medical, surgical, hospitalization, life insurance or other
"welfare" plan, fund or program (within the meaning of Section 3(1) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")); each
profit-sharing, stock bonus or other "pension" plan, fund or program (within the
meaning of Section 3(2) of ERISA); each employment, termination or severance
agreement; and each other employee benefit plan, fund, program, agreement or
arrangement, in each case, that is sponsored, maintained or contributed to or
required to be contributed to by the Company or by any trade or business,
whether or not incorporated (an "ERISA Affiliate"), that together with the
Company would be deemed a "single employer" within the meaning of Section
4001(b) of ERISA, or to which the Company or an ERISA Affiliate is party,
whether written or oral, for the benefit of any current or former employee,
consultant or director of the Company or any Subsidiary (the "Company Employee
Plans").

            (b)   With respect to each Company Employee Plan, the Company has
heretofore made available to Parent complete copies of the Company Employee Plan
and any amendments thereto (or if the Company Employee Plan is not a written
plan, a description thereof), any related trust or other funding vehicle, any
reports or summaries required under ERISA or the Code and the most recent
determination letter received from the Internal Revenue Service with respect to
each Company Employee Plan intended to qualify under Section 401 of the Code.
Except as set forth in Section 4.13(b) of the Company Disclosure Letter, since
December 31, 2003, there have not been any amendments, modifications,
terminations or any other changes to any Company Employee Plans as in effect on
such date.

            (c)   Except for liabilities which have not had and would not
reasonably be expected to have, individually or in the aggregate, result in a
Material Adverse Effect on the Company:

                  (i)   No liability under Title IV or Section 302 of ERISA has
      been incurred by the Company or any ERISA Affiliate that has not been
      satisfied in full, no condition exists that presents a risk to the Company
      or any ERISA Affiliate of incurring any such liability, and neither the
      Company nor any ERISA Affiliates made, or was required to make,
      contributions to any plan subject to

                                       22



      Title IV of ERISA during the six (6) year period ending on the last day of
      the most recent fiscal year ended prior to the Closing Date for any such
      plan.

                  (ii)  Each Company Employee Plan has been operated and
      administered in accordance with its terms and applicable Law, including
      ERISA and the Code.

            (d)   Each Company Employee Plan intended to be "qualified" within
the meaning of Section 401(a) of the Code is so qualified and the trusts
maintained thereunder are exempt from taxation under Section 501(a) of the Code.

            (e)   Except as set forth in Section 4.13(e) of the Company
Disclosures Letter, no Company Employee Plan provides medical, surgical,
hospitalization, death or similar benefits (whether or not insured) for periods
extending beyond retirement or other termination of service, other than (i)
coverage mandated by applicable Law, (ii) death benefits under any "pension
plan," or (iii) benefits the full cost of which is borne by the current or
former participant (or his beneficiary).

            (f)   Except as set forth in Section 4.13(f) of the Company
Disclosure Letter (which sets forth a list and quantification of all such
payments, benefits, accelerations or increases under Company Employee Plans),
the consummation of the transactions contemplated by this Agreement will not,
either alone or in combination with another event, (i) entitle any current or
former employee, officer, director or consultant of the Company or any ERISA
Affiliate to severance pay, unemployment compensation or any other payment or
benefit, or (ii) accelerate the time of payment or vesting, or increase the
amount of compensation or benefits due any such employee or officer. No amounts
payable under the Company Employee Plans will fail to be deductible for federal
income tax purposes by virtue of Section 280G of the Code.

            (g)   There are no pending, nor to the knowledge of the Company,
threatened or anticipated claims by or on behalf of any Company Employee Plan,
by any Person or beneficiary covered under any such Company Employee Plan, or
otherwise, involving any such Company Employee Plan (other than routine claims
for benefits).

            (h)   None of the Company, any Company Employee Plan, any trust
created thereunder or, to the knowledge of the Company, any trustee or
administrator thereof has engaged in a transaction in connection with which the
Company, any Company Employee Plan, any such trust or any trustee or
administrator thereof, or any party dealing with any Company Employee Plan or
any such trust, would be subject to either a civil penalty assessed pursuant to
Section 409 or 502(i) of ERISA or a Tax imposed pursuant to Section 4975 or 4976
of the Code.

            Section 4.14 Employee Matters. Except as set forth in Section 4.14
of the Company Disclosure Letter:

            (a)   Neither the Company nor any of its Subsidiaries is a party to
or bound by any (i) collective bargaining or similar agreement with any labor
organization,

                                       23



or (ii) work rules or practices agreed to with any labor organization or
employee association applicable to employees of the Company or any of its
Subsidiaries.

            (b)   As of the date hereof, none of the employees of the Company or
any of its Subsidiaries is represented by any labor organization, and the
Company has no knowledge of any current union organizing activities among the
employees of the Company or any of its Subsidiaries, nor does any question
concerning representation exist concerning such employees.

            (c)   There are no labor strikes, labor disputes, work stoppages,
lockouts or material grievances pending as of the date hereof, or, to the
knowledge of the Company, threatened involving the employees of the Company or
any of its Subsidiaries, and during the past five (5) years there have not been
any such actions.

            (d)   As of the date hereof, there are no complaints, charges or
claims against the Company or any of its Subsidiaries pending or, to the
knowledge of the Company, threatened to be brought or filed with any
Governmental Authority in connection with the employment by the Company or any
of its Subsidiaries of any individual, including, without limitation, any claim
relating to employment discrimination, equal pay, sexual harassment, employee
safety and health, wages and hours or workers' compensation.

            (e)   As of the date hereof, to the knowledge of the Company,
neither the Company nor any of its Subsidiaries has received notice of the
intent of any Governmental Authority responsible for the enforcement of labor or
employment Laws to conduct an investigation with respect to or relating to the
Company or any of its Subsidiaries, and no such investigation is in progress.

            (f)   During the last five (5) years, neither the Company nor any of
its Subsidiaries has effectuated a "plant closing" or a "mass layoff" (as such
terms are defined in the Worker Adjustment and Retraining Notification Act (the
"WARN Act")), and neither the Company nor any of its Subsidiaries has been
affected by any transaction or engaged in layoffs or employment terminations
sufficient in number to trigger application of any Law that is similar to the
WARN Act.

            (g)   Except as set forth in Section 4.14(g) of the Company
Disclosure Letter, none of the employees of the Company or any of its
Subsidiaries has suffered an "employment loss" (as defined in the WARN Act)
during the 90 day period prior to the date of this Agreement. The listing set
forth in Section 4.14(g) of the Company Disclosure Letter shall be updated at
the Closing for employment losses occurring during the 90 day period prior to
the Closing.

            Section 4.15 Taxes.

            (a)   Each of the Company, its Subsidiaries and any consolidated,
affiliated, combined or unitary group of which the Company or any of its
Subsidiaries is a member has (i) timely filed (or there have been timely filed
on its behalf) with the appropriate Governmental Authorities all material income
and other material Tax Returns

                                       24



required to be filed by it or them (giving effect to all extensions) and such
Tax Returns are correct and complete in all material respects; (ii) timely paid
in full (or there has been timely paid in full on its behalf) all material
income and other material Taxes required to have been paid by it or them, and
(iii) made adequate provision (or adequate provision has been made on its
behalf) for all material accrued Taxes not yet due. The accruals and reserves
for Taxes reflected in the Company's audited consolidated balance sheet as of
December 31, 2003 (and the notes thereto) and the most recent quarterly
financial statements (and the notes thereto) are adequate in accordance with
GAAP to cover all material Taxes accrued or accruable through the date thereof.

            (b)   There are no material Liens for Taxes upon any property or
assets of the Company or any Subsidiary of the Company, except for Liens for
Taxes not yet due and payable or which are being contested in good faith or for
which adequate reserves have been established.

            (c)   Each of the Company and its Subsidiaries has complied in all
material respects with all applicable Laws relating to the payment and
withholding of Taxes and has, within the time and in the manner prescribed by
Law, withheld and paid over to the proper Governmental Authorities all material
amounts required to be so withheld and paid over under applicable Law.

            (d)   No federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently pending with
regard to any material Taxes or material Tax Returns of the Company or any of
its Subsidiaries, and neither the Company nor any Subsidiary of the Company has
received a written notice of any proposed claims, audits or proceedings with
respect to any material Taxes.

            (e)   Neither the Company nor any of its Subsidiaries is a party to
any material Tax allocation, sharing, indemnification or similar agreement
(other than any Contract all the parties to which include only one or more of
the Company and its Subsidiaries).

            (f)   Neither the Company nor any of its Subsidiaries has been
included in any "consolidated," "unitary" or "combined" Tax Return (other than
Tax Returns which include only the Company and any of its Subsidiaries) provided
for under the Laws of the United States, any foreign jurisdiction or any state
or locality with respect to Taxes.

            (g)   Neither the Company nor any of its Subsidiaries have agreed,
or is required, to make any material adjustment under Section 481 of the Code
affecting any taxable period.

            (h)   No claim has been made in writing by any Governmental
Authorities in a jurisdiction where the Company or any of its Subsidiaries does
not file Tax Returns that any such entity is subject to material taxation by
that jurisdiction.

                                       25



            Section 4.16 Certain Contracts.

            (a)   Company Contracts. Section 4.16(a) of the Company Disclosure
Letter sets forth, with respect to or otherwise affecting the Company or any of
its Subsidiaries:

                  (i)   any Contract relating to the incurrence of indebtedness
      (including sale and leaseback transactions, capitalized lease transactions
      and other similar financing transactions) pursuant to which the
      outstanding indebtedness is in excess of one hundred thousand dollars
      ($100,000);

                  (ii)  any non-competition Contract or any other Contract or
      obligation that purports to limit in any respect the manner or the
      localities in which the business of the Company or any of its
      Subsidiaries, or following consummation of the transactions contemplated
      by this Agreement, Parent's businesses, is or would be conducted;

                  (iii) any Contract providing for the indemnification by the
      Company or any of its Subsidiaries of any Person in excess of one hundred
      thousand dollars ($100,000) individually or three hundred thousand dollars
      ($300,000) in the aggregate;

                  (iv)  any multi-year Insurance Contract involving the payment
      of one hundred thousand dollars ($100,000) individually or three hundred
      thousand dollars ($300,000) in the aggregate;

                  (v)   any Insurance Contract containing any rate guarantees,
      rate caps or rate escalators involving the payment of one hundred thousand
      dollars ($100,000) individually or three hundred thousand dollars
      ($300,000) in the aggregate;

                  (vi)  any reinsurance treaty or facultative reinsurance
      contract (in each case applicable to insurance in force or for which the
      Company or any of its Subsidiaries are entitled to any recovery);

                  (vii) any agreement or understanding with, or restriction
      imposed by, a Governmental Authority or other Third Party relating to the
      payment of dividends or maintenance of capital by the Company or any of
      its Subsidiaries;

                  (viii) all leases, subleases, licenses or other Contracts,
      including all amendments, extensions, renewals, guaranties or other
      Contracts with respect thereto, pursuant to which the Company or any of
      its Subsidiaries use or hold any material Leased Real Property ("Leases");
      and

                  (ix)  any other Contracts not listed above that involve the
      payment or receipt by the Company of one hundred thousand dollars
      ($100,000) individually or five hundred thousand dollars ($500,000) in the
      aggregate;

                                       26



(the Contracts of a type covered by clauses (i) to (ix) being referred to as the
"Material Contracts"). Prior to the date of this Agreement, the Company has made
available to Parent true and correct copies of each Material Contract (including
any amendments or supplements thereto).

            (b)   Insurance Contracts. Prior to the date of this Agreement, the
Company has made available to Parent correct and complete copies of the forms of
Insurance Contracts used in the business of the Company and/or its Subsidiaries
as of the date of this Agreement. Each such form has been appropriately and
timely filed and, if required, approved by applicable Governmental Authorities
and otherwise conforms, in all material respects, to the requirements of
applicable Laws.

            (c)   Except as has not had and would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company: (i) each Company Contract is a legal, valid and binding obligation of
the Company or the applicable Subsidiary of the Company (as the case may be)
and, to the knowledge of the Company, of each other party thereto, enforceable
against each such party in accordance with its terms, (ii) neither the Company
nor any Subsidiary of the Company (as the case may be) nor, to the knowledge of
the Company, any other party to a Company Contract, is in material violation or
default of any term of any Company Contract, and (iii) no condition or event
exists that, (with the giving of notice or the passage of time, or both), would
constitute a material violation or default by the Company or any of its
Subsidiaries, as the case may be, or any other party to a Company Contract, or
permit the termination, modification, cancellation or acceleration of
performance of the obligations of the Company or any of its Subsidiaries, as the
case may be, or any other party to the Company Contract. For purposes of this
Agreement, the term "Company Contracts" means, collectively, each Material
Contract and Insurance Contract.

            (d)   Except as set forth in Section 4.16(d) of the Company
Disclosure Letter or as has not had and would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company, since December 31, 2003: (i) no Third Party to any Company Contract has
canceled or otherwise terminated any Company Contract or has provided written or
oral notice to the Company or any of its Subsidiaries of its intent to do so,
and (ii) to the knowledge of the Company, no Third Party to any Company Contract
is unable to continue to perform its obligations thereunder.

            Section 4.17 Intellectual Property.

            (a)   As used herein: (i) "Intellectual Property" means all U.S.
state and foreign (A) trademarks, service marks, trade names, Internet domain
names, designs, logos, slogans and general intangibles of like nature, together
with the goodwill associated therewith, registrations and applications relating
to the foregoing ("Trademarks"), (B) patents and pending patent applications,
patent disclosures, and any and all divisions, continuations,
continuations-in-part, reissues, reexaminations, and any extensions thereof, any
counterparts claiming priority therefrom, utility models, patents of
importation/confirmation, certificates of invention and like statutory rights
("Patents"),

                                       27



(C) registered and unregistered copyrights (including those in Software), rights
of publicity and all registrations and applications to register the same
("Copyrights"), and (D) confidential information, technology, know-how,
inventions, processes, formulae, algorithms, models and methodologies ("Trade
Secrets"); (ii) "IP Licenses" means all licenses and agreements (excluding
"click-wrap" or "shrink-wrap" agreements or agreements contained in
"off-the-shelf" Software or the terms of use or service for any web site)
pursuant to which the Company and its Subsidiaries have acquired rights in
(including usage rights) to any Intellectual Property, or licenses and
agreements pursuant to which the Company and its Subsidiaries have licensed or
transferred the right to use any Intellectual Property, including license
agreements, settlement agreements and covenants not to sue; (iii) "Software"
means all computer programs, including any and all software implementations of
algorithms, models and methodologies whether in source code or object code form,
databases and compilations, including any and all data and collections of data,
all documentation, including user manuals and training materials, related to any
of the foregoing and the content and information contained on any Web site; and
(iv) "Company Intellectual Property" means the Intellectual Property and
Software held for use or used in the business of Company or its Subsidiaries as
currently conducted or as currently proposed to be conducted.

            (b)   Section 4.17(b) of the Company Disclosure Letter sets forth,
for the following Intellectual Property owned by the Company and its
Subsidiaries, a complete and accurate list of all U.S., state and foreign: (i)
material Patents; (ii) material Trademarks; and (iii) material Copyrights.

            (c)   Section 4.17(c) of the Company Disclosure Letter lists all
material IP Licenses.

            (d)   The Company, or one of its Subsidiaries, owns or possesses
valid and enforceable licenses or other legal rights to use, sell or license all
Company Intellectual Property, free and clear of all Liens, except Permitted
Liens, and there is no material breach or default thereof by the Company or any
of its Subsidiaries or, to the knowledge of the Company, of the other party
thereto.

            (e)   All Trademarks, Patents and Copyrights owned by the Company
and its Subsidiaries, and, to the knowledge of the Company, all Trademarks,
Patents and Copyrights used by but not owned by the Company and its Subsidiaries
are valid and subsisting, in full force and effect and have not lapsed, expired
or been abandoned, and are not the subject of any opposition filed with the
United States Patent and Trademark Office or any other intellectual property
registry.

            (f)   The Company Intellectual Property and the IP Licenses
constitute all the Intellectual Property, Software and IP Licenses that are
necessary for the continuing conduct and operation of the Company's business in
all respects as conducted and operated by the Company immediately prior to the
date of this Agreement.

                                       28



            (g)   Except as set forth in Section 4.17(g) of the Company
Disclosure Letter or as has not had and would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Company:

                  (i)   since January 1, 2001, no claims, or to the knowledge of
      Company, threat of claims, have been asserted by any Third Party against
      the Company or any of its Subsidiaries related to the use in the conduct
      of the businesses of the Company and its Subsidiaries of any Intellectual
      Property or Software, or challenging or questioning the validity or
      effectiveness of any IP License;

                  (ii)  there are no settlement agreements, consents, judgments,
      orders, forbearances to sue or similar obligations limit or restrict the
      Company's or any Subsidiary's rights and to any Company Intellectual
      Property;

                  (iii) to the knowledge of the Company, the conduct of the
      businesses of the Company and its Subsidiaries does not infringe,
      misappropriate, dilute or otherwise violate any Intellectual Property
      rights of any Third Party;

                  (iv)  the Company and its Subsidiaries have not licensed or
      sublicensed their rights in any Company Intellectual Property, or received
      or been granted any such rights, other than pursuant to the IP Licenses;

                  (v)   to the knowledge of the Company, no Third Party is
      misappropriating, infringing, diluting or violating any Intellectual
      Property owned by the Company or its Subsidiaries;

                  (vi)  the Company and its Subsidiaries have taken commercially
      reasonable measures to protect the confidentiality of their Trade Secrets;
      and

                  (vii) the consummation of the transactions contemplated hereby
      will not result in the loss or impairment of the Company's and its
      Subsidiaries' rights to own or use any material Company Intellectual
      Property, nor will such consummation require the consent of any Third
      Party in respect of any material Company Intellectual Property.

            Section 4.18 Properties and Assets.

            (a)   Neither the Company nor any of its Subsidiaries owns any real
property. Section 4.18(a) of the Company Disclosure Letter sets forth the
address for each leased property used by the Company or its Subsidiaries (the
"Leased Real Property"). The Company has delivered or made available to Parent a
correct and complete copy of each of the Leases. Except as set forth in Section
4.18(a) of the Company Disclosure Letter, with respect to each of the Leases:
(i) there are no material disputes with respect to such Lease; (ii) no security
deposit or portion thereof deposited with respect such Lease has been applied in
respect of a breach or default under such Lease that has not been redeposited in
full; (iii) neither the Company or any of its Subsidiaries owes, nor will they
owe in the future, any material brokerage commissions

                                       29



or finder's fees with respect to such Lease; (iv) the Company and its
Subsidiaries have not subleased, licensed or otherwise granted any Person the
right to use or occupy such Leased Real Property or any portion thereof; (v) the
Company and its Subsidiaries have not collaterally assigned or granted any other
material security interest in such Lease or any interest therein; and (vi) there
are no material Liens, except for Permitted Liens, on the estate or interest
created by such Lease.

            (b)   The Company and its Subsidiaries have, and at the Effective
Time will have, good and valid title to, or valid rights to use, all material
assets and properties (in each case, tangible and intangible) necessary to
permit the Company and its Subsidiaries to conduct their business as currently
conducted.

            Section 4.19 Environmental Matters. Except for matters that have not
had and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company, (a) no written notice,
notification, demand, request for information, citation, summons, complaint or
order has been received by, and no action, claim, suit, proceeding or review or,
to the knowledge of the Company, investigation is pending or, to the knowledge
of the Company or any of its Subsidiaries, threatened by any Person against, the
Company or any of its Subsidiaries with respect to any matters relating to or
arising out of any Environmental Law, (b) the Company and its Subsidiaries have
been and are in compliance with all Environmental Laws, including possessing all
material permits, authorizations, licenses, exemptions and other governmental
authorizations required for its operations under applicable Environmental Laws,
(c) with respect to any Leased Real Property currently or formerly owned or
leased, as the case may be, by the Company or its Subsidiaries, the Company and
its Subsidiaries have not Released Hazardous Materials that have or could
reasonably be expected to result in a claim against the Company or its
Subsidiaries, and (d) neither the Company nor any of its Subsidiaries has
entered into any agreement that may require them to pay to, reimburse,
guarantee, pledge, defend, indemnify or hold harmless any Person from or against
any liabilities or costs arising out of or related to the generation,
manufacture, use, transportation or disposal of Hazardous Materials, or
otherwise arising in connection with or under Environmental Laws.

            Section 4.20 Transactions with Affiliates. Except as set forth in
Section 4.20 of the Company Disclosure Letter, there are no outstanding material
amounts payable to or receivable from, or advances by the Company or any of its
Subsidiaries to, and neither the Company nor any of its Subsidiaries is
otherwise a creditor or debtor to, or party to any Contract with, any
shareholder, director, officer, or affiliate of the Company or any of its
Subsidiaries, or any relative of any of the foregoing. Except as set forth in
Section 4.20 of the Company Disclosure Letter or in the Company SEC Documents
filed prior to the date of this Agreement, since January 1, 2001, there has been
no material transaction, or series of similar transactions, agreements,
arrangements or understandings, nor are there any currently proposed material
transactions, or series of similar transactions, agreements, arrangements or
understandings to which the Company or any of its Subsidiaries was or is to be a
party, that would be required to be disclosed under Item 404 of Regulation S-K
promulgated under the Securities Act.

                                       30



            Section 4.21 Reinsurance.

            (a)   All material ceded reinsurance agreements relating to the
business of the Company or any of its Subsidiaries are in full force and effect
and neither the Company nor the relevant Subsidiary is in material breach of any
material provision thereof and, to the knowledge of the Company, no other party
to such reinsurance agreements is in breach or, has threatened breach of any
provision thereof.

            (b)   Except as set forth in Section 4.21(b) of the Company
Disclosure Letter, no reinsurer under any such ceded reinsurance agreement to
which the Company or any of its Subsidiaries is a party has given any notice of
termination with respect to any such arrangement or treaty, and there is no
pending or, to the knowledge of the Company, threatened dispute (it being
understood and agreed that any failure of a party to timely pay any amounts due
pursuant to such agreements shall constitute a dispute), under any such
arrangement or treaty regarding the liability for any claim against the Company
or the relevant Subsidiary by the insureds that are covered by any such
arrangement or treaty. The Company has not received any information that would
reasonably cause it to believe that the financial condition of any other party
to any reinsurance or other similar Contracts with such party is so impaired as
to result in a default thereunder.

            Section 4.22 Brokers and Agents.

            (a)   True and complete copies of all standard forms of agency or
brokers contracts or agreements used by the Company or its Subsidiaries in their
business have been made available to Parent. Section 4.22(a) of the Company
Disclosure Letter sets forth all Persons through which the Company and its
Subsidiaries places or sells products with premium volume, on an annualized
basis, in excess of two hundred fifty thousand dollars ($250,000) per year for
calendar year 2003 or 2004 ("Significant Agents"), and no Significant Agent has
any Contract which differs in any material respect from the Company's and its
Subsidiaries' standard forms.

            (b)   Except as set forth in Section 4.22(b) of the Company
Disclosure Letter, all premiums receivable from agents of the Company and its
Subsidiaries as reflected on the most recent balance sheet of the Company
included in the Company SEC Documents, to the extent uncollected (i) are valid
and existing and represent monies due, and the Company and its Subsidiaries have
made reserves reasonably considered adequate for receivables not collectible,
and (ii) subject to the reserves described in clause (i), not subject to any
refunds or other adjustments or to any defense, rights of setoff, assignments,
restrictions, Liens or conditions.

            Section 4.23 Producers. To the knowledge of the Company, each
producer of business for an Insurance Subsidiary, at the time such producer
wrote, sold, or produced business for an Insurance Subsidiary at any time since
January 1, 2001, was duly licensed (for the type of business written, sold, or
produced by such producer) in the particular jurisdiction in which such producer
wrote, sold, or produced such business. To the knowledge of the Company, no such
producer violated in any material respect (or

                                       31



with or without notice or lapse of time or both, would have violated in any
material respect) any term or provision of any insurance Law applicable to the
writing, sale, or production of business for any Insurance Subsidiary, and no
such producer wrote, sold or produced any business for an Insurance Subsidiary
that was not in compliance in all material respects with the guidelines of the
Insurance Subsidiary applicable to such producer. Each material contract between
an Insurance Subsidiary and a producer of business therefor ("Producer
Agreements") is valid, binding and in full force and effect in accordance with
its terms, and none of the parties thereto is in default with respect to any
such Producer Agreement, other than for such failures to be valid, binding and
in full force and effect or such defaults as have not had and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on an Insurance Subsidiary. Except as set forth in Section 4.23
of the Company Disclosure Letter, since January 1, 2001, no party to any
Producer Agreement has cancelled, substantially modified (including the amount
thereof) or otherwise terminated any material business with the Company and its
Subsidiaries, and no such party has indicated an intent to do so, including as a
result of the transactions contemplated by this Agreement. Since January 1,
2001, to the knowledge of the Company, at the time any Insurance Subsidiary paid
commissions to any producer in connection with the sale of insurance, each such
producer was duly licensed if required under applicable insurance Law in the
particular jurisdiction in which such producer sold such insurance for the
Insurance Subsidiary.

            Section 4.24 Disclosure Documents. None of the information supplied
or to be supplied in writing by or on behalf of the Company specifically for
inclusion or incorporation by reference in the joint proxy statement/prospectus
relating to the matters to be submitted to the Company shareholders at the
Company Shareholder Meeting and to the Parent shareholders at the Parent
Shareholder Meeting (such joint proxy statement/prospectus, and any amendments
or supplements thereto, the "Joint Proxy Statement/Prospectus") or any amendment
or supplement thereto shall, at the date the Joint Proxy Statement/Prospectus or
any such amendment or supplement is first mailed to the shareholders of the
Company and Parent or at the time of the Company Shareholder Approval or the
Parent Share Issuance Approval, contain any untrue statement of a material fact
or omit any material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. None of
the information supplied or to be supplied in writing by or on behalf of the
Company specifically for inclusion or incorporation by reference in the
Registration Statement on Form S-4 with respect to the issuance of Parent Class
A Common Shares issuable in the Merger (such Form S-4, and any amendments or
supplements thereto, the "Form S-4") or any amendment or supplement thereto
will, at the time it becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, not misleading.
The Joint Proxy Statement/Prospectus will comply as to form in all material
respects with the requirements of the Exchange Act.

            Section 4.25 Opinion of Financial Advisor. The Company Independent
Committee has received the opinion of Bear, Stearns & Co. Inc. ("Bear Stearns"),
to the effect that, based on, and subject to the various assumptions and
qualifications set forth in such opinion, as of the date of such opinion, the
Merger Consideration is fair from a

                                       32



financial point of view to the holders of Company Common Stock (other than
Parent, Buyer, Merger Subsidiary, PIC and PIC's Subsidiaries and their
respective affiliates), a copy of which has been made available to Parent.

            Section 4.26 Finders' or Advisors' Fees. Except for Bear Stearns,
there is no investment banker, broker, finder or other intermediary that has
been retained by or is authorized to act on behalf of the Company or any of its
Subsidiaries who might be entitled to any fee or commission in connection with
the transactions contemplated by this Agreement. The Company has made available
to Parent a complete and correct copy of the agreement between the Company and
Bear Stearns pursuant to which such firm would be entitled to any payment
relating to this Agreement, the Merger or the other transactions contemplated by
this Agreement and such agreement is the only agreement providing for the
payment of any consideration to Bear Stearns with respect to this Agreement, the
Merger or the other transactions contemplated by this Agreement.

            Section 4.27 Risk Management. The Company and each of its
Subsidiaries have in place risk management policies and procedures to protect
against risks of the type and in amounts reasonably expected to be incurred by
Persons of similar size and in similar lines of business as the Company and each
such Subsidiary.

            Section 4.28 Derivatives. Except as set forth in Section 4.28 of the
Company Disclosure Letter, neither the Company nor any of its Subsidiaries holds
any derivative instruments, including swaps, caps, floors and option agreements,
whether entered into for the Company 's account, or for the account of any of
its Subsidiaries or their customers.

                                    ARTICLE V

                         REPRESENTATIONS AND WARRANTIES
                     OF PARENT, BUYER AND MERGER SUBSIDIARY

            Except as expressly disclosed in the most recent Annual Report on
Form 10-K and Quarterly Reports on Form 10-Q since such Annual Report on Form
10-K (including, in each case, to the extent included in any document filed or
incorporated by reference as an exhibit thereto), in each case included in the
Parent SEC Documents filed and publicly available prior to the date hereof (it
being understood that express disclosure requires specific disclosure of the
individual matter or item in question and is not satisfied by any form of
generalized, boiler-plate or other generic disclosure) and except as set forth
in the disclosure letter delivered by Parent to the Company simultaneously with
the execution of this Agreement (the "Parent Disclosure Letter"), Parent, Buyer
and Merger Subsidiary represent and warrant to the Company as follows:

            Section 5.1 Organization and Qualification.

            (a)   Parent was duly organized as an exempted company formed with
limited liability under the laws of the Cayman Islands and is validly existing
and in good standing under the Laws of the Cayman Islands. Each of Buyer and
Merger Subsidiary is

                                       33



a corporation duly organized, validly existing and in good standing under the
Laws of its jurisdiction of incorporation or organization. Each of Parent, Buyer
and Merger Subsidiary has the requisite corporate power and corporate authority
and any necessary Governmental Authority, franchise, license, certificate, or
permit to own, operate and lease the properties that it purports to own, operate
or lease and to carry on its business as it is now being conducted, and is duly
qualified as a foreign corporation to do business, and is in good standing in
each jurisdiction where the character of its properties owned, operated or
leased or the nature of its activities makes such qualification necessary,
except for such failures to be so qualified and in good standing that have not
had and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent.

            Section 5.2 Capitalization.

            (a)   The authorized share capital of Parent consists of (i)
900,000,000 common shares, par value $0.0001 per share, divided into Parent
Class A Common Shares and Parent Class B Common Shares, of which, as of October
12, 2004, 15,584,090 Parent Class A Common Shares (including shares of
restricted stock) were issued and outstanding and 12,687,500 Parent Class B
Common Shares (including shares of restricted stock) were issued and
outstanding, and (ii) 100,000,000 preferred shares, par value $0.0001 per share,
none of which, as of the date hereof are outstanding. As of October 12, 2004,
there were no treasury shares of Parent outstanding. As of October 12, 2004, (I)
options to purchase in the aggregate 1,718,764 Parent Class A Common Shares are
outstanding (the "Parent Options"), all of which were granted under Parent's
Share Incentive Plan, as amended, (II) there are 260,850 shares of restricted
stock of Parent granted pursuant to Parent's Share Incentive Plan, as amended,
and (III) there are 55,000 Parent Class A Common Shares issuable pursuant to
warrants ("Parent Warrants"). All the outstanding shares of Parent's capital
stock are, and all shares that may be issued pursuant to the exercise of
outstanding Parent Options, pursuant to Parent's Share Incentive Plan, as
amended, or pursuant to Parent Warrants, when issued in accordance with the
respective terms thereof, duly authorized, validly issued, fully paid and
non-assessable. No Voting Debt of Parent or its Subsidiaries is issued and
outstanding. Except as set forth above and except for the transactions provided
for in this Agreement, as of the date hereof, (i) there are no shares of capital
stock of Parent authorized, issued or outstanding, and (ii) there are no
existing options, warrants, calls, pre-emptive rights, subscriptions or other
rights, convertible securities, agreements, arrangements or commitments of any
character, relating to the issued or unissued capital stock of Parent or any of
its Subsidiaries, obligating Parent or any of its Subsidiaries to issue,
transfer or sell or cause to be issued, transferred or sold any shares of
capital stock or Voting Debt of, or other equity interest in, Parent or any of
its Subsidiaries or securities convertible into or exchangeable for such shares
or equity interests or obligations of Parent or any of its Subsidiaries to
grant, extend or enter into any such option, warrant, call, subscription or
other right, convertible security, agreement, arrangement or commitment. There
are no outstanding contractual obligations of Parent or any of its Subsidiaries
to repurchase, redeem or otherwise acquire any Parent Class A Common Shares or
other capital stock of Parent or any of its Subsidiaries or affiliates of Parent
to make any investment (in the form of a loan, capital contribution or
otherwise) in any of its Subsidiaries or any other

                                       34



entity nor has Parent or any of its Subsidiaries granted or agreed to grant to
any Person any stock appreciation rights or similar equity-based rights.

            (b)   The authorized capital stock of Merger Subsidiary consists of
one thousand (1,000) shares of Merger Subsidiary Common Stock. As of the date
hereof, one hundred (100) shares of Merger Subsidiary Common Stock are issued
and outstanding, all of which are owned indirectly by Parent and directly by
Buyer and duly authorized, validly issued, fully paid and non-assessable.

            (c)   Except as set forth in Section 5.2(c) of the Parent Disclosure
Letter, there are no voting trusts or other agreements or understandings to
which Parent or any of its Subsidiaries is a party with respect to the voting of
the capital stock of Parent or any of its Subsidiaries.

            Section 5.3 Corporate Authorization; Enforceability; Board Action.

            (a)   Each of Parent, Buyer and Merger Subsidiary has the requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby (including the Merger). The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of each of Parent, Buyer and Merger Subsidiary and no other corporate
proceedings on the part of either Parent or Merger Subsidiary are necessary to
authorize the execution and delivery of this Agreement or to consummate the
Merger and the other transactions contemplated hereby, subject in the case of
the issuance of Parent Class A Common Shares in the Merger and any issuances of
Parent Class A Common Shares and/or Parent Class B Common Shares in connection
with the transactions contemplated by this Agreement and the Stock Purchase
Agreement to the approval by a majority of votes cast by the holders of the
Parent Class A Common Shares and Parent Class B Common Shares, as required by
the rules and regulations of the Nasdaq Stock Market (the "Parent Share Issuance
Approval"). This Agreement has been duly executed and delivered by each of
Parent, Buyer and Merger Subsidiary, as applicable, and, assuming due
authorization, execution and delivery of this Agreement by the other parties
thereto, constitutes a valid and binding agreement of each of Parent, Buyer and
Merger Subsidiary enforceable against each such party in accordance with its
terms, except to the extent that such enforcement may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar Laws, now or
hereafter in effect, affecting creditors' rights generally, and to general
equity principles.

            (b)   The Board of Directors of Parent, at a meeting duly called and
held, unanimously has (i) determined that this Agreement and the transactions
contemplated hereby (including the Merger) are advisable and in the best
interests of Parent and Parent's shareholders, (ii) approved and adopted this
Agreement, and (iii) resolved to recommend that Parent's shareholders vote for
the approval of the issuance of Parent Class A Common Shares in the Merger.

                                       35



            Section 5.4 Consents and Approvals; No Violations.

            (a)   The execution, delivery and performance by Parent, Buyer and
Merger Subsidiary of this Agreement and the consummation by Parent, its
Subsidiaries and Merger Subsidiary of the transactions contemplated hereby
(including the Merger) require no action by or in respect of, or notice to or
filing with, any Governmental Authority (including with respect to any
Subsidiary of Parent) other than (i) the filing of articles of merger in
connection with the Merger in accordance with the PBCL, (ii) compliance with any
applicable requirements of the HSR Act, (iii) compliance with any applicable
requirements of the Exchange Act and the rules and regulations promulgated
thereunder, (iv) compliance with any applicable requirements of the Securities
Act and the rules and regulations promulgated thereunder, (v) compliance with
the rules of the Nasdaq National Market, (vi) those set forth in Section 5.4(a)
of the Parent Disclosure Letter that are required under federal and state Laws
governing insurance and insurance companies, and (vii) any other approvals the
absence of which would not reasonably be expected to be, individually or in the
aggregate, material to the business of the Company or Parent after giving effect
to the consummation of the transactions contemplated hereby.

            (b)   Except as set forth in Section 5.4(b) of the Parent Disclosure
Letter, neither the execution, delivery or performance by Parent, Buyer and
Merger Subsidiary of this Agreement nor the consummation by Parent, Buyer and
Merger Subsidiary of the transactions contemplated hereby (including the Merger)
nor compliance by Parent, Buyer or Merger Subsidiary with any of the provisions
hereof or thereof will (i) conflict with or result in any breach of any
provisions of the memorandum and articles of association of Parent or the
similar organizational and governing documents of its Subsidiaries, (ii)
conflict with or result in any violation of any provision of any Law binding
upon or applicable to Parent or any of its Subsidiaries, (iii) require the
consent, approval or authorization of, or notice to or filing with, any Third
Party with respect to, result in any violation or breach of, or constitute (with
or without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation, amendment, or acceleration of any right or
obligation of Parent or its Subsidiaries or to a loss of any benefit to which
Parent or any of its Subsidiaries is entitled) under any provision of Contract
by which any of Parent or its Subsidiaries is bound or subject or any of
Parent's Permits, or (iv) result in the creation or imposition of any Lien
(other than Permitted Liens) on any asset of Parent or any of its Subsidiaries,
except in the case of (ii) and (iii) for such conflicts, violations, breaches,
defaults, rights or losses, or the failure to obtain any such consents or
approvals or to provide such notices or make such filings, that would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Parent.

            Section 5.5 SEC Filings and Financial Statements.

            (a)   Parent has filed with the SEC all forms, reports, schedules,
statements and other documents required to be filed or furnished by it and its
Subsidiaries since January 1, 2001 under the Exchange Act or the Securities Act
(as such documents have been amended since the time of their filing prior to the
date hereof, collectively, the

                                       36



"Parent SEC Documents"). As of their respective dates or, if amended prior to
the date hereof, as of the date of the last such amendment, the Parent SEC
Documents, including any financial statements or schedules included therein (i)
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and (ii) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be, and
the applicable rules and regulations of the SEC thereunder. Each of the
consolidated financial statements included in the Parent SEC Documents (the
"Parent Financial Statements") has been prepared in accordance with GAAP applied
on a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly presents in all material respects, as applicable,
the consolidated financial position and the consolidated results of operations
and cash flows (and changes in financial position, if any) of Parent and its
consolidated Subsidiaries as at the dates thereof or for the periods presented
therein (subject, in the case of any unaudited interim financial statements, to
normal year-end adjustments and for the absence of footnotes).

            (b)   The audited balance sheets of the Parent's Subsidiaries as of
December 31, 2003 and the related audited statements of income and cash flows
for each of the years ended December 31, 2003 and December 31, 2002, and the
unaudited interim balance sheet as of June 30, 2004 and the related unaudited
interim statements of income and cash flows for the six months ended June 30,
2004, and their respective annual statements for the fiscal years ended December
31, 2003 and December 31, 2002 filed with the insurance regulatory authorities
(or other comparable state regulatory agencies), copies of which have been
delivered to the Company prior to the date hereof present each such Subsidiary's
respective statutory financial conditions as of the dates thereof and their
respective results of operations and cash flows for the periods then ended in
conformity with SAP. The other information contained in such annual statements
present the information required to be contained therein in conformity with SAP
consistently applied. The balance sheets of the Parent's Subsidiaries in respect
of any period ending after June 30, 2004 but before the date of this Agreement,
and the related statements of income and cash flows, which have been filed with
insurance regulatory authorities (or other comparable state regulatory
agencies), copies of which have been delivered to the Company prior to the date
hereof, fairly present in all material respects each such Subsidiary's
respective statutory financial conditions as of the dates thereof and their
respective results of operations and cash flows for the periods then ended in
conformity with SAP consistently applied. The financial statements referred to
in this Section 5.5(b) are the "Parent Statutory Financial Statements."

            (c)   Parent has established and maintained disclosure controls and
procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act),
as required by Rule 13a-15(a) under the Exchange Act. Parent and each of its
Subsidiaries maintains a system of internal accounting controls sufficient to
comply with all legal and accounting requirements applicable to Parent and such
Subsidiary and has previously disclosed to the Company its work plan, budget and
timetable for compliance with the SEC rules promulgated under Section 404 of the
Sarbanes-Oxley Act. Parent is in compliance in all material respects with the
Sarbanes-Oxley Act. Parent has disclosed in

                                       37



the Parent SEC Documents, based on its most recent evaluation thereof, any
significant deficiencies in its internal accounting controls which would
reasonably be expected to adversely affect in any material respect the Company's
ability to record, process, summarize and report financial data.

            (d)   To the knowledge of Parent, neither Parent nor any of its
Subsidiaries nor any Representative of Parent or any of its Subsidiaries has
received or otherwise had or obtained knowledge of any material complaint,
allegation, assertion or claim, whether written or oral, regarding the
accounting or auditing practices, procedures, methodologies or methods of Parent
or any of its Subsidiaries or their respective internal accounting controls,
including any material complaint, allegation, assertion or claim that Parent or
any of its Subsidiaries has engaged in questionable accounting or auditing
practices.

            Section 5.6 Absence of Certain Changes. Except (x) as set forth in
Section 5.6 of the Parent Disclosure Letter, (y) as disclosed in the Parent SEC
Documents filed prior to the date hereof, or (z) for actions or inactions after
the date hereof in compliance with Section 6.2, (1) since December 31, 2003,
Parent has conducted its businesses and operations consistent with past practice
only in the ordinary and usual course thereof and there has not occurred (i) any
fact, event, circumstance, change, condition or effect (including the incurrence
of any Liabilities of any nature, whether or not accrued, contingent or
otherwise) that has had, or would reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect on Parent, (ii) any declaration
or payment of any dividend or other distribution (whether in cash, stock or
property) with respect to the equity interests of Parent or of any of its
Subsidiaries with a record date prior to the Closing Date other than dividends
paid to Parent or any of its wholly-owned Subsidiaries by a wholly-owned
Subsidiary, or (iii) any material change by Parent in accounting principles or
methods other than those required by Law, GAAP or SAP; and (2) since June 30,
2004, neither Parent nor any of its Subsidiaries has taken any action or made
any omission that, if taken or made after the date of this Agreement, would be
prohibited by Sections 6.2(b)(i) through (vii).

            Section 5.7 Undisclosed Liabilities. Except for Liabilities (a) set
forth in Section 5.7 of the Parent Disclosure Letter or reflected, disclosed or
reserved for in the Parent Financial Statements (including the footnotes
thereto) included in the Parent SEC Documents filed prior to the date of this
Agreement, (b) incurred (i) in the ordinary course of business and consistent
with past practice, (ii) pursuant to policies written by the Parent's
Subsidiaries, or (iii) pursuant to this Agreement, or (c) which are not,
individually or in the aggregate, material to Parent and its Subsidiaries taken
as a whole, neither Parent nor any of its Subsidiaries has incurred any
Liabilities of any nature that would be required to be reflected or reserved
against on a consolidated balance sheet of Parent and its Subsidiaries
(including the notes thereto) prepared in accordance with GAAP consistently
applied in preparing the Company Balance Sheet or that has had or would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Parent.

                                       38



            Section 5.8 Litigation

            (a)   As of the date hereof (i) there is no Action by or before any
Governmental Authority pending or, to the knowledge of Parent, threatened,
against, by or affecting Parent or any of its Subsidiaries (other than insurance
claims litigation in the ordinary course of business for which claims reserves
that are adequate in the aggregate have been established), except for such
Actions as have not had and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Parent, and (ii)
no investigation or inquiry by or before any Governmental Authority is pending
or, to the knowledge of Parent, threatened against Parent or any of its
Subsidiaries.

            (b)   Except as set forth in Section 5.8(b) of the Parent Disclosure
Letter or in the Parent SEC Documents filed prior to the date of this Agreement,
there are no judgments, injunctions, writs, orders or decrees binding on Parent
or any of its Subsidiaries that have had, or would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Parent.

            Section 5.9 Compliance with Laws.

            (a)   Except as set forth in Section 5.9(a) of the Parent Disclosure
Letter, Parent and each of its Subsidiaries are, and since January 1, 2001 have
been, in compliance in all material respects with all applicable Laws.

            (b)   Except as set forth in Section 5.9(b) of the Parent Disclosure
Letter, (i) all material Permits required for any business operated or services
furnished by Parent or its Subsidiaries are valid and in full force and effect
and (ii) the business of Parent and each of its Subsidiaries is being conducted
in compliance in all material respects with the terms of all such Permits.

            (c)   Except as set forth in Section 5.9(c) of the Parent Disclosure
Letter or as would not reasonably be expected to result in a Material Adverse
Effect on Parent, since January 1, 2001, (i) neither Parent nor any of its
Subsidiaries nor, to the knowledge of Parent, any Third Party service provider
acting on behalf of Parent, has received, nor otherwise has any knowledge of,
any written or oral notice from any Governmental Authority that (x) alleges any
noncompliance (or that Parent or any of its Subsidiaries or any such Third Party
service provider is under investigation or the subject of any inquiry by any
such Governmental Authority for such alleged noncompliance) with any applicable
Law, or (y) would reasonably be expected to result in a fine or assessment or a
cease and desist order, or the suspension, revocation or limitation or
restriction of any Parent Permit, and (ii) neither Parent nor any of its
Subsidiaries has entered into any agreement or settlement with any Governmental
Authority with respect to its non-compliance with, or violation of, any
applicable Law.

            (d)   Except as set forth in Section 5.9(d) of the Parent Disclosure
Letter or as would not reasonably be expected to result in a Material Adverse
Effect on Parent, since January 1, 2001, Parent and each of its Subsidiaries has
timely filed all regulatory

                                       39



reports, schedules, statements, documents, filings, submissions, forms,
registrations and other documents, together with any amendments required to be
made with respect thereto, that was required to be filed with any Governmental
Authority (the "Parent Business Documents"), including state insurance
regulatory authorities and any applicable federal regulatory authorities, and
have timely paid all fees due and payable in connection therewith. All Parent
Business Documents were true, correct and complete in all material respects when
filed, complied in all material respects with applicable Law in effect when
filed, and no material deficiencies have been asserted by any such Governmental
Authority with respect to Parent Business Documents that have not been
satisfied. There is no material unresolved violation or exception by any such
Governmental Authority with respect to any of the Parent Business Documents.
Parent has delivered or made available to the Company a true and complete copy
of each material Parent Business Documents.

            Section 5.10 Reserves. All Reserves carried on the Parent Statutory
Financial Statements (a) were determined, to the knowledge of Parent, in all
material respects in accordance with generally accepted actuarial principles
(except as set forth therein), consistently applied, (b) comply in all material
respects with the requirements of applicable Law and (c) were made with the good
faith intention and belief that they made reasonable provision in the aggregate
to cover the total amount of Liabilities under outstanding policies and
contracts of insurance of Parent and its Subsidiaries as of the dates of such
Parent Statutory Financial Statements (it being understood that no
representation or warranty is made in this Agreement to the effect that such
Reserves were or will be in fact adequate to cover the actual amount of such
Liabilities that are eventually paid after the date thereof).

            Section 5.11 Actuarial Analyses. Section 5.11 of the Parent
Disclosure Letter sets forth a list of all Third Party actuarial reports with
respect to Parent or any of its Subsidiaries relied upon by Parent or any of its
Subsidiaries or provided by Parent or any of its Subsidiaries to any
Governmental Authority since December 31, 2002, and all attachments, addenda,
supplements and modifications thereto (copies of which Parent has made available
to the Company) (the "Parent Actuarial Analyses"). To the knowledge of Parent,
the information and data furnished by Parent or any of its Subsidiaries to its
independent actuaries in connection with the preparation of the Parent Actuarial
Analyses were, at the time furnished, accurate in all material respects for the
periods covered in the Parent Actuarial Analyses. Furthermore, to the knowledge
of Parent, each Parent Actuarial Analysis was, at the relevant time of
preparation, prepared using appropriate modeling procedures accurately applied
and in conformity with generally accepted actuarial principles consistently
applied and was properly prepared in accordance with the assumptions stated
therein. To the knowledge of Parent, the assumptions used in making the
projections contained in the Parent Actuarial Analyses were arrived at in good
faith and were reasonable when made

            Section 5.12 Reinsurance.

            (a)   All material ceded reinsurance agreements relating to the
business of Parent or any of its Subsidiaries are in full force and effect and
neither Parent nor the

                                       40



relevant Subsidiary is in material breach of any material provision thereof and,
to the knowledge of Parent, no other party to such reinsurance agreements is in
breach or, has threatened breach of any provision thereof.

            (b)   Except as set forth in Section 5.12 of the Parent Disclosure
Letter, no reinsurer under any such ceded reinsurance agreement to which Parent
or any of its Subsidiaries is a party has given any notice of termination with
respect to any such arrangement or treaty.

            Section 5.13 Disclosure Documents. None of the information supplied
or to be supplied in writing by or on behalf of Parent specifically for
inclusion or incorporation by reference in the Joint Proxy Statement/Prospectus
or any amendment or supplement thereto shall, at the date the Joint Proxy
Statement/Prospectus or any such amendment or supplement is first mailed to the
shareholders of the Company or Parent or at the time of the Company Shareholder
Approval or the Parent Share Issuance Approval, contain any untrue statement of
a material fact or omit any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. None of the information supplied or to be supplied in writing by
or on behalf of Parent specifically for inclusion or incorporation by reference
in the Form S-4 or any amendment or supplement thereto will, at the time it
becomes effective under the Securities Act contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, not misleading. The Form S-4 and the
Joint Proxy Statement/Prospectus will comply as to form in all material respects
with the requirements of the Exchange Act.

            Section 5.14 Finders' or Advisors' Fees. Except for Merrill Lynch &
Co. and Fox Paine & Company, LLC, there is no investment banker, broker, finder
or other intermediary that has been retained by or is authorized to act on
behalf of Parent who might be entitled to any fee or commission in connection
with the transactions contemplated by this Agreement.

            Section 5.15 Operations of Merger Subsidiary. Merger Subsidiary was
formed solely for the purpose of engaging in the transactions contemplated
hereby, has engaged in no other business activities other than in connection
with or as contemplated hereby and has conducted its operations as contemplated
hereby.

            Section 5.16 Capital Resources. Parent and Buyer have available to
them (and hereby agree that they shall continue to have through the Effective
Time), either from their cash and cash equivalents on hand, committed equity
capital available to them on call, or borrowings currently available to them
under their existing credit facilities, all funds necessary to pay all cash
amounts required to be paid by them under this Agreement.

            Section 5.17 Taxes.

            (a)   Each of Parent, Buyer, Merger Subsidiary and any consolidated,
affiliated, combined or unitary group of which Parent, Buyer or Merger
Subsidiary is a

                                       41



member has (i) timely filed (or there have been timely filed on its behalf) with
the appropriate Governmental Authorities all material income and other material
Tax Returns required to be filed by it or them (giving effect to all extensions)
and such Tax Returns are correct and complete in all material respects; (ii)
timely paid in full (or there has been timely paid in full on its behalf) all
material income and other material Taxes required to have been paid by it or
them, and (iii) made adequate provision (or adequate provision has been made on
its behalf) for all accrued Taxes not yet due.

            (b)   There are no material Liens for Taxes upon any property or
assets of Parent, Buyer or Merger Subsidiary, except for Liens for Taxes not yet
due and payable or which are being contested in good faith or for which adequate
reserves have been established.

            (c)   No federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently pending with
regard to any material Taxes or material Tax Returns of Parent or any of its
Subsidiaries, and neither Parent nor any Subsidiary of Parent has received
written notice of any proposed claims, audits or proceedings with respect to any
material Taxes.

            (d)   Each of Parent, Buyer and Merger Subsidiary has complied in
all material respects with all applicable Laws relating to the payment and
withholding of Taxes and has, within the time and in the manner prescribed by
Law, withheld and paid over to the proper Governmental Authorities all amounts
required to be so withheld and paid over under applicable Law.

            (e)   No claim has been made in writing by any Governmental
Authorities in a jurisdiction where Parent or any of its Subsidiaries does not
file Tax Returns that any such entity is subject to material taxation by that
jurisdiction.

                                   ARTICLE VI

                                    COVENANTS

            Section 6.1 Conduct of the Company.

            (a)   Except as otherwise expressly provided in this Agreement, the
Company covenants and agrees that the business of the Company and its
Subsidiaries shall be conducted only in the ordinary course of business and
consistent with past practice and, to the extent consistent therewith, the
Company shall use (and the Company shall cause its Subsidiaries to use)
reasonable best efforts to preserve its business organization intact and
maintain its existing relations with customers, policyholders, insureds,
reinsurers, agents, underwriters, brokers and investment customers, suppliers,
employees, creditors and business partners.

            (b)   Without limiting the provisions of Section 6.1(a), except as
set forth in Section 6.1(b) of the Company Disclosure Letter, the Company
covenants and agrees that, except as expressly provided in this Agreement or as
required to comply with applicable Law, from and after the date of this
Agreement and prior to the Effective

                                       42



Time, the Company will not, and will not permit any of its Subsidiaries to
(without the prior written consent of Parent, which consent shall not be
unreasonably withheld or delayed if the action requested would not materially
and adversely impact the expected pro forma financial data (including expected
cost-savings) of Parent following consummation of the Merger as agreed by Parent
and the Company):

                  (i)   amend or propose to amend its articles of incorporation
      or bylaws or similar organizational documents;

                  (ii)  issue, sell, transfer, pledge, dispose of or encumber
      any additional shares of, or securities convertible into or exchangeable
      for, or options, warrants, calls, commitments or rights of any kind to
      acquire, any shares of capital stock of any class of the Company or its
      Subsidiaries, other than issuances pursuant to the exercise of Company
      Options outstanding on the date hereof;

                  (iii) (A) directly or indirectly, split, combine or reclassify
      the outstanding shares of capital stock of the Company, or any outstanding
      capital stock of any of the Subsidiaries of the Company; or (B) redeem,
      purchase or otherwise acquire directly or indirectly any of its capital
      stock;

                  (iv)  declare, set aside or pay any dividend or other
      distribution payable in cash, stock or property with respect to its
      capital stock;

                  (v)   adopt a plan of complete or partial liquidation or
      dissolution;

                  (vi)  (A) increase the compensation or benefits payable to any
      director, officer, other employee or consultant of the Company or any of
      its Subsidiaries; (B) grant any severance or termination pay to (or amend
      any such existing arrangement with) any director, officer, other employee
      or consultant of the Company or any of its Subsidiaries; (C) enter into
      any employment, deferred compensation or other similar agreement (or amend
      any such existing agreement) with any director, officer, other employee or
      contractor of the Company or any of its Subsidiaries; (D) increase any
      benefits payable under any existing severance or termination pay policies
      or agreements or employment agreements; or (E) permit any director,
      officer, other employee or contractor of the Company or any of its
      Subsidiaries who is not already a party to an agreement or a participant
      in a plan providing benefits upon or following a "change in control" to
      become a party to any such agreement or a participant in any such plan,
      other than pursuant to a pre-existing contractual commitment or as
      required by applicable Law;

                  (vii) (A) adopt any new benefit plan, terminate any Company
      Employee Plan or modify any Company Employee Plan in a way that could
      result in additional cost to Parent, the Company or any of their
      respective Subsidiaries, except for any amendments to a Company Employee
      Plan required to maintain its qualified plan status under Section 401(a)
      of the Code; (B) modify any actuarial cost method, assumption or practice
      used in determining benefit obligations,

                                       43



      annual expense and funding for any Company Employee Plan, except to the
      extent required by GAAP; (C) subject to any ERISA fiduciary obligation,
      modify the investment philosophy of the Company Employee Plan trusts or
      maintain an asset allocation that is not consistent with such philosophy;
      (D) subject to any ERISA fiduciary obligation, enter into any outsourcing
      agreement, or any other material contract relating to the Company Employee
      Plans or management of any benefit plan trusts; (E) grant any ad hoc
      pension increase; or (F) establish any new or fund any existing "rabbi" or
      similar trust (except in accordance with the current terms of any Company
      Employee Plan), or enter into any other arrangement for the purpose of
      securing non-qualified retirement benefits, termination benefits or
      deferred compensation;

                  (viii) modify, amend or terminate any of the Company Contracts
      or waive, release or assign any material rights or claims, except in the
      ordinary course of business and consistent with past practice;

                  (ix)  enter into any new (i) agency agreement that provides or
      permits: (A) a premium volume limitation greater than five hundred
      thousand dollars ($500,000); (B) a projected annual reinsurance ceded
      written premium greater than five hundred thousand dollars ($500,000); (C)
      policy limits of liability of greater than five hundred thousand dollars
      ($500,000) per occurrence; or (D) a per policy retention of more than five
      hundred thousand dollars ($500,000) per occurrence; or (ii) reinsurance
      agreement with ceded written premium in excess of five hundred thousand
      dollars ($500,000), except in situations where the new reinsurance
      agreement is essentially a renewal of an existing agreement with
      substantially similar terms and conditions;

                  (x)   enter into any material insurance transaction other than
      in the ordinary course of business and consistent with past practice;

                  (xi)  (A) incur any indebtedness for borrowed money or issue
      debt securities or assume, guarantee or endorse, or otherwise as an
      accommodation become responsible for, the obligations of any Person (other
      than a wholly-owned Subsidiary of the Company) for borrowed money, except
      for indebtedness incurred under the Company's existing credit facilities
      in the ordinary course of business and consistent with past practice and
      in an aggregate amount not to exceed at any time outstanding two hundred
      fifty thousand dollars ($250,000); (B) make any loans, advances or capital
      contributions to, or investments in, any other Person (other than to
      wholly-owned Subsidiaries of the Company); or (C) enter into any material
      commitment or transaction (including any borrowing, capital expenditure or
      purchase, sale or lease of assets) requiring a capital expenditure by the
      Company or its Subsidiaries, other than capital expenditures pursuant to
      the Company's capital expenditures budget previously furnished to Parent
      and other capital expenditures that do not exceed one hundred thousand
      dollars ($100,000) in the aggregate;

                                       44



                  (xii) (A) file any material Tax Return or claim for refund
      with any Governmental Authority; (B) make, revoke or change a material Tax
      election with respect to the Company or any of its Subsidiaries (unless
      required by applicable Law); (C) change a material method of accounting
      for Tax purposes with respect to the Company or any of its Subsidiaries;
      (D) consent to extend the period of limitations for the payment or
      assessment of any material Tax with respect to the Company or any of its
      Subsidiaries; or (E) settle or compromise any material Tax liability or
      refund of the Company or any of its Subsidiaries;

                  (xiii) change any of the accounting principles used by it
      unless required by GAAP, SAP or Law;

                  (xiv) pay, discharge or satisfy (A) any non-insurance
      Liabilities, other than (i) the payment, discharge or satisfaction of any
      such non-insurance Liabilities in the ordinary course of business and
      consistent with past practice; (ii) pursuant to existing obligations in
      accordance with their terms as in effect on the date of this Agreement (as
      previously disclosed to Parent); or (iii) settlements or compromises of
      any litigation (whether or not commenced prior to the date of this
      Agreement) where the amount paid (after giving effect to insurance
      proceeds actually received) does not exceed two hundred fifty thousand
      dollars ($250,000) in the aggregate for all such settlements or
      compromises; or (B) any insurance Liability (absolute, accrued, asserted
      or unasserted, contingent or otherwise) for amounts in excess of two
      hundred fifty thousand dollars ($250,000) (or, if in excess of such
      amount, with the consent of Parent, such consent not to be unreasonably
      withheld or delayed);

                  (xv)  (A) acquire (by merger, consolidation, or acquisition of
      stock or assets) any Person or division thereof or make any investment in
      another Person (other than an entity that is a wholly-owned subsidiary of
      the Company as of the date of this Agreement and other than incorporation
      of a wholly-owned subsidiary of the Company) or, except in the ordinary
      course of business and consistent with past practice, acquire assets; or
      (B) sell, transfer, lease, license, pledge, dispose of, or encumber or
      authorize or propose the sale, pledge, disposition or Lien of any assets
      of the Company or any of its Subsidiaries, except in the case of clause
      (B) above, for sales, transfers, leases, licenses, pledges, dispositions
      or Liens (I) pursuant to existing Contracts (the terms of which have been
      previously disclosed to Parent); (II) in the ordinary course of business
      and consistent with past practice; provided, that the fair market value of
      all assets sold, transferred, leased, licensed, pledged, disposed of or
      encumbered pursuant to this clause (II) does not exceed one hundred
      thousand dollars ($100,000) in the aggregate; or (III) involving obsolete
      assets not material to the business of the Company or its Subsidiaries;

                  (xvi) take any action, or fail to take any action, to cause
      the Company Common Stock to cease to be listed on the NYSE prior to the
      Closing Date;

                                       45



                  (xvii) take, or agree to commit to take, or omit to take, any
      action that could reasonably be expected to make any representation or
      warranty of the Company contained herein inaccurate in any respect at, or
      as of any time prior to, the Effective Time;

                  (xviii) take any action, or fail to take any action, that
      could impose a material delay in consummating the transactions
      contemplated hereby, including the Merger; or

                  (xix) enter into a Contract to do any of the foregoing, or
      authorize, recommend, propose or announce an intention to do any of the
      foregoing.

            Section 6.2 Conduct of Parent.

            (a)   Except as otherwise expressly provided in this Agreement,
Parent covenants and agrees that the business of Parent and its Subsidiaries
shall be conducted only in the ordinary course of business and consistent with
past practice and, to the extent consistent therewith, Parent shall use (and
Parent shall cause its Subsidiaries to use) reasonable best efforts to preserve
its business organization intact and maintain its existing relations with
customers, policyholders, insureds, reinsurers, agents, underwriters, brokers
and investment customers, suppliers, employees, creditors and business partners.

            (b)   Without limiting the provisions of Section 6.2(a), except as
set forth in Section 6.2(b) of the Parent Disclosure Letter, Parent covenants
and agrees that, except as expressly provided in this Agreement or as required
to comply with applicable Law, from and after the date of this Agreement and
prior to the Effective Time, Parent will not, and will not permit any of its
Subsidiaries to (without the prior written consent of the Company, which consent
shall not be unreasonably withheld or delayed):

                  (i)   amend or propose to amend the memorandum and articles of
      association of Parent;

                  (ii)  issue, sell, transfer, pledge, dispose of or encumber
      any additional shares of, or securities convertible into or exchangeable
      for, or options, warrants, calls, commitments or rights of any kind to
      acquire, any shares of capital stock of any class of Parent or its
      Subsidiaries, other than issuances pursuant to this Agreement, the Stock
      Purchase Agreement and the transactions contemplated hereby and thereby or
      issuances of Parent Class A Common Shares pursuant to the exercise of
      Parent Options or Parent Warrants outstanding on the date hereof or
      granted in the ordinary course of business and consistent with past
      practices;

                  (iii) redeem, purchase or otherwise acquire, directly or
      indirectly, any material amount of its capital stock, other than, during
      the period preceding the Measurement Period, pursuant to a repurchase plan
      meeting the provisions of Rule 10b-18 under the Exchange Act;

                                       46



                  (iv)  declare, set aside or pay any dividend or other
      distribution payable in each case with respect to its capital stock,
      except for dividends payable to Parent or a wholly-owned Subsidiary of
      Parent by another wholly-owned Subsidiary of Parent or dividends with a
      record date after the Effective Time;

                  (v)   adopt a plan of complete or partial liquidation or
      dissolution;

                  (vi)  take any action, or fail to take any action, to cause
      the Parent Class A Common Shares to cease to be quoted on the Nasdaq Stock
      Market prior to the Closing Date;

                  (vii) change any of the accounting principles used by it
      unless required by GAAP, SAP or Law;

                  (viii) take any action, or fail to take any action, that could
      impose a material delay in consummating the transactions contemplated
      hereby, including the Merger;

                  (ix)  take, or agree to commit to take, or omit to take, any
      action that could reasonably be expected to make any representation or
      warranty of Parent, Buyer or Merger Subsidiary contained herein inaccurate
      in any respect at, or as of any time prior to, the Effective Time; or

                  (x)   enter into a Contract to do any of the foregoing, or
      authorize, recommend, propose or announce an intention to do any of the
      foregoing.

            Section 6.3 Preparation of Proxy Statement; Shareholder Meetings.

            (a)   As promptly as reasonably practicable following the date
hereof, the Company and Parent shall cooperate in jointly preparing and filing
with the SEC the Joint Proxy Statement/Prospectus, and Parent shall prepare and
file with the SEC the Form S-4. Each of the Company and Parent shall use their
respective reasonable best efforts to have the Joint Proxy Statement/Prospectus
cleared by the SEC and the Form S-4 declared effective by the SEC and to keep
the Form S-4 effective as long as is necessary to consummate the Merger. The
Company and Parent shall, as promptly as practicable after receipt thereof,
provide the other party copies of any written comments, and advise the other
party of any oral comments or communications regarding the Joint Proxy
Statement/Prospectus or Form S-4 received from the SEC. The Company and Parent
shall cooperate and provide the other with a reasonable opportunity to review
and comment on any amendment or supplement to the Joint Proxy
Statement/Prospectus or the Form S-4 prior to filing the same with the SEC, and
such parties will provide promptly each other with a copy of all such filings
made with the SEC. Notwithstanding any other provision herein to the contrary,
no amendment or supplement (including by incorporation by reference) to the
Joint Proxy Statement/Prospectus or the Form S-4 shall be made without the
approval of both parties, which approval shall not be unreasonably withheld or
delayed; provided, however, that with respect to documents filed by a party

                                       47



which are incorporated by reference in the Form S-4 or Joint Proxy
Statement/Prospectus, this right of approval shall apply only with respect to
disclosures relating to this Agreement, the transactions contemplated hereby or
the other party or its business, financial condition or results of operations;
and provided, further, that the Company, in connection with a Company Change in
Recommendation, may amend or supplement the Joint Proxy Statement/Prospectus
(including by incorporation by reference) pursuant to a Qualifying Amendment,
and this right of approval of Parent shall not apply thereto, and this right of
approval also shall be subject to the right of each party to have its Board of
Directors' and, in the case of the Company, the Company Independent Committee's
deliberations and conclusions accurately described.

            (b)   Each of the Company and Parent will use its reasonable best
efforts to cause the Joint Proxy Statement/Prospectus to be mailed to the
Company's shareholders and Parent's shareholders as promptly as practicable
after the Form S-4 is declared effective under the Securities Act. Each of the
Company and Parent shall furnish all information concerning it and the holders
of its capital stock as may be reasonably requested in connection with any such
action. Each party will advise the other party, promptly after it receives
notice thereof, of the time when the Form S-4 has become effective, the issuance
of any stop order, the suspension of the qualification of the Parent Class A
Common Shares issuable in the Merger for offering or sale in any jurisdiction or
any request by the SEC for amendment of the Joint Proxy Statement/Prospectus or
the Form S-4.

            (c)   If, at any time prior to the Effective Time, any information
relating to the Company or Parent, or any of their respective affiliates,
officers or directors, should be discovered by the Company or Parent that should
be set forth in an amendment or supplement to either the Form S-4 or the Joint
Proxy Statement/Prospectus, as the case may be, so that such documents would not
include any misstatement of a material fact or omit any material fact necessary
to make the statements therein, in light of the circumstances under which they
are made, not misleading, the party that discovers such information shall
promptly notify the other party hereto and, to the extent required by Law, the
Company and Parent shall cooperate to cause an appropriate amendment or
supplement describing such information promptly to be filed with the SEC and
disseminated to the shareholders of the Company and Parent.

            (d)   The Company shall duly take all lawful action to call, give
notice of, convene and hold a meeting of its shareholders as soon as practicable
after the Form S-4 is declared effective under the Securities Act (the "Company
Shareholder Meeting") for the purpose of obtaining the Company Shareholder
Approval with respect to the transactions contemplated by this Agreement and
shall take all lawful action to solicit the adoption of this Agreement. In
furtherance of the foregoing, except as set forth in Section 6.6(a), the Board
of Directors of the Company and the Company Independent Committee shall
recommend adoption of this Agreement by the shareholders of the Company as set
forth in Sections 4.3(b) and 4.3(c) (the "Company Recommendation").

            (e)   Parent shall duly take all lawful action to call, give notice
of, convene and hold a meeting of its shareholders as soon as practicable after
the Form S-4

                                       48



is declared effective under the Securities Act (the "Parent Shareholder
Meeting") for the purpose of obtaining the Parent Share Issuance Approval and
shall take all lawful action to solicit the Parent Share Issuance Approval. The
Board of Directors of Parent shall recommend approval of the issuance of the
Parent Class A Common Shares in the Merger by the shareholders of Parent as set
forth in Section 5.3(b).

            Section 6.4 Access to Information; Confidentiality.

            (a)   The parties hereto shall each, and shall cause their
respective Subsidiaries to, give the other party and its Representatives access
to the offices, Representatives, properties, Books and Records of such party and
its respective Subsidiaries during normal business hours, furnish such financial
and operating data and all other information as such Persons may reasonably
request and shall instruct its own Representatives to cooperate in the other
party's investigation of the business of such party; provided, however, that no
such investigation by either Parent or the Company shall affect the
representations or warranties of the other.

            (b)   All information provided or obtained in connection with the
transactions contemplated by this Agreement will be held by the parties hereto
in accordance with the Confidentiality Agreement, dated June 1, 2004, between
Parent and the Company (as amended to date, the "Confidentiality Agreement"). In
the event of a conflict or inconsistency between the terms of this Agreement and
the Confidentiality Agreement, the terms of this Agreement will govern.

            Section 6.5 No Solicitation; Unsolicited Proposals.

            (a)   Except as otherwise expressly provided in this Section 6.5,
from the date of this Agreement until the Effective Time or, if earlier, the
termination of this Agreement in accordance with its terms, the Company shall
not, and shall cause its Subsidiaries not to, and shall use its reasonable best
efforts to cause the Company's and such Subsidiaries' respective Representatives
not to, directly or indirectly, (i) solicit, initiate, knowingly encourage or
knowingly facilitate (including by way of furnishing information), any inquiries
or the making or submission of any proposal that constitutes, or could
reasonably be expected to lead to, an Acquisition Proposal, (ii) participate or
engage in any discussions or negotiations with, or disclose or provide any
non-public information or data relating to the Company or its Subsidiaries or
afford access to the properties, books or records or employees of the Company or
its Subsidiaries to, any Third Party relating to an Acquisition Proposal, or
knowingly facilitate any effort or attempt to make or implement an Acquisition
Proposal or accept an Acquisition Proposal, or (iii) enter into any Contract
(including any agreement in principle, letter of intent, or understanding) with
respect to or contemplating any Acquisition Proposal or enter into any
agreement, arrangement or understanding requiring the Company to abandon,
terminate or fail to consummate the Merger or any other transaction contemplated
by this Agreement. The Company shall, and shall cause its Subsidiaries to, and
shall direct the Company's and such Subsidiaries' respective Representatives to,
immediately cease and terminate any existing solicitation, initiation,
encouragement, activity, discussion or negotiation with any Third Party
conducted heretofore by the Company, its Subsidiaries

                                       49



or their respective Representatives with respect to any Acquisition Proposal.
The Company also agrees that it will promptly request that each Third Party that
has heretofore executed a confidentiality or similar agreement within the twelve
(12) months prior to the date of this Agreement in connection with any Third
Party's consideration of any Acquisition Proposal return or destroy all
confidential information heretofore furnished to any Third Party by or on behalf
of the Company or any of its Subsidiaries.

            (b)   Notwithstanding the restrictions set forth in Section 6.5(a),
if, at any time prior to the Effective Time, (i) the Company receives an
unsolicited bona fide written proposal from a Third Party relating to an
Acquisition Proposal (under circumstances in which the Company has complied with
its obligations under Section 6.5(a)), and (ii) the Board of Directors of the
Company and the Company Independent Committee conclude in good faith (after
consultation with a financial advisor of nationally recognized reputation and
receiving the advice of nationally recognized outside counsel) that (A) such
Acquisition Proposal is, or would reasonably be expected to result in, a
Superior Proposal, and (B) the failure to provide nonpublic information or data
concerning the Company or participate in negotiations or discussions concerning
such Acquisition Proposal would be inconsistent with the fiduciary duties of the
Board of Directors of the Company to the Company's shareholders under applicable
Law, the Company may, subject to its giving Parent at least two (2) business
days' prior written notice of the identity of such Third Party and the terms and
conditions of such Acquisition Proposal and the Company's intention to furnish
nonpublic information to, or enter into discussions or negotiations with, such
Third Party, (x) furnish information with respect to the Company and its
Subsidiaries to such Third Party pursuant to a customary confidentiality
agreement containing terms no less restrictive than the terms of the
Confidentiality Agreement; provided, that a copy of all such information is
delivered simultaneously to Parent if it has not previously been so furnished to
Parent, and (y) participate in discussions or negotiations regarding such
proposal.

            (c)   The Company shall as soon as practicable (and in any event
within twenty-four (24) hours) notify and advise Parent in writing of the
receipt of any Acquisition Proposal or of any request for information or inquiry
that could reasonably be expected to lead to the receipt of an Acquisition
Proposal, the terms and conditions of any such Acquisition Proposal, request or
inquiry, and the identity of the Person making such Acquisition Proposal,
request or inquiry. The Company shall inform Parent on a reasonably prompt basis
of the status and material details of any discussions regarding, or relating to,
any Acquisition Proposal with a Third Party (including amendments and proposed
amendments) and, as promptly as practicable, of any change in the price,
structure or form of the consideration or material terms of and conditions
regarding the Acquisition Proposal.

            (d)   The Company agrees that it will promptly inform its and its
Subsidiaries' respective Representatives of the obligations undertaken in this
Section 6.5. The Company agrees that any breach of this Section 6.5 by any of
the Company's Subsidiaries or any of the Company's or the Company's
Subsidiaries' respective Representatives shall be deemed a breach by the Company
of this Section 6.5.

                                       50



            (e)   Nothing contained in this Agreement shall prohibit the Company
from taking and disclosing to its shareholders a position as required by Rule
14d-9 or Rule 14e-2 promulgated under the Exchange Act or from making any such
other disclosures that are required by applicable Law.

            (f)   For purposes of this Agreement:

                  (i)   "Acquisition Proposal" means any inquiry, offer,
      proposal, indication of interest, signed agreement or completed action, as
      the case may be, by any Third Party that relates to (1) a transaction or
      series of transactions (including any merger, consolidation,
      recapitalization, liquidation or other direct or indirect business
      combination) involving the Company or any of its Subsidiaries or the
      issuance or acquisition of shares of capital stock or other equity
      securities or Voting Debt of the Company or any of its Subsidiaries
      representing fifteen percent (15%) or more (by voting power) of the
      outstanding capital stock of the Company or any of its Subsidiaries, (2)
      any tender or exchange offer that if consummated would result in any
      Person, together with all affiliates thereof, beneficially owning shares
      of capital stock or other equity securities of the Company or any of its
      Subsidiaries representing fifteen percent (15%) or more (by voting power)
      of the outstanding capital stock of the Company or any of its
      Subsidiaries, or (3) the acquisition, license, purchase or other
      disposition of a material portion of the business or assets (including the
      capital stock or assets of any Subsidiary) of the Company or any of its
      Subsidiaries outside the ordinary course of business or inconsistent with
      past practice; and

                  (ii)  "Superior Proposal" means any bona fide written
      Acquisition Proposal (provided, that for the purposes of this definition,
      (A) the applicable percentages in clauses (1) and (2) of the definition of
      Acquisition Proposal shall be a majority as opposed to fifteen percent
      (15%), and (B) any acquisition, license, purchase or other disposition
      referred to in clause (3) of the definition of Acquisition Proposal shall
      be for a majority of the business and assets (including the capital stock
      or assets of any Subsidiary) of the Company or any of its Subsidiaries),
      on its most recently amended or modified terms, if amended or modified,
      that the Board of Directors of the Company and the Company Independent
      Committee determine in their good faith judgment (after receiving the
      advice of a financial advisor of nationally recognized reputation and
      nationally recognized outside counsel), taking into account, among other
      things, all legal, financial (including the effect of any Termination Fee
      payable hereunder and any additional fees and expenses to be incurred in
      connection with such proposal), timing, likelihood of completion (taking
      into account all approvals and consents required from Governmental
      Authorities, Third Parties and shareholders), any financing conditions or
      contingencies, and other aspects of the proposal and the Third Party
      making the proposal, would, if consummated, result in a transaction that
      is more favorable to the Company's shareholders (other than Parent, Buyer,
      Merger Subsidiary, PIC and PIC's Subsidiaries and their respective
      affiliates) (in their capacities as shareholders), from a financial point
      of view, than the transactions contemplated by this Agreement.

                                       51



            (g)   The Company agrees not to release or permit the release of any
Person from, or to waive or permit the waiver of any provision of, any
confidentiality, "standstill" or similar agreement to which any of the Company
or its Subsidiaries is a party. The Company will use its reasonable best efforts
to enforce or cause to be enforced each such agreement at the request of Parent.

            Section 6.6 Board Recommendation.

            (a)   Subject to Section 6.6(b), none of the Board of Directors of
the Company, the Company Independent Committee nor any committee or subcommittee
of either of the foregoing thereof shall (i) withdraw, qualify, modify or amend
(or propose to withdraw, qualify, modify or amend) in any manner adverse to
Parent, the Company Recommendation or take any action or make any statement,
filing or release, in connection with the Company Shareholder Meeting or
otherwise, inconsistent with the Company Recommendation (it being understood
that if an Acquisition Proposal is received by the Company and Parent requests
that the Board of Directors of the Company and the Company Independent Committee
reaffirm the Company Recommendation, a failure to so reaffirm the Company
Recommendation within three (3) business days of Parent's request shall be
considered an adverse modification of the Company Recommendation), or (ii)
approve or recommend (or propose publicly to approve or recommend) any
Acquisition Proposal (each of the foregoing being referred to as a "Company
Change in Recommendation").

            (b)   Notwithstanding the provisions of Section 6.6(a), if, prior to
the Company Shareholder Meeting, the Board of Directors of the Company or the
Company Independent Committee determines in good faith (after receiving the
advice of a financial advisor of nationally recognized reputation and nationally
recognized outside counsel) that the failure to make a Company Change in
Recommendation would be inconsistent with the fiduciary duties of the Board of
Directors of the Company to the Company's shareholders under applicable Law, the
Board of Directors of the Company and the Company Independent Committee may make
a Company Change in Recommendation but, in each case, only (i) after the Company
provides to Parent a written notice (a "Notice of Superior Proposal") (x)
advising Parent that the Board of Directors of the Company and the Company
Independent Committee have received, and desire to accept, a Superior Proposal,
(y) specifying the terms and conditions of such Superior Proposal, including the
amount per share that the Company's shareholders will receive per share of
Company Common Stock (valuing any non-cash consideration at what the Board of
Directors of the Company and the Company Independent Committee determine in good
faith, after consultation with a financial advisor of nationally recognized
reputation, to be the fair value of the non-cash consideration) and including a
copy thereof with all accompanying documentation, and (z) identifying the Person
making such Superior Proposal, (ii) and after negotiating in good faith with
Parent to make such adjustments in the terms and conditions of this Agreement as
would enable the Company to proceed with the Company Recommendation without a
Company Change in Recommendation if and to the extent Parent elects to seek to
make such adjustments; provided, however, that Parent shall not be obliged to
propose or agree to any such adjustment, and (iii) if Parent does not, within
five (5) calendar days of Parent's receipt of the Notice of Superior

                                       52



Proposal, make an offer that the Board of Directors of the Company and the
Company Independent Committee determine in good faith (based on the advice of a
financial advisor of nationally recognized reputation) to be as favorable to the
Company's shareholders as such Superior Proposal. Notwithstanding the foregoing,
the Company shall not be entitled to enter into any agreement (other than a
confidentiality agreement as contemplated by Section 6.5(b)) with respect to a
Superior Proposal unless this Agreement has been or concurrently is terminated
by its terms pursuant to Section 8.1 and the Company has paid any amounts due to
Parent pursuant to Section 8.3(b).

            Section 6.7 Regulatory Filings; Reasonable Best Efforts.

            (a)   Each of the Company, Merger Subsidiary and Parent shall, and
shall cause its Subsidiaries to, use their respective reasonable best efforts to
take, or cause to be taken, all actions necessary to comply promptly with all
legal requirements which may be imposed on such party or its Subsidiaries with
respect to the Merger and to consummate the transactions contemplated by this
Agreement as promptly as practicable, including preparing and filing as promptly
as practicable all documentation to effect all necessary notices, reports and
other filings and to obtain (and to cooperate with the other parties to obtain)
as promptly as reasonably practicable any permit, consent, authorization, order
or approval of, or any exemption by, any Governmental Authority and any other
public or private third party which is required to be obtained or made by such
party or any of its Subsidiaries in connection with the Merger and the
transactions contemplated by this Agreement. Subject to applicable Laws relating
to the exchange of information, each of the Company and Parent shall promptly
cooperate with and furnish information to the other and, to the extent
practicable, consult with each other on, all the information relating to the
Company or Parent, as the case may be, and any of their respective affiliates,
which appear in any filing made with, or written materials submitted to, any
Governmental Authority or any other third party in connection with the
transactions contemplated by this Agreement. The parties hereto agree that they
will consult with each other with respect to the obtaining of all permits,
consents, approvals, authorizations and orders of all Governmental Authorities
and any other third parties necessary or advisable to consummate the
transactions contemplated by this Agreement, and each of the Company and Parent
shall keep the other apprised of the status of matters relating to the
completion of the transactions contemplated hereby, including promptly
furnishing the other with copies of written notices or other communications
received by Parent or the Company or any of their respective affiliates from any
such third party or Governmental Authority with respect to the transactions
contemplated hereby. The Company and Parent may, as they deem reasonably
necessary, designate any competitively sensitive information provided to the
other under this Section 6.7 as "outside counsel only" and such information
shall be given only to outside counsel of the recipient. The Company and Parent
shall provide the other party with the opportunity to participate in any meeting
with any Governmental Authority in respect of any filing, investigation or other
inquiry in connection with the transactions contemplated hereby; provided that
(i) such participation of the Company shall not be required to be permitted by
Parent in connection with meetings not primarily related to obtaining any
Requisite Regulatory Approvals, and (ii) such participation shall not entitle
the Company to direct the conduct of any such meeting or otherwise bind Parent
to any action.

                                       53



            (b)   As promptly as reasonably practicable following the date
hereof, Parent and the Company shall cooperate in preparing and shall cause to
be filed, and shall cause their Subsidiaries to file with all applicable
Governmental Authorities, all filings required to be made under Laws governing
the insurance businesses of Parent and the Company in connection with the
transactions contemplated hereby (the "Insurance Filings"). Parent and the
Company shall, as promptly as practicable after receipt thereof, provide each
other with copies of any written comments and advise the other party of any oral
comments with respect to the Insurance Filings from each applicable Governmental
Authority. Each of Parent and the Company shall cooperate and provide the other
with a reasonable opportunity to review and comment on any Insurance Filing, and
on any amendment or supplement thereto and each will provide the other with a
copy of all such filings made.

            (c)   If any objections are asserted with respect to the
transactions contemplated hereby by any Governmental Authority or any other
third party under any applicable Law, or if any suit is instituted by any
Governmental Authority or any other third party challenging any of the
transactions contemplated by this Agreement as violative of any applicable Law,
each of Parent and the Company shall use its reasonable best efforts to resolve
any such objections or challenges as such Governmental Authority or other third
party may have to such transactions as promptly as practicable so as to permit
consummation of the transactions contemplated by this Agreement.

            (d)   Notwithstanding the foregoing, the parties hereby agree and
acknowledge that reasonable best efforts under Section 6.7(a) and Section 6.7(c)
shall not require or be construed to require, and nothing else in this Agreement
shall require or be construed to require, Parent or any of its Subsidiaries or
other affiliates, to (i)(A) offer, sell or hold separate pending divesture, or
agree to offer, sell or hold separate pending divestiture, or (B) consent to any
such offer, sale, holding or agreement, before or after the Effective Time, of
any businesses, operations or assets, or interests in any businesses, operations
or assets, of Parent, the Company or the Surviving Corporation (or any of their
respective Subsidiaries or other affiliates), or (ii) take or agree to take any
other action or agree or consent to any limitation or restrictions on or changes
in any such businesses, operations or assets of Parent, the Company or the
Surviving Corporation (or any of their respective Subsidiaries or other
affiliates) that, in the case of all such requirements described in clause (i)
and (ii), would reasonably be expected to, individually or in the aggregate with
all other such requirements, (1) materially and adversely impact the expected
pro forma financial data (including expected cost-savings) of Parent following
consummation of the Merger as agreed by Parent and the Company and (2) be
different in any material respect in character, degree or scope from the terms
or conditions customarily imposed in connection with such consents, waivers,
licenses, orders, registrations, approvals, permits, rulings or authorizations
by the appropriate Governmental Authority in the face of circumstances that are
substantially similar to those circumstances in question in light of the
transactions contemplated by this Agreement (including, without limitation, in
respect of the business, financial condition, scope and size of the parties
hereto) (a "Burdensome Condition").

                                       54



            (e)   The Company shall use its reasonable best efforts to obtain,
prior to the Closing (i) the unconditional consent to the Closing and the other
transactions contemplated hereby of each lender to whom the Company or any of
its Subsidiaries owes in excess of one hundred thousand dollars ($100,000) as of
the Closing Date, (ii) the unconditional consent to the Closing and the other
transactions contemplated hereby of each Person holding a mortgage or lien on
real property or material personal property owned or leased by the Company or
any of its Subsidiaries, (iii) the unconditional consent to the Closing and the
other transactions contemplated hereby of each lessor of real property leased by
the Company to the extent required by such lease, and (iv) the unconditional
consent to the Closing and the other transactions contemplated hereby of each
other party to each Material Contract with the Company or any Subsidiary of the
Company, but only if and to the extent that the failure to obtain such consent
would materially adversely affect the Company and its Subsidiaries taken as a
whole.

            Section 6.8 Litigation. The Company shall give Parent the
opportunity to participate in the defense of any litigation against the Company
and/or its directors relating to the transactions contemplated by this Agreement
or any other Acquisition Proposal and will not settle or compromise any such
action without the prior written consent of Parent, which consent shall not be
unreasonably withheld or delayed.

            Section 6.9 Employee Benefits.

            (a)   For the one (1) year period following the Effective Time,
Parent shall, or shall cause the Surviving Corporation to, provide to
individuals who are employed by the Company and its Subsidiaries immediately
prior to the Effective Time who remain employed with the Surviving Corporation
or any Subsidiary of the Surviving Corporation ("Affected Employees") employee
benefits (including, but not limited to, pension and welfare benefits, but
excluding any equity-based or incentive compensation) that in the aggregate are
no less favorable in any material respect than the employee benefits provided by
the Company or the applicable Subsidiary of the Company to such employees
immediately prior to the Effective Time (except such changes as are required by
Law); provided, however, that nothing contained in this Section 6.9 shall
operate to duplicate any benefit.

            (b)   Parent shall, or shall cause the Surviving Corporation to, (i)
waive all limitations as to preexisting conditions, exclusions, waiting periods
and actively-at-work requirements with respect to participation and coverage
requirements applicable to the Affected Employees under all employee benefit
plans of Parent or Subsidiary of Parent, the Surviving Corporation or Subsidiary
of the Surviving Corporation that such employees of the Company or any of its
Subsidiaries would be eligible to participate in after the Effective Time, other
than limitations or waiting periods that were in effect with respect to such
employees as of the Effective Time under any employee benefit plan maintained by
the Company or such Subsidiary for the Affected Employees immediately prior to
the Effective Time, (ii) provide each Affected Employee with credit for any
co-payments and deductibles paid prior to the Effective Time in satisfying any
applicable deductible or out-of-pocket requirements under any welfare plans that
such employees are eligible to participate in after the Effective Time during
the same plan year in which

                                       55



such co-payments and deductibles were paid, and (iii) give full credit, for all
purposes under all employee benefit plans or arrangements maintained by Parent
or any Subsidiary of Parent (to the extent such Affected Employees participate
in any such employee benefit plan or arrangement) for such Affected Employees'
service with the Company or any Subsidiary of the Company to the same extent
recognized by the Company immediately prior to the Effective Time; provided,
however, that the crediting shall not operate to duplicate any benefit.

            Section 6.10 Public Announcements. The initial press release with
respect to the Merger shall be a joint press release, to be agreed upon by
Parent and the Company. Thereafter, except as required by Law or stock exchange
rules and regulations, each party hereto (a) shall consult with the other party
before issuing any press release or making any public statement with respect to
this Agreement and the transactions contemplated hereby (to the extent not
previously issued or made in substance), and (b) shall not issue any press
release or make any public statement without the prior consent of the other
party, which consent shall not be unreasonably withheld or delayed.

            Section 6.11 Further Assurances. At and after the Effective Time,
the officers and directors of the Surviving Corporation shall be authorized to
execute and deliver, in the name and on behalf of the Company or Merger
Subsidiary, as the case may be, any deeds, bills of sale, assignments,
assurances or other documents, or instruments, and to take any other actions and
do any other things, in the name and on behalf of the Company or Merger
Subsidiary, reasonably necessary to vest, perfect or confirm of record or
otherwise in the Surviving Corporation any and all right, title and interest in,
to and under any of the rights, properties or assets of the Company acquired or
to be acquired by the Surviving Corporation as a result of, or in connection
with, the Merger and to otherwise accomplish the purpose and intent of this
Agreement and the transactions contemplated hereby.

            Section 6.12 Notification of Certain Matters.

            (a)   The Company shall notify Parent, and Parent, Buyer or Merger
Subsidiary shall notify the Company, of (i) any fact, event, circumstance,
change, condition, or effect that has had, or would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the Company
or Parent, as applicable, (ii) any representation or warranty made by it
contained in this Agreement becoming untrue or inaccurate in any material
respect, and (iii) the failure by it to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement, in each case within three (3) business days of such Person becoming
aware of the occurrence of such development; provided that the failure of any
party to give a notice shall not render any underlying breach of representation
or warranty a breach of, or a failure to comply with, a covenant for the
purposes of this Agreement. Failure to comply with this Section 6.12(a) shall
not result in a failure by any party to satisfy the conditions set forth in
Section 7.2(a) or 7.3, as the case may be, unless the event or matter giving
rise to the obligation to notify hereunder involves a breach of a representation
or warranty hereunder which results in a failure to satisfy the conditions set
forth in Section

                                       56



7.2(a) or 7.3, as the case may be, and which breach is incurable or has not been
cured in all material respects as contemplated by Section 8.1(f).

            (b)   The Company shall give prompt notice to Parent, and Parent,
Buyer or Merger Subsidiary shall give prompt notice to the Company, of: (i) any
notice or other communication from any Person alleging that the consent of such
Person is or may be required in connection with the transactions contemplated by
this Agreement, and (ii) any material notice or other communication from any
Governmental Authority in connection with the transactions contemplated by this
Agreement.

            (c)   If any event or matter arises after the date of this Agreement
that, if existing or occurring at the date of this Agreement, (i) would have
been required to be set forth or described by the Company in the Company
Disclosure Letter or by Parent in the Parent Disclosure Letter, or (ii) would
have caused a representation or warranty or covenant in Articles IV, V or VI
hereof, as applicable, to be violated as of such date, then the Company or
Parent, as applicable, shall, for informational purposes only, deliver to Parent
or the Company, as applicable, the Company Disclosure Letter or the Parent
Disclosure Letter, as applicable, updated to reflect such event or matter (A)
immediately prior to mailing the Joint Proxy Statement/Prospectus to
shareholders of the Company and Parent, and (B) two (2) business days prior to
the Effective Time; provided, however, that such supplemental disclosure shall
not be required to disclose any such event or matter, and the Company Disclosure
Letter or the Parent Disclosure Letter, as applicable, shall not be required to
be updated, in either case, with respect to representations or warranties that
are expressly made as of a specific date; provided, further, however, that the
failure of any party to give such notice shall not render any underlying breach
of representation or warranty a breach of, or a failure to comply with, a
covenant for the purposes of this Agreement. Failure to comply with this Section
6.12(c) shall not result in a failure by any party to satisfy the conditions set
forth in Section 7.2(a) or 7.3, as the case may be, unless the event or matter
giving rise to the obligation to notify hereunder involves a breach of a
representation or warranty hereunder which results in a failure to satisfy the
conditions set forth in Section 7.2(a) or 7.3, as the case may be, and which
breach is incurable or has not been cured in all material respects as
contemplated by Section 8.1(f).

            (d)   The parties' obligations under this Section 6.12 and the
disclosure of any matter in accordance with the provisions of this Section 6.12
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such disclosure and shall not be deemed to cure any breach or
inaccuracy of any representation or warranty made in this Agreement.

            Section 6.13 Director and Officer Liability.

            (a)   The Surviving Corporation shall, and Parent shall cause the
Surviving Corporation to, (i) for a period of six (6) years after the Effective
Time indemnify and hold harmless all current or former directors and officers of
the Company and its Subsidiaries (in their capacities as such) (the "Indemnified
Parties") to the same extent such Persons are indemnified as of the date hereof
by the Company pursuant to the

                                       57



articles of incorporation and bylaws of the Company and its Subsidiaries and
applicable Law for acts or omissions occurring at or prior to the Effective
Time, and (ii) cause to be maintained for a period of six (6) years after the
Effective Time a policy of directors' and officers' liability insurance of at
least the same coverage and amounts containing terms and conditions that are no
less advantageous to the insured than the terms currently provided to directors
and officers of the Company with respect to claims arising from facts or events
that occurred on or before the Effective Time with either the Company's current
provider of directors' and officers' liability insurance or with another
provider, but only with a provider whose A.M. Best Company, Inc. ("A.M. Best")
rating is at least as high as the A.M. Best rating of the Company's current
provider of directors' and officers' liability insurance; provided, however,
that Parent shall not be required to pay annual premiums in excess of two
hundred fifty percent (250%) of the current annual premiums paid by the Company
as of the date hereof as set forth in Section 6.13 of the Company Disclosure
Letter (the "Company's Current Premium"), and if such annual premiums for such
insurance would at any time exceed two hundred fifty percent (250%) of the
Company's Current Premium, then Parent shall cause to be maintained policies of
insurance which, in Parent's reasonable good faith determination, provide the
maximum coverage available at an annual premium equal to two hundred fifty
percent (250%) of the Company's Current Premium; provided, further, however,
that the Indemnified Parties may be required to make application and provide
reasonable and customary representations and warranties to the relevant
insurance carriers for the purpose of obtaining such insurance. The provisions
of this Section 6.12(a) shall be deemed to have been satisfied if the Surviving
Corporation obtains prepaid policies, which policies provide directors and
officers of the Company with coverage no less advantageous to the insured than
the terms currently provided to directors and officers of the Company for an
aggregate period of six (6) years after the Effective Time with respect to
claims arising from facts or events that occurred on or before the Effective
Time, with either the Company's current provider of directors' and officers'
liability insurance or with another provider, but only with a provider whose
A.M. Best rating is at least as high as the A.M. Best rating of the Company's
current provider of directors' and officers' liability insurance.

            (b)   Any Indemnified Party wishing to claim indemnification under
Section 6.13(a) following the Effective Time, upon learning of any claim,
action, suit, proceeding or investigation arising out of actions or omissions by
them in their capacities as directors or officers of the Company or any of its
Subsidiaries occurring at or prior to the Effective Time, shall promptly notify
the Surviving Corporation thereof; provided, that the failure to so notify shall
not affect the obligations of the Surviving Corporation under Section 6.13(a)
unless and to the extent such failure materially prejudices the Surviving
Corporation.

            (c)   Notwithstanding anything herein to the contrary, if any claim,
action, suit, proceeding or investigation is made against any Indemnified Party,
on or prior to the sixth anniversary of the Effective Time, the provisions of
this Section 6.13 shall continue in effect until the final disposition of such
claim, action, suit, proceeding or investigation.

                                       58



            (d)   If Parent, the Surviving Corporation, or any of their
respective successors or assigns (i) shall consolidate with or merge into any
other corporation or entity and shall not be the continuing or surviving
corporation or entity of such consolidation or merger, or (ii) shall transfer
all or substantially all of its properties and assets to any individual,
corporation or other entity, then, and in each such case, to the extent
necessary to effect such assumption, proper provisions shall be made so that
such successors and assigns shall assume all of the applicable obligations set
forth in this Section 6.13.

            (e)   The provisions of this Section 6.13 are (i) intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and representatives, and (ii) in addition to, and not in substitution for,
any other rights to indemnification or contribution that any such Person may
have by contract or otherwise.

            Section 6.14 Affiliates. As soon as practicable after the date
hereof and in any event not less than thirty (30) days prior to the Effective
Time, the Company shall deliver to Parent a letter identifying all Persons who,
in the reasonable opinion of the Company, may be, as of the date of the Company
Shareholder Meeting, its "affiliates" for purposes of Rule 145 under the
Securities Act. The Company shall use its reasonable best efforts to cause the
delivery to Parent of letter agreements in substantially the form attached as
Exhibit A.

            Section 6.15 Takeover Statutes. If any anti-takeover or similar
statute or regulation is or may become applicable to the transactions
contemplated hereby, each of the parties and their Board of Directors shall
grant or secure any required consents or approvals and take all such actions as
are necessary so that the transactions contemplated hereby may be consummated as
promptly as practicable on the terms contemplated hereby and otherwise act to
eliminate or minimize the effects (including any resulting delays) of any such
statute or regulation on the transactions contemplated hereby.

            Section 6.16 Comfort Letter. Upon the request of Parent, the Company
shall use its reasonable best efforts to cause to be delivered to Parent a
letter from the Company's independent accountants, dated a date within two (2)
business days before the date on which the Form S-4 shall become effective,
addressed to Parent, in form and substance reasonably satisfactory to Parent and
customary in scope and substance for comfort letters delivered by independent
public accountants in connection with registration statements similar to the
Form S-4; provided, that the failure of such a letter to be delivered by the
Company's independent accountants shall not result in a failure of a condition
to Closing (including Section 7.2(a)(ii) hereof).

            Section 6.17 Stock Market Quotation. Parent shall use its reasonable
best efforts to cause the shares of Parent Class A Common Shares to be issued in
the Merger to be quoted upon issuance on the Nasdaq Stock Market on the Closing
Date.

                                       59



                                   ARTICLE VII

                            CONDITIONS TO THE MERGER

            Section 7.1 Conditions to the Obligations of Each Party. The
obligations of the Company, Parent, Buyer and Merger Subsidiary to consummate
the Merger are subject to the satisfaction (or, to the extent legally
permissible, waiver) of the following conditions:

            (a)   Company Shareholder Approval. The Company shall have obtained
the Company Shareholder Approval;

            (b)   Parent Shareholder Approval. Parent shall have obtained the
Parent Share Issuance Approval;

            (c)   HSR Act. Any applicable waiting period (including any
extension thereof) under the HSR Act relating to transactions contemplated by
this Agreement (including the Merger) shall have expired or been terminated;

            (d)   No Injunctions or Restraints. No provision of any applicable
Law and no judgment, injunction, order or decree that makes illegal or otherwise
prohibits the consummation of the Merger or any of the other transactions
contemplated by this Agreement shall be in effect;

            (e)   Regulatory Matters. The authorizations, consents, orders,
permits or approvals of, or declarations or filings with, and all expirations of
waiting periods imposed by, any Governmental Authority (other than the
expiration of the applicable waiting period under the HSR Act that is addressed
in Section 7.1(c)) that are either (i) identified on Section 7.1(e) of the
Company Disclosure Letter or Section 7.1(e) of the Parent Disclosure Letter or
(ii) that are necessary for the consummation of the transactions contemplated
hereby and the absence of which would be materially adverse to Parent and its
Subsidiaries taken as a whole or the Company and its Subsidiaries taken as a
whole (all of the foregoing in clauses (i) and (ii), the "Requisite Regulatory
Approvals"), shall have been filed, have occurred or have been obtained and all
such Requisite Regulatory Approvals shall be in full force and effect; provided,
however, that a Requisite Regulatory Approval shall not be deemed to have been
obtained if in connection with the grant thereof there shall have been an
imposition by any Governmental Authority of any condition, requirement,
restriction or change of regulation, or any other action directly or indirectly
related to such grant taken by such Governmental Authority, which would (or if
implemented would reasonably be expected to) impose a Burdensome Condition;

            (f)   Effectiveness of Form S-4. The Form S-4 shall have become
effective under the Securities Act, no stop order suspending the effectiveness
of the Form S-4 shall be in effect, and no proceedings for that purpose shall be
threatened by the SEC or shall have been initiated by the SEC and not concluded
or withdrawn; and

                                       60



            (g)   Stock Quotation. The Parent Class A Common Shares to be issued
in the Merger to holders of shares of Company Common Stock shall have been
authorized for quotation on the Nasdaq Stock Market, subject to official notice
of issuance.

            Section 7.2 Conditions to the Obligations of Parent, Buyer and
Merger Subsidiary. The obligations of Parent, Buyer and Merger Subsidiary to
consummate the Merger are subject to the satisfaction (or, to the extent legally
permissible, waiver) of the following further conditions:

            (a)   Performances of Obligations; Representations and Warranties.
(i) The representations and warranties of the Company contained in this
Agreement (read without any Material Adverse Effect or materiality
qualifications, other than the representation set forth in clause (i) of Section
4.6, which shall be read with the Material Adverse Effect qualification) shall
be true and correct as of the date of this Agreement and as of the Effective
Time as if made at and as of such time (except to the extent expressly by its
terms made as of an earlier date, in which case as of such earlier date), other
than such failures to be true and correct that have not had and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company, (ii) the Company shall have performed in all
material respects all of its obligations hereunder required to be performed by
it at or prior to the Effective Time, and (iii) Parent shall have received a
certificate signed by the chief executive officer and chief financial officer of
the Company to the foregoing effect;

            (b)   Company Rating. A.M. Best shall not have informed the Company
or any of the Insurance Subsidiaries or otherwise announced that it (i) has
placed any of the Insurance Subsidiaries under review with negative implications
(unless it subsequently announces that such Insurance Subsidiary no longer is
under review with negative implications) or (ii) has downgraded (unless it
subsequently announces that it has reversed such downgrade) any of the Insurance
Subsidiaries below a rating of "A-", if, in the good faith reasonable
determination of Parent, such review with negative implications or downgrade
would reasonably be expected to have a Material Adverse Effect on the Company;
and

            (c)   No Litigation. No Governmental Authority shall have instituted
any Action (which remains pending at what would otherwise be the Closing Date
and which, in the reasonable good faith judgment of Parent, based on the advice
of outside counsel, would have a reasonable prospect of surviving a motion for
summary judgment by Parent or the Company (based on Parent's reasonable good
faith assessment of the facts)) before any Governmental Authority of competent
jurisdiction seeking to (i) enjoin, restrain or otherwise prohibit the
consummation of the Merger, (ii) impose criminal penalties in connection with
the consummation of the Merger, or (iii) impose a Burdensome Condition in
connection with the consummation of the Merger.

            Section 7.3 Conditions to the Obligations of the Company. The
obligation of the Company to consummate the Merger is subject to the
satisfaction (or, to the extent legally permissible, waiver) of the following
further conditions: (i) the

                                       61



representations and warranties of Parent, Buyer and Merger Subsidiary contained
in this Agreement (read without any Material Adverse Effect or materiality
qualifications, other than the representation set forth in clause (i) of Section
5.6, which shall be read with the Material Adverse Effect qualification) shall
be true and correct as of the date of this Agreement and as of the Effective
Time as if made at and as of such time (except to the extent expressly by its
terms made as of an earlier date, in which case as of such earlier date), other
than such failures to be true and correct that have not had and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Parent; (ii) Parent shall have performed in all material
respects all of its covenants, agreements and obligations hereunder required to
be performed by it at or prior to the Effective Time; and (iii) the Company
shall have received a certificate signed by the chief executive officer of
Parent to the foregoing effect.

                                  ARTICLE VIII

                            TERMINATION AND EXPENSES

            Section 8.1 Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, notwithstanding
the prior obtaining of the Company Shareholder Approval or the Parent Share
Issuance Approval:

            (a)   by mutual written consent of the Company and Parent;

            (b)   by either the Company or Parent,

                  (i)   if the Merger has not been consummated as of March 31,
      2005 (the "End Date"); provided, however, that if (x) the Effective Time
      has not occurred by such date by reason of non-satisfaction of the
      condition set forth in Section 7.1(c) or Section 7.1(e), and (y) all other
      conditions set forth in Article VII have heretofore been satisfied or
      waived or are capable of being satisfied, then such date shall
      automatically be extended to June 30, 2005 (which shall then be the End
      Date);

                  (ii)  if the Company Shareholder Approval shall not have been
      obtained by reason of the failure to obtain the required vote at the
      Company Shareholder Meeting or any adjournment thereof; or

                  (iii) if the Parent Share Issuance Approval shall not have
      been obtained by reason of the failure to obtain the required vote at the
      Parent Shareholder Meeting or any adjournment thereof;

            (c)   by either the Company or Parent, if there shall be any Law
that makes consummation of the Merger illegal or otherwise prohibited or if any
judgment, injunction, order or decree enjoining Parent, Buyer, Merger Subsidiary
or the Company from consummating the Merger is entered and such judgment,
injunction, order or decree shall become final and nonappealable; provided,
however, that the right to terminate this

                                       62



Agreement under this Section 8.1(c) is not available to a party that has not
fulfilled its obligations under Section 6.7;

            (d)   by Parent, if the Board of Directors of the Company, the
Company Independent Committee or the Company, as the case may be, shall have (i)
breached any provision of Section 6.5 (other than an immaterial breach of any of
the notice provisions thereof which is cured promptly), (ii) made a Company
Change in Recommendation, whether or not permitted by the terms hereof, or (iii)
failed to call the Company Shareholder Meeting in accordance with Section
6.3(d);

            (e)   by the Company, if the Board of Directors of Parent or Parent,
as the case may be, shall have failed to call the Parent Shareholder Meeting in
accordance with Section 6.3(e) or recommend approval of the issuance of the
Parent Class A Common Shares in the Merger (or shall have withdrawn, qualified,
modified or amended (or proposed to withdraw, qualify, modify or amend such
recommendation) in any manner adverse to the Company);

            (f)   by either Parent or the Company, if there shall have been a
breach by the other of any of its representations, warranties, covenants or
obligations contained in this Agreement, which breach would result in the
failure to satisfy one or more of the conditions set forth in Section 7.2(a) (in
the case of a breach by the Company) or Section 7.3 (in the case of a breach by
Parent), and in any such case such breach shall be incapable of being cured or,
if capable of being cured, shall not have been cured within thirty (30) days
after written notice thereof shall have been received by the party alleged to be
in breach; or

            (g)   by Parent, if the Average Sales Price is less than $12.00.

The party desiring to terminate this Agreement pursuant to clause (b), (c), (d),
(e), (f) or (g) of this Section 8.1 shall give written notice of such
termination to the other party in accordance with Section 9.3, specifying the
provision hereof pursuant to which such termination is effected.

            Section 8.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 8.1, this Agreement shall become void and of no effect with
no liability on the part of any party hereto, except (i) as set forth in Section
8.3, (ii) that Sections 8.2, 8.3 and 6.4(b), Article IX and the agreements
contained in the Confidentiality Agreement (to the extent set forth therein),
shall survive the termination hereof, and (iii) that no such termination shall
relieve any party of any liability or damages resulting from any breach by that
party of this Agreement prior to such termination.

            Section 8.3 Fees and Expenses.

            (a)   Other than as specifically provided in this Section 8.3 or
otherwise agreed to in writing by the parties, all costs and expenses incurred
in connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such costs or expenses, whether or not the Merger
is consummated, except that (i) filing

                                       63



fees in connection with the filing with the SEC of the Form S-4 and the Joint
Proxy Statement/Prospectus, (ii) filing fees payable under or pursuant to the
HSR Act, and (iii) all printing, mailing and related expenses incurred in
connection with printing and mailing of the Form S-4 and the Joint Proxy
Statement/Prospectus shall be shared equally by Buyer and the Company, whether
or not the Merger is consummated.

            (b)   If this Agreement is terminated pursuant to:

                  (i)   Section 8.1(b)(ii) and (A) at the time of the Company
      Shareholder Meeting there shall have been outstanding or there shall have
      been publicly announced a plan, intention or proposal (whether or not
      conditional) with respect to an Acquisition Proposal, which plan,
      intention or proposal has not been bona fide and irrevocably withdrawn and
      (B) within twelve (12) months after termination of this Agreement, the
      Company shall enter into any Contract with respect to an Acquisition
      Proposal (which Acquisition Proposal is consummated at any time
      thereafter), whether or not such Acquisition Proposal was publicly
      announced prior to the termination of this Agreement;

                  (ii)  Section 8.1(d); or

                  (iii) Section 8.1(f), based on a breach of this Agreement by
      the Company (in the case of a breach of a representation or warranty, to
      the extent intentional), and, in any such case, (A) at the time of such
      termination, there shall have been outstanding, there shall have been
      under consideration by the Company, or there shall have been publicly
      announced a plan, intention or proposal (whether or not conditional) with
      respect to an Acquisition Proposal, which plan, intention or proposal has
      not been bona fide and irrevocably withdrawn and (B) within twelve (12)
      months after termination of this Agreement, the Company shall enter into
      any Contract with respect to an Acquisition Proposal (which Acquisition
      Proposal is consummated at any time thereafter), whether or not such
      Acquisition Proposal was publicly announced prior to the termination of
      this Agreement;

then Parent would suffer direct and substantial damages, which damages cannot be
determined with reasonable certainty and, in order to compensate Parent for such
damages the Company shall pay to Parent as liquidated damages the amount of
seven million six hundred seventy-three thousand dollars ($7,673,000) by wire
transfer in immediately available funds to an account designated by Parent (the
"Termination Fee"). The Termination Fee shall be due and payable (A) in the case
of any termination by Parent, within three (3) business days of termination of
this Agreement and (B) in the case of any termination by the Company,
immediately prior to (and as condition to) such termination, except that in the
case of a termination fee payable pursuant to Section 8.3(b)(i) or (iii), such
Termination Fee will be due upon, and as a condition to the validity of, the
consummation of the relevant Acquisition Proposal. It is specifically agreed
that the amount to be paid pursuant to this Section 8.3(b) represents liquidated
damages and not a penalty.

                                       64



            (c)   The Company and Parent each hereby acknowledge that the
agreements contained in this Section 8.3 are an integral part of the
transactions contemplated by this Agreement, and that without these agreements,
neither the Company nor Parent would enter into this Agreement. The payment of
the Termination Fee pursuant to Section 8.3(b) shall be in lieu of any other
liabilities or damages with respect to this Agreement and the transactions
contemplated hereby, except as otherwise provided in clause (iii) of Section
8.2.

                                   ARTICLE IX

                                  MISCELLANEOUS

            Section 9.1 Non-Survival of Representations and Warranties. The
representations and warranties contained herein and in any certificate or other
writing delivered pursuant hereto shall not survive the Effective Time;
provided, that nothing in this Section 9.1 shall relieve the parties or their
respective Representatives of any liability following the Effective Time for any
willful or fraudulent misrepresentations contained herein or in any other
certificate or writing delivered pursuant hereto. This Section 9.1 shall not
limit any covenant or agreement of the parties which by its terms contemplates
performance after the Effective Time.

            Section 9.2 Amendments; No Waivers.

            (a)   Any provision of this Agreement (including the Company
Disclosure Letter and the Parent Disclosure Letter) may be amended or waived
prior to the Effective Time if, and only if, such amendment or waiver is in
writing and signed, in the case of an amendment, by the Company, Parent, Buyer
and Merger Subsidiary, or in the case of a waiver, by the party against whom the
waiver is to be effective; provided, however, that after the receipt of the
Company Shareholder Approval or the Parent Share Issuance Approval, as
applicable, if any such amendment or waiver shall by Law or in accordance with
the rules and regulations of any relevant securities exchange or market require
further approval of the shareholders of the Company or Parent, the effectiveness
of such amendment or waiver shall be subject to the necessary shareholder
approval.

            (b)   No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by Law.

            Section 9.3 Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including facsimile or similar
writing) and shall be deemed to have been duly given upon receipt when delivered
in person, by facsimile (receipt confirmed) or by overnight courier or
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified by like notice):

                                       65



            if to Parent, Buyer or Merger Subsidiary, to:

                     United National Group, Ltd.
                     Walker House, 87 Mary Street
                     P.O. Box 908GT
                     George Town, Grand Cayman
                     Cayman Islands
                     Attention:  Chief Executive Officer
                     Facsimile No.: (345) 949-7886

            with a copy to:

                     United National Group, Ltd.
                     c/o United National Insurance Company
                     Three Bala Plaza, East
                     Suite 300
                     Bala Cynwyd, PA 19004
                     Attention: Kevin L. Tate
                     Facsimile No.: (610) 660-8884

            and:

                     United National Insurance Company
                     Three Bala Plaza, East
                     Suite 300
                     Bala Cynwyd, PA 19004
                     Attention: William F. Schmidt
                     Facsimile No.: (610) 660-8884

            with a copy to:

                     United National Insurance Company
                     Three Bala Plaza, East
                     Suite 300
                     Bala Cynwyd, PA 19004
                     Attention: Richard S. March
                     Facsimile No.: (610) 660-6800

                                       66



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

                     Skadden, Arps, Slate, Meagher & Flom LLP
                     Four Times Square
                     New York, New York 10036
                     Attention:  Daniel Wolf
                     Facsimile No.: (212) 735-2000

            if to the Company, to:

                     420 S. York Road
                     Hatboro, Pennsylvania 19040
                     Attention: Joseph F. Morris
                     Facsimile No.: (215) 443-3603

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

                     Simpson Thacher & Bartlett LLP
                     425 Lexington Ave.
                     New York, NY 10017
                     Attention: Peter J. Gordon
                                Gary I. Horowitz
                     Facsimile No.: (212) 455-2502

            and:

                     Reed Smith LLP
                     2500 One Liberty Place
                     1650 Market Street
                     Philadelphia, PA 19103
                     Attention: Michael B. Pollack
                                Paul J. Jaskot
                     Facsimile No.: (215) 851-1420

            Section 9.4 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns; provided, that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other parties hereto, except that Merger Subsidiary
may transfer or assign, in whole or from time to time in part, to one or more of
its affiliates, its rights or obligations under this Agreement, but any such
transfer or assignment will not relieve Merger Subsidiary of its obligations
hereunder.

            Section 9.5 Governing Law. This Agreement, including all matters of
construction, validity and performance, shall be construed in accordance with
and governed by the law of the Commonwealth of Pennsylvania (without regard to
principles of conflicts or choice of laws) as to all matters, including but not
limited to, matters of validity, construction, effect, performance and remedies.

                                       67



            Section 9.6 Jurisdiction. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated hereby may be brought in
any federal or state court located in the Commonwealth of Pennsylvania, and each
of the parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by Law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 9.3 shall be deemed
effective service of process on such party.

            Section 9.7 Waiver of Jury Trial. Each of the parties hereto hereby
irrevocably waives any and all right to trial by jury in any legal proceeding
arising out of or related to this agreement or the transactions contemplated
hereby.

            Section 9.8 Counterparts; Effectiveness. This Agreement may be
executed in one or more counterparts, each of which together shall be deemed an
original, but all of which together shall constitute one and the same
instrument.

            Section 9.9 Entire Agreement. This Agreement (including the Company
Disclosure Letter and the Parent Disclosure Letter) and the Confidentiality
Agreement constitute the entire agreement between the parties with respect to
the subject matter of this Agreement and supersede and cancel all prior
agreements, negotiations, correspondence, undertakings, understandings and
communications of the parties, oral and written, with respect to the subject
matter hereof and thereof.

            Section 9.10 Third Party Beneficiaries. Nothing contained in this
Agreement or in any instrument or document executed by any party in connection
with the transactions contemplated hereby shall create any rights in, or be
deemed to have been executed for the benefit of, any Person that is not a party
hereto or thereto or a permitted successor or assign of such a party; provided,
however, that the parties hereto specifically acknowledge that the provisions of
Section 6.13 hereof are intended to be for the benefit of, and shall be
enforceable by, each Indemnified Party and his or her heirs and representatives,
affected thereby.

            Section 9.11 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon such
a determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an

                                       68



acceptable manner in order that the transactions contemplated hereby be
consummated as originally contemplated to the fullest extent possible.

            Section 9.12 Specific Performance. The parties hereby acknowledge
and agree that the failure of any party to perform its agreements and covenants
hereunder, including its failure to take all actions as are necessary on its
part to the consummation of the Merger, will cause irreparable injury to the
other parties, for which damages, even if available, will not be an adequate
remedy. Accordingly, each party hereby consents to the issuance of injunctive
relief by any court of competent jurisdiction to compel performance of such
party's obligations and to the granting by any court of the remedy of specific
performance of its obligations hereunder without proof of actual damages and
without any requirement for the securing or posting of any bond. Such remedy
shall not be deemed to be the exclusive remedy for a party's breach of its
obligations but shall be in addition to all other remedies available at law or
equity.

            Section 9.13 Construction; Interpretation; Disclosure Letters.

            (a)   The article and section headings contained in this Agreement
are solely for the purpose of reference, are not part of the agreement of the
parties and shall not in any way affect the meaning or interpretation of this
Agreement. As used in this Agreement, (i) unless otherwise specified herein, the
term "affiliate," with respect to any Person, shall mean and include any Person
controlling, controlled by or under common control with such Person, (ii) the
term "including" shall mean "including, without limitation", (iii) words in the
singular shall be held to include the plural and vice versa and words of one
gender shall be held to include the other genders as the context requires, (iv)
the words "hereof," "herein," and "herewith" and words of similar import shall,
unless otherwise stated, be construed to refer to this Agreement as a whole
(including the Company Disclosure Letter and the Parent Disclosure Letter) and
not to any particular provision of this Agreement, and article, section,
paragraph, exhibit and schedule references are to the articles, sections,
paragraphs, exhibits and schedules of this Agreement, unless otherwise
specified, (v) the word "or" shall not be exclusive, and (vi) Parent, Buyer,
Merger Subsidiary and the Company will be referred to herein individually as a
"party" and collectively as "parties" (except where the context otherwise
requires). Where a word or phrase is defined herein, each of its other
grammatical forms shall have a corresponding meaning. A reference to any party
to this Agreement or any other agreement or document shall include such party's
successors and permitted assigns.

            (b)   The parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.

            (c)   Any reference to any federal, state, local or non-United
States statute or Law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context otherwise requires.

                                       69



            (d)   A matter set forth in one section of the Company Disclosure
Letter or the Parent Disclosure Letter need not be set forth in any other
section of such disclosure letter so long as its relevance to such other section
of the disclosure letter or section of this Agreement is readily apparent on the
face of the information disclosed in such disclosure letter. The fact that any
item of information is disclosed in a disclosure letter shall not be construed
to mean that such information is required to be disclosed by this Agreement. Any
information or the dollar thresholds set forth in a disclosure letter shall not
be used as a basis for interpreting the terms "material" "Material Adverse
Effect" or other similar terms in this Agreement, except as otherwise expressly
set forth in such disclosure letter.

                            [Signature page follows]

                                       70



            IN WITNESS WHEREOF, the Company, Parent, Buyer and Merger Subsidiary
have caused this Agreement to be duly executed by their respective authorized
officers as of the date first written above.

                                     PENN-AMERICA GROUP, INC.

                                     By:    /s/ Martin P. Sheffield
                                         ---------------------------------------
                                     Name:   Martin P. Sheffield
                                     Title: Chairman, Special Committee

                                     UNITED NATIONAL GROUP, LTD.

                                     By:   /s/ David R. Bradley
                                         ---------------------------------------
                                     Name:   David R. Bradley
                                     Title: Chief Executive Officer

                                     U.N. HOLDINGS II, INC.

                                     By:   /s/ Richard A. March
                                         ---------------------------------------
                                     Name:   Richard A. March
                                     Title: Senior Vice President

                                     CHELTENHAM ACQUISITION CORP.

                                     By:   /s/ Troy Thacker
                                         ---------------------------------------
                                     Name:   Troy Thacker
                                     Title: President

EX-2.2

                                                                     EXHIBIT 2.2

                                                                  EXECUTION COPY

================================================================================

                            STOCK PURCHASE AGREEMENT

                                   DATED AS OF

                                OCTOBER 14, 2004

                                  BY AND AMONG

                          UNITED NATIONAL GROUP, LTD.,

                       UNITED NATIONAL INSURANCE COMPANY,

                          PENN INDEPENDENT CORPORATION,

                         THE SHAREHOLDERS NAMED HEREIN,

                                       AND

                        THE SHAREHOLDERS' REPRESENTATIVE

================================================================================



                                TABLE OF CONTENTS


                                                                                                                PAGE
                                                                                                                ----
                                                                                                             
ARTICLE I DEFINITIONS.........................................................................................     2
   Section 1.1        Definitions.............................................................................     2

ARTICLE II PURCHASE AND SALE OF SHARES........................................................................     6
   Section 2.1        Sale and Transfer of the PIC Shares.....................................................     6
   Section 2.2        The Purchase Price......................................................................     6
   Section 2.3        Purchase Price Adjustment...............................................................     7
   Section 2.4        EBITDA Payment..........................................................................     8
   Section 2.5        Further Assurances......................................................................     9

ARTICLE III THE CLOSING.......................................................................................    10
   Section 3.1        The Closing.............................................................................    10
   Section 3.2        Deliveries by PIC, the Shareholders and the Shareholders' Representative................    10
   Section 3.3        Deliveries by Parent....................................................................    11

ARTICLE IV REPRESENTATIONS AND WARRANTIES REGARDING PIC.......................................................    11
   Section 4.1        Organization and Qualification..........................................................    12
   Section 4.2        Capitalization..........................................................................    12
   Section 4.3        Corporate Authorization; Enforceability; Board Action...................................    13
   Section 4.4        Consents and Approvals; No Violations...................................................    14
   Section 4.5        Financial Statements....................................................................    14
   Section 4.6        Absence of Certain Changes..............................................................    15
   Section 4.7        Undisclosed Liabilities.................................................................    15
   Section 4.8        Litigation..............................................................................    16
   Section 4.9        Compliance with Laws....................................................................    16
   Section 4.10       Accounts................................................................................    18
   Section 4.11       Books and Records.......................................................................    18
   Section 4.12       Producer Relationships..................................................................    18
   Section 4.13       Insurance Markets.......................................................................    19
   Section 4.14       Employee Benefit Plans..................................................................    19
   Section 4.15       Employee Matters........................................................................    21
   Section 4.16       Taxes...................................................................................    21
   Section 4.17       Certain Contracts.......................................................................    23
   Section 4.18       Intellectual Property; Software.........................................................    24
   Section 4.19       Properties and Assets...................................................................    26
   Section 4.20       Environmental Matters...................................................................    26
   Section 4.21       Transactions with Affiliates............................................................    27
   Section 4.22       Insurance...............................................................................    27
   Section 4.23       Finders' or Advisors' Fees..............................................................    27
   Section 4.24       Ownership of PNG Shares.................................................................    28
   Section 4.25       Disclosure Documents....................................................................    28
   Section 4.26       Risk Management.........................................................................    28
   Section 4.27       Derivatives.............................................................................    28
   Section 4.28       Disclosure..............................................................................    28
   Section 4.29       Merger Agreement Representations and Warranties.........................................    29


                                       ii


                                                                                                               
   Section 4.30       No Other Representations................................................................    29

ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS..................................................    29
   Section 5.1        Ownership of Stock; Title...............................................................    29
   Section 5.2        Authority...............................................................................    30
   Section 5.3        No Violation; Consents and Approvals....................................................    30
   Section 5.4        Outstanding Obligations.................................................................    31
   Section 5.5        Disclosure Documents....................................................................    31

ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER.................................................    31
   Section 6.1        Organization and Qualification..........................................................    31
   Section 6.2        Corporate Authorization; Board Action...................................................    32
   Section 6.3        Consents and Approvals; No Violations...................................................    32
   Section 6.4        Investment Representation...............................................................    33

ARTICLE VII COVENANTS.........................................................................................    33
   Section 7.1        Conduct of PIC..........................................................................    33
   Section 7.2        Conduct of the Shareholders.............................................................    36
   Section 7.3        Access to Information; Confidentiality..................................................    36
   Section 7.4        Regulatory Filings; Commercially Reasonable Best Efforts................................    37
   Section 7.5        Notification of Certain Matters.........................................................    38
   Section 7.6        No Solicitation; Unsolicited Proposals..................................................    39
   Section 7.7        Subsequent Actions......................................................................    40
   Section 7.8        Employee Benefits.......................................................................    40
   Section 7.9        PNG.....................................................................................    41
   Section 7.10       Non-Solicitation and Non-Competition....................................................    41
   Section 7.11       Shareholder Releases....................................................................    43
   Section 7.12       Hatboro Headquarters....................................................................    44
   Section 7.13       Disclosure Documents....................................................................    44

ARTICLE VIII CONDITIONS.......................................................................................    45
   Section 8.1        Conditions to the Obligations of Each Party.............................................    45
   Section 8.2        Conditions to the Obligations of Parent and Buyer.......................................    45
   Section 8.3        Conditions to the Obligations of PIC and the Shareholders...............................    48
   Section 8.4        Frustration of Closing Conditions.......................................................    48

ARTICLE IX VOTING AGREEMENT...................................................................................    48
   Section 9.1        Voting of the PNG Shares................................................................    48

ARTICLE X TERMINATION.........................................................................................    49
   Section 10.1       Termination.............................................................................    49
   Section 10.2       Effect of Termination...................................................................    50
   Section 10.3       Fees and Expenses.......................................................................    50

ARTICLE XI INDEMNIFICATION....................................................................................    51
   Section 11.1       Indemnification by the Principal Shareholder............................................    51
   Section 11.2       Indemnification by Parent and Buyer.....................................................    52
   Section 11.3       Notice of Claim; Defense................................................................    53
   Section 11.4       Survival of Indemnification Claims; Offset..............................................    54
   Section 11.5       Characterization of Indemnification Payments............................................    54



                                       iii


                                                                                                               
   Section 11.6       Effect of Investigation.................................................................    54
   Section 11.7       Limitations on Indemnification..........................................................    54
   Section 11.8       Exclusive Remedy........................................................................    55

ARTICLE XII TAX MATTERS.......................................................................................    56
   Section 12.1       Apportionment of Taxes..................................................................    56
   Section 12.2       Contest Provisions......................................................................    57
   Section 12.3       Tax Returns.............................................................................    58
   Section 12.4       Refunds, Credits and Net Operating Losses...............................................    58
   Section 12.5       Survival of Tax Provisions..............................................................    59
   Section 12.6       Transfer Taxes..........................................................................    59
   Section 12.7       Exclusivity.............................................................................    59
   Section 12.8       Certain Post-Closing Actions which Affect Shareholders'
                       Liability for Taxes....................................................................    59
   Section 12.9       Termination of Existing Tax Sharing Agreements..........................................    59
   Section 12.10      Characterization of Indemnification Payments............................................    60
   Section 12.11      Assistance and Cooperation..............................................................    60
   Section 12.12      FIRPTA..................................................................................    60

ARTICLE XIII THE SHAREHOLDER REPRESENTATIVE...................................................................    60
   Section 13.1       The Shareholders' Representative........................................................    60

ARTICLE XIV MISCELLANEOUS.....................................................................................    62
   Section 14.1       Survival of Covenants, Representations and Warranties...................................    62
   Section 14.2       Amendments; No Waivers..................................................................    63
   Section 14.3       Notices.................................................................................    63
   Section 14.4       Successors and Assigns..................................................................    65
   Section 14.5       Governing Law...........................................................................    65
   Section 14.6       Jurisdiction............................................................................    65
   Section 14.7       Waiver of Jury Trial....................................................................    65
   Section 14.8       Counterparts; Effectiveness.............................................................    65
   Section 14.9       Entire Agreement........................................................................    65
   Section 14.10      Third Party Beneficiaries...............................................................    66
   Section 14.11      Severability............................................................................    66
   Section 14.12      Specific Performance....................................................................    66
   Section 14.13      Construction; Interpretation............................................................    66
   Section 14.14      Changes in PNG Common Stock.............................................................    67
   Section 14.15      Obligations of Each of the Shareholders and PIC.........................................    67

   EXHIBIT A......................................................................................  SHAREHOLDER DATA
   EXHIBIT B..............................................................................  FORM OF ESCROW AGREEMENT
   EXHIBIT C......................................................................................  KNOWLEDGE OF PIC
   EXHIBIT D...............................................................................  FORM OF GENERAL RELEASE
   EXHIBIT E...............................................................................  FORM OF SPOUSAL CONSENT
   EXHIBIT F...................................................................................  FORM OF MLB OPINION
   EXHIBIT G.................................................................  FORM OF SHAREHOLDERS' COUNSEL OPINION



                                       iv


                             INDEX OF DEFINED TERMS



                                                                                                                PAGE
                                                                                                                ----
                                                                                                             
Accounting Referee............................................................................................     7
Action........................................................................................................    16
Actual EBITDA.................................................................................................     9
Additional PNG Equity.........................................................................................     1
Additional PNG Equity Holders.................................................................................     1
Adjusted EBITDA...............................................................................................     9
Affected Employees............................................................................................    41
affiliate.....................................................................................................    66
Agreement.....................................................................................................     1
Alternative Transaction.......................................................................................    39
Approving Holders.............................................................................................    61
Audited Financial Statements..................................................................................    14
Books and Records.............................................................................................     2
Business Day..................................................................................................     2
Buyer.........................................................................................................     1
Closing.......................................................................................................    10
Closing Date..................................................................................................    10
Closing Date Balance Sheet....................................................................................     7
Closing Net Working Capital...................................................................................     7
Code..........................................................................................................     2
Confidentiality Agreement.....................................................................................    37
Contract......................................................................................................     2
Copyrights....................................................................................................    24
Current Leases................................................................................................    44
Designated Employees..........................................................................................    42
EBITDA Statement..............................................................................................     8
End Date......................................................................................................    49
ERISA.........................................................................................................    19
ERISA Affiliate...............................................................................................    19
Escrow Agreement..............................................................................................     2
Escrowed Amount...............................................................................................     6
Excess Bonus..................................................................................................     6
Exchange Act..................................................................................................     2
Fee Cap.......................................................................................................    51
Final EBITDA Statement........................................................................................     9
Financial Statements..........................................................................................    14
FIRPTA Certificate............................................................................................    60
Form S-4......................................................................................................    28
GAAP..........................................................................................................     7
General Releases..............................................................................................    10
Governmental Authority........................................................................................     2
Hazardous Material............................................................................................     2
Headquarters..................................................................................................    44


                                        v


                                                                                                               
Headquarters Lease............................................................................................    44
Headquarters Purchase Agreement...............................................................................    44
HSR Act.......................................................................................................    14
including.....................................................................................................    66
Indemnified Person............................................................................................    53
Indemnitor....................................................................................................    53
Indemnity Reduction Amounts...................................................................................    55
Insurance Permit..............................................................................................     3
Intellectual Property.........................................................................................    24
IP Licenses...................................................................................................    25
Joint Proxy Statement/Prospectus..............................................................................    28
Key Employees.................................................................................................    47
knowledge of the PIC..........................................................................................     3
Law...........................................................................................................     3
Lazard........................................................................................................    27
Leased Real Property..........................................................................................    26
Leases........................................................................................................    23
Liability.....................................................................................................     3
Lien..........................................................................................................     3
Major Producers...............................................................................................    18
Margin Error..................................................................................................     8
Material Adverse Effect.......................................................................................     3
Material Contracts............................................................................................    24
Merger........................................................................................................     3
Merger Agreement..............................................................................................     3
Net Working Capital...........................................................................................     3
Paid Amount...................................................................................................     6
Parent........................................................................................................     1
Parent Disclosure Letter......................................................................................    32
Parent Indemnified Persons....................................................................................    51
Parent Losses.................................................................................................     3
Patents.......................................................................................................    24
PBCL..........................................................................................................    13
Permitted Liens...............................................................................................     4
Person........................................................................................................     4
PIC...........................................................................................................     1
PIC Balance Sheet.............................................................................................     4
PIC Business Documents........................................................................................    17
PIC Contracts.................................................................................................    24
PIC Disclosure Letter.........................................................................................    12
PIC Employee Plans............................................................................................    19
PIC Holdings..................................................................................................    28
PIC Intellectual Property.....................................................................................    25
PIC Permits...................................................................................................     4
PIC Shares....................................................................................................     6
PIC Subsidiary Convertible Security...........................................................................    13



                                       vi


                                                                                                               
PIC-Produced Insurance Contracts..............................................................................     4
PNG...........................................................................................................     1
PNG Common Stock..............................................................................................     1
PNG Shares....................................................................................................    28
PNG Stock Purchase Agreements.................................................................................     1
Pre-Closing Tax Period........................................................................................    56
Principal Shareholder.........................................................................................     4
Producer......................................................................................................    18
Producer Agreement............................................................................................    18
Proxy.........................................................................................................    49
Purchase Price................................................................................................     6
Release.......................................................................................................     5
Releasee......................................................................................................    43
Representative................................................................................................     5
Requisite Regulatory Approvals................................................................................    46
Restricted Business...........................................................................................    42
Restricted Shareholder........................................................................................    43
Securities Act................................................................................................     5
Shareholder...................................................................................................     1
Shareholder Indemnified Persons...............................................................................    53
Shareholder Losses............................................................................................    53
Shareholders..................................................................................................     1
Shareholders' Representative..................................................................................     1
Software......................................................................................................    25
Straddle Period...............................................................................................    56
Subsidiary....................................................................................................     5
Target Net Working Capital....................................................................................     5
Tax...........................................................................................................     5
Tax Authority.................................................................................................     5
Tax Claim.....................................................................................................    59
Tax Gross-Up Payment..........................................................................................     5
Tax Return....................................................................................................     5
Taxes.........................................................................................................     5
Third Party...................................................................................................     6
Total Current Assets..........................................................................................     6
Total Current Liabilities.....................................................................................     6
Trade Secrets.................................................................................................    25
Trademarks....................................................................................................    24
Transfer Taxes................................................................................................    59
Unaudited Financial Statements................................................................................    14
Voting Debt...................................................................................................    12
WARN Act......................................................................................................    21



                                       vii


                            STOCK PURCHASE AGREEMENT

            THIS STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of October
14, 2004, is entered into by and among United National Group, Ltd., an exempted
company formed with limited liability under the laws of the Cayman Islands
("Parent"), United National Insurance Company, a Pennsylvania corporation and an
indirect, wholly-owned subsidiary of Parent ("Buyer"), Penn Independent
Corporation, a Pennsylvania corporation ("PIC"), each of the shareholders of PIC
whose names are set forth on Exhibit A hereto (each, a "Shareholder," and,
collectively, the "Shareholders") and Irvin Saltzman (the "Shareholders'
Representative") in his capacity as the Shareholders' Representative.

                              W I T N E S S E T H:

            WHEREAS, PIC, through a wholly-owned subsidiary, owns approximately
thirty-one percent (31%) of the outstanding common stock (the "PNG Common
Stock"), par value $0.01 per share, of Penn-America Group, Inc., a Pennsylvania
corporation ("PNG ");

            WHEREAS, the Shareholders own all of the issued and outstanding
shares of PIC, and each of the Shareholders deems it advisable and in their best
interests to consummate the acquisition of PIC by Parent and Buyer;

            WHEREAS, each of the Boards of Directors of Parent and PIC has
approved, and deems it advisable and in the best interests of its respective
shareholders to consummate the acquisition of PIC by Parent and Buyer, which
acquisition is to be effected by the purchase of all the outstanding capital
stock of PIC by Buyer upon the terms and subject to the conditions set forth
herein;

            WHEREAS, each of the Principal Shareholder (as defined below) and
Jon S. Saltzman (together, the "Additional PNG Equity Holders") desires to sell
to Buyer simultaneously with the Closing (as defined below), and Buyer desires
to acquire, shares of PNG Common Stock issued upon the exercise of the options
to purchase shares of PNG Common Stock owned by them (such shares of PNG Common
Stock, collectively, the "Additional PNG Equity"); and

            WHEREAS, the Additional PNG Equity Holders are entering into
separate stock purchase agreements with Buyer simultaneously with the execution
of this Agreement to effect the sale and transfer of the Additional PNG Equity
to Buyer (collectively, the "PNG Stock Purchase Agreements"), subject to the
terms and conditions contained in the PNG Stock Purchase Agreements.

            NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein,
intending to be legally bound hereby, the parties hereto agree as follows:



                                    ARTICLE I

                                   DEFINITIONS

            Section 1.1 Definitions. When used in this Agreement, the following
terms shall have the respective meanings specified therefor below:

            "Books and Records" means the originals or copies of all customer
lists, policy information, insurance contract forms, administrative and pricing
manuals, claim records, sales records, underwriting records, financial records,
compliance records, data files prepared for or filed with regulators of the
businesses of PIC and its Subsidiaries and premium Tax records, each in the
possession or control of PIC, its Subsidiaries or any of their affiliates,
whether or not stored in hardcopy form or on magnetic or optical media (to the
extent not subject to licensing restrictions), but excluding prior to the
Closing any such lists, information and records that are prohibited from being
disclosed or transferred by applicable Law or regulatory requirements.

            "Business Day" means any day other than Saturday, Sunday and any day
on which banking institutions in the Commonwealth of Pennsylvania are authorized
by Law or other governmental action to close.

            "Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.

            "Contract" means, with respect to any Person, any agreement,
arrangement, undertaking, contract, commitment, obligation, promise, indenture,
deed of trust or other instrument, document or agreement (whether written or
oral and whether express or implied) by which that Person, or any amount of its
properties or assets, is bound or subject.

            "Escrow Agreement" means the Escrow Agreement among Buyer, the
Principal Shareholder and the escrow agent named therein substantially in the
form of Exhibit B hereto.

            "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.

            "Governmental Authority" means any nation or government, any state
or other political subdivision thereof, any entity, authority or body exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, including any domestic (federal, state or local),
foreign or supranational governmental or regulatory authority, agency,
department, board, commission, administration or instrumentality, any court,
tribunal or arbitrative body or any self-regulatory organization (including but
not limited to state departments or divisions of insurance).

            "Hazardous Material" means all substances or materials regulated as
hazardous, toxic, explosive, dangerous, flammable or radioactive under any
Environmental Law including (i) petroleum, asbestos or polychlorinated biphenyls
and (ii) in the United States, all substances defined as Hazardous Substances,
Oils, Pollutants or Contaminants in the National Oil and Hazardous Substances
Pollution Contingency Plan, 40 C.F.R. Section 300.5.

                                        2


            "Insurance Permit" means any PIC Permit in any jurisdiction to
issue, underwrite, assume, place or otherwise transact the business of
insurance.

            "knowledge of PIC" means the actual knowledge that was or would
reasonably be expected to be obtained after due inquiry of the individuals
listed on Exhibit C hereto; provided, that in any case where PIC makes any
representations or warranties as to the action, inaction, status or position of
any Person other than PIC, its Subsidiaries, their respective officers and
directors and any Shareholder, it is specifically understood that PIC has not
made and shall not be required to make, any specific inquiry or investigation of
or with respect to such Person.

            "Law" means any law (including common law), ordinance, writ,
directive, judgment, order, decree, injunction, statute, treaty, rule,
regulation, regulatory requirement or determination of (or an agreement with) a
Governmental Authority.

            "Liability" means any debt, liability, commitment, obligation, claim
or cause of action of any kind whatsoever, whether due or to become due, known
or unknown, accrued or fixed, absolute or contingent, or otherwise.

            "Lien" means any and all liens, charges, security interests,
options, claims, mortgages, pledges, proxies, voting trusts or agreements,
obligations, understandings or arrangements or other restrictions on title or
transfer of any nature whatsoever.

            "Material Adverse Effect" means, with respect to any Person, any
fact, event, circumstance, change, condition or effect that, individually or
together with other facts, events, circumstances, changes, conditions or
effects, (a) has been, or would reasonably be expected to be, material and
adverse to the business, assets, properties, liabilities, financial condition or
results of operations of such Person and its Subsidiaries, taken as a whole, or
(b) has materially delayed, or would reasonably be expected to materially delay,
the consummation of the transactions contemplated hereby or has materially and
adversely affected, or would reasonably be expected to materially and adversely
affect, the ability of such Person and its Subsidiaries, taken as a whole, to
perform timely its obligations hereunder or to consummate timely the
transactions contemplated hereby; provided, however, that a change or effect
resulting from changes or effects to the U.S. economy in general shall be deemed
not to be a Material Adverse Effect.

            "Merger Agreement" means that certain Agreement and Plan of Merger,
dated as of October 14, 2004, by and among Parent, U.N. Holdings II, Inc.,
Cheltenham Acquisition Corp. and PNG.

            "Merger" means the business combination of PNG with Buyer pursuant
to, and upon the terms and conditions set forth in, the Merger Agreement.

            "Net Working Capital" means the Total Current Assets minus the Total
Current Liabilities of PIC and its Subsidiaries.

            "Parent Losses" means any and all actual losses, liabilities,
damages, judgments, settlements and expenses (including interest and penalties
recovered by a Third Party with respect thereto and reasonable attorneys' fees
and expenses and reasonable accountants' fees and expenses incurred in the
defense of any of the same or in asserting, preserving or enforcing any

                                        3


of the rights of the Parent Indemnified Persons arising under Article XI)
incurred by any of the Parent Indemnified Persons, whether or not involving a
third-party claim, which are caused by, arise from or are related to:

                        (i) any breach by PIC of any of PIC's representations
            and warranties contained in or made by or pursuant to Article IV
            (other than Sections 4.16 and 4.29); provided, however, that, in the
            case of any representation or warranty that is limited by
            "material," "Material Adverse Effect" or by any similar term or
            limitation, the occurrence of a breach or inaccuracy of such
            representation or warranty, as the case may be, and the amount of
            Parent Losses shall be determined as if "material," "Material
            Adverse Effect" or by any similar term or limitation were not
            included therein;

                        (ii) any breach by any of the Shareholders of any of
            such parties' covenants in Article VII that survive the Closing; or

                        (iii) any breach prior to the Closing by PIC or any of
            the Shareholders of any covenants contained in Article VII.

All statements contained in any exhibit, certificate or schedule hereto
delivered by PIC, the Shareholders' Representative or any Shareholder shall be
deemed representations and warranties.

            "Permitted Liens" means (a) Liens for Taxes not yet due and payable
or which are being contested in good faith and for which adequate reserves are
reflected on the Financial Statements, (b) original purchase price conditional
sales contracts and equipment leases with Third Parties entered into in the
ordinary course of business and consistent with past practice, (c) Liens that do
not materially interfere with or materially affect the value or use in any
material respect of the respective underlying asset to which such Liens relate,
and (d) any Liens disclosed on Section 1.1 of the PIC Disclosure Letter.

            "Person" means and includes an individual, a partnership, a joint
venture, a corporation, a limited liability company, a trust, an association, an
unincorporated organization, a Governmental Authority and any other entity or
group (as defined in the Exchange Act).

            "PIC Balance Sheet" means the unaudited consolidated balance sheet
of PIC as of June 30, 2004.

            "PIC Permits" means all licenses, franchises, permits, certificates,
approvals, accreditations or other similar authorizations from any Governmental
Authority required for, affecting, or relating in any way to, any business
operated or services furnished by PIC or its Subsidiaries, including Insurance
Permits.

            "PIC-Produced Insurance Contracts" means all policies, binders and
Contracts of insurance procured by PIC or any of its Subsidiaries.

            "Principal Shareholder" means Irvin Saltzman.

                                        4


            "Release" means any release, spill, emission, discharge, leaking,
pumping, injection, deposit, disposal, dispersal, leaching or migration into the
indoor or outdoor environment (including ambient air, surface water,
groundwater, and surface or subsurface strata) or into or out of any property,
including the movement of Hazardous Materials through or in the air, soil,
surface water, groundwater or property.

            "Representative" means, with respect to any Person, (a) such Person,
(b) its respective Subsidiaries and affiliates and (c) such Person's, and such
Person's respective Subsidiaries' and affiliates', respective officers,
directors, employees, shareholders, partners, controlling persons, auditors,
financial advisors, attorneys, accountants, consultants, agents, advisors or
representatives.

            "Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.

            "Subsidiary" of a Person means: (a) any corporation, association or
other business entity of which more than fifty percent (50%) of the total voting
power of shares or other voting securities outstanding thereof is at the time
owned or controlled, directly or indirectly, by that Person or one or more of
the other Subsidiaries of that Person (or a combination thereof); and (b) any
partnership or limited liability company (i) the sole general partner or the
managing general partner or managing member of which is such Person or one or
more of the other Subsidiaries of such Person (or any combination thereof) or
(ii) the only general partners or members of which are such Person or one or
more of the other Subsidiaries of such Person (or any combination thereof).
Without limiting the generality of the foregoing and for avoidance of ambiguity,
PNG shall not be deemed to be a Subsidiary of PIC.

            "Target Net Working Capital" means three million dollars
($3,000,000).

            "Tax Authority" means any competent Governmental Authority
exercising any regulatory or Taxing authority responsible for the determination,
assessment or collection of Taxes.

            "Tax Return" means any return, report or similar statement
(including any attachment or supplements thereto) supplied to or required to be
supplied to any Tax Authority, including any information return, claim for
refund, amended return or declaration of estimated Tax.

            "Tax" or "Taxes" means any and all federal, state, local, foreign or
other taxes of any kind (together with any and all interest, penalties,
additions to tax and additional amounts imposed with respect thereto) imposed by
any Tax Authority, including taxes, fees, duties, levies, customs, tariffs,
imposts, assessments, obligations or other similar charges of any kind on or
with respect to income, franchises, premiums, windfall or other profits, gross
receipts, property, sales, use, transfer, capital stock, payroll, employment,
social security, workers' compensation, unemployment compensation or net worth,
and taxes or other similar charges of any kind in the nature of excise,
withholding, ad valorem or value added.

            "Tax Gross-Up Payment" means a payment made such that (i) the sum of
the amount of such gross-up payment plus the amount of the payment with respect
to which such

                                        5


gross-up payment was made less (ii) all Taxes imposed on such sum equals (iii)
the amount of payment with respect to which such gross-up payment was made.

            "Third Party" means any Person (or group of Persons) other than
Parent and its Subsidiaries.

            "Total Current Assets" means the current assets of PIC and its
Subsidiaries relating to the line items set forth in Section 1.1 of the PIC
Disclosure Letter and set forth on the Closing Date Balance Sheet.

            "Total Current Liabilities" means the current liabilities of PIC and
its Subsidiaries relating to the line items set forth in Section 1.1 of the PIC
Disclosure Letter and set forth on the Closing Date Balance Sheet.

                                   ARTICLE II

                           PURCHASE AND SALE OF SHARES

            Section 2.1 Sale and Transfer of the PIC Shares. Subject to the
terms and conditions of this Agreement, at the Closing, the Shareholders shall
sell, convey, assign, transfer and deliver to Buyer all of the issued and
outstanding shares of common stock, par value $1.00 per share, of PIC (the "PIC
Shares") free and clear of all Liens.

            Section 2.2 The Purchase Price. Subject to the terms and conditions
of this Agreement, in consideration of the aforesaid sale, conveyance,
assignment, transfer and delivery to Buyer of the PIC Shares, Buyer shall pay to
the Shareholders total consideration of ninety-five million dollars
($95,000,000), as adjusted in accordance with the terms of this Agreement. Such
amount shall be paid as follows, Buyer shall (i) pay to the Shareholders by wire
transfer of immediately available funds to an account or accounts designated in
writing by the Shareholders' Representative the sum of (A) eighty-nine million
dollars ($89,000,000) minus (B) the amount, if any, equal to (1) the aggregate
amount of change of control bonuses or other payments (including the amounts
payable pursuant to Section 8.2(k)), including associated Tax Gross-Up Payments,
and any additional accruals (as compared to the relevant accrual set forth on
PIC's March 31, 2004 balance sheet) (with each accrual compared on an
item-by-item basis, rather than on an aggregate basis for all such accruals)
required in connection with or as a result of (with or without lapse of time and
whether alone or in combination with another event) the transactions
contemplated by this Agreement, with respect to amounts paid or payable to any
officers or employees of PIC or its Subsidiaries pursuant to Contracts in effect
as of the date hereof, minus (2) five million dollars ($5,000,000) (the excess
of (1) over (2), the "Excess Bonus") minus (3) any Tax benefit (including the
reduction of Taxes) when and if actually realized by PIC in any taxable period
or portion thereof beginning following the Closing solely as a result of the
payment of the Excess Bonus (assuming that all other available losses,
deductions, loss carry forwards and other tax attributes are utilized prior to
the Excess Bonus) (such sum, the "Paid Amount") to be distributed among the
Shareholders according to each Shareholders' percentage ownership as set forth
in Section 2.2 of the PIC Disclosure Letter and (ii) deposit into escrow the sum
of six million dollars ($6,000,000) (the "Escrowed Amount" and together with the
Paid Amount, the "Purchase Price"). The Purchase Price shall be subject to
adjustment pursuant to Sections 2.3, 2.4

                                        6


and 10.3(b). The Escrowed Amount shall be subject to the terms of the Escrow
Agreement and this Agreement and shall remain in escrow until eighteen (18)
months after the Closing Date or until it is paid to the Principal Shareholder
or Buyer pursuant to the Escrow Agreement and this Agreement; provided that,
subject in all respects to the terms of the Escrow Agreement, two million
dollars ($2,000,000) of the Escrowed Amount shall be paid to the Principal
Shareholder on each of the sixth (6) month anniversary of the Closing Date and
the one (1) year anniversary of the Closing Date. All interest earned on the
Escrowed Amount shall be paid to Buyer. Buyer shall pay the costs in connection
with establishing and maintaining the escrow account pursuant to the Escrow
Agreement.

            Section 2.3 Purchase Price Adjustment.

            (a) Within ninety (90) calendar days following the Closing Date,
Parent shall cause its independent public accountants to prepare and deliver to
the Shareholders' Representative a statement containing the balance sheet of PIC
as of the Closing Date (the "Closing Date Balance Sheet") and a calculation of
the Net Working Capital as of the Closing Date (such amount, the "Closing Net
Working Capital"); provided, that the Excess Bonus shall not be deducted in
calculating the Closing Net Working Capital. The Closing Date Balance Sheet
shall be prepared, and the Closing Net Working Capital shall be calculated, in
accordance with United States generally accepted accounting principles ("GAAP")
(as in effect on the Closing Date).

            (b) If the Shareholders' Representative in good faith disagrees with
Parent's calculation of the Closing Net Working Capital as set forth on the
Closing Date Balance Sheet, he may within twenty (20) Business Days after
receipt thereof deliver a written notice to Parent disagreeing with such
calculation of the Closing Net Working Capital. Any such notice of disagreement
shall specify in reasonable detail those items or amounts comprising the Closing
Net Working Capital as to which the Shareholders' Representative disagrees and
the basis of such disagreement. If no such notice of disagreement is timely
delivered pursuant to this Section 2.3(b), the Closing Net Working Capital set
forth on the Closing Date Balance Sheet shall be final and binding on the
parties hereto.

            (c) If a notice of disagreement shall be timely delivered pursuant
to Section 2.3(b), the parties shall, during the twenty (20) Business Days
following such delivery, use their reasonable efforts to reach an agreement on
the disputed items. If such an agreement is reached, the Closing Net Working
Capital as so agreed shall be final and binding on the parties hereto. If the
parties are unable to reach such an agreement, a nationally-recognized
accounting firm jointly selected by Parent and the Shareholders' Representative
not then performing, or that has not performed in the past two (2) years,
material services for any of the Shareholders or Parent (the "Accounting
Referee") shall be retained to review promptly this Agreement and the disputed
items or amounts. The Accounting Referee shall deliver to the parties, as
promptly as practicable, and within forty-five (45) calendar days of being
referred the matter, a report setting forth its adjustments, if any, to the
Closing Date Balance Sheet and the calculations supporting such adjustments. The
Accounting Referee shall act as an arbitrator to determine, based solely on the
provisions of this Section 2.3 and the presentations by Parent and the
Shareholders' Representative, and not by independent review, only those issues
still in dispute. Such report shall be final and binding upon the parties hereto
and the Closing Net Working Capital as adjusted pursuant to such report shall be
final and binding on the parties hereto. The cost of the Accounting

                                        7


Referee's review and report shall be borne by each of the Shareholder's
Representative and Parent in proportion to their respective Margin Errors. For
purposes of this section, "Margin Error" shall mean the difference between such
Person's disputed estimated amount of the Closing Net Working Capital and the
final amount of the binding Closing Net Working Capital as determined by the
Accounting Referee (in all cases multiplying any negative result by - 1).

            (d) If the Target Net Working Capital exceeds the Closing Net
Working Capital reflected on the Closing Date Balance Sheet, then the Principal
Shareholder shall promptly pay to Buyer, as an adjustment to the Purchase Price,
without interest, an amount equal to such excess.

            (e) Any payments pursuant to Section 2.3(d) shall be made by wire
transfer of immediately available funds to an account at a United States bank
designated in writing by Parent.

            Section 2.4 EBITDA Payment.

            (a) If the Closing occurs:

                        (i) prior to December 31, 2004, then as promptly as
            practicable after December 31, 2004 (but in no event later than
            ninety (90) days thereafter), Parent shall cause its independent
            public accountants to prepare and deliver to the Shareholders'
            Representative a statement containing a calculation of the Adjusted
            EBITDA (as defined in Section 2.4(e)) (the "EBITDA Statement"); or

                        (ii) after December 31, 2004, then as promptly as
            practicable after December 31, 2004 (but in no event later than
            ninety (90) days thereafter), PIC shall prepare and deliver to
            Parent and the Shareholders' Representative the EBITDA Statement.

            (b) In the case of Section 2.4(a)(i) above, if the Shareholders'
Representative in good faith disagrees with Parent's calculation of the EBITDA
Statement, he may within twenty (20) Business Days after receipt thereof deliver
a written notice to Parent disagreeing with such calculation of the EBITDA
Statement. In the case of Section 2.4(a)(ii) above, if Parent or the
Shareholders' Representative in good faith disagrees with PIC's calculation of
the EBITDA Statement, it may within twenty (20) Business Days after receipt
thereof deliver a written notice to PIC disagreeing with such calculation of the
EBITDA Statement. Any such notice of disagreement shall specify in reasonable
detail those items or amounts comprising the EBITDA Statement as to which the
Shareholders' Representative or Parent, as applicable, disagrees and the basis
of such disagreement. If no such notice of disagreement is timely delivered
pursuant to this Section 2.4(b), the EBITDA Statement shall be final and binding
on the parties hereto.

            (c) If a notice of disagreement shall be timely delivered pursuant
to Section 2.4(b), the parties shall, during the twenty (20) Business Days
following such delivery, use their reasonable efforts to reach an agreement on
the disputed items. If such an agreement is reached, the EBITDA Statement as so
agreed shall be final and binding on the parties hereto. If the parties are
unable to reach such an agreement, an Accounting Referee shall be retained to
review promptly this Agreement and the disputed items or amounts. The Accounting
Referee shall

                                        8


deliver to the parties, as promptly as practicable, and within forty-five (45)
calendar days of being referred the matter, a report setting forth its
adjustments, if any, to the EBITDA Statement and the calculations supporting
such adjustments. The Accounting Referee shall act as an arbitrator to
determine, based solely on the provisions of this Section 2.4 and the
presentations by Parent and the Shareholders' Representative, and not by
independent review, only those issues still in dispute. Such report shall be
final and binding upon the parties hereto and the EBITDA Statement as adjusted
pursuant to such report shall be final and binding on the parties hereto. The
EBITDA Statement, as agreed to by the Parent and the Shareholders'
Representative, or as adjusted by the Accountant pursuant to the preceding
sentence, will be final and binding and will be referred to as the "Final EBITDA
Statement". The cost of the Accounting Referee's review and report shall be
borne by each of the Shareholder's Representative and Parent in proportion to
their respective Margin Errors.

            (d) If the Actual EBITDA (as defined below) exceeds six million nine
hundred thirty-one thousand dollars ($6,931,000), Buyer shall, without interest,
pay to the Principal Shareholder an amount equal to 5.126 times the amount by
which the Actual EBITDA is in excess of six million nine hundred thirty-one
thousand dollars ($6,931,000) as an adjustment to the Purchase Price. If the
Actual EBITDA is less than five million six hundred seventy-one thousand dollars
($5,671,000), the Principal Shareholder shall pay, without interest, to Buyer
the absolute value of the amount equal to 5.126 times the amount by which the
Actual EBITDA is less than five million six hundred seventy-one thousand dollars
($5,671,000) as an adjustment to the Purchase Price. In no event shall any
payment by Buyer pursuant to this Section 2.4 exceed three million dollars
($3,000,000).

            (e) For purposes of this Agreement:

                        (i) "Actual EBITDA" means the Adjusted EBITDA as shown
            on the Final EBITDA Statement.

                        (ii) "Adjusted EBITDA" means consolidated pre-Tax net
            operating income of PIC and its Subsidiaries for the fiscal year
            ended December 31, 2004 (calculated in accordance with GAAP (as in
            effect on the Closing Date) applied on a consistent basis with the
            Audited Financial Statements) and as adjusted in accordance with
            Section 2.4(e) of the Parent Disclosure Letter. In all cases,
            Adjusted EBITDA will exclude the cumulative effect of any change in
            accounting principles.

            (f) Any payments or transfers made pursuant to Section 2.4(d) shall
be made within two (2) Business Days after the completion of the Final EBITDA
Statement in accordance with Section 2.4(c) above. Any payments pursuant to
Section 2.4(d) shall be made by wire transfer of immediately available funds to
an account at a United States bank designated in writing by Parent or the
Shareholders' Representative, as applicable.

            Section 2.5 Further Assurances. After the Closing, the Shareholders
and the Shareholders' Representative shall from time to time, at the reasonable
request of Parent, Buyer or PIC, execute and deliver such other instruments of
conveyance and transfer and take such other actions as Parent, Buyer or PIC may
reasonably request, in order to consummate the transactions

                                        9


contemplated hereby and to vest in Buyer the right, title and interest in and to
the PIC Shares.

                                   ARTICLE III

                                   THE CLOSING

            Section 3.1 The Closing. The sale and transfer (the "Closing") of
the PIC Shares by the Shareholders to Buyer shall take place at the offices of
Skadden, Arps, Slate, Meagher & Flom LLP, Four Times Square, New York, NY 10036,
at 10:00 am local time, as soon as reasonably practicable, but in any event
within two (2) Business Days after the satisfaction or waiver of the conditions
set forth in Article VIII (other than those conditions that by their nature are
to be satisfied at the Closing) (the actual time and date of the Closing being
referred to herein as the "Closing Date").

            Section 3.2 Deliveries by PIC, the Shareholders and the
Shareholders' Representative. Subject to the conditions set forth in this
Agreement, at the Closing, and simultaneously with Parent's deliveries
hereunder, PIC, the Shareholders and the Shareholders' Representative shall
deliver, or cause to be delivered, to Parent or Buyer, as applicable, the
following:

            (a) stock certificates representing all of the PIC Shares sufficient
to vest in Buyer good and marketable title to such PIC Shares accompanied by
stock powers duly endorsed in blank or accompanied by duly executed documents of
transfer;

            (b) a document, duly executed by each Person who is an executive
officer and/or director of PIC, reciting that such document shall become
effective simultaneously with the Closing, that effects the resignation of such
Person as an executive officer (unless such executive officer is a party to an
employment agreement or is otherwise continuing employment pursuant to Section
8.2(g)) and/or director of PIC;

            (c) executed general releases from each of the directors and
executive officers of PIC, as well as the Key Employees, in each case, in the
form attached hereto as Exhibit D (the "General Releases");

            (d) executed copies of the consents referred to in Sections 4.4(a)
and 7.4(d);

            (e) all of the Books and Records of PIC and its Subsidiaries;

            (f) the officer's certificate referred to in Section 8.2(a);

            (g) the Shareholders' Representative's certificate referred to in
Section 8.2(b);

            (h) a certificate of the secretary or an assistant secretary of PIC
setting forth resolutions of its Board of Directors with respect to the
authorization of PIC to execute and deliver this Agreement and to enter into the
transactions contemplated herein;

                                       10


            (i) the Escrow Agreement duly executed by the Principal Shareholder;

            (j) the FIRPTA Certificate (as defined below);

            (k) the opinion of Morgan, Lewis & Bockius LLP referred to in
Section 8.2(i);

            (l) the opinions of counsel to the Shareholders referred to in
Section 8.2(i);

            (m) an executed spousal consent for each of the Shareholders set
forth in Section 5.2(b) of the PIC Disclosure Letter, in form and substance as
set forth in Exhibit E; and

            (n) all other previously undelivered documents reasonably required
to be delivered by PIC, the Shareholders or the Shareholders' Representative to
Parent or Buyer at or prior to the Closing in connection with the consummation
of the transactions contemplated hereby.

            Section 3.3 Deliveries by Parent. Subject to the conditions set
forth in this Agreement, at the Closing, and simultaneously with PIC's, the
Shareholders' and the Shareholders' Representative's deliveries hereunder,
Parent shall deliver or cause to be delivered to PIC or the Shareholders'
Representative, as applicable, the following:

            (a) the Paid Amount;

            (b) either the Headquarters Lease or the Headquarters Purchase
Agreement duly executed by Parent or affiliate of Parent;

            (c) the Escrow Agreement duly executed by Buyer;

            (d) the Escrowed Amount to the escrow agent identified in the Escrow
Agreement;

            (e) the officer's certificate referred to in Section 8.3; and

            (f) all other previously undelivered documents required to be
delivered by Parent to PIC and the Shareholders' Representative at or prior to
the Closing in connection with the consummation of the transactions contemplated
hereby.

                                   ARTICLE IV

                  REPRESENTATIONS AND WARRANTIES REGARDING PIC

            Each of PIC and the Shareholders, jointly and severally, represents
and warrants to Parent and Buyer as follows:

                                       11


            Section 4.1 Organization and Qualification. Each of PIC and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the Laws of its jurisdiction of incorporation or organization.
Each of PIC and its Subsidiaries has the requisite corporate power and authority
and any necessary PIC Permit to own, operate and lease the properties that it
purports to own, operate or lease and to carry on its business as it is now
being conducted, and is duly qualified as a foreign corporation to do business,
and is in good standing in each jurisdiction where the character of its
properties owned, operated or leased or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified would not
reasonably be expected to have a Material Adverse Effect on PIC. Section 4.1 of
the disclosure letter delivered by PIC and the Shareholders' Representative to
Parent simultaneously with the execution of this Agreement (the "PIC Disclosure
Letter") sets forth a complete list of PIC's Subsidiaries and for each such
Subsidiary indicates its ownership and the jurisdictions in which it is
organized and qualified to do business as a foreign corporation. Other than as
set forth in Section 4.1 of the PIC Disclosure Letter and its ownership of PNG
Common Stock, neither PIC nor any of its Subsidiaries is the record or
beneficial owner, directly or indirectly, of any capital stock or other
ownership interest of any kind whatsoever in any other Person.

            Section 4.2 Capitalization.

            (a) The authorized capital stock of PIC consists of 1,000,000 PIC
Shares, of which, as of the date hereof, 534,333 shares are issued and
outstanding. As of the date hereof, there are no PIC Shares held in treasury.
All the outstanding shares of PIC's capital stock are duly authorized, validly
issued, fully paid and non-assessable. There are no bonds, debentures, notes or
other indebtedness having voting rights (or convertible into securities having
such rights) ("Voting Debt") of PIC or any of its Subsidiaries issued and
outstanding. Except as set forth above or in Section 4.2(a) of the PIC
Disclosure Letter and except for the transactions provided for in this
Agreement, as of the date hereof, (i) there are no shares of capital stock of
PIC authorized, issued or outstanding and (ii) there are no existing options,
warrants, calls, pre-emptive rights, subscriptions or other rights, convertible
securities, agreements, arrangements or commitments of any character, relating
to the issued or unissued capital stock of PIC or any of its Subsidiaries,
obligating PIC or any of its Subsidiaries to issue, transfer or sell or cause to
be issued, transferred or sold any shares of capital stock or Voting Debt of, or
other equity interest in, PIC or any of its Subsidiaries or securities
convertible into or exchangeable for such shares or equity interests or
obligations of PIC or any of its Subsidiaries to grant, extend or enter into any
such option, warrant, call, subscription or other right, convertible security,
agreement, arrangement or commitment. There are no outstanding contractual
obligations of PIC or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any PIC Shares or other capital stock of PIC or any of its Subsidiaries
or affiliates of PIC or to provide funds to make any investment (in the form of
a loan, capital contribution or otherwise) in any of its Subsidiaries or any
other entity nor has PIC or any of its Subsidiaries granted or agreed to grant
to any Person any stock appreciation rights or similar equity-based rights.

            (b) Except as set forth in Section 4.2(b) of the PIC Disclosure
Letter, all of the outstanding capital stock of, or other ownership interests
in, each Subsidiary of PIC is, directly or indirectly, owned by PIC, and all
such capital stock has been validly issued and is fully paid and nonassessable
and owned by either PIC or one of its Subsidiaries free and clear of all Liens
and free of any other limitation or restriction (including any restriction on
the right to

                                       12


vote, sell or otherwise dispose of such capital stock or other ownership
interests). Except as set forth in Section 4.2(b) of the PIC Disclosure Letter,
there are no outstanding options, warrants or other rights to acquire from PIC
or any of its Subsidiaries, and no preemptive or similar rights, subscriptions
or other rights, or convertible or exchangeable securities, agreements,
arrangements or commitments of any character, relating to the capital stock of
any Subsidiary of PIC, obligating PIC or any of its Subsidiaries to issue,
transfer or sell, any capital stock, voting securities or other ownership
interests in, or any securities convertible into or exchangeable for any capital
stock, voting securities or ownership interests in, any Subsidiary of PIC or
obligating PIC or any Subsidiary of PIC to grant, extend or enter into any such
option, warrant, subscription or other right, convertible or exchangeable
security, agreement, arrangement or commitment (each of the foregoing, a "PIC
Subsidiary Convertible Security"). There are no outstanding obligations of the
PIC or any of its Subsidiaries to repurchase, redeem or otherwise acquire from
any Person (other than PIC or a wholly-owned Subsidiary of PIC) any outstanding
shares of capital stock of any Subsidiary of PIC or any PIC Subsidiary
Convertible Securities. No Subsidiary of PIC owns, either directly or
indirectly, any shares of capital stock of PIC.

            (c) Except as set forth in Section 4.2(c) of the PIC Disclosure
Letter, there are no voting trusts or other agreements or understandings to
which PIC or any of its Subsidiaries is a party with respect to the voting of
the capital stock of PIC or any of its Subsidiaries. None of PIC or its
Subsidiaries is required to redeem, repurchase or otherwise acquire shares of
capital stock of PIC or any of its Subsidiaries, respectively, as a result of
the transactions contemplated by this Agreement.

            Section 4.3 Corporate Authorization; Enforceability; Board Action.

            (a) PIC has the requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of PIC and no other corporate proceedings on the
part of PIC are necessary to authorize the execution and delivery of this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by PIC and, assuming due authorization,
execution and delivery of this Agreement by the other parties hereto,
constitutes a valid and binding agreement of PIC enforceable against PIC in
accordance with its terms, except to the extent that such enforcement may be
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other similar Laws, now or hereafter in effect, affecting creditors' rights
generally, and to general equity principles.

            (b) The Board of Directors of PIC, at a meeting duly called and held
or by written consent, unanimously has (i) determined that this Agreement and
the transactions contemplated hereby are advisable and in the best interests of
PIC and the Shareholders, and (ii) approved and adopted this Agreement and the
transactions contemplated hereby.

            (c) No "fair price," "merger moratorium," "control share
acquisition" or other similar anti-takeover statute or regulation (including the
provisions of Subchapters E, F, G and H of Chapter 25 of the Pennsylvania
Business Corporation Law (the "PBCL")) applies, will apply or purports to apply
to this Agreement or the transactions contemplated hereby.

                                       13


Pursuant to the PBCL, the articles of incorporation of PNG explicitly provide
that the provisions of Subchapters E, F, G and H of Chapter 25 of the PBCL shall
not be applicable to PNG; and therefore, no "fair price," "merger moratorium,"
"control share acquisition" or other similar anti-takeover statute or regulation
(including the provisions of Subchapters E, F, G and H of Chapter 25 of the
PBCL) applies, will apply or purports to apply to the Merger Agreement or the
transactions contemplated thereby.

            Section 4.4 Consents and Approvals; No Violations.

            (a) The execution, delivery and performance by PIC of this Agreement
and the consummation by PIC and its Subsidiaries of the transactions
contemplated hereby require no action by or in respect of, or notice to or
filing with, any Governmental Authority (including with respect to any
Subsidiary of PIC) other than (i) compliance with any applicable requirements of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act") and (ii) those set forth in Section 4.4(a) of the PIC Disclosure Letter
that are required under federal and state Laws governing insurance and companies
that underwrite, place or otherwise transact the business of insurance. Section
4.4(a) of the PIC Disclosure Letter sets forth each such approval and identifies
the applicable Subsidiary (including the applicable state in which it operates)
and applicable Governmental Authority.

            (b) Except as set forth in Section 4.4(b) of the PIC Disclosure
Letter, neither the execution, delivery or performance by PIC of this Agreement
nor the consummation by PIC and its Subsidiaries of the transactions
contemplated hereby nor compliance by PIC with any of the provisions hereof will
(i) conflict with or result in any breach of any provisions of the articles of
incorporation or bylaws of PIC or the similar organizational and governing
documents of any of its Subsidiaries, (ii) assuming compliance with the matters
referred to in Section 4.4(a), conflict with or result in any violation of any
provision of any Law binding upon or applicable to PIC or any of its
Subsidiaries, (iii) require the consent, approval or authorization of, or notice
to or filing with, any Third Party with respect to, result in any violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation, amendment, or
acceleration of any right or obligation of PIC or any of its Subsidiaries or to
a loss of any benefit to which PIC or any of its Subsidiaries is entitled)
under, any provision of any PIC Contract or any PIC Permit or (iv) result in the
creation or imposition of any Lien (other than a Permitted Lien) on any asset of
PIC or any of its Subsidiaries.

            Section 4.5 Financial Statements.

            (a) Section 4.5(a) of the PIC Disclosure Letter sets forth a true
and complete copy of PIC's consolidated financial statements, which include a
combined balance sheet of PIC and its subsidiaries as of December 31 for each of
the years 2001 to 2003, together with combined statements of income,
shareholders' equity and cash flows for each of the years then ended, all of
which have been reviewed by PIC's independent public accountants, whose reports
thereon are included (the "Audited Financial Statements"). Section 4.5(a) of the
PIC Disclosure Letter sets forth a true and complete copy of PIC's unaudited
interim balance sheet as of June 30, 2004 and the related unaudited interim
statements of income for the six (6) months ended June 30, 2004 (the "Unaudited
Financial Statements" and, together with the Audited Financial Statements, the
"Financial Statements"). The Financial Statements have been prepared

                                       14


from, and are in accordance with, the Books and Records of PIC and its
consolidated Subsidiaries, comply in all material respects with applicable
accounting requirements have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present in all material respects the consolidated
financial position and the consolidated results of operations and cash flows
(and changes in financial position, if any) of PIC and its consolidated
Subsidiaries as at the dates thereof or for the periods presented therein
(subject, in the case of any unaudited interim financial statements, to normal
year-end adjustments and the absence of footnotes), in each case in conformity
with GAAP applied on a consistent basis (except as may be indicated in the notes
thereto).

            (b) PIC and its Subsidiaries maintain accurate Books and Records
reflecting their assets and liabilities and maintain proper and adequate
internal accounting controls that provide assurance that (i) transactions are
executed with management's authorization, (ii) transactions are recorded as
necessary to permit preparation of their financial statements and to maintain
accountability for their assets, (iii) access to their assets is permitted only
in accordance with management's authorization, and (iv) accounts, notes and
other receivable and inventory are recorded accurately, and proper and adequate
procedures are implemented to effect the collection thereof on a current and
timely basis.

            (c) Neither PIC nor any of its Subsidiaries nor, to the knowledge of
PIC, any Representative of PIC or any of its Subsidiaries has received or
otherwise had or obtained knowledge of any material complaint, allegation,
assertion or claim, whether written or oral, regarding the accounting or
auditing practices, procedures, methodologies or methods of PIC or any of its
Subsidiaries or their respective internal accounting controls, including any
material complaint, allegation, assertion or claim that PIC or any of its
Subsidiaries has engaged in questionable accounting or auditing practices.

            Section 4.6 Absence of Certain Changes. Except as set forth in
Section 4.6 of the PIC Disclosure Letter, since December 31, 2003 (a) PIC and
its Subsidiaries have conducted their respective businesses and operations in
all material respects consistent with past practice only in the ordinary and
usual course thereof and there has not occurred (i) any fact, event,
circumstance, change, condition or effect (including the incurrence of any
Liabilities of any nature, whether or not accrued, contingent or otherwise) that
has had, or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on PIC; (ii) any declaration, setting aside
or payment of any dividend or other distribution (whether in cash, stock or
property) with respect to the equity interests of PIC or of any of its
wholly-owned Subsidiaries other than dividends paid to PIC or any of its
wholly-owned Subsidiaries by a wholly-owned Subsidiary; or (iii) any change by
PIC or any of its Subsidiaries in accounting principles or methods, and (b)
neither PIC nor any of its Subsidiaries has taken any action or made any
omission which, if taken or made after the date of this Agreement, would be
prohibited by Section 7.1.

            Section 4.7 Undisclosed Liabilities. Except for Liabilities (a) set
forth in Section 4.7 of the PIC Disclosure Letter or on the face of the
Financial Statements, (b) incurred in the ordinary course of business and
consistent with past practice, and (c) that are not, individually or in the
aggregate, material to PIC, neither PIC nor any of its Subsidiaries has incurred
any Liabilities of any nature that would be required to be reflected or reserved
against on a

                                       15


consolidated balance sheet of PIC and its Subsidiaries (including the notes
thereto) prepared in accordance with GAAP as applied in preparing the PIC
Balance Sheet. Section 4.7 of the PIC Disclosure Letter sets forth the amount of
principal and unpaid interest outstanding under each instrument evidencing
indebtedness of PIC and its Subsidiaries that will accelerate or become due or
result in a right of redemption or repurchase on the part of the holder of such
indebtedness (with or without due notice or lapse of time) as a result of this
Agreement or the transactions contemplated hereby.

            Section 4.8 Litigation.

            (a) PIC has furnished to Parent and its Representatives a complete
list of each litigation, suit, action, claim, charge or other proceeding (each,
an "Action") that has been instituted or, to the knowledge of PIC, threatened
against, by or affecting PIC or any of its Subsidiaries, the outcome of which,
if determined adversely to PIC, would be reasonably expected to have a Material
Adverse Effect on PIC. Except as set forth in Section 4.8(a) of the PIC
Disclosure Letter, (i) there is no Action by or before any Governmental
Authority pending or, to the knowledge of PIC, threatened, against, by or
affecting PIC or any of its Subsidiaries, except for such Actions as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on PIC and (ii) no investigation or inquiry by or before any
Governmental Authority is pending or, to the knowledge of PIC, threatened
against PIC or any of its Subsidiaries.

            (b)Except as set forth in Section 4.8(b) of the PIC Disclosure
Letter, there are no judgments, injunctions, writs, orders or decrees binding on
PIC or any of its Subsidiaries that (i) have had, or would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
PIC or any of its Subsidiaries or (ii) would be binding upon Parent or any of
its Subsidiaries following consummation of the transactions contemplated hereby.

            Section 4.9 Compliance with Laws.

            (a) Except as set forth in Section 4.9(a) of the PIC Disclosure
Letter, PIC and each of its Subsidiaries and, to the knowledge of PIC, each
Third Party service provider acting on behalf of PIC or any of its Subsidiaries,
are, and since January 1, 2001 have been, in compliance in all material respects
with all applicable Laws. All Books and Records, including personnel files of
any employee or agent, of PIC and its Subsidiaries have been maintained, in all
material respects, accurately and in accordance with applicable Law.

            (b) Except as set forth in Section 4.9(b) of the PIC Disclosure
Letter, (i) all PIC Permits are valid and in full force and effect, (ii) neither
PIC nor any of its Subsidiaries is in default under, or in violation of, any PIC
Permit, and no event has occurred or condition exists which constitutes or, that
with notice or lapse of time or both, could constitute, a default under, or
violation of, any PIC Permit, (iii) none of the PIC Permits shall be terminated
or impaired or become terminable, in whole or in part, as a result of the
transactions contemplated hereby, and (iv) all applications required to have
been filed for the renewal of any PIC Permits have been duly filed on a timely
basis with the appropriate Governmental Authorities. All such PIC Permits are
set forth in Section 4.9(b) of the PIC Disclosure Letter. Neither PIC nor any of
its Subsidiaries is operating under any Contract with any Governmental Authority
that requires it to take, or refrain from taking, any action relating to the
conduct of its business or the performance

                                       16


of its obligations under this Agreement or the Merger Agreement otherwise
permitted by applicable Law.

            (c) Except as set forth in Section 4.9(c) of the PIC Disclosure
Letter or as would not reasonably be expected to have a Material Adverse Effect
on PIC, since January 1, 2001, (i) neither PIC nor any of its Subsidiaries nor,
to the knowledge of PIC, any Third Party service provider acting on behalf of
PIC, has received, or otherwise has any knowledge of, any written or oral notice
from any Governmental Authority that (x) alleges any material noncompliance (or
that PIC or any of its Subsidiaries or any such Third Party service provider is
under investigation or the subject of an inquiry by any such Governmental
Authority for such alleged noncompliance) with any applicable Law or (y) could
reasonably be expected to result in a fine, assessment or cease and desist
order, or the suspension, revocation or material limitation or restriction of
any PIC Permit, (ii) to the knowledge of PIC, there is no reasonable basis for
the assertion of any such violation or the institution of any such proceeding of
the type described in clause (i) and (iii) neither PIC nor any of its
Subsidiaries has entered into any agreement or settlement with any Governmental
Authority with respect to its non-compliance with, or violation of, any
applicable Law.

            (d) Except as set forth in Section 4.9(d) of the PIC Disclosure
Letter, since January 1, 2001, PIC and each of its Subsidiaries has timely filed
all regulatory reports, schedules, statements, documents, filings, submissions,
forms, registrations and other documents, together with any amendments required
to be made with respect thereto, that each was required to file with any
Governmental Authority (the "PIC Business Documents"), including state insurance
regulatory authorities and any applicable federal regulatory authorities, and
have timely paid all Taxes, fees and assessments due and payable in connection
therewith, except where the failure to make such payments and filings would not
be material to PIC and its Subsidiaries. All PIC Business Documents were true,
correct and complete in all material respects when filed, complied in all
material respects with applicable Law in effect when filed, and no material
deficiencies have been asserted by any such Governmental Authority with respect
to PIC Business Documents that have not been satisfied. There is no material
unresolved violation or exception by any such Governmental Authority with
respect to any of the PIC Business Documents. As of their respective dates, the
PIC Business Documents complied in all material respects with applicable Law and
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. PIC has delivered or made available to Parent a true and
complete copy of each material PIC Business Document.

            (e) Except as set forth in Section 4.9(e) of the PIC Disclosure
Letter, PIC and its Subsidiaries have properly administered, in compliance in
all material respects with applicable Law, all accounts for which it acts as a
fiduciary, if any, including, but not limited to, accounts for which it serves
as a trustee, agent, custodian, personal representative, guardian, conservator
or investment advisor, in accordance with the terms of the governing document.
Neither PIC nor its Subsidiaries nor any of its directors, officers or employees
has committed any breach of trust with respect to any such fiduciary account,
and the accounting for each such fiduciary account is true and correct in all
material respects and accurately reflects the assets of such fiduciary account.

                                       17


            (f) PIC and its Subsidiaries have implemented procedures and
programs to provide assurance that its agents and employees are in compliance in
all material respects with all applicable Laws, including Laws, regulations,
directives and opinions of Governmental Authorities relating to advertising,
licensing and sales practices.

            (g) Each of PIC and its Subsidiaries has been and is in material
compliance with (i) all applicable Laws concerning privacy or security, and (ii)
all of its internal policies and/or agreements with other Persons concerning
privacy or security.

            Section 4.10 Accounts. Section 4.10 of the PIC Disclosure Letter
sets forth the names of all financial and other similar institutions at which
PIC and/or its Subsidiaries maintain accounts, deposits or safe deposit boxes of
any nature, and the account numbers and the names of all Persons authorized to
draw thereon or make withdrawals therefrom.

            Section 4.11 Books and Records. The Books and Records of PIC and its
Subsidiaries (i) are complete and accurate in all material respects and (ii)
have been maintained in all material respects in accordance with PIC's and its
Subsidiaries' customary business practices, as applicable, and with applicable
Law. PIC has heretofore made available to Parent the minute books of PIC and
PIC's Subsidiaries for its inspection. These minutes are complete and correct
through December 31, 2003. Minute books that are complete and correct through
the date hereof will be provided prior to Closing.

            Section 4.12 Producer Relationships.

            (a) Section 4.12(a)(i) of the PIC Disclosure Letter sets forth the
standard form of agreement currently being utilized by PIC and its Subsidiaries
with respect to the insurance producers of the PIC-Produced Insurance Contracts
(the "Producer Agreement"). Except as set forth in Section 4.12(a)(ii) of the
PIC Disclosure Letter, all of the Contracts currently in effect between PIC or
one of its Subsidiaries and a producer of PIC-Produced Insurance Contracts are
in all material respects in the form of the Producer Agreement.

            (b) Section 4.12(b) of the PIC Disclosure Letter sets forth a list
of the top twenty (20) producers of PIC-Produced Insurance Contracts during the
year ended December 31, 2003 (the "Major Producers"). Since January 1, 2003, no
Major Producer has cancelled, substantially modified (including the amount
thereof) or otherwise terminated its Producer Agreement with PIC or any of its
Subsidiaries with PIC and its Subsidiaries, and, to the knowledge of PIC, no
such party has indicated an intent to do so. To the knowledge of PIC, each
producer of PIC-Produced Insurance Contracts with which PIC or any of its
Subsidiaries has a written Contract (a "Producer") is duly licensed (to the
extent that such licenses are required) in each jurisdiction in which the
Producer places or sells insurance on behalf of PIC or any of its Subsidiaries.
Except as set forth in Section 4.12(b) of the PIC Disclosure Letter, PIC and its
Subsidiaries are not in breach or violation of, or default under, in any
material respect, any of its Contracts with Producers. To the knowledge of PIC,
no Producer is the subject of, or party to, any disciplinary action or
proceeding under any applicable Law. Except as set forth in Section 4.12(b) of
the PIC Disclosure Letter, there is no dispute pending or, to the knowledge of
PIC, threatened against PIC or any of its Subsidiaries by any Producer.

                                       18


            (c) Except as set forth in Section 4.12(c) of the PIC Disclosure
Letter, PIC has no agency contracts, Third Party administration Contracts or
other similar arrangements or commitments, or amendments, supplements or
modifications thereto, under which an independent party has authority to perform
underwriting analysis and issue insurance policies on behalf of PIC or any of
its Subsidiaries or otherwise bind PIC or any of its Subsidiaries without prior
approval by PIC or any of its Subsidiaries.

            Section 4.13 Insurance Markets. Except as set forth in Section 4.13
of the PIC Disclosure Letter, PIC and its Subsidiaries have all requisite
authorizations to place business in the insurance markets in which they operate.
Except as set forth in Section 4.13 of the PIC Disclosure Letter, since January
1, 2003, neither PIC nor any of its Subsidiaries has had its authority
cancelled, nonrenewed, suspended, substantially restricted or otherwise impaired
in any such insurance market in which it places business. Except as set forth in
Section 4.13 of the PIC Disclosure Letter, neither PIC nor any of its
Subsidiaries is in violation of, or default under, any requirements necessary to
place business in the insurance markets in which it operates. Except as set
forth in Section 4.13 of the PIC Disclosure Letter, neither PIC nor any of its
Subsidiaries is the subject of, or party to, any actual or, to the knowledge of
PIC, threatened disciplinary action or proceeding under any applicable Law in
respect of its placement of business in any of the insurance markets in which it
operates. Neither PIC nor any of its Subsidiaries places business directly or
indirectly in any insurance market, other than those in which it has full
authorization to do so. At and following the Closing, except as set forth in
Section 4.13 of the PIC Disclosure Letter, each of PIC and its Subsidiaries will
hold valid authorizations to place business in the insurance markets in which it
operates as of the date hereof.

            Section 4.14 Employee Benefit Plans.

            (a) Section 4.14(a) of the PIC Disclosure Letter sets forth a true
and complete list of each deferred compensation and each bonus or other
incentive compensation, stock purchase, stock option, phantom stock, phantom
equity or other equity compensation plan, program, agreement or arrangement,
each severance or termination pay, medical, surgical, hospitalization, life
insurance or other "welfare" plan, fund or program (within the meaning of
Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")); each profit-sharing, stock bonus or other "pension" plan, fund or
program (within the meaning of Section 3(2) of ERISA); each employment,
termination or severance agreement; and each other employee benefit plan, fund,
program, agreement or arrangement, in each case, that is sponsored, maintained
or contributed to or required to be contributed to by PIC or by any trade or
business, whether or not incorporated (an "ERISA Affiliate"), that together with
PIC would be deemed a "single employer" within the meaning of Section 4001(b) of
ERISA, or to which PIC or an ERISA Affiliate is party, whether written or oral,
for the benefit of any current or former employee, consultant or director of PIC
or any Subsidiary (the "PIC Employee Plans").

            (b) With respect to each PIC Employee Plan, PIC has heretofore made
available to Parent true and complete copies of the PIC Employee Plan and any
amendments thereto (or if the PIC Employee Plan is not a written plan, a
description thereof), any related trust or other funding vehicle, any reports or
summaries required under ERISA or the Code and the most recent determination
letter received from the Internal Revenue Service with respect to each PIC
Employee Plan intended to qualify under Section 401 of the Code. Except as set
forth in

                                       19


Section 4.14(b) of the PIC Disclosure Letter, there have not been any
amendments, modifications, terminations or any other changes to any PIC Employee
Plans as in effect on such date.

            (c) No liability under Title IV or Section 302 of ERISA has been
incurred by PIC or any ERISA Affiliate that has not been satisfied in full, no
condition exists that presents a material risk to PIC or any ERISA Affiliate of
incurring such liability, and neither PIC nor any ERISA Affiliates made, or was
required to make, contributions to any plan subject to Title IV of ERISA during
the six (6) year period ending on the last day of the most recent fiscal year
ended prior to the Closing Date for any such plan.

            (d) Each PIC Employee Plan has been operated and administered in all
material respects in accordance with its terms and applicable Law, including
ERISA and the Code.

            (e) Each PIC Employee Plan that is intended to be qualified under
Section 401(a) of the Code has received a determination letter from the Internal
Revenue Service to the effect that such PIC Employee Plans is qualified and the
trust related thereto is exempt from federal income taxes under Sections 401(a)
and 501(a), respectively, of the Code, no such determination letter has been
revoked and revocation has not been threatened.

            (f) No PIC Employee Plan provides medical, surgical,
hospitalization, death or similar benefits (whether or not insured) for periods
extending beyond retirement or other termination of service, other than (i)
coverage mandated by applicable Law, (ii) death benefits under any "pension
plan," or (iii) benefits the full cost of which is borne by the current or
former participant (or his beneficiary).

            Except as set forth in Section 4.14(g) of the PIC Disclosure Letter,
the consummation of the transactions contemplated by this Agreement will not,
either alone or in combination with another event, (i) entitle any current or
former employee, officer, director or consultant of PIC or any ERISA Affiliate
to severance pay, unemployment compensation or any other payment or benefit or
(ii) accelerate the time of payment or vesting, or increase the amount of
compensation or benefits due any such employee or officer. No amounts payable
under the PIC Employee Plans will fail to be deductible for federal income Tax
purposes by virtue of Section 280G of the Code. Section 4.14(g) of the PIC
Disclosure Letter sets forth each outstanding grant under any existing phantom
stock plan of PIC and its Subsidiaries, and all liabilities accrued under such
phantom stock plans have been paid, accrued, or otherwise adequately reserved in
accordance with GAAP.

            (g) There are no pending or threatened material claims by or on
behalf of any PIC Employee Plan, by any Person or beneficiary covered under any
such PIC Employee Plan, or otherwise involving any such PIC Employee Plan (other
than routine claims for benefits).

            (h) None of PIC, any PIC Employee Plan, any trust created thereunder
or, to the knowledge of PIC, any trustee or administrator thereof has engaged in
a transaction in connection with which PIC, any PIC Employee Plan, any such
trust or any trustee or administrator thereof, or any party dealing with any PIC
Employee Plan or any such trust, would be subject

                                       20


to either a civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or
a Tax imposed pursuant to Section 4975 or 4976 of the Code.

            Section 4.15 Employee Matters. Except as set forth in Section 4.15
of the PIC Disclosure Letter:

            (a) Neither PIC nor any of its Subsidiaries is a party to or bound
by any (i) collective bargaining or similar agreement with any labor
organization or (ii) work rules or practices agreed to with any labor
organization or employee association applicable to employees of PIC or any of
its Subsidiaries.

            (b) None of the employees of PIC or any of its Subsidiaries is
represented by any labor organization, and PIC has no knowledge of any current
union organizing activities among the employees of PIC or any of its
Subsidiaries, nor does any question concerning representation exist concerning
such employees.

            (c) There are no labor strikes, labor disputes, work stoppages,
lockouts or material grievances pending or, to the knowledge of PIC, threatened
involving the employees of PIC or any of its Subsidiaries, and during the past
five (5) years there has not been any such actions.

            (d) There are no complaints, charges or claims against PIC or any of
its Subsidiaries pending or, to the knowledge of PIC, threatened to be brought
or filed with any Governmental Authority in connection with the employment by
PIC or any of its Subsidiaries of any individual, including, without limitation,
any claim relating to employment discrimination, equal pay, sexual harassment,
employee safety and health, wages and hours or workers' compensation.

            (e) To the knowledge of PIC, neither PIC nor any of its Subsidiaries
has received notice of the intent of any Governmental Authority responsible for
the enforcement of labor or employment Laws to conduct an investigation with
respect to or relating to PIC or any of its Subsidiaries, and no such
investigation is in progress.

            (f) During the last five (5) years, neither PIC nor any of its
Subsidiaries has effectuated a "plant closing" or a "mass layoff" (as such terms
are defined in the Worker Adjustment and Retraining Notification Act (the "WARN
Act")), and neither PIC nor any of its Subsidiaries has been affected by any
transaction or engaged in layoffs or employment terminations sufficient in
number to trigger application of any Law that is similar to the WARN Act.

            (g) None of the employees of PIC or any of its Subsidiaries has
suffered an "employment loss" (as defined in the WARN Act) during the ninety
(90) day period prior to the date of this Agreement.

            Section 4.16 Taxes. Except as set forth in Section 4.16 of the PIC
Disclosure Letter:

            (a) Each of PIC, its Subsidiaries and any consolidated, affiliated,
combined or unitary group of which PIC or any of its Subsidiaries is a member
has (i) timely filed (or

                                       21


there have been timely filed on its behalf) with the appropriate Tax Authorities
all income and other Tax Returns required to be filed by it or them (giving
effect to all extensions) (except for delays or latenesses in filing of short
duration the occurrence of which has not had and will not have, individually or
in the aggregate, a Material Adverse Effect on PIC or any of its Subsidiaries)
and such Tax Returns are true, correct and complete in all material respects,
(ii) timely (giving effect to all extensions) paid in full (or there has been
timely (giving effect to all extensions) paid in full on its behalf) all
material income and other Taxes required to have been paid by it or them, and
(iii) made adequate provision (or adequate provision has been made on its
behalf) for all accrued Taxes not yet due.

            (b) There are no Liens for Taxes upon any property or assets of PIC
or any Subsidiary of PIC, except for Liens for Taxes not yet due and payable.

            (c) Each of PIC and its Subsidiaries has complied in all material
respects with all applicable Laws relating to the withholding of Taxes and
payment thereof.

            (d) As of the date of this Agreement, no federal, state, local or
foreign audits or other administrative proceedings or court proceedings are
presently pending with regard to any Taxes or Tax Returns of PIC or any of its
Subsidiaries, and neither PIC nor any Subsidiary of PIC has received a written
notice of any pending or proposed claims, audits or proceedings with respect to
Taxes.

            (e) Neither PIC nor any of its Subsidiaries has granted in writing
any power of attorney which is currently in force with respect to any Taxes or
Tax Returns.

            (f) Neither PIC nor any of its Subsidiaries has requested an
extension of time within which to file any Tax Return which has not since been
filed and no currently effective waivers, extensions, or comparable consents
regarding the application of the statute of limitations with respect to Taxes or
Tax Returns has been given by or on behalf of PIC or any of its Subsidiaries.

            (g) Neither PIC nor any of its Subsidiaries is a party to any
Contract providing for the allocation, sharing or indemnification of Taxes.

            (h) The federal income Tax Returns of PIC and each of its
Subsidiaries have been examined and any disputes relating thereto have been
settled with the Internal Revenue Service (or the applicable statutes of
limitation for the assessment of Taxes for such periods have expired) for all
periods ending on or before December 31, 2000.

            (i) Neither PIC nor any of its Subsidiaries has been included in any
"consolidated," "unitary" or "combined" Tax Return (other than Tax Returns which
include only PIC and any of its Subsidiaries) provided for under the laws of the
United States, any foreign jurisdiction or any state or locality with respect to
Taxes for any taxable year.

            (j) Neither PIC nor any of its Subsidiaries has constituted either a
"distributing corporation" or a "controlled corporation" (within the meaning of
Section 355(a)(1)(A) of the Code) in a distribution of stock to which Section
355 of the Code (or so

                                       22


much of Section 356 of the Code as relates to Section 355 of the Code) applies
and which occurred within two years of the date of this Agreement.

            (k) Neither PIC nor any of its Subsidiaries have agreed, or is
required, to make any material adjustment under Section 481 of the Code
affecting any taxable year ending after December 31, 1999.

            (l) No claim has been made in writing by any Tax Authority in a
jurisdiction where PIC or any of its Subsidiaries does not file Tax Returns that
any such entity is, or may be, subject to taxation by that jurisdiction.

            (m) Neither PIC nor any of its Subsidiaries has received any written
notice of deficiency or assessment from any Tax Authority for any amount of Tax
that has not been fully settled or satisfied, and to the knowledge of PIC, no
such deficiency or assessment is proposed.

            Section 4.17 Certain Contracts.

            (a) PIC Contracts. Section 4.17(a) of the PIC Disclosure Letter sets
forth, with respect to or otherwise affecting PIC or any of its Subsidiaries:
(i) any Contract relating to the incurrence of indebtedness (including sale and
leaseback transactions, capitalized lease transactions and other similar
financing transactions), including any such Contract that contains provisions
that in any non-de-minimis manner restrict, or may restrict, the conduct of
business of the issuer thereof as currently conducted that will be acquired,
directly or indirectly, by Parent, (ii) any non-competition Contract or any
other Contract or obligation that purports to limit in any respect the manner or
the localities in which the business of PIC or any of its Subsidiaries, or
following consummation of the transactions contemplated by this Agreement,
Parent's businesses, is or would be conducted, (iii) any Contract providing for
the indemnification by PIC or any of its Subsidiaries of any Person, (iv) any
joint venture or partnership Contract, (v) any Contract that grants any right of
first refusal or right of first offer or similar right or that limits or
purports to limit the ability of PIC or any of its Subsidiaries to own, operate,
sell, transfer, pledge or otherwise dispose of any material amount of assets or
business (other than in connection with financing transactions or Contracts
entered into in the ordinary course of business and consistent with past
practice that require that the particular transactions that are the subject
thereof to be conducted with the counterparty or counterparties to the
contract), (vi) any Contract providing for any future payments that are
conditioned, in whole or in part, on a change of control or similar event, (vii)
any Contract that contains a "most favored nation" clause or requires any type
of exclusive dealing or similar arrangement involving PIC or any of its
Subsidiaries, (viii) any agency, broker, sales representative, marketing or
similar Contract involving annual payments in excess of seventy-five thousand
dollars ($75,000), (ix) any agreement or understanding with, or restriction
imposed by, a Governmental Authority or other Third Party relating to the
payment of dividends or maintenance of capital by PIC or any of its
Subsidiaries, (x) any agreement or commitment to make any loan, advance or
capital contribution to, or investment in, any Person other than a direct or
indirect wholly-owned Subsidiary of PIC, (xi) all leases, subleases, licenses or
other Contracts, including all amendments, extensions, renewals, guaranties or
other Contracts with respect thereto, pursuant to which PIC or any of its
Subsidiaries use or hold any material Leased Real Property ("Leases"), (xii) any
agreement granting or obtaining any right to use or

                                       23


practice any rights under any material Intellectual Property (other than
licenses for readily available commercial software having an acquisition price
of less than twenty-five thousand dollars ($25,000)), (xiii) any material
outsourcing agreements (including those pursuant to which call center or
customer service functions are performed), (xiv) any other Contracts not listed
above that involve annual revenues or annual expenditures in excess of one
hundred thousand dollars ($100,000), and (xv) any other Contracts not listed
above that are material to PIC and its Subsidiaries taken as a whole (the
Contracts of a type covered by clauses (i) to (xv) being referred to as the
"Material Contracts"). Prior to the date of this Agreement, PIC has made
available to Parent true and correct copies of each Material Contract (including
any amendments or supplements thereto).

            (b) Except as would not reasonably be expected to have a Material
Adverse Effect on PIC: (i) each PIC Contract (as defined below) is a legal,
valid and binding obligation of PIC or the applicable Subsidiary of PIC (as the
case may be) and, to the knowledge of PIC, of each other party thereto,
enforceable against each such party in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer and other similar laws affecting the
rights and remedies of creditors generally and general principles of equity,
(ii) neither PIC nor any Subsidiary of PIC (as the case may be) nor, to the
knowledge of PIC, any other party to a PIC Contract, is in material violation or
default of any term of any PIC Contract, and (iii) to the knowledge of PIC, no
condition or event exists that, (with the giving of notice or the passage of
time, or both), would be reasonably expected to constitute a material violation
or default by PIC or any of its Subsidiaries, as the case may be, or any other
party to a PIC Contract, or permit the termination, modification, cancellation
or acceleration of performance of the obligations of PIC or any of its
Subsidiaries, as the case may be, or any other party to the PIC Contract. For
purposes of this Agreement, the term "PIC Contracts" means, collectively, each
Material Contract and PIC-Produced Insurance Contract, and each other Contract
to which PIC or any of its Subsidiaries is a party (without regard to any dollar
or materiality thresholds) or to which PIC or any of its Subsidiaries, or any of
their respective businesses or assets, is bound.

            (c) Except as set forth in Section 4.17(c) of the PIC Disclosure
Letter or as would not reasonably be expected to have a Material Adverse Effect
on PIC, since December 31, 2003: (i) no Third Party to any PIC Contract has
canceled or otherwise terminated any PIC Contract or has provided written or
oral notice to PIC or any of its Subsidiaries of its intent to do so and (ii) to
the knowledge of PIC, no Third Party to any PIC Contract is unable to continue
to perform its obligations thereunder.

            Section 4.18 Intellectual Property; Software.

            (a) As used herein: (i) "Intellectual Property" means all United
States and foreign (A) trademarks, service marks, trade names, Internet domain
names, designs, logos, and slogans, together with goodwill, registrations and
applications relating to the foregoing ("Trademarks"), (B) patents and pending
patent applications, patent disclosures, and any and all divisions,
continuations, continuations-in-part, reissues, reexaminations, and any
extensions thereof, any counterparts claiming priority therefrom, utility
models, patents of importation/confirmation, certificates of invention and like
statutory rights ("Patents"), (C) registered and unregistered copyrights
(including those in Software) and all registrations and applications to register
the same ("Copyrights"), and (D) confidential information, know-how, inventions,

                                       24


processes, formulae, algorithms, models and methodologies ("Trade Secrets"),
(ii) "IP Licenses" means all licenses and agreements (excluding "click-wrap" or
"shrink-wrap" agreements or agreements contained in "off-the-shelf" Software or
the terms of use or service for any Web site) pursuant to which PIC and its
Subsidiaries have acquired rights in (including usage rights) to any
Intellectual Property, or licenses and agreements pursuant to which PIC and its
Subsidiaries have licensed or transferred the right to use any Intellectual
Property, including license agreements, settlement agreements and covenants not
to sue, (iii) "Software" means all computer programs, including any and all
software implementations of algorithms, models and methodologies whether in
source code or object code form, databases and compilations, including any and
all data and collections of data, all documentation, including user manuals and
training materials, related to any of the foregoing, and (iv) "PIC Intellectual
Property" means the Intellectual Property and Software owned by PIC or its
Subsidiaries and used in its business.

            (b) Section 4.18(b) of the PIC Disclosure Letter sets forth, for the
following Intellectual Property owned by PIC and its Subsidiaries, a complete
and accurate list of all U.S., state and foreign: (i) Patents; (ii) registered
Trademarks (including Internet domain name registrations) and material
unregistered Trademarks and service marks; and (iii) registered Copyrights.

            (c) Section 4.18(c) of the PIC Disclosure Letter sets forth all
material Software that is owned by PIC or its Subsidiaries and used in its
business and all material IP Licenses.

            (d) PIC, or one of its Subsidiaries, owns all PIC Intellectual
Property, free and clear of all Liens, except Permitted Liens.

            (e) All registered Trademarks and registered Copyrights owned by PIC
and its Subsidiaries are valid and subsisting, in full force and effect and have
not lapsed, expired or been abandoned, and are not the subject of any opposition
filed with the United States Patent and Trademark Office or any other
intellectual property registry.

            (f) PIC Intellectual Property and the IP Licenses constitute all the
Intellectual Property, Software and IP Licenses that are necessary for the
continuing conduct and operation of PIC's business in all respects as conducted
and operated by the immediately prior to the date of this Agreement.

            (g) Except as set forth in Section 4.18(g) of the PIC Disclosure
Letter:

                        (i) no infringement claims, or to the knowledge of PIC,
            threat of infringement claims, have been asserted by any Third Party
            in writing against PIC or any of its Subsidiaries related to the use
            in the conduct of the businesses of PIC and its Subsidiaries of any
            Intellectual Property or Software, or challenging or questioning the
            validity or effectiveness of any IP License;

                        (ii) no settlement agreements, consents, judgments,
            orders, forbearances to sue or similar obligations limit or restrict
            PIC's or any Subsidiary's rights and to any PIC Intellectual
            Property;

                                       25


                        (iii) to the knowledge of PIC, the conduct of the
            businesses of PIC and its Subsidiaries does not infringe,
            misappropriate, dilute or otherwise violate any Intellectual
            Property rights of any Third Party;

                        (iv) PIC and its Subsidiaries have not licensed or
            sublicensed their rights in any PIC Intellectual Property, other
            than pursuant to the IP Licenses;

                        (v) to the knowledge of PIC, no Third Party is
            misappropriating, infringing, diluting or violating any Intellectual
            Property owned by PIC or its Subsidiaries; and

                        (vi) the consummation of the transactions contemplated
            hereby will not result in the termination of PIC's and its
            Subsidiaries' rights to own or use any of the PIC Intellectual
            Property, nor will such consummation require the consent of any
            Third Party in respect of any IP Licenses.

            Section 4.19 Properties and Assets.

            (a) Neither PIC nor any of its Subsidiaries owns any real property.
Section 4.19(a) of the PIC Disclosure Letter sets forth the address or other
description of all leasehold or subleasehold estates and other rights to use or
occupy any land or buildings held by or for PIC or its Subsidiaries (the "Leased
Real Property"). PIC has delivered or made available to Parent a true and
complete copy of each of the Leases. Except as set forth in Section 4.19(a) of
the PIC Disclosure Letter, with respect to each of the Leases: (i) there are no
material disputes with respect to such Lease; (ii) no security deposit or
portion thereof deposited with respect to such Lease has been applied in respect
of a breach or default under such Lease that has not been redeposited in full;
(iii) neither PIC or any of its Subsidiaries owes, nor will they owe in the
future, any brokerage commissions or finder's fees with respect to such Lease;
(iv) the other party to such Lease is not an affiliate of, and otherwise does
not have any economic interest in, PIC or any of its Subsidiaries; (v) PIC and
its Subsidiaries have not subleased, licensed or otherwise granted any Person
the right to use or occupy such Leased Real Property or any portion thereof;
(vi) PIC and its Subsidiaries have not collaterally assigned or granted any
other security interest in such Lease or any interest therein; and (vii) there
are no Liens granted by PIC and its Subsidiaries, except for Permitted Liens, on
the estate or interest created by such Lease.

            (b) PIC and its Subsidiaries have, and following the Closing will
continue to have, good and valid title to their owned assets (except for
Permitted Liens), or in the case of assets and properties that they lease,
license or have other rights in, valid rights by lease, license or other
agreement to use, all assets and properties (in each case, tangible and
intangible) necessary and desirable to permit PIC and its Subsidiaries to
conduct their business as currently conducted. The assets and properties (in
each case, tangible and intangible) owned or used by PIC are adequate in all
material respects for their current use.

            Section 4.20 Environmental Matters. Except for matters that are not
material to PIC, (a) no written notice, notification, demand, request for
information, citation, summons, complaint or order has been received by, and no
action, claim, suit, proceeding or review or, to

                                       26


the knowledge of PIC, investigation is pending or, to the knowledge of PIC or
any of its Subsidiaries, threatened by any Person against, PIC or any of its
Subsidiaries with respect to any matters relating to or arising out of any
Environmental Law, (b) PIC and its Subsidiaries have been and are in compliance
in all material respects with all applicable Environmental Laws, including
possessing all material permits, authorizations, licenses, exemptions and other
governmental authorizations required for its operations under applicable
Environmental Laws, and (c) with respect to any Leased Real Property leased by
PIC or its Subsidiaries, there have been, to the knowledge of PIC, no Releases
of Hazardous Materials that have or could reasonably be expected to result in a
claim against PIC or its Subsidiaries. Neither PIC nor any of its Subsidiaries
has entered into any agreement that may require them to pay to, reimburse,
guarantee, pledge, defend, indemnify or hold harmless any Person from or against
any liabilities or costs arising out of or related to the generation,
manufacture, use, transportation or disposal of Hazardous Materials, or
otherwise arising in connection with or under Environmental Laws.

            Section 4.21 Transactions with Affiliates. Except as set forth in
Section 4.21 of the PIC Disclosure Letter, there are no outstanding amounts
payable to or receivable from, or advances by PIC or any of its Subsidiaries to,
and neither PIC nor any of its Subsidiaries is otherwise a creditor or debtor
to, or party to any Contract with, any shareholder, director, officer, employee,
affiliate or associate of PIC or any of its Subsidiaries, or any relative of any
of the foregoing.

            Section 4.22 Insurance. Section 4.22 of the PIC Disclosure Letter
sets forth a list of all insurance policies and fidelity bonds relating to the
assets, business, operations, employees, officers or directors of PIC and its
Subsidiaries and PIC has provided or made available to Parent true and complete
copies of all such insurance policies and fidelity bonds. There is no claim by
PIC or any of its Subsidiaries pending under any of such policies or bonds as to
which coverage has been, to the knowledge of PIC, questioned, denied or disputed
by the underwriters of such policies or bonds or in respect of which such
underwriters have reserved their rights. All premiums payable under all such
policies and bonds have been timely paid and PIC and its Subsidiaries have
otherwise complied fully with the terms and conditions of all such policies and
bonds. Such policies of insurance and bonds (or other policies and bonds
providing substantially similar insurance coverage) have been in effect since
December 31, 2003 and remain in full force and effect. PIC and each of its
Subsidiaries maintain insurance policies and fidelity bonds (including financial
institutions bond, property and casualty insurance, professional liability
insurance and workers' compensation insurance) of the type and in amounts
customarily carried by Persons conducting businesses similar to PIC's business.
PIC has no knowledge of any threatened termination of, premium increase with
respect to, or material alteration of coverage under, any of such policies or
bonds.

            Section 4.23 Finders' or Advisors' Fees. Except for Lazard Freres &
Co. LLC ("Lazard"), there is no investment banker, broker, finder or other
intermediary that has been retained by or is authorized to act on behalf of PIC
or any of its Subsidiaries who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement. PIC has made
available to Parent a complete and correct copy of the agreement between PIC and
Lazard pursuant to which such firm would be entitled to any payment relating to
this Agreement or the transactions contemplated hereby and such agreement is the
only agreement providing for

                                       27


the payment of any consideration to Lazard with respect to this Agreement or the
transactions contemplated by this Agreement.

            Section 4.24 Ownership of PNG Shares. As of the date of this
Agreement, PIC Holdings, Inc. ("PIC Holdings") is the sole record and beneficial
owner of four million six hundred thirty-one thousand two hundred fifty
(4,631,250) shares of PNG Common Stock (the "PNG Shares") free and clear of all
Liens, except as set forth in Section 4.24 of the PIC Disclosure Letter. Neither
PIC nor any of its Subsidiaries owns, of record or beneficially, any shares of
capital stock or other voting securities of PNG other than the PNG Shares. PIC
Holdings has the sole right to vote the PNG Shares at any PNG shareholders'
meeting. For avoidance of doubt, none of the representations and warranties
contained in Article IV of this Agreement are made with respect to PNG or the
PNG Common Stock other than as set forth in this Section 4.24 and Section 4.29
below.

            Section 4.25 Disclosure Documents. None of the information supplied
or to be supplied by or on behalf of PIC for inclusion or incorporation by
reference in the joint proxy statement/prospectus relating to the matters to be
submitted to PNG's shareholders at the PNG shareholder meeting related to the
Merger and to the Parent shareholders at the Parent shareholder meeting related
to the Merger (such joint proxy statement/prospectus, and any amendments or
supplements thereto, the "Joint Proxy Statement/Prospectus") or any amendment or
supplement thereto shall, at the date the Joint Proxy Statement/Prospectus or
any such amendment or supplement is first mailed to the shareholders of PNG and
Parent, contain any untrue statement of a material fact or omit any material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the
information supplied or to be supplied by or on behalf of PIC for inclusion or
incorporation by reference in the Registration Statement on Form S-4 with
respect to the issuance of Parent Class A common shares issuable in the Merger
(such Form S-4, and any amendments or supplements thereto, the "Form S-4") or
any amendment or supplement thereto will, at the time it becomes effective under
the Securities Act, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, not misleading. No representation or warranty is made by PIC
in this Section 4.25 with respect to statements made or incorporated by
reference therein based on information that was not supplied by or on behalf of
PIC for inclusion or incorporation by reference in the Joint Proxy
Statement/Prospectus or the Form S-4.

            Section 4.26 Risk Management. PIC and each of its Subsidiaries have
in place risk management policies and procedures sufficient in scope and
operation to protect against risks of the type and in amounts reasonably
expected to be incurred by Persons of similar size and in similar lines of
business as PIC and each such Subsidiary.

            Section 4.27 Derivatives. Except as set forth in Section 4.27 of the
PIC Disclosures Letter, neither PIC nor any of its Subsidiaries holds any
derivative instruments, including swaps, caps, floors and option agreements,
whether entered into for PIC's account, or for the account of any of its
Subsidiaries or their customers.

            Section 4.28 Disclosure. The representations and warranties
contained in this Article IV do not contain any untrue statement of material
fact or omit to state any material fact

                                       28


necessary to make any statement contained in this Article IV not misleading, in
light of the circumstances under which they are made.

            Section 4.29 Merger Agreement Representations and Warranties. The
representations and warranties made by PNG in Article IV of the Merger Agreement
are true and correct.

            Section 4.30 No Other Representations. EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS ARTICLE IV, THE PIC SHARES ARE
BEING SOLD AND TRANSFERRED PURSUANT TO THIS AGREEMENT "AS IS, WHERE IS," AND
NEITHER PIC NOR THE SHAREHOLDERS ARE MAKING ANY OTHER REPRESENTATIONS OR
WARRANTIES, WRITTEN OR ORAL, STATUTORY, EXPRESS OR IMPLIED, CONCERNING THE PIC
SHARES OR THE BUSINESS, ASSETS, OR LIABILITIES OF PIC OR ANY SUBSIDIARY OF PIC,
INCLUDING, IN PARTICULAR, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, ALL OF WHICH ARE HEREBY EXPRESSLY EXCLUDED AND DISCLAIMED.
PARENT AND BUYER HEREBY WAIVE AND RELINQUISH ALL RIGHTS AND PRIVILEGES ARISING
OUT OF, OR WITH RESPECT OR IN RELATION TO, ANY REPRESENTATIONS, WARRANTIES, AND
COVENANTS, WHETHER EXPRESS OR IMPLIED, WHICH MAY HAVE BEEN MADE OR GIVEN, OR
WHICH MAY BE DEEMED TO HAVE BEEN MADE OR GIVEN BY PIC OR THE SHAREHOLDERS, OTHER
THAN OTHERWISE SET FORTH HEREIN.

                                    ARTICLE V

                         REPRESENTATIONS AND WARRANTIES
                               OF THE SHAREHOLDERS

            Each of the Shareholders, severally, and not jointly, represents and
warrants to Parent as follows:

            Section 5.1 Ownership of Stock; Title.

            (a) Such Shareholder is the sole lawful record and beneficial owner
of the PIC Shares set forth opposite such Shareholder's name on Exhibit A, which
ownership is free and clear of all Liens. Such Shareholder is not a party to any
Contract creating rights with respect to such PIC Shares in any Person and such
Shareholder has the full power and legal right to sell, assign, transfer and
deliver such PIC Shares. There are no existing warrants, options, stock purchase
agreements, redemption agreements, restrictions of any nature, voting trust
agreements, proxies, calls or rights to subscribe of any character relating to
the PIC Shares owned by such Shareholder. Such Shareholder has not received any
notice of any adverse claim to the ownership of any of the PIC Shares (or any
capital stock or other ownership interest of PIC or its predecessors) owned by
such Shareholder, and is not aware of existing facts that would give rise to any
adverse claim to the ownership of the PIC Shares (or any capital stock or other
ownership interest of PIC or its predecessors) owned by such Shareholder. On the
Closing Date, such Shareholder shall have good and marketable title to the PIC
Shares owned by such Shareholder, free and clear of all Liens. The delivery of
certificates for the PIC Shares owned by such

                                       29


Shareholder to Buyer pursuant to the provisions of this Agreement, subject to
consummation of the transactions contemplated hereby, will transfer to Parent
good and marketable title to the PIC Shares owned by such Shareholder, free and
clear of all Liens, except for those created by Parent or Buyer.

            (b) The Shareholders are, collectively, the sole record and
beneficial owners of all of the issued and outstanding PIC Shares, free and
clear of all Liens.

            Section 5.2 Authority.

            (a) Such Shareholder has the requisite power and authority and has
full legal capacity necessary to execute, deliver and perform his, her or its
obligations under this Agreement and all other agreements and instruments to be
executed and delivered by such Shareholder hereunder or in connection herewith
and to carry out such Shareholder's obligations hereunder and thereunder and the
transactions contemplated hereby. No other proceedings on the part of such
Shareholder are necessary to authorize such execution, delivery and performance.
This Agreement has been duly and validly executed and delivered by such
Shareholder and, assuming due authorization, execution and delivery of this
Agreement by the other parties hereto, constitutes a valid and binding agreement
of such Shareholder enforceable against it in accordance with its terms, except
to the extent that such enforcement may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar Laws, now or hereafter
in effect, affecting creditors' rights generally, and to general equity
principles.

            (b) Except as set forth in Section 5.2(b) of the PIC Disclosure
Letter, no Person has any community property rights by virtue of marriage or
otherwise in any of the PIC Shares.

            Section 5.3 No Violation; Consents and Approvals.

            (a) The execution and delivery of this Agreement by such Shareholder
and the consummation of the transactions contemplated hereby require no action
by or in respect of, or filing with, any Governmental Authority other than (i)
compliance with any applicable requirements of the HSR Act and (ii) those set
forth in Section 4.4(a) of the PIC Disclosure Letter which are required under
federal and state Laws, rules and regulations governing insurance and insurance
companies.

            (b) Except as set forth in Section 5.3(b) of the PIC Disclosure
Letter, neither the execution, delivery or performance by such Shareholder of
this Agreement nor the consummation by such Shareholder of the transactions
contemplated hereby nor compliance by such Shareholder with any of the
provisions hereof will (i) conflict with or result in any breach of any
organizational and governing documents of such Shareholder that is a trust, (ii)
assuming compliance with the matters referred to in Section 5.3(a), conflict
with or result in any violation of any provision of any Law binding upon or
applicable to such Shareholder, (iii) require the consent, approval or
authorization of, or notice to or filing with, any Third Party with respect to,
result in any violation or breach of, or constitute (with or without due notice
or lapse of time or both) a default (or give rise to any right of termination,
cancellation, amendment, or acceleration of any right or obligation of such
Shareholder or to a loss of any benefit to which such

                                       30


Shareholder is entitled) under, any provision of any Contract or (iv) result in
the creation or imposition of any Lien (other than a Permitted Lien) on any PIC
Shares held by such Shareholder.

            Section 5.4 Outstanding Obligations. Except as set forth in Section
5.4 of the PIC Disclosure Letter, PIC and its Subsidiaries have no outstanding
liabilities or obligations to, and there are no amounts due from PIC or any of
its Subsidiaries to, any Shareholder (or any of his, her or its relatives,
spouse (and relatives of such spouse), shareholders, partners, directors,
officers or affiliates) and such Shareholder (and any of his, her or its
relatives, spouse (and relatives of such spouse), shareholders, partners,
directors, officers and affiliates) has no Liability to or from PIC.

            Section 5.5 Disclosure Documents. None of the information supplied
or to be supplied by or on behalf of such Shareholder for inclusion or
incorporation by reference in the Joint Proxy Statement/Prospectus or any
amendment or supplement thereto shall, at the date the Joint Proxy
Statement/Prospectus or any such amendment or supplement is first mailed to the
shareholders of PNG and Parent, contain any untrue statement of a material fact
or omit any material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. None of
the information supplied or to be supplied by or on behalf of such Shareholder
for inclusion or incorporation by reference in the Form S-4 or any amendment or
supplement thereto will, at the time it becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
not misleading. No representation or warranty is made by such Shareholder in
this Section 5.5 with respect to statements made or incorporated by reference
therein based on information that was not supplied by or on behalf of such
Shareholder for inclusion or incorporation by reference in the Joint Proxy
Statement/Prospectus or the Form S-4.

                                   ARTICLE VI

               REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER

            Parent and Buyer, jointly and severally, represent and warrant to
PIC and the Shareholders that:

            Section 6.1 Organization and Qualification. Parent was duly
organized as an exempted company formed with limited liability under the laws of
the Cayman Islands and is validly existing and in good standing under the Laws
of the Cayman Islands. Buyer is a corporation duly organized, validly existing
and in good standing under the Commonwealth of Pennsylvania. Each of Parent and
Buyer has the requisite corporate power and corporate authority and any
necessary Governmental Authority, franchise, license, certificate, or permit to
own, operate and lease the properties that it purports to own, operate or lease
and to carry on its business as it is now being conducted, and is duly qualified
as a foreign corporation to do business, and is in good standing in each
jurisdiction where the character of its properties owned, operated or leased or
the nature of its activities makes such qualification necessary, except for such
failures to be so qualified and in good standing that do not, or would not be
reasonably expected to, result in a Material Adverse Effect on Parent.

                                       31


            Section 6.2 Corporate Authorization; Board Action. Each of Parent
and Buyer has the requisite corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of each of Parent and Buyer and no other corporate proceedings on
the part of either Parent or Buyer are necessary to authorize the execution and
delivery of this Agreement or to consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered by each of Parent
and Buyer and, assuming due authorization, execution and delivery of this
Agreement by the other parties hereto, constitutes a valid and binding agreement
of each of Parent and Buyer enforceable against each such party in accordance
with its terms, except to the extent that such enforcement may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
Laws, now or hereafter in effect, affecting creditors' rights generally, and to
general equity principles.

            Section 6.3 Consents and Approvals; No Violations.

            (a) The execution, delivery and performance by Parent and Buyer of
this Agreement and the consummation by Parent, its Subsidiaries and Buyer of the
transactions contemplated hereby require no action by or in respect of, or
notice to or filing with, any Governmental Authority (including with respect to
any Subsidiary of Parent) other than (i) compliance with any applicable
requirements of the HSR Act, (ii) compliance with any applicable requirements of
the Exchange Act and the rules and regulations promulgated thereunder, (iii)
compliance with any applicable requirements of the Securities Act and the rules
and regulations promulgated thereunder, and (iv) those set forth in Section
6.3(a) of the disclosure letter delivered by Parent to PIC simultaneously with
the execution of this Agreement (the "Parent Disclosure Letter") that are
required under federal and state Laws governing insurance and insurance
companies. Section 6.3(a) of the Parent Disclosure Letter sets forth each such
approval and identifies the applicable Governmental Authority.

            (b) Except as set forth in Section 6.3(b) of the Parent Disclosure
Letter, neither the execution, delivery or performance by Parent and Buyer of
this Agreement nor the consummation by Parent and Buyer of the transactions
contemplated hereby nor compliance by Parent or Buyer with any of the provisions
hereof or thereof will (i) conflict with or result in any breach of any
provisions of the memorandum and articles of association of Parent or the
similar organizational and governing documents of its Subsidiaries, (ii)
conflict with or result in any violation of any provision of any Law binding
upon or applicable to Parent or any of Subsidiaries, (iii) require the consent,
approval or authorization of, or notice to or filing with, any Third Party with
respect to, result in any violation or breach of, or constitute (with or without
due notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation, amendment, or acceleration of any right or obligation
of Parent or its Subsidiaries or to a loss of any benefit to which Parent or any
of its Subsidiaries is entitled) under any provision of any Contract binding
upon Parent or its Subsidiaries or (iv) result in the creation or imposition of
any Lien (other than Permitted Liens) on any asset of Parent or any of its
Subsidiaries, except in the case of (ii), (iii) and (iv) for such conflicts,
violations, breaches, defaults, rights or losses, or the failure to obtain any
such consents or approvals or to provide such notices or make such filings, that
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent.

                                       32


            Section 6.4 Investment Representation. Buyer is acquiring the PIC
Shares for investment for its own account, not as a nominee or agent, and not
with a view to, or for resale in connection with, any distribution thereof in
violation of the Securities Act.

                                   ARTICLE VII

                                    COVENANTS

            Section 7.1 Conduct of PIC.

            (a) PIC covenants and agrees that the business of PIC and its
Subsidiaries shall be conducted in all material respects only in the ordinary
course of business and consistent with past practice and, to the extent
consistent therewith, PIC shall use (and PIC shall cause its Subsidiaries to
use) commercially reasonable best efforts to preserve its business organization
intact and maintain its existing relations with customers, agents, underwriters,
brokers, suppliers, employees, creditors and business partners.

            (b) Without limiting the provisions of Section 7.1(a), except as set
forth in Section 7.1(b) of the PIC Disclosure Letter, PIC covenants and agrees
that, except as expressly provided in this Agreement or as required to comply
with applicable Law, or with the prior written consent of Parent, from and after
the date of this Agreement and prior to the Closing, PIC shall not, and shall
not permit any of its Subsidiaries to:

                        (i) amend or propose to amend its articles of
            incorporation or bylaws or similar organizational documents;

                        (ii) issue, sell, transfer, pledge, dispose of or
            encumber any additional shares of, or securities convertible into or
            exchangeable for, or options, warrants, calls, commitments or rights
            of any kind to acquire, any shares of capital stock of any class of
            PIC or its Subsidiaries;

                        (iii) (A) directly or indirectly, split, combine or
            reclassify the outstanding shares of capital stock of PIC, or any
            outstanding capital stock of any of the Subsidiaries of PIC; or (B)
            redeem, purchase or otherwise acquire directly or indirectly any of
            its capital stock;

                        (iv) declare, set aside or pay any dividend or other
            distribution payable in cash, stock or property with respect to its
            capital stock;

                        (v) adopt a plan of complete or partial liquidation or
            dissolution;

                        (vi) (A) increase the compensation or benefits payable
            to any director, officer, employee or consultant of PIC or any of
            its Subsidiaries; (B) grant any severance or termination pay to (or
            amend any such existing arrangement with) any director, officer,
            employee or consultant of PIC or any of its Subsidiaries; (C) enter
            into any employment, deferred compensation or other similar
            agreement (or amend any such existing agreement) with any director,
            officer, employee or consultant of PIC or any of its Subsidiaries;
            (D) increase any benefits

                                       33


            payable under any existing severance or termination pay policies or
            agreements or employment agreements; or (E) permit any director,
            officer, employee or consultant of PIC or any of its Subsidiaries
            who is not already a party to an agreement or a participant in a
            plan providing benefits upon or following a "change in control" to
            become a party to any such agreement or a participant in any such
            plan, other than pursuant to a pre-existing contractual commitment
            or as required by applicable Law;

                        (vii) (A) adopt any new benefit plan, terminate any PIC
            Employee Plan or modify any PIC Employee Plan in a way that could
            result in additional cost to Parent, PIC or any of their respective
            Subsidiaries, except for any amendments to a PIC Employee Plan
            required to maintain its qualified plan status under Section 401(a)
            of the Code; (B) modify any actuarial cost method, assumption or
            practice used in determining benefit obligations, annual expense and
            funding for any PIC Employee Plan, except to the extent required by
            GAAP; (C) subject to any ERISA fiduciary obligation, modify the
            investment philosophy of the PIC Employee Plan trusts or maintain an
            asset allocation that is not consistent with such philosophy; (D)
            subject to any ERISA fiduciary obligation, enter into any
            outsourcing agreement, or any other material contract relating to
            the PIC Employee Plans or management of any benefit plan trusts; (E)
            grant any ad hoc pension increase; or (F) establish any new or fund
            any existing "rabbi" or similar trust (except in accordance with the
            current terms of any PIC Employee Plan), or enter into any other
            arrangement for the purpose of securing non-qualified retirement
            benefits, termination benefits or deferred compensation;

                        (viii) modify, amend or terminate any Material Contracts
            or PIC-Produced Insurance Contracts or waive, release or assign any
            material rights or claims, except in the ordinary course of business
            and consistent with past practice;

                        (ix) enter into any Contract that provides for
            risk-sharing or risk-retention by PIC or any of its Subsidiaries;

                        (x) enter into any material insurance transaction other
            than in the ordinary course of business and consistent with past
            practice;

                        (xi) permit any material insurance policy naming it as a
            beneficiary or a loss payable payee to be cancelled or terminated
            without notice to Parent or fail to renew coverage under any such
            policy;

                        (xii) (A) incur any indebtedness for borrowed money or
            issue debt securities or assume, guarantee or endorse, or otherwise
            as an accommodation become responsible for, the obligations of any
            Person (other than a wholly-owned Subsidiary of PIC) for borrowed
            money, except for indebtedness incurred under PIC's existing credit
            facilities in the ordinary course of business and consistent with
            past practice and in an aggregate amount not to exceed one hundred
            seventy-five thousand dollars ($175,000); (B) make any loans,
            advances or capital contributions to, or investments in, any other
            Person (other than to wholly-owned

                                       34


            Subsidiaries of PIC); or (C) enter into any material commitment or
            transaction (including any borrowing, capital expenditure or
            purchase, sale or lease of assets) requiring a capital expenditure
            by PIC or its Subsidiaries, other than capital expenditures pursuant
            to PIC's capital expenditures budget previously furnished to Parent
            and other capital expenditures that do not exceed one hundred
            thousand dollars ($100,000) in the aggregate;

                        (xiii) (A) make, revoke or change a material Tax
            election with respect to PIC or any of its Subsidiaries; (B) change
            a material method of reporting income or deductions for Tax purposes
            with respect to PIC or any of its Subsidiaries; (C) consent to
            extend the period of limitations for the payment or assessment of
            any material Tax with respect to PIC or any of its Subsidiaries; or
            (D) settle or compromise any material Tax liability of PIC or any of
            its Subsidiaries;

                        (xiv) change any of the accounting principles used by it
            unless required by GAAP;

                        (xv) pay, discharge or satisfy any Liabilities other
            than (A) the payment, discharge or satisfaction of any such
            Liabilities in the ordinary course of business and consistent with
            past practice and in accordance with their terms as in effect on the
            date of this Agreement (as previously disclosed to Parent) and (B)
            settlements or compromises of any litigation (whether or not
            commenced prior to the date of this Agreement) where the amount paid
            (after giving effect to insurance proceeds actually received) does
            not exceed one hundred thousand dollars ($100,000) in the aggregate
            for all such settlements or compromises;

                        (xvi) (A) acquire (by merger, consolidation, or
            acquisition of stock or assets) any Person or division thereof or
            make any investment in another Person (other than an entity that is
            a wholly-owned subsidiary of PIC as of the date of this Agreement
            and other than incorporation of a wholly-owned subsidiary of PIC)
            or, except in the ordinary course of business and consistent with
            past practice, acquire assets, or (B) sell, transfer, lease,
            license, pledge, dispose of, or encumber or authorize or propose the
            sale, pledge, disposition or Lien of any assets of PIC or any of its
            Subsidiaries, except in the case of clause (B) above, for sales,
            transfers, leases, licenses, pledges, dispositions or Liens (I)
            pursuant to existing Contracts (the terms of which have been
            previously disclosed to Parent) or (II) in the ordinary course of
            business and consistent with past practice; provided, that the fair
            market value of all assets sold, transferred, leased, licensed,
            pledged, disposed of or encumbered pursuant to this clause (II) does
            not exceed fifty thousand dollars ($50,000) in the aggregate;

                        (xvii) take any action, or fail to take any action, that
            would reasonably be expected to adversely affect or delay in any
            material respect the ability of any of the parties hereto to obtain
            any approval of any Governmental Authority required to consummate
            the transactions contemplated hereby;

                                       35


                        (xviii) take, or agree to commit to take, or omit to
            take, any action that would make any representation or warranty of
            PIC contained herein inaccurate in any respect at, or as of any time
            prior to, the Closing;

                        (xix) sell, transfer, pledge, dispose of, permit to
            exist any Lien on, any of the PNG Shares or any interest therein or
            relating thereto;

                        (xx) take any action, or fail to take any action, that
            could impose a material delay in consummating the transactions
            contemplated hereby; or

                        (xxi) enter into a Contract to do any of the foregoing,
            or authorize, recommend, propose or announce an intention to do any
            of the foregoing.

            Section 7.2 Conduct of the Shareholders. Each Shareholder covenants
and agrees that, except as expressly provided in this Agreement or as required
to comply with applicable Law, or with the prior written consent of Parent, from
and after the date of this Agreement and prior to the Closing, such Shareholder
shall not:

                        (i) sell, transfer, pledge, dispose of, or permit to
            exist any Lien on, any of such Person's PIC Shares or any interest
            therein or relating thereto;

                        (ii) take any action, or fail to take any action, that
            could reasonably be expected to adversely affect or delay in any
            material respect the ability of any of the parties hereto to obtain
            any approval of any Governmental Authority required to consummate
            the transactions contemplated hereby;

                        (iii) take, or agree to commit to take, or omit to take,
            any action that could make any representation or warranty of such
            Person contained herein inaccurate in any respect at, or as of any
            time prior to, the Closing;

                        (iv) take any action, or fail to take any action, that
            could impose a material delay in consummating the transactions
            contemplated hereby; or

                        (v) enter into a Contract to do any of the foregoing, or
            authorize, recommend, propose or announce an intention to do any of
            the foregoing.

            Section 7.3 Access to Information; Confidentiality.

            (a) PIC shall, and shall cause its Subsidiaries to, give Parent and
its Representatives reasonable access to the offices, Representatives,
properties, Books and Records of PIC and its Subsidiaries during normal business
hours, furnish to Parent and its Representatives such financial and operating
data and all other information as such Persons may reasonably request and shall
instruct its own Representatives to cooperate in all reasonable respects with
Parent in its investigation of the business of PIC and its Subsidiaries;
provided, however, that no investigation of PIC's business shall affect any
representation or warranty given by PIC or any Shareholder hereunder.

                                       36


            (b) All information provided or obtained in connection with the
transactions contemplated by this Agreement shall be held by Parent in
accordance with the Confidentiality Agreement, dated June 1, 2004, between
Parent and PIC (as amended to date, the "Confidentiality Agreement"). In the
event of a conflict or inconsistency between the terms of this Agreement and the
Confidentiality Agreement, the terms of this Agreement shall govern.

            (c) From and after the Closing Date, the Shareholders shall, and
shall cause their respective Representatives to, keep confidential any and all
information concerning PIC and its Subsidiaries, including the PIC Intellectual
Property, prior to the Closing Date.

            Section 7.4 Regulatory Filings; Commercially Reasonable Best
Efforts.

            (a) Each of Parent, Buyer, PIC, the Shareholders and the
Shareholders' Representative shall (i) promptly make or cause to be made the
filings required of such party or any of its Subsidiaries under the HSR Act and
any other antitrust Laws with respect to the Merger, the sale of the PIC Shares
and the Additional PNG Equity and the other transactions contemplated by this
Agreement, (ii) comply with any request under the HSR Act or such other
antitrust Laws for additional information, documents, or other material received
by such party or any of its Subsidiaries from the Federal Trade Commission or
the Department of Justice or any other Governmental Authority in respect of such
filings, the Merger, the sale of the PIC Shares and the Additional PNG Equity or
any other transactions contemplated by this Agreement, (iii) cooperate with the
other parties in connection with any such filing and in connection with
resolving any investigation or other inquiry of any such agency or other
Governmental Authority under any antitrust Laws with respect to any such filing,
the Merger, the sale of the PIC Shares and the Additional PNG Equity or any
other transactions contemplated by this Agreement, and (iv) use commercially
reasonable best efforts to resolve such objections, if any, as may be asserted
by any Governmental Authority with respect to the Merger, the sale of the PIC
Shares and the Additional PNG Equity or any other transactions contemplated
hereby under the antitrust Laws. PIC, the Shareholders and the Shareholders'
Representative shall not propose to enter into, or enter into, any agreement,
arrangement or understanding with any Governmental Authority with respect to any
Governmental Authority's review of the Merger, the sale of the PIC Shares and
the Additional PNG Equity or any other transactions contemplated by this
Agreement without the prior written consent of Parent.

            (b) Each of the parties agrees to use commercially reasonable best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the sale of the PIC Shares and the other
transactions contemplated by this Agreement, including (i) the obtaining of all
other necessary actions or non-actions, waivers, consents and approvals from
Governmental Authorities and the making of all other necessary registrations and
filings (including other filings with Governmental Authorities, if any), (ii)
the obtaining of all necessary consents, approvals or waivers from third
parties, (iii) the preparation of the Registration Statement on Form S-4 and the
Joint Proxy Statement/Prospectus concerning the Merger, and (iv) the execution
and delivery of any additional instruments necessary to consummate the
transactions contemplated by, and to fully carry out the purposes of, this
Agreement.

                                       37


            (c) Notwithstanding anything to the contrary in this Section 7.4 or
otherwise, (i) neither Parent nor any of its Subsidiaries shall be required to
divest or hold separate any of their or PIC's or any of its Subsidiaries'
respective businesses, product lines or assets, (ii) neither Parent nor any of
its Subsidiaries shall be required to sell, hold separate, otherwise dispose of
or license or conduct their business in a specified manner, or agree to sell,
hold separate, otherwise dispose of or license or conduct their business in a
specified manner, or take or agree to take any other action or agree to any
limitation that could reasonably be expected to have an adverse effect, in
either the short-term or the long-term, on the business, assets, properties,
liabilities, financial condition or results of operations of Parent or its
Subsidiaries or on the expected benefits of the transactions contemplated by
this Agreement and the Merger Agreement, including the Merger, (iii) neither
Parent nor Buyer shall be required to waive any of the conditions set forth in
Article VIII, and (iv) no party shall be required to pursue or defend any
administrative or judicial action or proceeding that may be instituted or
threatened.

            (d) PIC shall use its commercially reasonable best efforts to
obtain, prior to the Closing (i) the unconditional consent to the Closing and
the other transactions contemplated hereby of each lender to whom PIC or any of
its Subsidiaries owes in excess of ten thousand dollars ($10,000) as of the
Closing Date, (ii) the unconditional consent to the Closing and the other
transactions contemplated hereby of each Person holding a mortgage or Lien on
real property or material personal property owned or leased by PIC or any of its
Subsidiaries to the extent required by such mortgage or lien, (iii) the
unconditional consent to the Closing and the other transactions contemplated
hereby of the lessor of each of the Leases to the extent required by such Lease,
(iv) the unconditional consent to the Closing and the other transactions
contemplated hereby of each other party to each Material Contract with PIC or
any Subsidiary of PIC, but only if and to the extent that the failure to obtain
such consent could adversely affect PIC or any Subsidiary of PIC or the ability
of any Person to consummate the transactions contemplated hereby. Section 7.4(d)
of the PIC Disclosure Letter sets forth each such consent.

            Section 7.5 Notification of Certain Matters.

            (a) PIC and the Shareholders shall notify Parent, and Parent shall
notify PIC and the Shareholders' Representative, of (i) any fact, event,
circumstance, change, condition, or effect that has had, or would reasonably be
expected to have had, individually or in the aggregate, a Material Adverse
Effect on PIC or Parent, as applicable, (ii) any representation or warranty made
by it contained in this Agreement becoming untrue or inaccurate in any material
respect, and (iii) the failure by it to comply with or satisfy, in any material
respect, any covenant, condition or agreement to be complied with or satisfied
by it under this Agreement, in each case within three (3) Business Days of such
Person becoming aware of the occurrence of such development.

            (b) PIC and the Shareholders shall give prompt notice to Parent, and
Parent or Buyer shall give prompt notice to PIC and the Shareholders'
Representative, of: (i) any notice or other communication from any Person
alleging that the consent of such Person is or may be required in connection
with the transactions contemplated by this Agreement and (ii) any notice or
other communication from any Governmental Authority in connection with the
transactions contemplated by this Agreement.

                                       38


            (c) If any event or matter arises after the date of this Agreement
that, if existing or occurring at the date of this Agreement, (i) would have
been required to be set forth or described by PIC or any Shareholder in the PIC
Disclosure Letter or by Parent in the Parent Disclosure Letter or (ii) would
have caused a representation or warranty or covenant in Articles IV, V, VI or
Article VII, as applicable, to be violated in any material respect as of such
date, then PIC, the Shareholders or Parent, as applicable, shall, for
informational purposes only, deliver to Parent or PIC and the Shareholders'
Representative, as applicable, the PIC Disclosure Letter or the Parent
Disclosure Letter, as applicable, updated to reflect such event or matter two
(2) Business Days prior to the Closing Date; provided, however, that such
supplemental disclosure shall not be required to disclose any such event or
matter, and the PIC Disclosure Letter or the Parent Disclosure Letter, as
applicable, shall not be required to be updated, in either case, with respect to
representations or warranties that are expressly made as of a specific date.

            (d) The parties' obligations under this Section 7.5 and the
disclosure of any matter in accordance with the provisions of this Section 7.5
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such disclosure (including the remedies described in Article XI)
and shall not be deemed to cure any breach or inaccuracy of any representation
or warranty made in this Agreement.

            Section 7.6 No Solicitation; Unsolicited Proposals.

            (a) From the date of this Agreement until the Closing or, if
earlier, the termination of this Agreement in accordance with its terms, the
Shareholders and PIC shall not, and PIC shall cause its Subsidiaries and PIC's
and such Subsidiaries' respective Representatives not to, and the Shareholders
shall cause their Representatives not to, directly or indirectly, (i) encourage,
engage in, solicit or initiate any discussions or negotiate with, or provide any
information to, or negotiate or enter into any agreement or agreement in
principle with, or vote in favor of or in any other way support (including by
tendering or agreeing to tender shares) or agree to so vote or support, any
Person with respect to a sale, merger or business combination of PIC or PNG or
any division of PIC or PNG, the sale or encumbrance of any of their respective
material assets (including all or any portion of the PIC Shares or the PNG
Shares, as applicable) or any similar transaction (each, an "Alternative
Transaction") or (ii) enter into any Contract (including any agreement in
principle, letter of intent, or understanding) with respect to or contemplating
any Alternative Transaction or enter into any agreement, arrangement or
understanding requiring PIC or any of the Shareholders to abandon, terminate or
fail to consummate the transactions contemplated by this Agreement. The
Shareholders and PIC shall, and PIC shall cause its Subsidiaries and PIC's and
such Subsidiaries' respective Representatives to, immediately cease and
terminate any existing solicitation, initiation, encouragement, activity,
discussion or negotiation with any Third Party conducted heretofore by PIC, the
Shareholders, PIC's Subsidiaries or any of their respective Representatives with
respect to any Alternative Transaction. PIC and its Subsidiaries also agree that
they shall promptly request that each Third Party that has heretofore executed a
confidentiality or similar agreement within the twelve (12) months prior to the
date of this Agreement in connection with any Third Party's consideration of any
Alternative Transaction return or destroy all confidential information
heretofore furnished to any Third Party by or on behalf of PIC or any of its
Subsidiaries.

                                       39


            (b) PIC and the Shareholders, as applicable, shall as soon as
practicable (and in any event within twenty-four (24) hours) notify and advise
Parent orally and in writing of any Alternative Transaction or of any request
for information or inquiry that may lead to an Alternative Transaction, the
terms and conditions of such Alternative Transaction, request or inquiry, and
the identity of the Person making such Alternative Transaction, request or
inquiry. PIC and the Shareholders, as applicable, shall inform Parent on a
prompt and current basis of the status, content and details of any discussions
regarding, or relating to, any Alternative Transaction with a Third Party
(including amendments and proposed amendments) and, as promptly as practicable,
of any change in the price, structure or form of the consideration or material
terms of and conditions regarding the Alternative Transaction. In fulfilling
their obligations under this Section 7.6(b), PIC and the Shareholders, as
applicable, shall provide promptly to Parent copies of all written
correspondence or other written material, including material in electronic form,
between PIC and the Shareholders, as applicable, and such Third Party.

            (c) PIC and the Shareholders agree that any breach of this Section
7.6 by any of their respective Subsidiaries or any of their respective
Representatives shall be deemed a breach by PIC and the Shareholders, as
applicable, of this Section 7.6.

            (d) PIC and the Shareholders agree not to release or permit the
release of any Person from, or to waive or permit the waiver of any provision
of, any confidentiality, "standstill" or similar agreement to which any of PIC,
its Subsidiaries or the Shareholders is a party and shall promptly provide
Parent with a copy of such agreements. Each of PIC and the Shareholders shall
use its commercially reasonable best efforts to enforce or cause to be enforced
each such agreement at the request of Parent.

            (e) Nothing in this Section 7.6, or elsewhere in this Agreement,
shall limit, prohibit or otherwise affect in any way the manner in which any
member of the Board of Directors of PNG performs his duties solely in his
capacity as such a director, with respect to his fiduciary duties to the
shareholders of PNG or otherwise.

            Section 7.7 Subsequent Actions. If at any time after the Closing
Parent or Buyer shall consider or be advised that any deeds, bills of sale,
instruments of conveyance, assignments, assurances or any other actions or
things are necessary or desirable (i) to vest, perfect or confirm ownership (of
record or otherwise) in Buyer, its right, title or interest in, to or under any
or all of the PIC Shares, (ii) to vest, perfect or confirm ownership (of record
or otherwise) in PIC and each Subsidiary of PIC, any of its rights, properties
or assets or (iii) otherwise to carry out this Agreement, the Shareholders and
the Shareholders' Representative shall execute and deliver all deeds, bills of
sale, instruments of conveyance, powers of attorney, assignments and assurances
and take and do all such other actions and things as may be requested by Parent
in order to vest, perfect or confirm any and all right, title and interest in,
to and under such rights, properties or assets in Buyer or PIC or any Subsidiary
of PIC or otherwise to carry out this Agreement.

            Section 7.8 Employee Benefits.

            (a) For a period of one (1) year immediately following the Closing
Date, except as otherwise required by applicable Law, Parent shall, or shall
cause PIC to, provide to individuals who are employed by PIC and its
Subsidiaries immediately prior to the Closing

                                       40


who remain employed with PIC or any Subsidiary of PIC after the Closing
("Affected Employees"), employee benefits (including pension and welfare
benefits, but excluding any equity-based or incentive compensation) which are,
in the aggregate, substantially comparable to and no less favorable in any
material respect than the employee benefits provided to Affected Employees
immediately prior to the Closing.

            (b) Parent shall, or shall cause PIC to, provide to Affected
Employees full credit (consistent with current policies), solely for purposes of
eligibility and vesting, under severance benefit, vacation and other employee
benefit plans or arrangements maintained by Parent or any Subsidiary of Parent
(to the extent such Affected Employees participate in any such employee welfare
benefit plan or arrangement) for such Affected Employees' service with PIC or
any Subsidiary of PIC to the same extent recognized by PIC immediately prior to
the Closing; provided, however, that the crediting shall not operate to
duplicate any benefit.

            (c) Parent shall, or shall cause PIC to, (i) waive all limitations
as to preexisting conditions, exclusions and waiting periods with respect to
participation and coverage requirements applicable to the Affected Employees
under any welfare benefit plans of Parent that such employees may be eligible to
participate in after the Closing, other than limitations or waiting periods that
were in effect with respect to such employees as of the Closing under any
welfare plan maintained by PIC for the Affected Employees immediately prior to
the Closing, and (ii) provide each Affected Employee with credit for any
co-payments and deductibles paid prior to the Closing in satisfying any
applicable deductible or out-of-pocket requirements under any welfare plans that
such employees are eligible to participate in after the Closing during the same
plan year in which such co-payments and deductibles were paid.

            Section 7.9 PNG. PIC, the Shareholders shall use their commercially
reasonable best efforts to (i) cause PNG, upon the consummation of the
transactions contemplated hereby (if the Merger is not consummated
simultaneously therewith or immediately thereafter), to allow Parent to obtain
representation on the PNG Board of Directors proportional to Parent's aggregate
equity ownership of PNG (after giving effect to the Closing) (which, as of the
date hereof, shall be no less than two (2) of the seven (7) director positions
on the PNG Board of Directors) and (ii) prevent PNG from taking any action or
omitting to take any action under or with respect to Pennsylvania law, PNG's
articles of incorporation, bylaws, other governing documents or Contracts
(including, without limitation, by adopting a shareholder rights or similar
plan, by issuing additional securities, by effect of any state takeover law or
state law that purports to limit or restrict business combinations or the
ability to acquire or vote shares of PNG Common Stock, or by amending any of
PNG's articles of incorporation, bylaws or other governing documents or
adopting, amending or terminating any Contracts) that has the effect of
preventing or making more difficult any business combination or other
transaction involving Parent and its affiliates, on the one hand, and PNG and
its shareholders, on the other hand.

            Section 7.10 Non-Solicitation and Non-Competition.

            (a) Except in connection with the Restricted Shareholder's
employment by Parent or any of its Subsidiaries, each of the Restricted
Shareholder and the Principal Shareholder agrees that he shall not (and shall
cause each of his respective Representatives not to), without the prior written
consent of Parent, directly or indirectly, individually or on behalf of

                                       41



any other Person, prior to the third anniversary of the Closing Date with
respect to the Principal Shareholder and prior to the first anniversary of the
Closing Date with respect to the Restricted Shareholder (i) solicit, aid, induce
or encourage any individual, who is an employee of any of Parent, PIC or any of
their respective Subsidiaries or affiliates as of the date of this Agreement or
immediately prior to the Closing Date (the "Designated Employees") to leave his
or her employment relationship with Parent, PIC or any of their respective
Subsidiaries or affiliates before or after the Closing; provided, however, that
it is understood that this Section 7.10 shall not prohibit: (A) any solicitation
by a professional search firm where none of the Principal Shareholder, the
Restricted Shareholder or any of their respective Representatives has, directly
or indirectly, directed such firm to solicit that Person; or (B) generalized
solicitations by advertising and the like which are not specifically directed to
the Designated Employees; or (ii) hire or otherwise engage, or assist any Person
in hiring or otherwise engaging, any such Designated Employee who has been
employed by Parent, PIC or any of their Subsidiaries or affiliates within the
immediately preceding twenty-four (24) months.

            (b) Except in connection with the Restricted Shareholder's
employment by Parent or any of its Subsidiaries, each of the Restricted
Shareholder and the Principal Shareholder agrees that he shall not (and shall
cause each of his respective Representatives not to), without the prior written
consent of Parent, directly or indirectly, prior to the third anniversary of the
Closing Date with respect to the Principal Shareholder and prior to the first
anniversary of the Closing Date with respect to the Restricted Shareholder,
solicit any Person who is a client or customer of a Restricted Business (as
defined below) as of the Closing Date for the purposes of providing any products
or services of a type substantially similar to any of those provided by a
Restricted Business.

            (c) Except in connection with the Restricted Shareholder's
employment by Parent or any of its Subsidiaries, each of the Restricted
Shareholder and the Principal Shareholder agrees that he shall not (and shall
cause each of his respective Representatives not to), without the prior written
consent of Parent, directly or indirectly, prior to the third anniversary of the
Closing Date with respect to the Principal Shareholder and prior to the first
anniversary of the Closing Date with respect to the Restricted Shareholder,
engage in or carry on in any capacity, directly or indirectly (including as
shareholder, investor, member, partner, principal, proprietor, independent
contractor, agent or creditor), any business, trade or venture substantially
similar to a Restricted Business in the United States; provided, however, that
the ownership of less than two percent (2%) of any class of the issued and
outstanding securities of a Person engaged in a Restricted Business shall not
constitute a violation of Sections 7.10(b) and (c) if such class of securities
of such Person is traded on a national securities exchange or in the
over-the-counter market.

            (d) For purposes of this Agreement:

                  (i) "Restricted Businesses" means the business conducted by
            PIC, PNG and their respective Subsidiaries including the activities
            of (i) acting as a wholesale broker of general liability, commercial
            property and multi-peril insurance, (ii) marketing and underwriting
            general liability, commercial property and multi-peril insurance,
            and (iii) handling or administering Third-Party claims relating to
            general liability, commercial property and multi-peril insurance;
            and

                                       42



                  (ii) "Restricted Shareholder" means the following Shareholder:
            E. Anthony Saltzman.

            (e) The parties agree that the remedy at law for any breach of the
foregoing will be inadequate and that Parent, in addition to any other relief
available to it, shall be entitled to temporary and permanent injunctive relief
without proof of actual damages and without any requirement for the securing or
posting of any bond.

            (f) Each of the Restricted Shareholder and the Principal Shareholder
acknowledges that the covenants in this Section 7.10 are an essential element of
the transactions contemplated by this Agreement and a fundamental inducement to
Parent and Buyer to enter into this Agreement. Moreover, each of the Restricted
Shareholder and the Principal Shareholder acknowledges that the business of PIC,
Parent and their respective Subsidiaries can be conducted in any location
throughout the United States. Parent, Buyer, the Restricted Shareholder, and the
Principal Shareholder intend to and hereby confer jurisdiction to enforce the
covenants in this Section 7.10 upon the courts of any jurisdiction within the
geographical scope of the covenants in this Section 7.10. Each of the Restricted
Shareholder and the Principal Shareholder agrees that this Section 7.10 shall be
deemed to be a series of separate covenants, one for each state, territory and
jurisdiction of the United States in which the Restricted Businesses purport to
conduct business. With respect to any proceeding of or before a Governmental
Authority, each of the Restricted Shareholder and the Principal Shareholder
further agrees that (i) if a Governmental Authority shall refuse to enforce any
of these separate covenants, such unenforceable covenants shall be deemed
eliminated from the provisions hereof for the purposes of such proceeding to the
extent necessary for the remaining separate covenants to be enforced in such
proceeding and (ii) if a Governmental Authority shall refuse to enforce one or
more of the separate covenants because the total time thereof is deemed to be
excessive or unreasonable, then such covenants which would otherwise be
unenforceable due to such excessive or unreasonable period of time shall be
enforced for such lesser period of time as shall be deemed reasonable and not
excessive by such Governmental Authority.

            (g) All memoranda, notes, lists, records and other documents (and
all copies thereof), including, but not limited to, such items stored in
computer memories, on microfiche or made available to the Restricted Shareholder
or the Principal Shareholder concerning the Restricted Businesses or the
business of Parent or any of its affiliates, are and shall be Parent's property
and shall be delivered to Parent or any of its affiliates, promptly upon
termination of the Restricted Shareholder's or the Principal Shareholder's
employment with Parent or any of its affiliates, as the case may be, or at any
other time on request.

            Section 7.11 Shareholder Releases. Except as set forth in this
Section 7.11, each Shareholder, on behalf of itself and its affiliates, and
their respective heirs, executors, successors and assigns, hereby remises,
releases and forever discharges, and by these presents does release and forever
discharge, Parent, PIC, and their respective Subsidiaries and Parent's, PIC's
and their Subsidiaries' respective Representatives (each, a "Releasee"), jointly
and severally, of and from any and all actions, causes of action, suits, debts,
accounts, bonds, bills, covenants, contracts, controversies, agreements,
liabilities, damages, costs, expenses, demands, judgments, executions,
variances, claims and other obligations of whatever kind or nature, in law or in
equity, known or unknown, arising from, connected or related to, or caused by
any event, occurrence,

                                       43



cause or thing, of any type, whatsoever, arising or existing, or occurring, in
whole or in part, at any time from the beginning of the world through the date
hereof; provided, however, that this release shall not extend to (a) any
obligation of the Releasee or any of them provided for in or incurred under this
Agreement or in any written agreement (whenever any such obligation or the cause
thereof shall have arisen) between a Shareholder and the Releasee, or any of
them, to be executed at or in connection with the consummation of the
transactions contemplated by this Agreement, or (b) the entitlement of a Person
to COBRA continuation coverage benefits or any other similar benefits required
to be provided by Law. This release is for any relief, no matter how
denominated, including, but not limited to, injunctive relief, wages, front pay,
compensatory damages, or punitive damages. Notwithstanding any other provision
of this Section 7.11 to the contrary, this release is not intended to interfere
with, and shall not apply to, a Shareholder's right to file a charge with the
Equal Employment Opportunity Commission in connection with any claim such Person
believes it may have against the Releasees. However, by executing this
Agreement, the Shareholders hereby waive the right to recover in any proceeding
they may bring before the Equal Employment Opportunity Commission or any State
human rights commission or in any proceeding brought by the Equal Employment
Opportunity Commission or any State human rights commission on their behalf.
This release is for any relief, no matter how denominated, including, but not
limited to, injunctive relief, wages, front pay, compensatory damages, or
punitive damages. This release shall be irrevocable and may not be changed
orally.

            Section 7.12 Hatboro Headquarters. At or prior to Closing, Parent
shall enter into, or cause an affiliate of Parent to enter into, (a) a lease
(the "Headquarters Lease") with the Principal Shareholder for a term of at least
ten (10) years for the whole of the building located at 420 S. York Road,
Hatboro, Pennsylvania (the "Headquarters") on terms mutually acceptable to
Parent and the Principal Shareholder; provided, that such terms shall be no less
favorable than the terms in effect as of the date of this Agreement under any
lease between PIC, PNG or their affiliates and the Principal Shareholder (the
"Current Leases"), which include, among other things, an annual rental rate of
approximately $17.00 per square foot and annual expense adjustments as set forth
in the Current Leases, or (b) an agreement with the Principal Shareholder to
purchase the Headquarters and the related land on terms mutually acceptable to
Parent or an affiliate of Parent and the Principal Shareholder (the
"Headquarters Purchase Agreement").

            Section 7.13 Disclosure Documents. PIC shall instruct and shall use
its commercially reasonable best efforts to cause its independent public
accountants to provide for the purposes of filing, and to consent to such
filing, the Audited Financial Statements, the Unaudited Financial Statements,
any financial statements of PIC and its Subsidiaries prepared after the date of
this Agreement, and such consents and other documentation, in form and substance
as required by applicable Law, in any public or private financing documents or
other documents filed with the U.S. Securities and Exchange Commission or any
other Governmental Authority. Buyer and PIC shall each pay fifty percent (50%)
of the costs of PIC's independent public accountants incurred by PIC in
connection with this Section 7.13.

                                       44



                                  ARTICLE VIII

                                   CONDITIONS

            Section 8.1 Conditions to the Obligations of Each Party. The
obligations of PIC, the Shareholders, Parent and Buyer to effect the Closing are
subject to the satisfaction (or, to the extent legally permissible, waiver) of
the following conditions:

            (a) HSR Act. Any applicable waiting period (including any extension
thereof) under the HSR Act relating to transactions contemplated by this
Agreement shall have expired or been terminated; and

            (b) No Injunctions or Restraints. No provision of any applicable Law
and no judgment, injunction, order or decree that makes illegal or otherwise
prohibit the Closing or any of the other transactions contemplated by this
Agreement shall be in effect.

            Section 8.2 Conditions to the Obligations of Parent and Buyer. The
obligations of Parent and Buyer to effect the Closing are subject to the
satisfaction (or, to the extent legally permissible, waiver) of the following
further conditions:

            (a) Performances of Obligations; Representations and Warranties of
PIC. (i) The representations and warranties of PIC contained in this Agreement
and in any certificate or other writing delivered by PIC pursuant hereto (A) if
subject to any limitations as to "materiality" or "Material Adverse Effect,"
shall be true and correct in all respects on the date of this Agreement and at
and as of the Closing as if made at and as of such time (except to the extent
expressly by its terms made as of an earlier date, in which case as of such
earlier date), and (B) if not subject to any limitations as to "materiality" or
"Material Adverse Effect," shall be true and correct in all material respects on
the date of this Agreement and at and as of the Closing as if made at and as of
such time (except to the extent expressly by its terms made as of an earlier
date, in which case as of such earlier date), (ii) PIC shall have performed in
all material respects all of its covenants, agreements and obligations hereunder
required to be performed by it at or prior to the Closing, and (iii) Parent
shall have received a certificate signed by the chief executive officer of PIC
to the foregoing effect;

            (b) Performances of Obligations; Representations and Warranties of
the Shareholders. (i) The representations and warranties of the Shareholders
contained in this Agreement and in any certificate or other writing delivered by
the Shareholders pursuant hereto (A) if subject to any limitations as to
"materiality" or "Material Adverse Effect," shall be true and correct in all
respects on the date of this Agreement and at and as of the Closing as if made
at and as of such time (except to the extent expressly by its terms made as of
an earlier date, in which case as of such earlier date), and (B) if not subject
to any limitations as to "materiality" or "Material Adverse Effect," shall be
true and correct in all material respects on the date of this Agreement and at
and as of the Closing as if made at and as of such time (except to the extent
expressly by its terms made as of an earlier date, in which case as of such
earlier date), (ii) the Shareholders shall have performed in all material
respects all of their covenants, agreements and obligations hereunder required
to be performed by them at or prior to the Closing, and (iii) Par-

                                       45



ent shall have received a certificate signed by the Shareholders' Representative
to the foregoing effect;

            (c) No Litigation. No proceeding or litigation shall have been
threatened or shall have been commenced by or before any Governmental Authority
(i) seeking to restrain or prohibit the consummation of the transaction
contemplated by this Agreement or the Merger Agreement or seeking to obtain from
Parent, PIC or any of their respective Subsidiaries any damages that are
material in relation to Parent and Parent's Subsidiaries taken as a whole or PIC
and PIC's Subsidiaries taken as a whole, as applicable, (ii) seeking to prohibit
or limit the ownership or operation by Parent, PIC or any of their respective
Subsidiaries of any material portion of the business or assets of PIC and its
Subsidiaries, or to compel Parent, PIC or any of their respective Subsidiaries
to dispose of or hold separate any material portion of their business or assets,
as applicable, as a result of the transactions contemplated by this Agreement or
the Merger Agreement, (iii) seeking to impose limitations on the ability of
Parent to, directly or indirectly, acquire or hold, or exercise full rights of
ownership of, any shares of capital stock of PIC or PNG, (iv) seeking to
prohibit Parent or Parent's Subsidiaries from, after the Closing Date,
effectively controlling in any material respect the business or operations of
PIC and PIC's Subsidiaries, taken as a whole, or (v) that would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
PIC or Parent;

            (d) Regulatory Matters. The authorizations, consents, orders,
permits or approvals of, or declarations or filings with, and all expirations of
waiting periods imposed by, any Governmental Authority (other than the
expiration of the applicable waiting period under the HSR Act that is addressed
in Section 8.1(a)) that are necessary for the consummation of the transactions
contemplated hereby shall have been filed, have occurred or have been obtained
(all of the foregoing, the "Requisite Regulatory Approvals") and all such
Requisite Regulatory Approvals shall be in full force and effect; provided,
however, that a Requisite Regulatory Approval shall not be deemed to have been
obtained if in connection with the grant thereof there shall have been an
imposition by any Governmental Authority of any condition, requirement,
restriction or change of regulation, or any other action directly or indirectly
related to such grant taken by such Governmental Authority, which could (or if
implemented could) have more than an immaterial effect on Parent or PIC;

            (e) Third Party Consents. All material Third Party consents and
approvals required in connection with the consummation of the transactions
contemplated by this Agreement, which shall consist solely of those set forth in
Section 8.2(e) of the PIC Disclosure Letter, shall have been obtained;

            (f) PNG. If the Merger is not consummated simultaneously with the
Closing hereunder or immediately thereafter, PNG shall have taken all necessary
action to allow Parent to obtain representation on the PNG Board of Directors
proportional to Parent's aggregate equity ownership of PNG (after giving effect
to the Closing) (which, as of the date hereof, shall be no less than two (2) of
the seven (7) director positions on the PNG Board of Directors) and PNG shall
not have taken any action or omitted to take any action under or with respect to
Pennsylvania law, PNG's articles of incorporation, bylaws, other governing
documents or Contracts (including, without limitation, by adopting a shareholder
rights or similar plan, by issuing additional securities, by effect of any state
takeover law or state law that purports to limit or restrict

                                       46



business combinations or the ability to acquire or vote shares of PNG Common
Stock, or by amending any of PNG's articles of incorporation, bylaws or other
governing documents or adopting, amending or terminating any Contracts) that has
the effect of preventing or making more difficult any business combination or
other transaction involving Parent and its affiliates, on the one hand, and PNG
and its shareholders, on the other hand;

            (g) Employment Arrangements. (i) Each of Robert A. Lear, Jason M.
Waksman, Edward A. Levy, and E. Anthony Saltzman shall have entered into
employment agreements with PIC, each effective as of the Closing Date; (ii) Bret
T. Van Leeuwen and Karl F. Snearer shall be employed by PIC or its Subsidiaries
as of the Closing Date under the terms of the employment arrangement currently
in effect with respect to them, as may be modified after the date of this
Agreement; and (iii) Scott A. Rohr shall have executed an amendment to his
current employment arrangements, which amendment shall be in form and substance
reasonably satisfactory to Parent and which shall terminate any existing phantom
stock plan and any outstanding phantom equity of any Subsidiary of PIC to which
he is entitled (collectively, the "Key Employees");

            (h) General Releases. Each of the directors and officers of PIC and
PIC's Subsidiaries shall have executed and delivered to Parent a General
Release;

            (i) Legal Opinion. Parent and Buyer shall have received (i) an
opinion of Morgan, Lewis & Bockius LLP, counsel to PIC (or other counsel
reasonably acceptable to Parent), dated as of the Closing Date, in form and
substance satisfactory to Parent, to the effect set forth in Exhibit F; and (ii)
opinions of counsel to the Shareholders dated as of the Closing Date, in form
and substance satisfactory to Parent, to the effect set forth in Exhibit G;

            (j) PNG Stock Purchase Agreements. The closing of the sale of the
Additional PNG Equity shall have been consummated prior to or simultaneously
with the Closing in accordance with the terms of the PNG Stock Purchase
Agreements; and

            (k) Satisfaction of Payments. All obligations to the Principal
Shareholder (approximately $2,750,000) and Robert A. Lear (approximately
$2,900,000) pursuant to the Deferred Compensation Agreement between the
Principal Shareholder and PIC, dated as of November 18, 2002, and the Executive
Employment Agreement between Robert A. Lear and PIC, dated as of November 11,
1997, as amended, respectively, shall have been satisfied in full at or prior to
the Closing and such agreements shall have been terminated.

                                       47



            Section 8.3 Conditions to the Obligations of PIC and the
Shareholders. The obligation of PIC and the Shareholders to effect the Closing
is subject to the satisfaction (or, to the extent legally permissible, waiver)
of the following further conditions: (i) the representations and warranties of
Parent and Buyer contained in this Agreement and in any certificate or other
writing delivered by Parent pursuant hereto (A) if subject to any limitations as
to "materiality" or "Material Adverse Effect," shall be true and correct in all
respects on the date of this Agreement and at and as of the Closing as if made
at and as of such time (except to the extent expressly by its terms made as of
an earlier date, in which case as of such earlier date), and (B) if not subject
to any limitations as to "materiality" or "Material Adverse Effect," shall be
true and correct in all material respects on the date of this Agreement and at
and as of the Closing as if made at and as of such time (except to the extent
expressly by its terms made as of an earlier date, in which case as of such
earlier date), (ii) Parent shall have performed in all material respects all of
its covenants, agreements and obligations hereunder required to be performed by
it at or prior to the Closing, and (iii) PIC and the Shareholders'
Representative shall have received a certificate signed by the chief executive
officer of Parent to the foregoing effect.

            Section 8.4 Frustration of Closing Conditions. None of Parent,
Buyer, PIC, the Shareholders or the Shareholders' Representative may rely,
either as a basis for not consummating the transactions contemplated hereby or
terminating this Agreement and transactions contemplated hereby, on the failure
of any condition set forth in Sections 8.1, 8.2 or 8.3, as the case may be, to
be satisfied if such failure was caused by such party's breach of any provision
of this Agreement or failure to use its reasonable best efforts to consummate
the transactions contemplated hereby, as required by and subject to Section 7.4.

                                   ARTICLE IX

                                VOTING AGREEMENT

            Section 9.1 Voting of the PNG Shares.

            (a) Until the Closing or the termination of this Agreement in
accordance with the terms hereof, PIC hereby agrees that it shall cause PIC
Holdings at any annual, special or other meeting of the shareholders of PNG, and
at any adjournment or adjournments thereof, or by written consent without a
meeting, to vote the PNG Shares (i) in favor of any business combination or
other transaction, or other resolution or matter submitted to the PNG
shareholders involving or related to any business combination or other
transaction, with Parent and its affiliates, on the one hand, and PNG and its
shareholders, on the other hand, including the adoption of the Merger Agreement
and the consummation of the transactions contemplated thereby and (ii) against
approval or adoption of any business combination or other transaction involving
a Third Party and PNG, or any other action or agreement that could have the
effect of preventing or making more difficult any business combination or other
transaction involving Parent and its affiliates, on the one hand, and PNG and
its shareholders, on the other hand, or that could impede, interfere with,
frustrate, delay, postpone or attempt to discourage the transactions
contemplated by the Merger Agreement. PIC shall cause PIC Holdings, as the
holder of the PNG Shares, to be present, in person or by proxy, at all annual,
special or other meetings of the share-

                                       48



holders of PNG, and at any adjournment or adjournments thereof, so that all of
the PNG Shares are counted for the purpose of determining the presence of a
quorum at such meetings.

            (b) PIC shall cause PIC Holdings, with respect to the PNG Shares, to
constitute and appoint Parent, or any nominee of Parent, with full power of
substitution, from the date of this Agreement until the earlier of the
termination of this Agreement and the Closing, as PIC Holdings' true and lawful
attorney and proxy (its "Proxy"), for and in its name, place and stead, to vote
the PNG Shares, as its Proxy, at any annual, special or other meeting of the
shareholders of PNG, and at any adjournment or adjournments thereof, or by
written consent without a meeting, (i) in favor of any business combination or
other transaction, or other resolution or matter submitted to the PNG
shareholders involving or related to any business combination or other
transaction, with Parent and its affiliates, on the one hand, and PNG and its
shareholders, on the other hand, including the adoption of the Merger Agreement
and the consummation of the transactions contemplated thereby and (ii) against
approval or adoption of any business combination or other transaction involving
a Third Party and PNG, or any other action or agreement that could have the
effect of preventing or making more difficult any business combination or other
transaction involving Parent and its affiliates, on the one hand, and PNG and
its shareholders, on the other hand, or that could impede, interfere with,
frustrate, delay, postpone or attempt to discourage the transactions
contemplated by the Merger Agreement. THIS POWER OF ATTORNEY AND PROXY IS
IRREVOCABLE, IS GRANTED IN CONSIDERATION OF PARENT AND BUYER ENTERING INTO THIS
AGREEMENT, IS COUPLED WITH AN INTEREST SUFFICIENT IN LAW TO SUPPORT AN
IRREVOCABLE POWER AND SHALL TERMINATE UPON THE EARLIER OF THE TERMINATION OF
THIS AGREEMENT AND THE CLOSING. This appointment shall revoke all prior
attorneys and proxies appointed by PIC Holdings at any time with respect to the
PNG Shares and no subsequent attorneys or proxies shall be appointed by PIC
Holdings or be effective with respect thereto while this Agreement is in effect.

                                   ARTICLE X

                                   TERMINATION

            Section 10.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing Date:

            (a) by mutual written consent of PIC and Parent;

            (b) by either PIC or Parent, if the Closing not been consummated as
of March 31, 2005 (the "End Date"); provided, however, that if (x) the Closing
has not occurred by such date by reason of non-satisfaction of the condition set
forth in Section 8.1(a) or 8.2(d) and (y) all other conditions set forth in
Article VIII have heretofore been satisfied or waived or are capable of being
satisfied, then such date shall automatically be extended to June 30, 2005
(which shall then be the End Date); provided, further, that at the End Date the
right to terminate this Agreement under this Section 10.1(b) shall not be
available to any party whose failure to fulfill in any material respect any
obligation under this Agreement has caused or resulted in the failure of the
Closing to occur on or before the End Date;

                                       49



            (c) by either PIC or Parent, if there shall be any Law that makes
effecting the Closing illegal or otherwise prohibited or if any judgment,
injunction, order or decree enjoining Parent, Buyer, PIC or any Shareholder from
effecting the Closing is entered and such judgment, injunction, order or decree
shall become final and nonappealable; provided, however, that the right to
terminate this Agreement under this Section 10.1(c) is not available to a party
that has not fulfilled its obligations under Section 7.3;

            (d) by either PIC or Parent, if there shall have been a breach by
the other of any of its representations, warranties, covenants or obligations
contained in this Agreement, which breach would result in the failure to satisfy
one or more of the conditions set forth in Section 8.2(a) (in the case of a
breach by PIC) or Section 8.3 (in the case of a breach by Parent or Buyer), and
in any such case such breach shall be incapable of being cured or, if capable of
being cured, shall not have been cured within thirty (30) days after written
notice thereof shall have been received by the party alleged to be in breach; or

            (e) by Parent, if there shall have been a breach by any of the
Shareholders of any of their representations, warranties, covenants or
obligations contained in this Agreement, which breach would result in the
failure to satisfy one or more of the conditions set forth in Section 8.2(b),
and such breach shall be incapable of being cured or, if capable of being cured,
shall not have been cured within thirty (30) days after written notice thereof
shall have been received by the party alleged to be in breach.

The party desiring to terminate this Agreement pursuant to clause (b), (c), (d)
or (e) of this Section 10.1 shall give written notice of such termination to the
other party in accordance with Section 14.3, specifying the provision hereof
pursuant to which such termination is effected.

            Section 10.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 10.1, this Agreement shall become void and of no effect with
no liability on the part of any party hereto, except (i) that the provisions of
this Agreement set forth in this Section 10.2 and Article XIV and the agreements
contained in the Confidentiality Agreement (to the extent set forth therein),
shall survive the termination hereof and (ii) that no such termination shall
relieve any party of any liability or damages resulting from any breach by that
party of this Agreement prior to such termination.

            Section 10.3 Fees and Expenses.

            (a) If the transactions contemplated by this Agreement are not
consummated, all costs and expenses incurred by any party to this Agreement in
connection with this Agreement or the transactions contemplated hereby shall be
paid by the party incurring such cost or expense. If the transactions
contemplated by this Agreement are consummated, except as otherwise provided
herein, (i) the Shareholders shall pay or reimburse all of the costs, fees and
related expenses incurred by PIC, its Subsidiaries and the Shareholders (A) in
connection with this Agreement, the transactions contemplated hereby, and the
other strategic alternatives considered by PIC and the Shareholders and (B)
pursuant to that certain Agreement, dated August 20, 1993, as in effect as of
the Closing, between PIC and PNG; except that PIC shall pay or reimburse the
reasonable and documented fees and expenses of the Shareholders and the Key
Employees incurred in connection with this Agreement and the transactions
contemplated hereby

                                       50



(whether relating to legal, accounting, actuarial, financial advisory or other
fees and expenses) in an amount not to exceed one hundred fifty thousand dollars
($150,000) (the "Fee Cap") and (ii) filing fees payable under or pursuant to the
HSR Act shall be paid by Buyer.

            (b) Without limitation on the generality of the foregoing, the
Shareholders will be responsible for all expenses in excess of the Fee Cap
incurred by or on behalf of PIC and the Shareholders, including but not limited
to the fees, expenses, and disbursements of its investment bankers, accountants,
actuaries and counsel. To the extent any fees or expenses have been paid by PIC
or its Subsidiaries to any Person whose fees, expenses and disbursements are the
responsibility of the Shareholders pursuant to the foregoing, such amount shall
be deductible, at the option of Buyer, from the Purchase Price payable to the
Shareholders at the Closing. The Shareholders jointly and severally agree to
indemnify Buyer against all claims for fees, expenses and disbursements by any
Person which the Shareholders are responsible for pursuant to the foregoing.

                                   ARTICLE XI

                                 INDEMNIFICATION

            Section 11.1 Indemnification by the Principal Shareholder.

            (a) Subject to Sections 11.1(c) and (d), the Principal Shareholder
shall indemnify, defend and hold harmless Parent, each of its Subsidiaries
(including PIC and its Subsidiaries), and each of their respective
Representatives (and the respective heirs, successors and assigns of each of the
foregoing) (the "Parent Indemnified Persons") from and against and in respect of
one hundred percent (100%) of all Parent Losses.

            (b) Subject to Section 11.1(e), the Principal Shareholder shall
indemnify, defend and hold harmless the Parent Indemnified Persons from and
against and in respect of one hundred percent (100%) of all actual losses,
liabilities, damages, judgments, settlements and expenses (including interest
and penalties recovered by a Third Party with respect thereto and reasonable
attorneys' fees and expenses and reasonable accountants' fees and expenses
incurred in the defense of any of the same or in asserting, preserving or
enforcing any of the rights of the Parent Indemnified Persons arising under
Article XI) incurred by any of the Parent Indemnified Persons, whether or not
involving a Third-Party claim, which are caused by, arise from or are related to
any breach of any representation or warranty made by any Shareholder pursuant to
Article V or any covenant of any Shareholder contained in this Agreement;
provided, however, that, in the case of any representation or warranty that is
limited by "material," "Material Adverse Effect" or by any similar term or
limitation, the occurrence of a breach or inaccuracy of such representation or
warranty, as the case may be, and the amount of losses subject to
indemnification hereunder shall be determined as if "material," "Material
Adverse Effect" or by any similar term or limitation were not included therein.
All statements contained in any schedule hereto delivered by PIC or any
Shareholder pursuant hereto or in connection with the transactions contemplated
hereby shall be deemed representations and warranties of the Principal
Shareholder.

            (c) The Principal Shareholder's indemnification obligations arising
from Section 11.1(a) (to the extent relating to clause (i) of the definition of
Parent Losses) shall

                                       51



survive only until eighteen (18) months after the Closing Date; provided,
however, that the indemnification obligations related to the representations and
warranties contained in (i) Sections 4.2, 4.14(g), 4.23 and 4.24 shall survive
without limitation and (ii) Sections 4.14 (except for subsection (g)) and 4.20
shall survive until the expiration of the applicable statute of limitations plus
a period of ten (10) Business Days. No claim for the recovery of any Parent
Losses may be asserted by any Parent Indemnified Person after the termination of
the applicable period as set forth in this Section 11.1(c); provided, however,
that claims asserted in writing by any Parent Indemnified Person prior to the
termination of the applicable period as set forth in this Section 11.1(c) shall
not thereafter be barred; provided, further, however, that the limitations set
forth in this Section 11.1(c) shall not apply to any representation and warranty
of any Shareholder contained in Article V or any covenant or agreement to be
performed by any party hereto.

            (d) The Principal Shareholder's obligation to indemnify the Parent
Indemnified Persons for Parent Losses resulting from or arising out of a breach
of a representation or warranty contained in or made pursuant to Article IV
(except for Sections 4.2, 4.14, 4.20, 4.23 and 4.24) pursuant to Section 11.1(a)
is subject to the limitation that no indemnification shall be made by the
Principal Shareholder with respect to any claim unless the aggregate amount of
Parent Losses exceeds two hundred eighty-seven thousand five hundred dollars
($287,500); however, if such aggregate amount exceeds two hundred eighty-seven
thousand five hundred dollars ($287,500), then in such event, indemnification
shall be made by the Principal Shareholder for the full amount of Parent Losses
(including the first $287,500). In no event shall the Principal Shareholder's
aggregate obligations to indemnify the Parent Indemnified Persons for Parent
Losses resulting from or arising out of a breach of a representation or warranty
contained in or made pursuant to: (i) Article IV (except for Sections 4.2, 4.7,
4.9, 4.13, 4.14, 4.15, 4.20, 4.23 and 4.24) pursuant to Section 11.1(a) exceed
six million dollars ($6,000,000); and (ii) Sections 4.7 (but only to the extent
such breach is not also a breach of another representation or warranty contained
in this Agreement), 4.9, 4.13, 4.14 and 4.15 pursuant to Section 11.1(a) exceed
ten million dollars ($10,000,000); provided that the $10,000,000 limitation
described in clause (ii) of this sentence shall not be in addition to the
$6,000,000 limitation described in clause (i) of this sentence, but shall only
constitute and extension of such $6,000,000 limitation, such that the Principal
Shareholder's obligations to indemnify the Parent Indemnified Persons for Parent
Losses resulting from or arising out of a breaches of representations or
warranties described in this sentence shall not exceed $10,000,000 in the
aggregate. The Principal Shareholder's obligation to indemnify the Parent
Indemnified Persons for Parent Losses resulting from or arising out of a breach
of a representation or warranty contained in or made pursuant to Sections 4.2,
4.20, 4.23 and 4.24 pursuant to Section 11.1(a) shall not be subject to any
limitations contained in this Section 11.1(d).

            (e) The Principal Shareholder's indemnification obligation arising
from Section 11.1(b) shall survive indefinitely. In no event shall the Principal
Shareholder's obligation to indemnify the Parent Indemnified Persons pursuant to
Section 11.1(b) exceed the Purchase Price.

            Section 11.2 Indemnification by Parent and Buyer.

            (a) Subject to Sections 11.2(b) and (c), Parent and Buyer shall,
jointly and severally, indemnify, defend and hold harmless the Shareholders and
each of their respective

                                       52



Representatives (and the respective heirs, successors and assigns of each of the
foregoing) (the "Shareholder Indemnified Persons") from and against and in
respect of one hundred percent (100%) of all actual losses, liabilities,
damages, judgments, settlements and expenses (including interest and penalties
recovered by a Third Party with respect thereto and reasonable attorneys' fees
and expenses and reasonable accountants' fees and expenses incurred in the
defense of any of the same or in asserting, preserving or enforcing any of the
rights of the Shareholder Indemnified Persons arising under Article XI) incurred
by any of the Shareholder Indemnified Persons, whether or not involving a
Third-Party claim, which are caused by, arise from or are related to (i) any
breach of any representation or warranty made by Parent or Buyer pursuant to
Article VI, (ii) any covenant of Parent or Buyer contained in this Agreement, or
(iii) the operation by Buyer of the business of PIC and its Subsidiaries
following the Closing (except to the extent any such Shareholder Losses are
related to any action or inaction by any Shareholder Indemnified Persons or the
operation of the business of PIC and its Subsidiaries prior to the Closing)
("Shareholder Losses").

            (b) Parent's and Buyer's indemnification obligations arising from
Section 11.2(a) shall survive only until the eighteen (18) month anniversary of
the Closing Date. No indemnification claim may be asserted by any Shareholder
Indemnified Person after the termination of the applicable period as set forth
in this Section 11.2(b); provided, however, that claims asserted in writing by
any Shareholder Indemnified Person prior to the termination of the applicable
period as set forth in this Section 11.2(b) shall not thereafter be barred;
provided, further, however, that the limitations set forth in this Section
11.2(b) shall not apply to any covenant or agreement to be performed by any
party hereto.

            (c) Parent's and Buyer's obligations to indemnify the Shareholder
Indemnified Persons for Shareholder Losses resulting from or arising out of a
breach of a representation or warranty contained in or made pursuant to Article
VI pursuant to Section 11.2(a) is subject to the limitation that no
indemnification shall be made by Parent or Buyer with respect to any claim
unless the aggregate amount of Shareholder Losses exceeds two hundred
eighty-seven thousand five hundred dollars ($287,500); however, if such
aggregate amount exceeds two hundred eighty-seven thousand five hundred dollars
($287,500), then in such event, indemnification shall be made by Parent or Buyer
for the full amount of Shareholder Losses (including the first $287,500). In no
event shall Parent's or Buyer's aggregate obligations to indemnify the
Shareholder Indemnified Persons for Shareholder Losses pursuant to clause (i) of
Section 11.2(a) and clause (iii) of Section 11.2(a) exceed six million dollars
($6,000,000). Nothing in the foregoing sentence shall imply that, solely as a
result of the terms of such sentence, the Shareholder Indemnified Persons assume
any liability (including in excess of the cap referred to in such sentence) for
matters referred to in clause (iii) of Section 11.2(a).

            Section 11.3 Notice of Claim; Defense. A Parent Indemnified Person
or a Shareholder Indemnified Person that desires to seek indemnification under
any part of this Article XI (each, an "Indemnified Person") shall give to each
party responsible or alleged to be responsible for indemnification hereunder (an
"Indemnitor") prompt notice of any third-party claim that may give rise to any
indemnification obligation under this Article XI, together with the estimated
amount of such claim (if then estimable), and the Indemnitor shall have the
right to assume the defense (at its expense) of any such claim through counsel
of such Indemnitor's own choosing by so notifying the Indemnified Persons within
fifteen (15) Business Days of the first

                                       53



receipt by such Indemnitor of such notice from the Indemnified Persons;
provided, however, that any such counsel shall be reasonably satisfactory to the
Indemnified Persons. Failure to give such notice shall not affect the
indemnification obligations hereunder in the absence of actual and material
prejudice and in such case, only to the extent of such prejudice. If, under
applicable standards of professional conduct, a conflict between any Indemnified
Persons and any Indemnitor exists in respect of such third-party claim, the
Indemnitor shall pay the reasonable fees and expenses of such additional counsel
as may be required to be retained in order to resolve such conflict (but not
more than one firm of counsel). The Indemnitor shall be liable for the fees and
expenses of counsel employed by the Indemnified Persons for any period during
which the Indemnitor has not assumed the defense of any such third-party claim.
If the Indemnitor assumes such defense, the Indemnified Persons shall have the
right to participate in the defense thereof and to employ counsel, at its own
expense, separate from the counsel employed by the Indemnitor. If the Indemnitor
chooses to defend or prosecute any third-party claim, the Indemnified Persons
shall agree to any settlement, compromise or discharge of such third-party claim
that the Indemnitor may recommend and that, by its terms, discharges the
Indemnified Persons from any Liability in connection with such third-party
claim; provided, however, that, without the consent of the Indemnified Persons,
the Indemnitor shall not consent to, and the Indemnified Persons shall not be
required to agree to, the entry of any judgment or enter into any settlement
that (i) provides for injunctive or other non-monetary relief affecting the
Indemnified Persons or any affiliate of the Indemnified Persons or (ii) does not
include as an unconditional term thereof the giving of a release from all
liability with respect to such claim by each claimant or plaintiff for the
benefit of each Indemnified Person.

            Section 11.4 Survival of Indemnification Claims; Offset. The
indemnification obligations set forth in this Article XI shall survive the
Closing as set forth in Sections 11.1(c) and 11.1(e) and may be satisfied, in
whole or in part, by offset against the Escrowed Amount.

            Section 11.5 Characterization of Indemnification Payments. Any
payments made pursuant to this Article XI shall be treated for all Tax purposes
as adjustments to the Purchase Price.

            Section 11.6 Effect of Investigation. The right to indemnification
and all other remedies based on any representation, warranty, covenant or
obligation contained in or made pursuant to this Agreement shall not be affected
by any investigation conducted with respect to, or any knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the date the Closing occurs, with respect to
the accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant or obligation. The waiver of any condition to the obligation
of any party hereto to consummate the transactions contemplated hereby, where
such condition is based on the accuracy of any representation or warranty, or on
the performance of or compliance with any covenant or obligation, shall not
affect the right to indemnification or other remedy based on such
representation, warranty, covenant or obligation.

            Section 11.7 Limitations on Indemnification.

            (a) Notwithstanding the other provisions of this Article XI, the
amount by which an Indemnitor is or may be required to pay to an Indemnified
Person in respect of

                                       54



losses for which indemnification is provided under this Article XI shall be
reduced by (i) any amounts actually received (including amounts actually
received under insurance policies) by the Indemnified Person from Third Parties
in respect of such loss or (ii) any actual reduction in income Taxes payable by
the Indemnified Person, solely as a result of the deductibility for income Tax
purposes of such losses for which indemnification is provided under this Article
XI, for the taxable year in which such deduction is claimed (assuming that all
other available losses, deductions, loss carry forwards and other Tax attributes
are utilized prior to such losses for which indemnification is provided under
this Article XI) (such amounts are collectively referred to herein as "Indemnity
Reduction Amounts"). If any Indemnified Person receives any Indemnity Reduction
Amounts in respect of a claim for which indemnification is provided under this
Agreement after the full or partial amount of such claim has been paid by an
Indemnitor, then the Indemnified Person shall promptly remit to the Indemnitor
an amount equal to the excess, if any, of (i) the amount theretofore paid by the
Indemnitor in respect of such claim, less (ii) the amount of the indemnity
payment that would have been due if such Indemnity Reduction Amounts in respect
thereof had been received before the indemnity payment was made.

            (b) Notwithstanding anything to the contrary in the organizational
documents or other instruments of PIC or any of its Subsidiaries, no Shareholder
shall have any right to indemnification or other recovery thereunder or
otherwise (whether as an officer, director, shareholder or in any other
capacity) from PIC or any of its Subsidiaries with respect to any matter to the
extent that such the Principal Shareholder is liable, or would be liable but for
the limitations on indemnification contained herein, to any of the Parent
Indemnified Persons for indemnification under this Article XI with respect to
such matter.

            (c) EXCEPT WITH RESPECT TO AMOUNTS PAID OR PAYABLE BY AN INDEMNIFIED
PERSON IN CONNECTION WITH THIRD-PARTY CLAIMS AND EXCEPT IN THE CASE OF FRAUD OR
WILLFUL MISREPRESENTATION, AN INDEMNITOR SHALL NOT HAVE ANY LIABILITY TO ANY
INDEMNIFIED PERSON FOR ANY LOSS OF PROFITS, SPECIAL, INDIRECT, CONSEQUENTIAL,
EXEMPLARY, PUNITIVE OR INCIDENTAL DAMAGES ARISING OUT OF OR RELATED TO THIS
AGREEMENT HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE),
WHETHER OR NOT THE INDEMNITOR HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.

            (d) Notwithstanding anything contained in this Agreement to the
contrary, in the case of fraud or willful misrepresentation, the limitations on
indemnification (including as to duration and amount) contained in Sections
11.1(c), 11.1(d), 11.2(b), and 11.2(c) shall not apply to any claim for
indemnification under this Article XI by an Indemnified Person.

            Section 11.8 Exclusive Remedy. Except in the case of fraud or
willful misrepresentation, Parent, Buyer and the Shareholders agree that the
indemnification provisions of this Article XI and Article XII shall be the
exclusive monetary remedy of the Indemnified Persons with respect to breaches of
representations, warranties, covenants, obligations or other provisions of this
Agreement.

                                       55



                                   ARTICLE XII

                                   TAX MATTERS

            Section 12.1 Apportionment of Taxes.

            (a) Principal Shareholder Indemnification. The Principal Shareholder
shall indemnify, defend and hold harmless the Parent Indemnified Persons from
and against and in respect of one hundred percent (100%) of all Taxes (and
reasonable attorneys' fees and expenses and reasonable accountants' fees and
expenses incurred asserting, preserving or enforcing any of the rights arising
under Article XII), other than any such Taxes that were included in Total
Current Liabilities for purposes of calculating the Closing Net Working Capital
pursuant to Section 2.3(a), incurred in connection with (i) any Taxes imposed on
PIC or any of its Subsidiaries for any taxable period ending on or before the
Closing Date, and for the portion of any Straddle Period (as defined below)
ending on the Closing Date (a "Pre-Closing Tax Period"), (ii) any Taxes imposed
on any member of any consolidated, combined, affiliated or unitary group
(including, without limitation any Taxes imposed pursuant to Treasury Regulation
Section 1.1502-6 or a similar provision of any state, local or foreign income
Tax Law imposing joint and/or several liability upon the members of a
consolidated, combined, affiliated or unitary group) with which PIC or any of
its Subsidiaries files or has filed a Tax Return on a consolidated, combined,
unitary or affiliated basis for any Pre-Closing Tax Period, (iii) any Transfer
Taxes for which the Principal Shareholder is liable pursuant to Section 12.6,
and (iv) any Taxes imposed on PIC or any of its Subsidiaries as a result of any
breach of any warranty or representation under Section 4.16.

            (b) Buyer's Indemnification of Shareholders. Parent and Buyer,
jointly and severally, shall indemnify, defend and hold harmless the
Shareholders from and against and in respect of one hundred percent (100%) of
all Taxes (and reasonable attorneys' fees and expenses and reasonable
accountants' fees and expenses incurred in asserting, pursuing or enforcing any
of the rights arising under Article XII) incurred in connection with any Tax
imposed on PIC or any of its Subsidiaries for any taxable period beginning after
the Closing Date and the portion of any Straddle Period beginning after the
Closing Date.

            (c) Proration of Taxes and Earnings and Profits. To the extent
permitted by Law or administrative practice, the taxable years of PIC and each
of its Subsidiaries shall end on and include the Closing Date. Whenever it is
necessary to determine the liability for Taxes, or the earnings and profits, of
PIC or any of its Subsidiaries for a portion of a taxable year or period that
begins before and ends after the Closing Date (a "Straddle Period"), the
determination of the Taxes or the earnings and profits for the portion of the
year or period ending on, and the portion of the year or period beginning after,
the Closing Date shall be determined by using an interim-closing-of-the-books
method assuming that such taxable period ended at the close of the Closing Date,
except that (A) exemptions, allowances or deductions that are allowed on an
annual basis shall be apportioned on a per-diem basis and (B) Taxes other than
Taxes based upon income or receipts or ad valorem Taxes, such as real property,
personal property, intangibles and other similar Taxes (including, but not
limited to, franchise Taxes not based upon income or receipts) shall be
allocated as follows: the portion of the Tax that relates to the Pre-Closing Tax
Period shall be deemed to be the amount of such Tax from the entire taxable year
or period multiplied by a fraction the numerator of which is the number of days
in the Pre-Closing Tax Period

                                       56



and the denominator of which is the number of days in the entire year or period,
and the remainder of such Tax shall be allocated to the portion of the year or
period beginning on the day after the Closing Date.

            (d) To the extent that an indemnification obligation of one party
pursuant to this Section 12.1 may overlap with another indemnification
obligation of such party pursuant to this Section 12.1, the party entitled to
such indemnification shall be limited to only one of such indemnification
payments.

            (e) Whenever in accordance with this Section 12.1 Parent or Buyer
shall be required to pay the Shareholders an amount or the Principal Shareholder
shall be required to pay Buyer an amount, such payments shall be made as of the
later of (x) ten (10) days after the date such payment is requested or (y) ten
(10) days before the requesting party is required to pay the related Tax
liability.

            Section 12.2 Contest Provisions.

            (a) Notification of Contests. Buyer shall notify the Shareholders'
Representative in writing within fifteen (15) days of receipt by Parent, Buyer,
PIC or any of their Subsidiaries of written notice of any pending or threatened
audits, assessments, inquiries or claims, which may affect the liability for
Taxes (including, without limitation, under this Section 12) of the Principal
Shareholder. The Shareholders' Representative shall notify Buyer in writing
within fifteen (15) days of receipt by any Shareholder of written notice of any
pending or threatened audits, assessments, inquiries or claims, which may affect
the liability for Taxes (including, without limitation, under this Section 12)
of Parent or Buyer. If the Shareholders' Representative or Buyer fails to give
such prompt notice to the other party, it shall not be entitled to
indemnification for any related Taxes only if (and only to the extent that) such
failure to give notice materially prejudices the other party's ability to
contest liability for such Taxes.

            (b) Which Party Controls.

                  (i) Principal Shareholder's Items. The Shareholders'
            Representative shall at his expense have the sole right to control,
            defend, prosecute, settle and compromise any audit, assessment,
            inquiry or claim for Taxes with respect to Taxes set forth in
            Section 12.1(a), other than Taxes for any Straddle Period which
            shall be controlled by Buyer pursuant to Section 12.2(b)(ii) hereof.

                  (ii) Buyer's Items. Buyer shall at its expense have the sole
            right to control defend, prosecute, settle and compromise any audit,
            assessment, inquiry or claim for Taxes related to PIC or any
            Subsidiary of PIC (including, without limitation, those relating to
            any Taxes for any Straddle Period) other than those controlled by
            the Shareholders' Representative pursuant to Section 12.2(b)(i);
            provided, that, for a Straddle Period in which the Principal
            Shareholder may have a Tax liability, no settlement with respect to
            such Tax liability shall be made without the Shareholders'
            Representative consent, which consent shall not be unreasonably
            withheld or delayed.

                                       57



                  (iii) Participation Rights. Notwithstanding Section 12.2(b)(i)
            and (ii), any party whose liability for Taxes may be affected by an
            audit, assessment, inquiry or claim shall be entitled to participate
            at its expense in such defense and to employ counsel of its choice
            at its expense.

            Section 12.3 Tax Returns.

            (a) The Shareholders. The Shareholders' Representative shall prepare
or cause to be prepared and timely file or cause to be timely filed (taking into
account any extensions) all required Tax Returns relating to PIC and any
Subsidiary of PIC for any taxable period that ends on or before the Closing
Date.

            (b) Buyer. Buyer shall prepare or cause to be prepared and timely
file or cause to be timely filed (taking into account any extensions) all other
Tax Returns (including for any Straddle Periods) relating to PIC and any of its
Subsidiaries. Buyer shall provide the Shareholders' Representative with a copy
of any Tax Return with respect to a Straddle Period at least thirty (30) days
prior to the date it is filed, accompanied by a statement calculating in
reasonable detail the Principal Shareholders' indemnification obligation with
respect thereto pursuant to Section 12.1. Such Straddle Period Tax Returns shall
be prepared in a manner consistent with prior practice to the extent supported
by applicable Law. Buyer shall not file or cause to be filed any Straddle Period
Tax Return without the Shareholder Representatives' prior consent, which shall
not be unreasonably withheld.

            Section 12.4 Refunds, Credits and Net Operating Losses.

            (a) Any refunds or credits of Taxes of PIC or any of its
Subsidiaries plus any interest received with respect thereto for any Pre-Closing
Tax Period (including, without limitation, refunds or credits arising by reason
of amended Tax Returns filed after the Closing Date or refunds of estimated
Taxes or "quick refunds" pursuant to Code Section 6411 or any corresponding
provision of applicable Tax Law) shall be for the account of the Shareholders
and shall be paid or caused to be paid by Buyer to the Shareholders'
Representative within ten (10) Business Days after receipt of such refund or
after the relevant Tax Return is filed which causes the credit to become
available to Buyer, PIC or any of their Subsidiaries. Any refunds or credits of
Taxes of PIC or any of its Subsidiaries plus any interest received with respect
thereto from the applicable Tax Authority for any taxable period beginning after
the Closing Date shall be for the account of Buyer. Any refunds or credits of
Taxes of PIC or any of its Subsidiaries plus interest received with respect
thereto for any Straddle Period shall be apportioned between the Shareholders
and Buyer in the same manner as the liability for such Taxes is apportioned
pursuant to Section 12.1. Notwithstanding anything to the contrary in this
Agreement, the parties acknowledge, agree and shall report for all income Tax
purposes that, pursuant to applicable Law, any income Tax deductions arising
from the payment of change of control bonuses or other similar payments
referenced in Sections 2.2 and 8.2(k) shall be attributable to the taxable
period (or portion thereof) ending on the Closing Date and any refund or credit
attributable thereto (plus any interest received with respect thereto) with
respect to any Pre-Closing Tax Period shall be for the account of the
Shareholders and shall be paid in accordance with the first sentence of this
Section 12.4(a).

                                       58



            (b) Neither Buyer nor any of its affiliates shall be under any
obligation to make any payment to the Shareholders for the use in a Tax Return
for a period beginning after the Closing Date, of any excess Tax credit
(including any excess foreign tax credits), net operating loss, or other Tax
attribute of PIC or any Subsidiary of PIC, and the Shareholders shall not be
liable to Buyer for any change in the amount of such credits or net operating
loss after the Closing Date which results from any adjustments made to any Tax
Return which affects the amount of such credits or net operating loss.

            Section 12.5 Survival of Tax Provisions. Any claim to be made
pursuant to this Article XII (a "Tax Claim") must be made within thirty (30)
days following the expiration (giving effect to any valid extensions, waivers
and tolling periods) of the applicable statutes of limitations relating to the
Taxes at issue.

            Section 12.6 Transfer Taxes. Notwithstanding any other provision of
this Agreement to the contrary, all excise, sales, use, transfer (including real
property transfer or gains), documentary, value added, stamp, filing,
recordation and other similar Taxes together with any interest, additions or
penalties with respect thereto and any interest in respect of such additions or
penalties, incurred in connection with the transactions contemplated by this
Agreement (collectively, "Transfer Taxes") and all expenses relating thereto
shall be borne by the Principal Shareholder. Notwithstanding Section 12.3, which
shall not apply to Tax Returns relating to Transfer Taxes, any Tax Returns that
must be filed in connection with Transfer Taxes shall be prepared and filed when
due by the Buyer. To the extent required by applicable law, the Shareholders
shall cause their respective affiliates to cooperate in the execution of any
such Tax Returns.

            Section 12.7 Exclusivity. Notwithstanding any other provision in
this Agreement, this Article XII shall exclusively govern all matters related to
indemnification for Taxes under this Agreement and Article XI shall not apply to
such matters.

            Section 12.8 Certain Post-Closing Actions which Affect Shareholders'
Liability for Taxes.

            (a) None of Buyer or any affiliate of Buyer shall (or shall cause or
permit PIC or any Subsidiary of PIC to) amend, refile or otherwise modify any
Tax Return relating in whole or in part to PIC or any Subsidiary of PIC with
respect to any taxable year or period ending on or before the Closing Date
without the prior written consent of the Shareholders' Representative, which
consent may be withheld in the sole discretion of the Shareholders'
Representative.

            (b) Buyer shall make all elections and waivers under applicable Law
(including Section 172 of the Code) to waive the carryback of any operating
losses, net operating losses, capital losses, tax credits or similar items to a
Pre-Closing Tax Period and/or a Straddle Period.

            Section 12.9 Termination of Existing Tax Sharing Agreements. Any and
all existing Tax sharing agreements or arrangements, written or oral, between
the Shareholders and PIC shall terminate as of the Closing. After the Closing
Date, neither PIC nor any of its Subsidiaries shall have any further rights or
obligations under any such Tax sharing agreements.

                                       59



            Section 12.10 Characterization of Indemnification Payments. Any
payments made pursuant to this Article XII shall be treated for all Tax purposes
as adjustments to the Purchase Price.

            Section 12.11 Assistance and Cooperation. The parties agree that
after the Closing Date:

            (a) Each party shall assist (and cause their respective
Representatives to assist) the other party in preparing and filing any Tax
Returns which such other party is responsible for preparing and filing,
including maintaining and making available to the other party all records
(including audit records and work-papers) necessary in connection with Taxes and
in resolving disputes and audits with respect to all taxable periods relating to
Taxes;

            (b) The parties shall cooperate fully in preparing for any audits
of, or disputes with, Tax Authorities regarding any Tax Returns and payments in
respect thereof;

            (c) The parties shall make available to each other and to any Tax
Authority as reasonably requested all relevant books and records relating to
Taxes, Tax Returns, schedules, work-papers and other relevant documents related
to Taxes;

            (d) The parties shall furnish the other with copies of all relevant
correspondence received from any Tax Authority; and

            (e) The Shareholders shall provide Buyer with copies of all Tax
Returns (including all supporting documentation) related to PIC and its
Subsidiaries filed for Pre-Closing Tax Periods.

            Section 12.12 FIRPTA. Immediately prior to the Closing, the
Shareholders shall furnish to Buyer a certification in accordance with Treasury
Regulation Section 1.1445-2(c), and otherwise in form and substance reasonably
satisfactory to Buyer, certifying that an interest in PIC is not a United States
real property interest because PIC is not and has not been a United States real
property holding corporation (as defined in Section 897(c)(2) of the Code)
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code
(the "FIRPTA Certificate").

                                  ARTICLE XIII

                         THE SHAREHOLDER REPRESENTATIVE

            Section 13.1 The Shareholders' Representative.

            (a) The Shareholders hereby authorize, direct and appoint Irvin
Saltzman to act as sole and exclusive agent, attorney-in-fact and representative
of the Shareholders, with full power of substitution with respect to all matters
under this Agreement, including, without limitation, determining, giving and
receiving notices and processes hereunder, receiving distributions of the Paid
Amount to or for the benefit of the Shareholders, contesting and settling any
and all claims for indemnification pursuant to Articles XI and XII, resolving
any other disputes hereunder, performing the duties expressly assigned to the
Shareholders' Representative

                                       60



hereunder and to engage and employ agents and representatives and to incur such
other expenses as the Shareholders' Representative shall reasonably deem
necessary or prudent in connection with the foregoing. The Shareholders'
Representative shall have the sole and exclusive right on behalf of any
Shareholder to take any action or provide any waiver, or receive any notice with
respect to any claims for indemnification under Articles XI and XII and to
settle any claim or controversy arising with respect thereto. Any such actions
taken, exercises of rights, power or authority, and any decision or
determination made by the Shareholders' Representative consistent herewith,
shall be absolutely and irrevocably binding on each Shareholder as if such
Shareholder personally had taken such action, exercised such rights, power or
authority or made such decision or determination in such Shareholder's
individual capacity, and no Shareholder shall have the right to object, dissent,
protest or otherwise contest the same. Any action required to be taken by the
Shareholders hereunder or any action which the Shareholders, at their election,
have the right to take hereunder, shall be taken only by the Shareholders'
Representative and no Shareholder acting on its own shall be entitled to take
any such action. All deliveries and payments to be made by Parent or Buyer to
any Shareholder hereunder shall be made exclusively to the Shareholders'
Representative on behalf of the Shareholders and any delivery or payment so made
to the Shareholders' Representative shall constitute full performance of the
obligations hereunder of Parent or Buyer to the Shareholders. Parent and Buyer
shall not be liable for allocation of particular deliveries and payments among
the Shareholders.

            (b) The appointment of the Shareholders' Representative as each
Shareholder's attorney-in-fact revokes any power of attorney heretofore granted
that authorized any other Person or Persons to represent such Shareholder with
regard to this Agreement, the PIC Shares and the transactions contemplated
hereby. The appointment of the Shareholders' Representative as attorney-in-fact
pursuant hereto is coupled with an interest and is irrevocable. The obligations
of each Shareholder pursuant to this Agreement (i) will not be terminated by
operation of law, death, mental or physical incapacity, liquidation,
dissolution, bankruptcy, insolvency or similar event with respect to such
Shareholder or any proceeding in connection therewith, or in the case of a
trust, by the death of any trustee or trustees or the termination of such trust,
or any other event, and (ii) shall survive the delivery of an assignment by any
Shareholder of the whole or any fraction of its interest in any payment due to
it under this Agreement.

            (c) Irvin Saltzman hereby accepts the foregoing appointment and
agrees to serve as the Shareholders' Representative, subject to the provisions
hereof, for the period of time from and after the date hereof without
compensation except for the reimbursement from the Shareholders of reasonable
out of pocket expenses incurred by the Shareholders' Representative in his
capacity as such.

            (d) Each Shareholder hereby waives all potential conflicts of
interest arising out of the Shareholders' Representative's activities or
authority as the Shareholders' Representative and his relationships with PIC or
any of its Subsidiaries or affiliates (whether before or after the Closing),
whether as an employee, consultant, agent, director, officer, shareholder or
other representative of PIC or any of its affiliates.

            (e) The Shareholders' Representative may resign at any time by
giving written notice of resignation, at least sixty (60) days prior to the
effectiveness of such resignation, to Parent, the Shareholders, the
Shareholders' Representative may be removed at any time

                                       61



with or without cause by the approval of the holders of seventy five percent
(75%) of the PIC Shares held by the Shareholders on the Closing Date (the
"Approving Holders"). Upon any such resignation or removal, such Approving
Holders shall select a successor Shareholders' Representative, which successor
shall be approved by the Approving Holders. In the case of a resigning
Shareholders' Representative, if no successor Shareholders' Representative shall
have been so appointed by the Approving Holders and shall have accepted such
appointment (effective upon the date of resignation of the resigning
Shareholders' Representative), within fifteen (15) days after the resigning
Shareholders' Representative's giving of notice of resignation, the resigning
Shareholders' Representative (or Parent if the resigning Shareholders'
Representative does not act) may, on behalf of the Approving Holders, appoint a
successor Shareholders' Representative. Upon the acceptance of any appointment
as the Shareholders' Representative thereunder by a successor Shareholders'
Representative, such successor Shareholders' Representative shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the resigning Shareholders' Representative, and the resigning Shareholders'
Representative shall be discharged from its duties and obligations as the
Shareholders' Representative under this Agreement. After any resigning
Shareholders' Representative's resignation or removal hereunder as the
Shareholders' Representative, the provisions of this Article XIII shall inure to
his benefit as to any actions taken or omitted to be taken by it while it was
the Shareholders' Representative. Any successor Shareholders' Representative
shall by means of execution of a counterpart hereof be bound by the terms of
this Agreement applicable to the Shareholders' Representative. Notwithstanding
the foregoing, upon the death or disability of Irvin Saltzman, Jami
Saltzman-Levy shall automatically succeed as Shareholders' Representative
without any further action on the part of any Person.

            (f) The provisions of this Article XIII shall in no way impose any
obligations on Parent or Buyer. In particular, notwithstanding any notice
received by Parent or Buyer to the contrary (except any notice of the
appointment of a successor Shareholders' Representative approved by Parent) and
absent bad faith or willful misconduct, Parent and Buyer (i) shall be fully
protected in relying upon and shall be entitled to rely upon, shall have no
liability to the Shareholders with respect to, actions, decisions and
determinations of the Shareholders' Representative and (ii) shall be entitled to
assume that all actions, decisions and determinations of the Shareholders'
Representative are fully authorized by all of the Shareholders.

                                   ARTICLE XIV

                                  MISCELLANEOUS

            Section 14.1 Survival of Covenants, Representations and Warranties.
Each of the covenants, representations and warranties of Parent, Buyer, PIC and
the Shareholders in this Agreement or in any schedule, instrument or other
document delivered pursuant to this Agreement shall survive the Closing Date and
shall continue in force thereafter, except as limited by Section 11.1(c),
Section 11.2(b) and Section 12.5; provided, that nothing in Articles XI or XII
or this Section 14.1 shall relieve the parties or their respective
Representatives of any liability following the Closing Date for any willful or
fraudulent misrepresentations contained herein or in any other certificate or
writing delivered pursuant hereto.

                                       62



            Section 14.2 Amendments; No Waivers.

            (a) Any provision of this Agreement (including the PIC Disclosure
Letter, the Parent Disclosure Letter and the Exhibits hereto) may be amended or
waived at any time prior to the Closing if, and only if, such amendment or
waiver is in writing and signed, in the case of an amendment, by PIC, the
Shareholders' Representative, Parent and Buyer, or in the case of a waiver, by
the party against whom the waiver is to be effective.

            (b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by Law.

            Section 14.3 Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including facsimile or similar
writing) and shall be deemed to have been duly given upon receipt when delivered
in person, by facsimile (receipt confirmed) or by overnight courier or
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified by like notice):

            if to Parent or Buyer, to:

                           United National Group, Ltd.
                           Walker House, 87 Mary Street
                           P.O. Box 908GT
                           George Town, Grand Cayman
                           Cayman Islands
                           Attention: Chief Executive Officer
                           Facsimile No.: (345) 949-7886

            with a copy to:

                           United National Group, Ltd.
                           c/o United National Insurance Company
                           Three Bala Plaza, East
                           Suite 300
                           Bala Cynwyd, PA 19004
                           Attention: Kevin L. Tate
                           Facsimile No.: (610) 660-8884

                                       63



            and:

                           United National Insurance Company
                           Three Bala Plaza, East
                           Suite 300
                           Bala Cynwyd, PA 19004
                           Attention: William F. Schmidt
                           Facsimile No.: (610) 660-8884

            with a copy to:

                           United National Insurance Company
                           Three Bala Plaza, East
                           Suite 300
                           Bala Cynwyd, PA 19004
                           Attention: Richard S. March
                           Facsimile No.: (610) 660-6800

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

                           Skadden, Arps, Slate, Meagher & Flom LLP
                           Four Times Square
                           New York, New York 10036
                           Attention: Daniel Wolf
                           Facsimile No.: (212) 735-2000

            if to PIC, to:

                           Penn Independent Corporation
                           420 South York Road
                           Hatboro, Pennsylvania 19040
                           Attention: Robert A. Lear
                           Facsimile No.: (215) 441-8618 ((215) 443-3699 must be
                                          called prior to any facsimile
                                          transmissions)

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

                           Morgan, Lewis & Bockius LLP
                           1701 Market Street
                           Philadelphia, Pennsylvania 19107
                           Attention: Stephen M. Goodman
                           Facsimile No.: (215) 963-5001

                                       64



            if to the Shareholders or the Shareholders' Representative:

                           Irvin Saltzman
                           431 Chilean Avenue
                           Palm Beach, Florida 33480
                           Facsimile No.: (561) 805-9591

            Section 14.4 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns; provided, that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other parties hereto, except that Parent or Buyer may
transfer or assign, in whole or from time to time in part, to one or more of its
affiliates, its rights or obligations under this Agreement, but any such
transfer or assignment shall not relieve Parent or Buyer of its obligations
hereunder.

            Section 14.5 Governing Law. This Agreement, including all matters of
construction, validity and performance, shall be construed in accordance with
and governed by the law of the Commonwealth of Pennsylvania (without regard to
principles of conflicts or choice of laws) as to all matters, including but not
limited to, matters of validity, construction, effect, performance and remedies.

            Section 14.6 Jurisdiction. Except as set forth in Section 7.10, any
suit, action or proceeding seeking to enforce any provision of, or based on any
matter arising out of or in connection with, this Agreement or the transactions
contemplated hereby may be brought in any federal or state court located in the
Commonwealth of Pennsylvania, and each of the parties hereby consents to the
jurisdiction of such courts (and of the appropriate appellate courts therefrom)
in any such suit, action or proceeding and irrevocably waives, to the fullest
extent permitted by Law, any objection which it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding in any such court or
that any such suit, action or proceeding which is brought in any such court has
been brought in an inconvenient forum. Process in any such suit, action or
proceeding may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. Without limiting the foregoing, each
party agrees that service of process on such party as provided in Section 14.3
shall be deemed effective service of process on such party.

            Section 14.7 Waiver of Jury Trial. Each of the parties hereto hereby
irrevocably waives any and all right to trial by jury in any legal proceeding
arising out of or related to this Agreement or the transactions contemplated
hereby.

            Section 14.8 Counterparts; Effectiveness. This Agreement may be
executed in one or more counterparts, each of which together shall be deemed an
original, but all of which together shall constitute one and the same
instrument.

            Section 14.9 Entire Agreement. This Agreement (including the PIC
Disclosure Letter, the Parent Disclosure Letter and the Exhibits hereto)
constitutes the entire agreement between the parties with respect to the subject
matter of this Agreement and supersede and can-

                                       65



cel all prior agreements, negotiations, correspondence, undertakings,
understandings and communications of the parties, oral and written, with respect
to the subject matter hereof and thereof.

            Section 14.10 Third Party Beneficiaries. Nothing contained in this
Agreement or in any instrument or document executed by any party in connection
with the transactions contemplated hereby shall create any rights in, or be
deemed to have been executed for the benefit of, any Person that is not a party
hereto or thereto or a permitted successor or assign of such a party.

            Section 14.11 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon such
a determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent possible.

            Section 14.12 Specific Performance. The parties hereby acknowledge
and agree that the failure of any party to perform its agreements and covenants
hereunder, including its failure to take all actions as are necessary on its
part to the consummation of the transactions contemplated hereby, will cause
irreparable injury to the other parties, for which damages, even if available,
will not be an adequate remedy. Accordingly, each party hereby consents to the
issuance of injunctive relief by any court of competent jurisdiction to compel
performance of such party's obligations and to the granting by any court of the
remedy of specific performance of its obligations hereunder without proof of
actual damages and without any requirement for the securing or posting of any
bond. Such remedy shall not be deemed to be the exclusive remedy for a party's
breach of its obligations but shall be in addition to all other remedies
available at law or equity.

            Section 14.13 Construction; Interpretation.

            (a) The article and section headings contained in this Agreement are
solely for the purpose of reference, are not part of the agreement of the
parties and shall not in any way affect the meaning or interpretation of this
Agreement. As used in this Agreement, (i) unless otherwise specified herein, the
term "affiliate," with respect to any Person, shall mean and include any Person
controlling, controlled by or under common control with such Person, (ii) the
term "including" shall mean "including, without limitation," (iii) words in the
singular shall be held to include the plural and vice versa and words of one
gender shall be held to include the other genders as the context requires, (iv)
the words "hereof," "herein," and "herewith" and words of similar import shall,
unless otherwise stated, be construed to refer to this Agreement as a whole
(including the PIC Disclosure Letter, the Parent Disclosure Letter and the
Exhibits hereto) and not to any particular provision of this Agreement, and
article, section, paragraph, exhibit and schedule references are to the
articles, sections, paragraphs, exhibits and schedules of this Agreement, unless
otherwise specified, (v) the word "or" shall not be exclusive, and (vi) Parent,
Buyer, PIC and the Shareholders and will be referred to herein individually as a
"party"

                                       66



and collectively as "parties" (except where the context otherwise requires).
Where a word or phrase is defined herein, each of its other grammatical forms
shall have a corresponding meaning. A reference to any party to this Agreement
or any other agreement or document shall include such party's successors and
permitted assigns.

            (b) The parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.

            (c) Any reference to any federal, state, local or non-United States
statute or Law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context otherwise requires.

            Section 14.14 Changes in PNG Common Stock. For all purposes of this
Agreement, the PNG Shares shall include any securities issued or exchanged with
respect to such PNG Shares upon any recapitalization, reclassification, merger,
consolidation, spin-off, partial or complete liquidation, stock dividend,
split-up or combination of the securities of PNG or any other change in PNG's
capital structure.

            Section 14.15 Obligations of Each of the Shareholders and PIC.
Whenever this Agreement requires PIC to take any action or to fail to take any
action at or prior to the Closing, that requirement shall be deemed to include
an agreement and undertaking on the part of each of the Shareholders to cause
PIC to take that action or to fail to take that action, as applicable.

                            [Signature page follows]

                                       67



            IN WITNESS WHEREOF, Parent, Buyer, PIC, each of the Shareholders and
the Shareholders' Representative, in his capacity as the Shareholders'
Representative, have executed this Agreement or caused this Agreement to be
executed by their respective duly authorized officers as of the date first
written above.

UNITED NATIONAL GROUP, LTD.                UNITED NATIONAL INSURANCE
                                           COMPANY

By: /s/ David R. Bradley                   By: /s/ William F. Schmidt
    ----------------------------------         ---------------------------------
Name: David R. Bradley                     Name: William F. Schmidt
Title: Chief Executive Officer             Title: President & CEO

PENN INDEPENDENT CORPORATION               IRVIN SALTZMAN TRUST
                                           DATED FEBRUARY 18, 1989

By: /s/ Robert A. Lear                     /s/ Irvin Saltzman
    ----------------------------------     -------------------------------------
Name: Robert A. Lear                       Irvin Saltzman, Trustee
Title: Chief Executive Officer

JON S. SALTZMAN IRREVOCABLE TRUST,         JAMI LYNN SALTZMAN IRREVOCABLE TRUST,
DATED MAY 20, 1985                         DATED MAY 20, 1985

By: /s/ Jon S. Saltzman                    By: /s/ Jon S. Saltzman
    ----------------------------------         ---------------------------------
    Jon S. Saltzman, Trustee                   Jon S. Saltzman, Trustee

By: /s/ E. Anthony Saltzman                By: /s/ E. Anthony Saltzman
    ----------------------------------         ---------------------------------
    E. Anthony Saltzman, Trustee               E. Anthony Saltzman, Trustee

By: /s/ Jami Lynn Saltzman-Levy            By: /s/ Jami Lynn Saltzman-Levy
    ----------------------------------         ---------------------------------
    Jami Lynn Saltzman-Levy, Trustee           Jami Lynn Saltzman-Levy, Trustee

E. ANTHONY SALTZMAN                        JAN-CAROL POTTS IRREVOCABLE
IRREVOCABLE TRUST,                         TRUST, DATED MAY 20, 1985
DATED MAY 20, 1985

By: /s/ Jon S. Saltzman                    By: /s/ Jon S. Saltzman
    ----------------------------------         ---------------------------------
    Jon S. Saltzman, Trustee                   Jon S. Saltzman, Trustee

By: /s/ E. Anthony Saltzman                By: /s/ E. Anthony Saltzman
    ----------------------------------         ---------------------------------
    E. Anthony Saltzman, Trustee               E. Anthony Saltzman, Trustee

By: /s/ Jami Lynn Saltzman-Levy            By:  /s/ Jami Lynn Saltzman-Levy
    ----------------------------------          --------------------------------
   Jami Lynn Saltzman-Levy, Trustee             Jami Lynn Saltzman-Levy, Trustee

LIANE B. SALTZMAN IRREVOCABLE TRUST,     RYAN LYNCH SALTZMAN 1996
DATED MAY 20, 1985                       IRREVOCABLE TRUST,
                                         DATED DECEMBER 18, 1996

By: /s/ Jon S. Saltzman
    ----------------------------------
    Jon S. Saltzman, Trustee

By: /s/ E. Anthony Saltzman              By: /s/ Jon S. Saltzman
    ----------------------------------       -----------------------------------
    E. Anthony Saltzman, Trustee             Jon S. Saltzman, Trustee

By: /s/ Jami Lynn Saltzman-Levy
    ----------------------------------
    Jami Lynn Saltzman-Levy, Trustee

KATHRYN THERESA SALTZMAN 1996            IAN ASHER SALTZMAN 1996
IRREVOCABLE TRUST,                       IRREVOCABLE TRUST,
DATED DECEMBER 18, 1996                  DATED DECEMBER 18, 1996

By: /s/ Jon S. Saltzman                  By: /s/ Jami Lynn Saltzman-Levy
    ----------------------------------       -----------------------------------
    Jon S. Saltzman, Trustee                 Jami Lynn Saltzman-Levy, Trustee

LEE JORDAN SALTZMAN 1996                 SAMUEL LEE SALTZMAN 1996
IRREVOCABLE TRUST,                       IRREVOCABLE TRUST,
DATED DECEMBER 18, 1996                  DATED DECEMBER 18, 1996

By: /s/ Jami Lynn Saltzman-Levy          By: /s/ Jami Lynn Saltzman-Levy
    ----------------------------------       -----------------------------------
    Jami Lynn Saltzman-Levy, Trustee         Jami Lynn Saltzman-Levy, Trustee

STEFANIE LEA SALTZMAN 1996               JONI LYNN ANDERSON 1996
IRREVOCABLE TRUST,                       IRREVOCABLE TRUST,
DATED DECEMBER 18, 1996                  DATED DECEMBER 18, 1996

By: /s/ Jami Lynn Saltzman-Levy          By: /s/ Jami Lynn Saltzman-Levy
    ----------------------------------       -----------------------------------
    Jami Lynn Saltzman-Levy, Trustee         Jami Lynn Saltzman-Levy, Trustee

ERIK DOUGLAS ANDERSON 1996               MADISON LOUISE SALTZMAN 1998
IRREVOCABLE TRUST,                       IRREVOCABLE TRUST,
DATED DECEMBER 18, 1996                  DATED SEPTEMBER 23, 1998

By: /s/ Jami Lynn Saltzman-Levy          By: /s/ Jami Lynn Saltzman-Levy
    ----------------------------------       -----------------------------------
    Jami Lynn Saltzman-Levy, Trustee         Jami Lynn Saltzman-Levy, Trustee

                                       2



NICHOLAS ANDREW SALTZMAN                 JACOB ALLAN ANDERSON TRUST,
TRUST, DATED SEPTEMBER 23, 1998          DATED FEBRUARY 17, 1999

By: /s/ Jami Lynn Saltzman-Levy          By: /s/ Jami Lynn Saltzman-Levy
    ----------------------------------       ----------------------------------
    Jami Lynn Saltzman-Levy, Trustee         Jami Lynn Saltzman-Levy, Trustee

JON S. SALTZMAN                          E. ANTHONY SALTZMAN

/s/ Jon S. Saltzman                      /s/ Jami Lynn Saltzman-Levy
- --------------------------------------   --------------------------------------

JAMI LYNN SALTZMAN-LEVY                  LIANE B. ANDERSON

/s/ Jami Lynn Saltzman-Levy              /s/ Jami Lynn Saltzman-Levy
- --------------------------------------   --------------------------------------

JAN-CAROL SALTZMAN                       SHAREHOLDERS' REPRESENTATIVE

/s/ Jan-Carol Saltzman                   By: /s/ Jami Lynn Saltzman-Levy
- --------------------------------------       ----------------------------------
                                         Name: Irvin Saltzman
                                         Title: Shareholders' Representative

                                       3

EX-2.3

                                                                     EXHIBIT 2.3

                                                                  EXECUTION COPY

================================================================================

                            STOCK PURCHASE AGREEMENT

                                   DATED AS OF

                                OCTOBER 14, 2004

                                  BY AND AMONG

                          UNITED NATIONAL GROUP, LTD.,

                       UNITED NATIONAL INSURANCE COMPANY,

                                       AND

                                 IRVIN SALTZMAN

================================================================================



                                TABLE OF CONTENTS



                                                                                                                       PAGE
                                                                                                                       ----
                                                                                                                    
ARTICLE I DEFINITIONS............................................................................................        1
   Section 1.1        Definitions................................................................................        1

ARTICLE II PURCHASE AND SALE OF SHARES...........................................................................        3
   Section 2.1        Sale and Transfer of PNG Common Stock......................................................        3
   Section 2.2        Further Assurances.........................................................................        3

ARTICLE III THE CLOSING..........................................................................................        4
   Section 3.1        The Closing................................................................................        4
   Section 3.2        Deliveries by the Equity Holder............................................................        4
   Section 3.3        Deliveries by Parent.......................................................................        4

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE EQUITY HOLDER...................................................        4
   Section 4.1        Ownership of Stock; Title..................................................................        4
   Section 4.2        Authority..................................................................................        5
   Section 4.3        No Violation; Consents and Approvals.......................................................        5

ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER.....................................................        6
   Section 5.1        Organization and Qualification.............................................................        6
   Section 5.2        Corporate Authorization; Board Action......................................................        6
   Section 5.3        Consents and Approvals; No Violations......................................................        6
   Section 5.4        Investment Representation..................................................................        7

ARTICLE VI COVENANTS.............................................................................................        7
   Section 6.1        Conduct of the Equity Holder...............................................................        7
   Section 6.2        Notification of Certain Matters............................................................        7
   Section 6.3        Subsequent Actions.........................................................................        7
   Section 6.4        Exercise of PNG Options....................................................................        8

ARTICLE VII CONDITIONS...........................................................................................        8
   Section 7.1        Conditions to the Obligations of Each Party................................................        8
   Section 7.2        Conditions to the Obligations of Parent and Buyer..........................................        8
   Section 7.3        Conditions to the Obligations of the Equity Holder.........................................        9

ARTICLE VIII VOTING AGREEMENT....................................................................................        9
   Section 8.1        Voting of the PNG Shares...................................................................        9

ARTICLE IX TERMINATION...........................................................................................       10
   Section 9.1        Termination................................................................................       10
   Section 9.2        Effect of Termination......................................................................       11
   Section 9.3        Fees and Expenses..........................................................................       11

ARTICLE X INDEMNIFICATION........................................................................................       11
   Section 10.1       Indemnification by the Equity Holder.......................................................       11
   Section 10.2       Indemnification by Parent and Buyer........................................................       12
   Section 10.3       Notice of Claim; Defense...................................................................       12
   Section 10.4       Survival of Indemnification Claims.........................................................       13
   Section 10.5       Characterization of Indemnification Payments...............................................       13


                                       i



                                                                                                                 
   Section 10.6       Effect of Investigation....................................................................       13
   Section 10.7       Exclusive Remedy...........................................................................       13

ARTICLE XI MISCELLANEOUS.........................................................................................       13
   Section 11.1       Survival of Covenants, Representations and Warranties......................................       13
   Section 11.2       Amendments; No Waivers.....................................................................       13
   Section 11.3       Notices....................................................................................       14
   Section 11.4       Successors and Assigns.....................................................................       15
   Section 11.5       Governing Law..............................................................................       15
   Section 11.6       Jurisdiction...............................................................................       15
   Section 11.7       Waiver of Jury Trial.......................................................................       16
   Section 11.8       Counterparts; Effectiveness................................................................       16
   Section 11.9       Entire Agreement...........................................................................       16
   Section 11.10      Third Party Beneficiaries..................................................................       16
   Section 11.11      Severability...............................................................................       16
   Section 11.12      Specific Performance.......................................................................       16
   Section 11.13      Construction; Interpretation...............................................................       17
   Section 11.14      Changes in PNG Options and PNG Shares......................................................       17

EXHIBIT A........................................................................................................   FORM OF OPINION



                                       ii



                             INDEX OF DEFINED TERMS



                                                                                                                      PAGE
                                                                                                                      ----
                                                                                                                   
affiliate........................................................................................................      17
Agreement........................................................................................................       1
Business Day.....................................................................................................       1
Buyer............................................................................................................       1
Closing..........................................................................................................       4
Closing Date.....................................................................................................       4
Contract.........................................................................................................       1
Equity Holder....................................................................................................       1
Equity Holder Indemnified Persons................................................................................      12
Equity Holder Losses.............................................................................................      12
Equity Purchase Price............................................................................................       3
Exchange Act.....................................................................................................       1
Governmental Authority...........................................................................................       2
including........................................................................................................      17
Indemnified Person...............................................................................................      12
Indemnitor.......................................................................................................      12
Law..............................................................................................................       2
Liability........................................................................................................       2
Lien.............................................................................................................       2
Merger Agreement.................................................................................................       2
Parent...........................................................................................................       1
Person...........................................................................................................       2
PIC Shares.......................................................................................................       1
PNG..............................................................................................................       1
PNG Common Stock.................................................................................................       1
PNG Options......................................................................................................       3
PNG Shares.......................................................................................................       3
Proxy............................................................................................................      10
Representative...................................................................................................       2
Requisite Regulatory Approvals...................................................................................       8
Securities Act...................................................................................................       2
Shareholders.....................................................................................................       1
Stock Purchase Agreement.........................................................................................       1
Subsidiary.......................................................................................................       2
Tax..............................................................................................................       3
Tax Authority....................................................................................................       3
Taxes............................................................................................................       3
Third Party......................................................................................................       3


                                      iii



                            STOCK PURCHASE AGREEMENT

            THIS STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of October
14, 2004, is entered into by and among United National Group, Ltd., an exempted
company formed with limited liability under the laws of the Cayman Islands
("Parent"), United National Insurance Company, a Pennsylvania corporation and an
indirect, wholly-owned subsidiary of Parent ("Buyer"), and Irvin Saltzman (the
"Equity Holder").

                              W I T N E S S E T H:

            WHEREAS, Penn Independent Corporation, a Pennsylvania corporation
("PIC"), through a wholly-owned subsidiary, owns approximately thirty-one
percent (31%) of the outstanding common stock (the "PNG Common Stock"), par
value $0.01 per share, of Penn-America Group, Inc., a Pennsylvania corporation
("PNG");

            WHEREAS, simultaneously with the execution of this Agreement the
shareholders of PIC (the "Shareholders"), who together own all of the issued and
outstanding shares of PIC (the "PIC Shares"), are entering into a Stock Purchase
Agreement with Parent, Buyer, PIC and Irvin Saltzman, in his capacity as
Shareholders' Representative (the "Stock Purchase Agreement") pursuant to which
Buyer will acquire all of the PIC Shares;

            WHEREAS, the Equity Holder owns certain PNG Options (as defined
below) and shares of PNG Common Stock, and the Equity Holder desires to sell to
Buyer, and Buyer desires to acquire such shares of PNG Common Stock owned by the
Equity Holder and as are issued upon the exercise of the PNG Options prior to
the Closing (as defined below).

            NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein,
intending to be legally bound hereby, the parties hereto agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

            Section 1.1 Definitions. When used in this Agreement, the following
terms shall have the respective meanings specified therefor below:

            "Business Day" means any day other than Saturday, Sunday and any day
on which banking institutions in the Commonwealth of Pennsylvania are authorized
by Law or other governmental action to close.

            "Contract" means, with respect to any Person, any agreement,
arrangement, undertaking, contract, commitment, obligation, promise, indenture,
deed of trust or other instrument, document or agreement (whether written or
oral and whether express or implied) by which that Person, or any amount of its
properties or assets, is bound or subject.

            "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.



            "Governmental Authority" means any nation or government, any state
or other political subdivision thereof, any entity, authority or body exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, including any domestic (federal, state or local),
foreign or supranational governmental or regulatory authority, agency,
department, board, commission, administration or instrumentality, any court,
tribunal or arbitrative body or any self-regulatory organization (including but
not limited to state departments or divisions of insurance).

            "Law" means any law (including common law), ordinance, writ,
directive, judgment, order, decree, injunction, statute, treaty, rule,
regulation, regulatory requirement or determination of (or an agreement with) a
Governmental Authority.

            "Liability" means any debt, liability, commitment, obligation, claim
or cause of action of any kind whatsoever, whether due or to become due, known
or unknown, accrued or fixed, absolute or contingent, or otherwise.

            "Lien" means any and all liens, charges, security interests,
options, claims, mortgages, pledges, proxies, voting trusts or agreements,
obligations, understandings or arrangements or other restrictions on title or
transfer of any nature whatsoever.

            "Merger Agreement" means that certain Agreement and Plan of Merger,
dated as of October 14, 2004, by and among PNG, Parent, U.N. Holdings II, Inc.,
and Cheltenham Acquisition Corp.

            "Person" means and includes an individual, a partnership, a joint
venture, a corporation, a limited liability company, a trust, an association, an
unincorporated organization, a Governmental Authority and any other entity or
group (as defined in the Exchange Act).

            "Representative" means, with respect to any Person, (a) such Person,
(b) its respective Subsidiaries and affiliates and (c) such Person's, and such
Person's respective Subsidiaries' and affiliates', respective officers,
directors, employees, shareholders, partners, controlling persons, auditors,
financial advisors, attorneys, accountants, consultants, agents, advisors or
representatives.

            "Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.

            "Subsidiary" of a Person means: (a) any corporation, association or
other business entity of which more than fifty percent (50%) of the total voting
power of shares or other voting securities outstanding thereof is at the time
owned or controlled, directly or indirectly, by that Person or one or more of
the other Subsidiaries of that Person (or a combination thereof); and (b) any
partnership or limited liability company (i) the sole general partner or the
managing general partner or managing member of which is such Person or one or
more of the other Subsidiaries of such Person (or any combination thereof) or
(ii) the only general partners or members of which are such Person or one or
more of the other Subsidiaries of such Person (or any combination thereof).

                                       2



            "Tax Authority" means any competent Governmental Authority
exercising any regulatory or Taxing authority responsible for the determination,
assessment or collection of Taxes.

            "Tax" or "Taxes" means any and all federal, state, local, foreign or
other taxes of any kind (together with any and all interest, penalties,
additions to tax and additional amounts imposed with respect thereto) imposed by
any Tax Authority, including taxes, fees, duties, levies, customs, tariffs,
imposts, assessments, obligations or other similar charges of any kind on or
with respect to income, franchises, premiums, windfall or other profits, gross
receipts, property, sales, use, transfer, capital stock, payroll, employment,
social security, workers' compensation, unemployment compensation or net worth,
and taxes or other similar charges of any kind in the nature of excise,
withholding, ad valorem or value added.

            "Third Party" means any Person (or group of Persons) other than
Parent and its Subsidiaries.

                                   ARTICLE II

                           PURCHASE AND SALE OF SHARES

            Section 2.1 Sale and Transfer of PNG Common Stock.

                  (a) Subject to the terms and conditions of this Agreement, the
Equity Holder shall sell, convey, assign, transfer and deliver to Buyer, free
and clear of all Liens, one hundred twelve thousand five hundred (112,500)
shares of PNG Common Stock issued to the Equity Holder upon exercise of options
to purchase shares of PNG Common Stock held by the Equity Holder, or such lesser
number of shares as may received by the Equity Holder if such options expire in
accordance with their terms (the "PNG Options"), which PNG Options shall be
exercised by the Equity Holder prior to the Closing, and thirty-three thousand
three hundred (33,300) shares of PNG Common Stock (or such lesser number of
shares as the Equity Holder may hold as a result of use of a portion of such
shares in exercises of the PNG Options as contemplated by Section 6.4) (the
aggregate number of shares of PNG Common Stock, the "PNG Shares"), and which
shares of PNG Common Stock and PNG Options represent all PNG Common Stock and
PNG Options owned beneficially or of record by the Equity Holder (other than
through ownership of PIC Shares).

                  (b) Subject to the terms and conditions of this Agreement, in
consideration of the aforesaid sale, conveyance, assignment, transfer and
delivery to Buyer of the PNG Shares, Buyer shall pay to the Equity Holder by
wire transfer of immediately available funds to an account or accounts
designated in writing by the Equity Holder an amount equal to the number of
shares of PNG Common Stock actually delivered by the Equity Holder pursuant to
Section 2.1(a) multiplied by thirteen dollars and fifty-three cents ($13.53)
(such amount, the "Equity Purchase Price").

            Section 2.2 Further Assurances. After the Closing, the Equity Holder
shall from time to time, at the reasonable request of Parent or Buyer, execute
and deliver such other instruments of conveyance and transfer and take such
other actions as Parent or Buyer may rea-

                                       3



sonably request, in order to consummate the transactions contemplated hereby and
to vest in Buyer the right, title and interest in and to the PNG Shares.

                                   ARTICLE III

                                   THE CLOSING

            Section 3.1 The Closing. Subject to the satisfaction or waiver of
the conditions set forth in Article VII, the sale and transfer (the "Closing")
of the PNG Shares by the Equity Holder to the Buyer shall take place
simultaneously with and at the same location as the closing of the Stock
Purchase Agreement (the actual time and date of the Closing being referred to
herein as the "Closing Date").

            Section 3.2 Deliveries by the Equity Holder. Subject to the
conditions set forth in this Agreement, at the Closing, and simultaneously with
Parent's deliveries hereunder, the Equity Holder shall deliver, or cause to be
delivered, to Parent or Buyer, as applicable, the following:

                  (a) stock certificates representing all of the shares of PNG
Shares sufficient to vest in Buyer good and marketable title to such shares of
PNG Shares accompanied by stock powers duly endorsed in blank by the Equity
Holder;

                  (b) the opinions of counsel to the Equity Holder referred to
in Section 7.2(d); and

                  (c) all other previously undelivered documents reasonably
required to be delivered by the Equity Holder to Parent or Buyer at or prior to
the Closing in connection with the consummation of the transactions contemplated
hereby.

            Section 3.3 Deliveries by Parent. Subject to the conditions set
forth in this Agreement, at the Closing, and simultaneously with the Equity
Holder's deliveries hereunder, Parent shall deliver or cause to be delivered to
the Equity Holder, the following:

                  (a) the Equity Purchase Price; and

                  (b) all other previously undelivered documents required to be
delivered by Parent or Buyer to the Equity Holder at or prior to the Closing in
connection with the consummation of the transactions contemplated hereby.

                                   ARTICLE IV

               REPRESENTATIONS AND WARRANTIES OF THE EQUITY HOLDER

            The Equity Holder represents and warrants to Parent and Buyer as
follows:

            Section 4.1 Ownership of Stock; Title. The Equity Holder is, and
upon exercise of the PNG Options, the Equity Holder will be, the sole lawful
record and beneficial owner of the PNG Shares described in Section 2.1(a), which
ownership is and will be free and

                                       4



clear of all Liens. The Equity Holder is not a party to any agreement creating
rights with respect to the PNG Options or the PNG Shares in any Person and the
Equity Holder has the full power and legal right to sell, assign, transfer and
deliver the PNG Shares. There are no existing warrants, options, stock purchase
agreements, redemption agreements, restrictions of any nature, voting trust
agreements, proxies, calls or rights to subscribe of any character relating to
the PNG Options or the PNG Shares. The Equity Holder has not received any notice
of any adverse claim to the ownership of any of the PNG Options or the PNG
Shares, has no reason to know of any such adverse claim that may be justified,
and is not aware of existing facts that would give rise to any adverse claim to
the ownership of the PNG Options or the PNG Shares. On the Closing Date, the
Equity Holder shall have good and marketable title to the PNG Shares, free and
clear of all Liens. The delivery of certificates for the PNG Shares to Buyer
pursuant to the provisions of this Agreement, subject to consummation of the
transactions contemplated hereby, will transfer to Buyer good and marketable
title to the PNG Shares, free and clear of all Liens, except for those created
by Parent or Buyer. Other than the PNG Options and the PNG Shares, neither the
Equity Holder nor any of his affiliates are the record or beneficial owners,
directly or indirectly, of any capital stock or other ownership interest of any
kind whatsoever in PNG or any of its Subsidiaries, other than through ownership
of PIC Shares.

            Section 4.2 Authority.

                  (a) The Equity Holder has the requisite power and authority
and has full legal capacity necessary to execute, deliver and perform his
obligations under this Agreement and all other agreements and instruments to be
executed and delivered by the Equity Holder hereunder or in connection herewith
and to carry out the Equity Holder's obligations hereunder and thereunder and
the transactions contemplated hereby. No other proceedings on the part of the
Equity Holder are necessary to authorize such execution, delivery and
performance. This Agreement has been duly and validly executed and delivered by
the Equity Holder and, assuming due authorization, execution and delivery of
this Agreement by the other parties hereto, constitutes a valid and binding
agreement of the Equity Holder enforceable against him in accordance with its
terms, except to the extent that such enforcement may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar Laws, now or
hereafter in effect, affecting creditors' rights generally, and to general
equity principles.

                  (b) No Person has any community property rights by virtue of
marriage or otherwise in any of the PNG Options or the PNG Shares.

            Section 4.3 No Violation; Consents and Approvals.

                  (a) The execution and delivery of this Agreement by the Equity
Holder and the consummation of the transactions contemplated hereby require no
action by or in respect of, or filing with, any Governmental Authority other
than compliance with any applicable requirements of the HSR Act.

                  (b) Neither the execution, delivery or performance by the
Equity Holder of this Agreement nor the consummation by the Equity Holder of the
transactions contemplated hereby nor compliance by the Equity Holder with any of
the provisions hereof will (i) conflict with or result in any violation of any
provision of any Law binding upon or applicable to

                                       5



the Equity Holder, (ii) require the consent, approval or authorization of, or
notice to or filing with, any Third Party with respect to, result in any
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation,
amendment, or acceleration of any right or obligation of the Equity Holder or to
a loss of any benefit to which the Equity Holder is entitled) under, any
provision of any Contract or (iii) result in the creation or imposition of any
Lien on any of the PNG Options or the PNG Shares.

                                   ARTICLE V

               REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER

            Parent and Buyer, jointly and severally, represent and warrant to
the Equity Holder that:

            Section 5.1 Organization and Qualification. Parent was duly
organized as an exempted company formed with limited liability under the laws of
the Cayman Islands and is validly existing and in good standing under the laws
of the Cayman Islands. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania.

            Section 5.2 Corporate Authorization; Board Action. Each of Parent
and Buyer has the requisite corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of each of Parent and Buyer and no other corporate proceedings on
the part of either Parent or Buyer are necessary to authorize the execution and
delivery of this Agreement or to consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered by each of Parent
and Buyer and, assuming due authorization, execution and delivery of this
Agreement by the other parties hereto, constitutes a valid and binding agreement
of each of Parent and Buyer enforceable against each such party in accordance
with its terms, except to the extent that such enforcement may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
Laws, now or hereafter in effect, affecting creditors' rights generally, and to
general equity principles.

            Section 5.3 Consents and Approvals; No Violations.

                  (a) The execution, delivery and performance by Parent and
Buyer of this Agreement and the consummation by Parent and Buyer of the
transactions contemplated hereby require no action by or in respect of, or
notice to or filing with, any Governmental Authority other than (i) compliance
with any applicable requirements of the HSR Act, (ii) compliance with any
applicable requirements of the Exchange Act and the rules and regulations
promulgated thereunder, (iii) compliance with any applicable requirements of the
Securities Act and the rules and regulations promulgated thereunder and (iv)
compliance with any applicable requirements under federal and state Laws
governing insurance and insurance companies.

                                       6



                  (b) Neither the execution, delivery or performance by Parent
and Buyer of this Agreement nor the consummation by Parent and Buyer of the
transactions contemplated hereby nor compliance by Parent or Buyer with any of
the provisions hereof or thereof will conflict with or result in any breach of
any provisions of the memorandum and articles of association of Parent or the
similar organizational and governing documents of Buyer.

            Section 5.4 Investment Representation. Buyer is acquiring the PNG
Shares for investment for its own account, not as a nominee or agent, and not
with a view to, or for resale in connection with, any distribution thereof in
violation of the Securities Act.

                                   ARTICLE VI

                                    COVENANTS

            Section 6.1 Conduct of the Equity Holder. The Equity Holder
covenants and agrees that, except as expressly provided in this Agreement or as
required to comply with applicable Law or applicable fiduciary duties, or with
the prior written consent of Parent, from and after the date of this Agreement
and prior to the Closing, the Equity Holder shall not willfully or
intentionally:

                        (i) sell, transfer, pledge, dispose of, or permit to
      exist any Lien on, any of the PNG Options or the PNG Shares or any
      interest therein or relating thereto;

                        (ii) take, or agree to commit to take, or omit to take,
      any action that could make any representation or warranty of the Equity
      Holder contained herein inaccurate in any respect at, or as of any time
      prior to, the Closing; or

                        (iii) enter into a Contract to do any of the foregoing.

            Section 6.2 Notification of Certain Matters.

                  (a) The Equity Holder shall notify Parent, and Parent shall
notify the Equity Holder of (i) any representation or warranty made by it
contained in this Agreement becoming untrue or inaccurate in any material
respect, and (ii) the failure by it to comply with or satisfy, in any material
respect, any covenant, condition or agreement to be complied with or satisfied
by it under this Agreement, in each case within three (3) Business Days of such
Person becoming aware of the occurrence of such development.

                  (b) The Equity Holder shall give prompt notice to Parent, and
Parent or Buyer shall give prompt notice to the Equity Holder of: (i) any notice
or other communication from any Person alleging that the consent of such Person
is or may be required in connection with the transactions contemplated by this
Agreement and (ii) any notice or other communication from any Governmental
Authority in connection with the transactions contemplated by this Agreement.

            Section 6.3 Subsequent Actions. If at any time after the Closing
Parent or Buyer shall consider or be advised that any instruments of conveyance,
assignments, assurances or any other actions or things are necessary or
desirable (i) to vest, perfect or confirm ownership

                                       7



(of record or otherwise) in Buyer, its right, title or interest in, to or under
any or all of the PNG Shares, or (ii) to otherwise carry out this Agreement, the
Equity Holder shall execute and deliver all instruments of conveyance,
assignments and assurances and take and do all such other actions and things as
may be requested by Parent in order to vest, perfect or confirm any and all
right, title and interest in, to and under the PNG Shares in Buyer.

            Section 6.4 Exercise of PNG Options. The Equity Holder shall take
all actions necessary to exercise the PNG Options prior to Closing, except that
the Equity Holder shall be permitted to allow the PNG Options to expire in
accordance with their terms. The Equity Holder shall be permitted to effect
exercises of the PNG Options using the PNG Shares as consideration for such
exercises if such exercises are permitted by the terms of the PNG Options and
involve the delivery of shares of PNG Common Stock to PNG and not the sale of
shares of PNG Common Stock through a broker or other means to the public
markets.

                                  ARTICLE VII

                                   CONDITIONS

            Section 7.1 Conditions to the Obligations of Each Party. The
obligations of the Equity Holder, Parent and Buyer to effect the Closing are
subject to the satisfaction (or, to the extent legally permissible, waiver) of
the following conditions:

                  (a) HSR Act. Any applicable waiting period (including any
extension thereof) under the HSR Act relating to transactions contemplated by
this Agreement or the Stock Purchase Agreement shall have expired or been
terminated; and

                  (b) No Injunctions or Restraints. No provision of any
applicable Law and no judgment, injunction, order or decree that makes illegal
or otherwise prohibit the Closing or any of the other transactions contemplated
by this Agreement shall be in effect.

            Section 7.2 Conditions to the Obligations of Parent and Buyer. The
obligations of Parent and Buyer to effect the Closing are subject to the
satisfaction (or, to the extent legally permissible, waiver) of the following
further conditions:

                  (a) Performances of Obligations; Representations and
Warranties of the Equity Holder. (i) The representations and warranties of the
Equity Holder contained in this Agreement shall be true and correct in all
material respects on the date of this Agreement and at and as of the Closing as
if made at and as of such time (except to the extent expressly by its terms made
as of an earlier date, in which case as of such earlier date) and (ii) the
Equity Holder shall have performed in all material respects all of his
covenants, agreements and obligations hereunder required to be performed by them
at or prior to the Closing; and

                  (b) Regulatory Matters. The authorizations, consents, orders,
permits or approvals of, or declarations or filings with, and all expirations of
waiting periods imposed by, any Governmental Authority (other than the
expiration of the applicable waiting period under the HSR Act that is addressed
in Section 7.1(a)) that are necessary for the consummation of the transactions
contemplated hereby shall have been filed, have occurred or have been obtained
(all of the foregoing, the "Requisite Regulatory Approvals") and all such
Requisite Regulatory Ap-

                                       8



provals shall be in full force and effect; provided, however, that a Requisite
Regulatory Approval shall not be deemed to have been obtained if in connection
with the grant thereof there shall have been an imposition by any Governmental
Authority of any condition, requirement, restriction or change of regulation, or
any other action directly or indirectly related to such grant taken by such
Governmental Authority, which could (or if implemented could) have more than an
immaterial effect on Parent;

                  (c) No Litigation. No proceeding or litigation shall have been
threatened or shall have been commenced by or before any Governmental Authority
(i) seeking to restrain or prohibit the consummation of the transaction
contemplated by this Agreement or seeking to obtain from Parent any damages that
are material in relation to Parent or (ii) seeking to prohibit or limit the
ownership or operation by Buyer of the PNG Shares;

                  (d) Legal Opinion. Parent and Buyer shall have received an
opinion of counsel to the Equity Holder (or other counsel reasonably acceptable
to Parent), dated as of the Closing Date, in form and substance satisfactory to
Parent, to the effect set forth in Exhibit A; and

                  (e) Stock Purchase Agreement. The closing of the sale of the
PIC Shares to Buyer shall be consummated in accordance with the terms of the
Stock Purchase Agreement simultaneously with the Closing.

            Section 7.3 Conditions to the Obligations of the Equity Holder. The
obligation of the Equity Holder to effect the Closing is subject to the
satisfaction (or, to the extent legally permissible, waiver) of the following
further conditions: (i) the representations and warranties of Parent and Buyer
contained in this Agreement shall be true and correct in all material respects
on the date of this Agreement and at and as of the Closing as if made at and as
of such time (except to the extent expressly by its terms made as of an earlier
date, in which case as of such earlier date), and (ii) Parent shall have
performed in all material respects all of its covenants, agreements and
obligations hereunder required to be performed by it at or prior to the Closing.

                                  ARTICLE VIII

                                VOTING AGREEMENT

            Section 8.1 Voting of the PNG Shares.

                  (a) Until the Closing or the termination of this Agreement in
accordance with the terms hereof, the Equity Holder hereby agrees that he shall,
at any annual, special or other meeting of the shareholders of PNG, and at any
adjournment or adjournments thereof, or by written consent without a meeting,
vote any PNG Shares (i) in favor of any business combination or other
transaction, or other resolution or matter submitted to the PNG shareholders
involving or related to any business combination or other transaction, with
Parent and its affiliates, on the one hand, and PNG and its shareholders, on the
other hand, including the adoption of the Merger Agreement and the consummation
of the transactions contemplated thereby and (ii) against approval or adoption
of any business combination or other transaction involving a Third

                                       9



Party and PNG, or any other action or agreement that could have the effect of
preventing or making more difficult any business combination or other
transaction involving Parent and its affiliates, on the one hand, and PNG and
its shareholders, on the other hand, or that could impede, interfere with,
frustrate, delay, postpone or attempt to discourage the transactions
contemplated by the Merger Agreement. The Equity Holder shall be present, in
person or by proxy, at all annual, special or other meetings of the shareholders
of PNG, and at any adjournment or adjournments thereof, so that all of the PNG
Shares are counted for the purpose of determining the presence of a quorum at
such meetings.

                  (b) The Equity Holder will, with respect to the PNG Shares,
constitute and appoint Parent, or any nominee of Parent, with full power of
substitution, from the date of this Agreement until the earlier of the
termination of this Agreement and the Closing, as the Equity Holder's true and
lawful attorney and proxy (its "Proxy"), for and in its name, place and stead,
to vote the PNG Shares, as its Proxy, at any annual, special or other meeting of
the shareholders of PNG, and at any adjournment or adjournments thereof, or by
written consent without a meeting, (i) in favor of any business combination or
other transaction, or other resolution or matter submitted to the PNG
shareholders involving or related to any business combination or other
transaction, with Parent and its affiliates, on the one hand, and PNG and its
shareholders, on the other hand, including the adoption of the Merger Agreement
and the consummation of the transactions contemplated thereby and (ii) against
approval or adoption of any business combination or other transaction involving
a Third Party and PNG, or any other action or agreement that could have the
effect of preventing or making more difficult any business combination or other
transaction involving Parent and its affiliates, on the one hand, and PNG and
its shareholders, on the other hand, or that could impede, interfere with,
frustrate, delay, postpone or attempt to discourage the transactions
contemplated by the Merger Agreement. THIS POWER OF ATTORNEY AND PROXY IS
IRREVOCABLE, IS GRANTED IN CONSIDERATION OF PARENT AND BUYER ENTERING INTO THIS
AGREEMENT, IS COUPLED WITH AN INTEREST SUFFICIENT IN LAW TO SUPPORT AN
IRREVOCABLE POWER AND SHALL TERMINATE UPON THE EARLIER OF THE TERMINATION OF
THIS AGREEMENT AND THE CLOSING. This appointment shall revoke all prior
attorneys and proxies appointed by the Equity Holder at any time with respect to
the PNG Shares and no subsequent attorneys or proxies shall be appointed by the
Equity Holder or be effective with respect thereto while this Agreement is in
effect.

                                   ARTICLE IX

                                   TERMINATION

            Section 9.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing Date:

                  (a) by mutual written consent of the Equity Holder and Parent;

                  (b) by Parent or the Equity Holder if the Stock Purchase
Agreement is terminated pursuant to Article X thereof;

                                       10



                  (c) by either the Equity Holder or Parent, if there shall be
any Law that makes effecting the Closing illegal or otherwise prohibited or if
any judgment, injunction, order or decree enjoining Parent, Buyer or the Equity
Holder from effecting the Closing is entered and such judgment, injunction,
order or decree shall become final and nonappealable; or

                  (d) by Parent, if there shall have been a breach by the Equity
Holder of any of its representations, warranties, covenants or obligations
contained in this Agreement, which breach would result in the failure to satisfy
one or more of the conditions set forth in Section 7.2(a), and such breach shall
be incapable of being cured or, if capable of being cured, shall not have been
cured within thirty (30) days after written notice thereof shall have been
received by the party alleged to be in breach.

            Section 9.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 9.1, this Agreement shall become void and of no effect with
no liability on the part of any party hereto, except (i) that the provisions of
this Agreement set forth in this Section 9.2 and Article XI shall survive the
termination hereof and (ii) that no such termination shall relieve any party of
any liability or damages resulting from any breach by that party of this
Agreement prior to such termination.

            Section 9.3 Fees and Expenses. Other than as specifically agreed to
in writing by the parties or as set forth in this Agreement, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs or expenses,
whether or not the Closing is effected.

                                   ARTICLE X

                                 INDEMNIFICATION

            Section 10.1 Indemnification by the Equity Holder.

                  (a) Subject to Section 10.1(b), the Equity Holder shall
indemnify, defend and hold harmless Parent, each of its Subsidiaries (including
PIC and its Subsidiaries), and each of their respective Representatives (and the
respective heirs, successors of each of the foregoing) the ("Parent Indemnified
Persons") from and against and in respect of one hundred percent (100%) of all
actual losses, liabilities, damages, judgments, settlements and expenses
(including interest and penalties recovered by a Third Party with respect
thereto and reasonable attorneys' fees and expenses and reasonable accountants'
fees and expenses incurred in the defense of any of the same or in asserting,
preserving or enforcing any of the rights of the Parent Indemnified Persons
arising under Article X) incurred by any of the Parent Indemnified Persons,
whether or not involving a Third-Party claim, which are caused by, arise from or
are related to any breach of any representation or warranty made by the Equity
Holder pursuant to Article IV or any covenant of the Equity Holder contained in
this Agreement.

                  (b) The Equity Holder's indemnification obligation arising
from Section 10.1(a) shall survive indefinitely. In no event shall the Equity
Holder's obligation to indemnify the Parent Indemnified Persons pursuant to
Section 10.1(a) exceed the Equity Purchase Price.

                                       11



            Section 10.2 Indemnification by Parent and Buyer.

                  (a) Subject to Sections 10.2(b) and (c), Parent and Buyer
shall, jointly and severally, indemnify, defend and hold harmless the Equity
Holder and his Representatives (and the respective heirs, successors and assigns
of each of the foregoing) (the "Equity Holder Indemnified Persons") from and
against and in respect of one hundred percent (100%) of all actual losses,
liabilities, damages, judgments, settlements and expenses (including interest
and penalties recovered by a Third Party with respect thereto and reasonable
attorneys' fees and expenses and reasonable accountants' fees and expenses
incurred in the defense of any of the same or in asserting, preserving or
enforcing any of the rights of the Equity Holder Indemnified Persons arising
under Article XI) incurred by any of the Equity Holder Indemnified Persons,
whether or not involving a Third-Party claim, which are caused by, arise from or
are related to (i) any breach of any representation or warranty made by Parent
or Buyer pursuant to Article V, or (ii) any covenant of Parent or Buyer
contained in this Agreement ("Equity Holder Losses").

                  (b) Parent's and Buyer's indemnification obligations arising
from Section 10.2(a) shall survive indefinitely. In no event shall Parent's and
Buyer's obligation to indemnify the Equity Holder Indemnified Persons pursuant
to Section 10.2(a) exceed the Equity Purchase Price.

            Section 10.3 Notice of Claim; Defense. A Parent Indemnified Person
or a Equity Holder Indemnified Person that desires to seek indemnification under
any part of this Article X (each, an "Indemnified Person") shall give to each
party responsible or alleged to be responsible for indemnification hereunder (an
"Indemnitor") prompt notice of any third-party claim that may give rise to any
indemnification obligation under this Article X, together with the estimated
amount of such claim (if then estimable), and the Indemnitor shall have the
right to assume the defense (at its expense) of any such claim through counsel
of such Indemnitor's own choosing by so notifying the Indemnified Persons within
fifteen (15) Business Days of the first receipt by such Indemnitor of such
notice from the Indemnified Persons; provided, however, that any such counsel
shall be reasonably satisfactory to the Indemnified Persons. Failure to give
such notice shall not affect the indemnification obligations hereunder in the
absence of actual and material prejudice and in such case, only to the extent of
such prejudice. If, under applicable standards of professional conduct, a
conflict between any Indemnified Persons and any Indemnitor exists in respect of
such third-party claim, the Indemnitor shall pay the reasonable fees and
expenses of such additional counsel as may be required to be retained in order
to resolve such conflict (but not more than one firm of counsel). The Indemnitor
shall be liable for the fees and expenses of counsel employed by the Indemnified
Persons for any period during which the Indemnitor has not assumed the defense
of any such third-party claim. If the Indemnitor assumes such defense, the
Indemnified Persons shall have the right to participate in the defense thereof
and to employ counsel, at its own expense, separate from the counsel employed by
the Indemnitor. If the Indemnitor chooses to defend or prosecute any third-party
claim, the Indemnified Persons shall agree to any settlement, compromise or
discharge of such third-party claim that the Indemnitor may recommend and that,
by its terms, discharges the Indemnified Persons from any Liability in
connection with such third-party claim; provided, however, that, without the
consent of the Indemnified Persons, the Indemnitor shall not consent to, and the
Indemnified Persons shall not be required to agree to, the entry of any judgment
or enter into any settlement that (i) provides for injunctive or other
non-monetary relief affecting the Indemnified Persons or any

                                       12



affiliate of the Indemnified Persons or (ii) does not include as an
unconditional term thereof the giving of a release from all liability with
respect to such claim by each claimant or plaintiff for the benefit of each
Indemnified Person.

            Section 10.4 Survival of Indemnification Claims. The indemnification
obligations set forth in this Article X shall survive the Closing as set forth
in Sections 10.1(b) and 10.2(b).

            Section 10.5 Characterization of Indemnification Payments. Any
payments made pursuant to this Article X shall be treated for all Tax purposes
as adjustments to the Equity Purchase Price.

            Section 10.6 Effect of Investigation. The right to indemnification
and all other remedies based on any representation, warranty, covenant or
obligation contained in or made pursuant to this Agreement shall not be affected
by any investigation conducted with respect to, or any knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the date the Closing occurs, with respect to
the accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant or obligation. The waiver of any condition to the obligation
of any party hereto to consummate the transactions contemplated hereby, where
such condition is based on the accuracy of any representation or warranty, or on
the performance of or compliance with any covenant or obligation, shall not
affect the right to indemnification or other remedy based on such
representation, warranty, covenant or obligation.

            Section 10.7 Exclusive Remedy. Except in the case of fraud or
willful misrepresentation, Parent, Buyer and the Equity Holder agree that the
indemnification provisions of this Article X shall be the exclusive monetary
remedy of the Indemnified Persons with respect to breaches of representations,
warranties, covenants, obligations or other provisions of this Agreement.

                                   ARTICLE XI

                                  MISCELLANEOUS

            Section 11.1 Survival of Covenants, Representations and Warranties.
Each of the covenants, representations and warranties of Parent, Buyer and the
Equity Holder in this Agreement or in any schedule, instrument or other document
delivered pursuant to this Agreement shall survive the Closing Date; provided,
that nothing in Article X or this Section 11.1 shall relieve the parties or
their respective Representatives of any liability following the Closing Date for
any willful or fraudulent misrepresentations contained herein or in any other
certificate or writing delivered pursuant hereto.

            Section 11.2 Amendments; No Waivers.

                  (a) Any provision of this Agreement (including the Exhibit
hereto) may be amended or waived at any time prior to the Closing if, and only
if, such amendment or waiver is in writing and signed, in the case of an
amendment, by the Equity Holder, Parent and Buyer, or in the case of a waiver,
by the party against whom the waiver is to be effective.

                                       13



                  (b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by Law.

            Section 11.3 Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including facsimile or similar
writing) and shall be deemed to have been duly given upon receipt when delivered
in person, by facsimile (receipt confirmed) or by overnight courier or
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified by like notice):

            if to Parent or Buyer, to:

                           United National Group, Ltd.
                           Walker House, 87 Mary Street
                           P.O. Box 908GT
                           George Town, Grand Cayman
                           Cayman Islands
                           Attention: Chief Executive Officer
                           Facsimile No.: (345) 949-7886

            with a copy to:

                           United National Group, Ltd.
                           c/o United National Insurance Company
                           Three Bala Plaza, East
                           Suite 300
                           Bala Cynwyd, PA 19004
                           Attention: Kevin L. Tate
                           Facsimile No.: (610) 660-8884

            and:

                           United National Insurance Company
                           Three Bala Plaza, East
                           Suite 300
                           Bala Cynwyd, PA 19004
                           Attention: William F. Schmidt
                           Facsimile No.: (610) 660-8884

                                       14



            with a copy to:

                           United National Insurance Company
                           Three Bala Plaza, East
                           Suite 300
                           Bala Cynwyd, PA 19004
                           Attention: Richard S. March
                           Facsimile No.: (610) 660-6800

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

                           Skadden, Arps, Slate, Meagher & Flom LLP
                           Four Times Square
                           New York, New York 10036
                           Attention: Daniel Wolf
                           Facsimile No.: (212) 735-2000

            if to the Equity Holder:

                           Irvin Saltzman
                           431 Chilean Avenue
                           Palm Beach, Florida 33480
                           Facsimile No.: (561) 805-9591

            Section 11.4 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns; provided, that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other parties hereto, except that Parent or Buyer may
transfer or assign, in whole or from time to time in part, to one or more of its
affiliates, its rights or obligations under this Agreement, but any such
transfer or assignment shall not relieve Parent or Buyer of its obligations
hereunder.

            Section 11.5 Governing Law. This Agreement, including all matters of
construction, validity and performance, shall be construed in accordance with
and governed by the law of the Commonwealth of Pennsylvania (without regard to
principles of conflicts or choice of laws) as to all matters, including but not
limited to, matters of validity, construction, effect, performance and remedies.

            Section 11.6 Jurisdiction. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated hereby may be brought in
any federal or state court located in the Commonwealth of Pennsylvania, and each
of the parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by Law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be

                                       15



served on any party anywhere in the world, whether within or without the
jurisdiction of any such court. Without limiting the foregoing, each party
agrees that service of process on such party as provided in Section 11.3 shall
be deemed effective service of process on such party.

            Section 11.7 Waiver of Jury Trial. Each of the parties hereto hereby
irrevocably waives any and all right to trial by jury in any legal proceeding
arising out of or related to this Agreement or the transactions contemplated
hereby.

            Section 11.8 Counterparts; Effectiveness. This Agreement may be
executed in one or more counterparts, each of which together shall be deemed an
original, but all of which together shall constitute one and the same
instrument.

            Section 11.9 Entire Agreement. This Agreement (including the Exhibit
hereto) constitutes the entire agreement between the parties with respect to the
subject matter of this Agreement and supersede and cancel all prior agreements,
negotiations, correspondence, undertakings, understandings and communications of
the parties, oral and written, with respect to the subject matter hereof and
thereof.

            Section 11.10 Third Party Beneficiaries. Nothing contained in this
Agreement or in any instrument or document executed by any party in connection
with the transactions contemplated hereby shall create any rights in, or be
deemed to have been executed for the benefit of, any Person that is not a party
hereto or thereto or a permitted successor or assign of such a party.

            Section 11.11 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon such
a determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent possible.

            Section 11.12 Specific Performance. The parties hereby acknowledge
and agree that the failure of any party to perform its agreements and covenants
hereunder, including its failure to take all actions as are necessary on its
part to the consummation of the transactions contemplated hereby, will cause
irreparable injury to the other parties, for which damages, even if available,
will not be an adequate remedy. Accordingly, each party hereby consents to the
issuance of injunctive relief by any court of competent jurisdiction to compel
performance of such party's obligations and to the granting by any court of the
remedy of specific performance of its obligations hereunder without proof of
actual damages and without any requirement for the securing or posting of any
bond. Such remedy shall not be deemed to be the exclusive remedy for a party's
breach of its obligations but shall be in addition to all other remedies
available at law or equity.

                                       16



            Section 11.13 Construction; Interpretation.

                  (a) The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement. As used in this Agreement, (i) unless otherwise specified
herein, the term "affiliate," with respect to any Person, shall mean and include
any Person controlling, controlled by or under common control with such Person,
(ii) the term "including" shall mean "including, without limitation," (iii)
words in the singular shall be held to include the plural and vice versa and
words of one gender shall be held to include the other genders as the context
requires, (iv) the words "hereof," "herein," and "herewith" and words of similar
import shall, unless otherwise stated, be construed to refer to this Agreement
as a whole (including the Exhibit hereto) and not to any particular provision of
this Agreement, and article, section, paragraph, exhibit and schedule references
are to the articles, sections, paragraphs, exhibits and schedules of this
Agreement, unless otherwise specified, (v) the word "or" shall not be exclusive,
and (vi) Parent, Buyer and the Equity Holder and will be referred to herein
individually as a "party" and collectively as "parties" (except where the
context otherwise requires). Where a word or phrase is defined herein, each of
its other grammatical forms shall have a corresponding meaning. A reference to
any party to this Agreement or any other agreement or document shall include
such party's successors and permitted assigns.

                  (b) The parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provisions
of this Agreement.

                  (c) Any reference to any federal, state, local or non-United
States statute or Law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context otherwise requires.

            Section 11.14 Changes in PNG Options and PNG Shares. For all
purposes of this Agreement, the PNG Options and PNG Shares shall include any
securities issued or exchanged with respect to such PNG Options and PNG Shares,
as applicable, upon any recapitalization, reclassification, merger,
consolidation, spin-off, partial or complete liquidation, stock dividend,
split-up or combination of the securities of PNG or any other change in PNG's
capital structure.

                            [Signature page follows]

                                       17



            IN WITNESS WHEREOF, Parent, Buyer, and the Equity Holder have
executed this Agreement or caused this Agreement to be executed by their
respective duly authorized officers as of the date first written above.

UNITED NATIONAL GROUP, LTD.              UNITED NATIONAL INSURANCE
                                         COMPANY

By:  /s/ David R. Bradley
    --------------------------------
Name: David R. Bradley
Title: Chief Executive Officer           By:  /s/ William F. Schmidt
                                             -----------------------------------
                                         Name: William F. Schmidt
                                         Title: President & CEO

                                         IRVIN SALTZMAN

                                          /s/ Irvin Saltzman
                                         ---------------------------------------
                                         Name: Irvin Saltzman

EX-2.4

                                                                     EXHIBIT 2.4

                                                                  EXECUTION COPY

================================================================================

                            STOCK PURCHASE AGREEMENT

                                   DATED AS OF

                                OCTOBER 14, 2004

                                  BY AND AMONG

                          UNITED NATIONAL GROUP, LTD.,

                       UNITED NATIONAL INSURANCE COMPANY,

                                JON S. SALTZMAN,

                                       AND

                              JOANNE LYNCH SALTZMAN

================================================================================



                                TABLE OF CONTENTS



                                                                                 PAGE
                                                                                 ----
                                                                              
ARTICLE I DEFINITIONS.........................................................     1
   Section 1.1        Definitions.............................................     1

ARTICLE II PURCHASE AND SALE OF SHARES........................................     3
   Section 2.1        Sale and Transfer of PNG Common Stock...................     3
   Section 2.2        Further Assurances......................................     4

ARTICLE III THE CLOSING.......................................................     4
   Section 3.1        The Closing.............................................     4
   Section 3.2        Deliveries by the Equity Holders........................     4
   Section 3.3        Deliveries by Parent....................................     4

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE EQUITY HOLDERS...............     4
   Section 4.1        Ownership of Stock; Title...............................     5
   Section 4.2        Authority...............................................     5
   Section 4.3        No Violation; Consents and Approvals....................     5

ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER..................     6
   Section 5.1        Organization and Qualification..........................     6
   Section 5.2        Corporate Authorization; Board Action...................     6
   Section 5.3        Consents and Approvals; No Violations...................     6
   Section 5.4        Investment Representation...............................     7

ARTICLE VI COVENANTS..........................................................     7
   Section 6.1        Conduct of the Equity Holders...........................     7
   Section 6.2        Notification of Certain Matters.........................     7
   Section 6.3        Subsequent Actions......................................     8
   Section 6.4        Exercise of PNG Options.................................     8

ARTICLE VII CONDITIONS........................................................     8
   Section 7.1        Conditions to the Obligations of Each Party.............     8
   Section 7.2        Conditions to the Obligations of Parent and Buyer.......     8
   Section 7.3        Conditions to the Obligations of the Equity Holders.....     9

ARTICLE VIII VOTING AGREEMENT.................................................     9
   Section 8.1        Voting of the PNG Shares................................     9

ARTICLE IX TERMINATION........................................................    10
   Section 9.1        Termination.............................................    10
   Section 9.2        Effect of Termination...................................    11
   Section 9.3        Fees and Expenses.......................................    11

ARTICLE X INDEMNIFICATION.....................................................    11
   Section 10.1       Indemnification by the Equity Holders...................    11
   Section 10.2       Indemnification by Parent and Buyer.....................    12
   Section 10.3       Notice of Claim; Defense................................    12
   Section 10.4       Survival of Indemnification Claims......................    13
   Section 10.5       Characterization of Indemnification Payments............    13


                                        i


                                                                               
   Section 10.6       Effect of Investigation.................................                 13
   Section 10.7       Exclusive Remedy........................................                 13

ARTICLE XI MISCELLANEOUS......................................................                 13
   Section 11.1       Survival of Covenants, Representations and Warranties...                 13
   Section 11.2       Amendments; No Waivers..................................                 14
   Section 11.3       Notices.................................................                 14
   Section 11.4       Successors and Assigns..................................                 15
   Section 11.5       Governing Law...........................................                 15
   Section 11.6       Jurisdiction............................................                 16
   Section 11.7       Waiver of Jury Trial....................................                 16
   Section 11.8       Counterparts; Effectiveness.............................                 16
   Section 11.9       Entire Agreement........................................                 16
   Section 11.10      Third Party Beneficiaries...............................                 16
   Section 11.11      Severability............................................                 16
   Section 11.12      Specific Performance....................................                 16
   Section 11.13      Construction; Interpretation............................                 17
   Section 11.14      Changes in PNG Options and PNG Shares...................                 17

EXHIBIT A.....................................................................    FORM OF OPINION



                                       ii


                             INDEX OF DEFINED TERMS



                                                                                 PAGE
                                                                                 ----
                                                                              
affiliate.....................................................................    17
Agreement.....................................................................     1
Business Day..................................................................     1
Buyer.........................................................................     1
Closing.......................................................................     4
Closing Date..................................................................     4
Contract......................................................................     1
Equity Holder Indemnified Persons.............................................    12
Equity Holder Losses..........................................................    12
Equity Holders................................................................     1
Equity Purchase Price.........................................................     3
Exchange Act..................................................................     2
Governmental Authority........................................................     2
including.....................................................................    17
Indemnified Person............................................................    12
Indemnitor....................................................................    12
Law...........................................................................     2
Liability.....................................................................     2
Lien..........................................................................     2
Merger Agreement..............................................................     2
Parent........................................................................     1
Person........................................................................     2
PIC Shares....................................................................     1
PNG...........................................................................     1
PNG Common Stock..............................................................     1
PNG Options...................................................................     3
PNG Shares....................................................................     3
Proxy.........................................................................    10
Representative................................................................     2
Requisite Regulatory Approvals................................................     9
Securities Act................................................................     2
Shareholders..................................................................     1
Stock Purchase Agreement......................................................     1
Subsidiary....................................................................     2
Tax...........................................................................     3
Tax Authority.................................................................     3
Taxes.........................................................................     3
Third Party...................................................................     3


                                       iii


                            STOCK PURCHASE AGREEMENT

            THIS STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of October
14, 2004, is entered into by and among United National Group, Ltd., an exempted
company formed with limited liability under the laws of the Cayman Islands
("Parent"), United National Insurance Company, a Pennsylvania corporation and an
indirect, wholly-owned subsidiary of Parent ("Buyer"), Jon S. Saltzman and
Joanne Lynch Saltzman (collectively, the "Equity Holders").

                              W I T N E S S E T H:

            WHEREAS, Penn Independent Corporation, a Pennsylvania corporation
("PIC"), through a wholly-owned subsidiary, owns approximately thirty-one
percent (31%) of the outstanding common stock (the "PNG Common Stock"), par
value $0.01 per share, of Penn-America Group, Inc., a Pennsylvania corporation
("PNG");

            WHEREAS, simultaneously with the execution of this Agreement the
shareholders of PIC (the "Shareholders"), who together own all of the issued and
outstanding shares of PIC (the "PIC Shares"), are entering into a Stock Purchase
Agreement with Parent, Buyer, PIC and Irvin Saltzman, in his capacity as
Shareholders' Representative (the "Stock Purchase Agreement") pursuant to which
Buyer will acquire all of the PIC Shares;

            WHEREAS, the Equity Holders own certain PNG Options and PNG Shares
(each as defined below), and the Equity Holders desire to sell to Buyer, and
Buyer desires to acquire such shares of PNG Common Stock owned by the Equity
Holders and as are issued upon the exercise of the PNG Options and the PNG
Shares prior to the Closing (as defined below).

            NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein,
intending to be legally bound hereby, the parties hereto agree as follows:

                                   ARTICLE I

                                   DEFINITIONS

            Section 1.1 Definitions. When used in this Agreement, the following
terms shall have the respective meanings specified therefor below:

            "Business Day" means any day other than Saturday, Sunday and any day
on which banking institutions in the Commonwealth of Pennsylvania are authorized
by Law or other governmental action to close.

            "Contract" means, with respect to any Person, any agreement,
arrangement, undertaking, contract, commitment, obligation, promise, indenture,
deed of trust or other instrument, document or agreement (whether written or
oral and whether express or implied) by which that Person, or any amount of its
properties or assets, is bound or subject.



            "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.

            "Governmental Authority" means any nation or government, any state
or other political subdivision thereof, any entity, authority or body exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, including any domestic (federal, state or local),
foreign or supranational governmental or regulatory authority, agency,
department, board, commission, administration or instrumentality, any court,
tribunal or arbitrative body or any self-regulatory organization (including but
not limited to state departments or divisions of insurance).

            "Law" means any law (including common law), ordinance, writ,
directive, judgment, order, decree, injunction, statute, treaty, rule,
regulation, regulatory requirement or determination of (or an agreement with) a
Governmental Authority.

            "Liability" means any debt, liability, commitment, obligation, claim
or cause of action of any kind whatsoever, whether due or to become due, known
or unknown, accrued or fixed, absolute or contingent, or otherwise.

            "Lien" means any and all liens, charges, security interests,
options, claims, mortgages, pledges, proxies, voting trusts or agreements,
obligations, understandings or arrangements or other restrictions on title or
transfer of any nature whatsoever.

            "Merger Agreement" means that certain Agreement and Plan of Merger,
dated as of October 14, 2004, by and among PNG, Parent, U.N. Holdings II, Inc.,
and Cheltenham Acquisition Corp.

            "Person" means and includes an individual, a partnership, a joint
venture, a corporation, a limited liability company, a trust, an association, an
unincorporated organization, a Governmental Authority and any other entity or
group (as defined in the Exchange Act).

            "Representative" means, with respect to any Person, (a) such Person,
(b) its respective Subsidiaries and affiliates and (c) such Person's, and such
Person's respective Subsidiaries' and affiliates', respective officers,
directors, employees, shareholders, partners, controlling persons, auditors,
financial advisors, attorneys, accountants, consultants, agents, advisors or
representatives.

            "Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.

            "Subsidiary" of a Person means: (a) any corporation, association or
other business entity of which more than fifty percent (50%) of the total voting
power of shares or other voting securities outstanding thereof is at the time
owned or controlled, directly or indirectly, by that Person or one or more of
the other Subsidiaries of that Person (or a combination thereof); and (b) any
partnership or limited liability company (i) the sole general partner or the
managing general partner or managing member of which is such Person or one or
more of the other Subsidiaries of such Person (or any combination thereof) or
(ii) the only general partners or members of which

                                        2


are such Person or one or more of the other Subsidiaries of such Person (or any
combination thereof).

            "Tax Authority" means any competent Governmental Authority
exercising any regulatory or Taxing authority responsible for the determination,
assessment or collection of Taxes.

            "Tax" or "Taxes" means any and all federal, state, local, foreign or
other taxes of any kind (together with any and all interest, penalties,
additions to tax and additional amounts imposed with respect thereto) imposed by
any Tax Authority, including taxes, fees, duties, levies, customs, tariffs,
imposts, assessments, obligations or other similar charges of any kind on or
with respect to income, franchises, premiums, windfall or other profits, gross
receipts, property, sales, use, transfer, capital stock, payroll, employment,
social security, workers' compensation, unemployment compensation or net worth,
and taxes or other similar charges of any kind in the nature of excise,
withholding, ad valorem or value added.

            "Third Party" means any Person (or group of Persons) other than
Parent and its Subsidiaries.

                                   ARTICLE II

                           PURCHASE AND SALE OF SHARES

            Section 2.1 Sale and Transfer of PNG Common Stock.

                  (a) Subject to the terms and conditions of this Agreement, the
Equity Holders shall sell, convey, assign, transfer and deliver to Buyer, free
and clear of all Liens, ninety-five thousand twenty-five (95,025) shares of PNG
Common Stock issued to Jon S. Saltzman upon exercise of options to purchase
shares of PNG Common Stock held by him, or such lesser number of shares as may
received by him if such options expire in accordance with their terms (the "PNG
Options"), which PNG Options shall be exercised by the Jon S. Saltzman prior to
the Closing, and an aggregate of one hundred one thousand four hundred
seventy-five (101,475) shares of PNG Common Stock (or such lesser number of
shares as the Equity Holders may hold as a result of use of a portion of such
shares in exercises of the PNG Options as contemplated by Section 6.4) (the
aggregate number of shares of PNG Common Stock, the "PNG Shares"), and which
shares of PNG Common Stock and PNG Options represent all PNG Common Stock and
PNG Options owned beneficially or of record by the Equity Holders (other than
through ownership of PIC Shares).

                  (b) Subject to the terms and conditions of this Agreement, in
consideration of the aforesaid sale, conveyance, assignment, transfer and
delivery to Buyer of the PNG Shares, Buyer shall pay to the Equity Holders by
wire transfer of immediately available funds to an account or accounts
designated in writing by the Equity Holders an amount equal to the number of
shares of PNG Common Stock actually delivered by the Equity Holders pursuant to
Section 2.1(a) multiplied by thirteen dollars and fifty-three cents ($13.53)
(such amount, the "Equity Purchase Price").

                                        3


            Section 2.2 Further Assurances. After the Closing, the Equity
Holders shall from time to time, at the reasonable request of Parent or Buyer,
execute and deliver such other instruments of conveyance and transfer and take
such other actions as Parent or Buyer may reasonably request, in order to
consummate the transactions contemplated hereby and to vest in Buyer the right,
title and interest in and to the PNG Shares.

                                   ARTICLE III

                                   THE CLOSING

            Section 3.1 The Closing. Subject to the satisfaction or waiver of
the conditions set forth in Article VII, the sale and transfer (the "Closing")
of the PNG Shares by the Equity Holders to the Buyer shall take place
simultaneously with and at the same location as the closing of the Stock
Purchase Agreement (the actual time and date of the Closing being referred to
herein as the "Closing Date").

            Section 3.2 Deliveries by the Equity Holders. Subject to the
conditions set forth in this Agreement, at the Closing, and simultaneously with
Parent's deliveries hereunder, the Equity Holders shall deliver, or cause to be
delivered, to Parent or Buyer, as applicable, the following:

                  (a) stock certificates representing all of the shares of PNG
Shares sufficient to vest in Buyer good and marketable title to such shares of
PNG Shares accompanied by stock powers duly endorsed in blank by the Equity
Holders;

                  (b) the opinions of counsel to the Equity Holders referred to
in Section 7.2(d); and

                  (c) all other previously undelivered documents reasonably
required to be delivered by the Equity Holders to Parent or Buyer at or prior to
the Closing in connection with the consummation of the transactions contemplated
hereby.

            Section 3.3 Deliveries by Parent. Subject to the conditions set
forth in this Agreement, at the Closing, and simultaneously with the Equity
Holders' deliveries hereunder, Parent shall deliver or cause to be delivered to
the Equity Holders, the following:

                  (a) the Equity Purchase Price; and

                  (b) all other previously undelivered documents required to be
delivered by Parent or Buyer to the Equity Holders at or prior to the Closing in
connection with the consummation of the transactions contemplated hereby.

                                   ARTICLE IV

              REPRESENTATIONS AND WARRANTIES OF THE EQUITY HOLDERS

            The Equity Holders, jointly and severally, represent and warrant to
Parent and Buyer as follows:

                                        4


            Section 4.1 Ownership of Stock; Title. The Equity Holders are, and
upon exercise of the PNG Options, the Equity Holders will be, the sole lawful
record and beneficial owners of the PNG Shares described in Section 2.1(a),
which ownership is and will be free and clear of all Liens. The Equity Holders
are not a party to any agreement creating rights with respect to the PNG Options
or the PNG Shares in any Person and the Equity Holders have the full power and
legal right to sell, assign, transfer and deliver the PNG Shares. There are no
existing warrants, options, stock purchase agreements, redemption agreements,
restrictions of any nature, voting trust agreements, proxies, calls or rights to
subscribe of any character relating to the PNG Options or the PNG Shares. The
Equity Holders have not received any notice of any adverse claim to the
ownership of any of the PNG Options or the PNG Shares, have no reason to know of
any such adverse claim that may be justified, and are not aware of existing
facts that would give rise to any adverse claim to the ownership of the PNG
Options or the PNG Shares. On the Closing Date, the Equity Holders shall have
good and marketable title to the PNG Shares, free and clear of all Liens. The
delivery of certificates for the PNG Shares to Buyer pursuant to the provisions
of this Agreement, subject to consummation of the transactions contemplated
hereby, will transfer to Buyer good and marketable title to the PNG Shares, free
and clear of all Liens, except for those created by Parent or Buyer. Other than
the PNG Options and the PNG Shares, neither of the Equity Holders nor any of
their affiliates are the record or beneficial owners, directly or indirectly, of
any capital stock or other ownership interest of any kind whatsoever in PNG or
any of its Subsidiaries, other than through ownership of PIC Shares.

            Section 4.2 Authority.

                  (a) The Equity Holders have the requisite power and authority
and have full legal capacity necessary to execute, deliver and perform his
obligations under this Agreement and all other agreements and instruments to be
executed and delivered by the Equity Holders hereunder or in connection herewith
and to carry out the Equity Holders' obligations hereunder and thereunder and
the transactions contemplated hereby. No other proceedings on the part of the
Equity Holders are necessary to authorize such execution, delivery and
performance. This Agreement has been duly and validly executed and delivered by
the Equity Holders and, assuming due authorization, execution and delivery of
this Agreement by the other parties hereto, constitutes a valid and binding
agreement of the Equity Holders enforceable against them in accordance with its
terms, except to the extent that such enforcement may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar Laws, now or
hereafter in effect, affecting creditors' rights generally, and to general
equity principles.

                  (b) No Person has any community property rights by virtue of
marriage or otherwise in any of the PNG Options or the PNG Shares.

            Section 4.3 No Violation; Consents and Approvals.

                  (a) The execution and delivery of this Agreement by the Equity
Holders and the consummation of the transactions contemplated hereby require no
action by or in respect of, or filing with, any Governmental Authority other
than compliance with any applicable requirements of the HSR Act.

                                        5


                  (b) Neither the execution, delivery or performance by the
Equity Holders of this Agreement nor the consummation by the Equity Holders of
the transactions contemplated hereby nor compliance by the Equity Holders with
any of the provisions hereof will (i) conflict with or result in any violation
of any provision of any Law binding upon or applicable to the Equity Holders,
(ii) require the consent, approval or authorization of, or notice to or filing
with, any Third Party with respect to, result in any violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation, amendment, or acceleration
of any right or obligation of the Equity Holders or to a loss of any benefit to
which the Equity Holders are entitled) under, any provision of any Contract or
(iii) result in the creation or imposition of any Lien on any of the PNG Options
or the PNG Shares.

                                    ARTICLE V

               REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER

            Parent and Buyer, jointly and severally, represent and warrant to
the Equity Holders that:

            Section 5.1 Organization and Qualification. Parent was duly
organized as an exempted company formed with limited liability under the laws of
the Cayman Islands and is validly existing and in good standing under the laws
of the Cayman Islands. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania.

            Section 5.2 Corporate Authorization; Board Action. Each of Parent
and Buyer has the requisite corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of each of Parent and Buyer and no other corporate proceedings on
the part of either Parent or Buyer are necessary to authorize the execution and
delivery of this Agreement or to consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered by each of Parent
and Buyer and, assuming due authorization, execution and delivery of this
Agreement by the other parties hereto, constitutes a valid and binding agreement
of each of Parent and Buyer enforceable against each such party in accordance
with its terms, except to the extent that such enforcement may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
Laws, now or hereafter in effect, affecting creditors' rights generally, and to
general equity principles.

            Section 5.3 Consents and Approvals; No Violations.

                  (a) The execution, delivery and performance by Parent and
Buyer of this Agreement and the consummation by Parent and Buyer of the
transactions contemplated hereby require no action by or in respect of, or
notice to or filing with, any Governmental Authority other than (i) compliance
with any applicable requirements of the HSR Act, (ii) compliance with any
applicable requirements of the Exchange Act and the rules and regulations

                                        6


promulgated thereunder, (iii) compliance with any applicable requirements of the
Securities Act and the rules and regulations promulgated thereunder and (iv)
compliance with any applicable requirements under federal and state Laws
governing insurance and insurance companies.

                  (b) Neither the execution, delivery or performance by Parent
and Buyer of this Agreement nor the consummation by Parent and Buyer of the
transactions contemplated hereby nor compliance by Parent or Buyer with any of
the provisions hereof or thereof will conflict with or result in any breach of
any provisions of the memorandum and articles of association of Parent or the
similar organizational and governing documents of Buyer.

            Section 5.4 Investment Representation. Buyer is acquiring the PNG
Shares for investment for its own account, not as a nominee or agent, and not
with a view to, or for resale in connection with, any distribution thereof in
violation of the Securities Act.

                                   ARTICLE VI

                                    COVENANTS

            Section 6.1 Conduct of the Equity Holders. The Equity Holders
covenant and agree that, except as expressly provided in this Agreement or as
required to comply with applicable Law or applicable fiduciary duties, or with
the prior written consent of Parent, from and after the date of this Agreement
and prior to the Closing, the Equity Holders shall not willfully or
intentionally:

                        (i) sell, transfer, pledge, dispose of, or permit to
      exist any Lien on, any of the PNG Options or the PNG Shares or any
      interest therein or relating thereto;

                        (ii) take, or agree to commit to take, or omit to take,
      any action that could make any representation or warranty of the Equity
      Holders contained herein inaccurate in any respect at, or as of any time
      prior to, the Closing; or

                        (iii) enter into a Contract to do any of the foregoing.

            Section 6.2 Notification of Certain Matters.

                  (a) The Equity Holders shall notify Parent, and Parent shall
notify the Equity Holders of (i) any representation or warranty made by it
contained in this Agreement becoming untrue or inaccurate in any material
respect, and (ii) the failure by it to comply with or satisfy, in any material
respect, any covenant, condition or agreement to be complied with or satisfied
by it under this Agreement, in each case within three (3) Business Days of such
Person becoming aware of the occurrence of such development.

                  (b) The Equity Holders shall give prompt notice to Parent, and
Parent or Buyer shall give prompt notice to the Equity Holders of: (i) any
notice or other communication from any Person alleging that the consent of such
Person is or may be required in connection with the transactions contemplated by
this Agreement and (ii) any notice or other communication from any Governmental
Authority in connection with the transactions contemplated by this Agreement.

                                        7


            Section 6.3 Subsequent Actions. If at any time after the Closing
Parent or Buyer shall consider or be advised that any instruments of conveyance,
assignments, assurances or any other actions or things are necessary or
desirable (i) to vest, perfect or confirm ownership (of record or otherwise) in
Buyer, its right, title or interest in, to or under any or all of the PNG
Shares, or (ii) to otherwise carry out this Agreement, the Equity Holders shall
execute and deliver all instruments of conveyance, assignments and assurances
and take and do all such other actions and things as may be requested by Parent
in order to vest, perfect or confirm any and all right, title and interest in,
to and under the PNG Shares in Buyer.

            Section 6.4 Exercise of PNG Options. Jon S. Saltzman shall take all
actions necessary to exercise the PNG Options prior to Closing, except that Jon
S. Saltzman shall be permitted to allow the PNG Options to expire in accordance
with their terms. Jon S. Saltzman shall be permitted to effect exercises of the
PNG Options using the PNG Shares as consideration for such exercises if such
exercises are permitted by the terms of the PNG Options and involve the delivery
of shares of PNG Common Stock to PNG and not the sale of shares of PNG Common
Stock through a broker or other means to the public markets.

                                   ARTICLE VII

                                   CONDITIONS

            Section 7.1 Conditions to the Obligations of Each Party. The
obligations of the Equity Holders, Parent and Buyer to effect the Closing are
subject to the satisfaction (or, to the extent legally permissible, waiver) of
the following conditions:

                  (a) HSR Act. Any applicable waiting period (including any
extension thereof) under the HSR Act relating to transactions contemplated by
this Agreement or the Stock Purchase Agreement shall have expired or been
terminated; and

                  (b) No Injunctions or Restraints. No provision of any
applicable Law and no judgment, injunction, order or decree that makes illegal
or otherwise prohibit the Closing or any of the other transactions contemplated
by this Agreement shall be in effect.

            Section 7.2 Conditions to the Obligations of Parent and Buyer. The
obligations of Parent and Buyer to effect the Closing are subject to the
satisfaction (or, to the extent legally permissible, waiver) of the following
further conditions:

                  (a) Performances of Obligations; Representations and
Warranties of the Equity Holders. (i) The representations and warranties of the
Equity Holders contained in this Agreement shall be true and correct in all
material respects on the date of this Agreement and at and as of the Closing as
if made at and as of such time (except to the extent expressly by its terms made
as of an earlier date, in which case as of such earlier date) and (ii) the
Equity Holders shall have performed in all material respects all of their
covenants, agreements and obligations hereunder required to be performed by them
at or prior to the Closing; and

                  (b) Regulatory Matters. The authorizations, consents, orders,
permits or approvals of, or declarations or filings with, and all expirations of
waiting periods imposed by, any Governmental Authority (other than the
expiration of the applicable waiting period under the

                                        8


HSR Act that is addressed in Section 7.1(a)) that are necessary for the
consummation of the transactions contemplated hereby shall have been filed, have
occurred or have been obtained (all of the foregoing, the "Requisite Regulatory
Approvals") and all such Requisite Regulatory Approvals shall be in full force
and effect; provided, however, that a Requisite Regulatory Approval shall not be
deemed to have been obtained if in connection with the grant thereof there shall
have been an imposition by any Governmental Authority of any condition,
requirement, restriction or change of regulation, or any other action directly
or indirectly related to such grant taken by such Governmental Authority, which
could (or if implemented could) have more than an immaterial effect on Parent;

                  (c) No Litigation. No proceeding or litigation shall have been
threatened or shall have been commenced by or before any Governmental Authority
(i) seeking to restrain or prohibit the consummation of the transaction
contemplated by this Agreement or seeking to obtain from Parent any damages that
are material in relation to Parent or (ii) seeking to prohibit or limit the
ownership or operation by Buyer of the PNG Shares;

                  (d) Legal Opinion. Parent and Buyer shall have received an
opinion of counsel to the Equity Holders (or other counsel reasonably acceptable
to Parent), dated as of the Closing Date, in form and substance satisfactory to
Parent, to the effect set forth in Exhibit A; and

                  (e) Stock Purchase Agreement. The closing of the sale of the
PIC Shares to Buyer shall be consummated in accordance with the terms of the
Stock Purchase Agreement simultaneously with the Closing.

            Section 7.3 Conditions to the Obligations of the Equity Holders. The
obligation of the Equity Holders to effect the Closing is subject to the
satisfaction (or, to the extent legally permissible, waiver) of the following
further conditions: (i) the representations and warranties of Parent and Buyer
contained in this Agreement shall be true and correct in all material respects
on the date of this Agreement and at and as of the Closing as if made at and as
of such time (except to the extent expressly by its terms made as of an earlier
date, in which case as of such earlier date), and (ii) Parent shall have
performed in all material respects all of its covenants, agreements and
obligations hereunder required to be performed by it at or prior to the Closing.

                                  ARTICLE VIII

                                VOTING AGREEMENT

            Section 8.1 Voting of the PNG Shares.

                  (a) Until the Closing or the termination of this Agreement in
accordance with the terms hereof, each of the Equity Holders hereby agrees that
he or she shall, at any annual, special or other meeting of the shareholders of
PNG, and at any adjournment or adjournments thereof, or by written consent
without a meeting, vote any PNG Shares (i) in favor of any business combination
or other transaction, or other resolution or matter submitted to the PNG
shareholders involving or related to any business combination or other
transaction, with

                                        9


Parent and its affiliates, on the one hand, and PNG and its shareholders, on the
other hand, including the adoption of the Merger Agreement and the consummation
of the transactions contemplated thereby and (ii) against approval or adoption
of any business combination or other transaction involving a Third Party and
PNG, or any other action or agreement that could have the effect of preventing
or making more difficult any business combination or other transaction involving
Parent and its affiliates, on the one hand, and PNG and its shareholders, on the
other hand, or that could impede, interfere with, frustrate, delay, postpone or
attempt to discourage the transactions contemplated by the Merger Agreement. The
Equity Holders shall be present, in person or by proxy, at all annual, special
or other meetings of the shareholders of PNG, and at any adjournment or
adjournments thereof, so that all of the PNG Shares are counted for the purpose
of determining the presence of a quorum at such meetings.

                  (b) Each of the Equity Holders will, with respect to the PNG
Shares, constitute and appoint Parent, or any nominee of Parent, with full power
of substitution, from the date of this Agreement until the earlier of the
termination of this Agreement and the Closing, as the Equity Holder's true and
lawful attorney and proxy (its "Proxy"), for and in its name, place and stead,
to vote the PNG Shares, as its Proxy, at any annual, special or other meeting of
the shareholders of PNG, and at any adjournment or adjournments thereof, or by
written consent without a meeting, (i) in favor of any business combination or
other transaction, or other resolution or matter submitted to the PNG
shareholders involving or related to any business combination or other
transaction, with Parent and its affiliates, on the one hand, and PNG and its
shareholders, on the other hand, including the adoption of the Merger Agreement
and the consummation of the transactions contemplated thereby and (ii) against
approval or adoption of any business combination or other transaction involving
a Third Party and PNG, or any other action or agreement that could have the
effect of preventing or making more difficult any business combination or other
transaction involving Parent and its affiliates, on the one hand, and PNG and
its shareholders, on the other hand, or that could impede, interfere with,
frustrate, delay, postpone or attempt to discourage the transactions
contemplated by the Merger Agreement. THIS POWER OF ATTORNEY AND PROXY IS
IRREVOCABLE, IS GRANTED IN CONSIDERATION OF PARENT AND BUYER ENTERING INTO THIS
AGREEMENT, IS COUPLED WITH AN INTEREST SUFFICIENT IN LAW TO SUPPORT AN
IRREVOCABLE POWER AND SHALL TERMINATE UPON THE EARLIER OF THE TERMINATION OF
THIS AGREEMENT AND THE CLOSING. This appointment shall revoke all prior
attorneys and proxies appointed by the Equity Holders at any time with respect
to the PNG Shares and no subsequent attorneys or proxies shall be appointed by
the Equity Holders or be effective with respect thereto while this Agreement is
in effect.

                                   ARTICLE IX

                                   TERMINATION

            Section 9.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing Date:

                  (a) by mutual written consent of the Equity Holders and
Parent;

                                       10


                  (b) by Parent or the Equity Holders if the Stock Purchase
Agreement is terminated pursuant to Article X thereof;

                  (c) by either the Equity Holders or Parent, if there shall be
any Law that makes effecting the Closing illegal or otherwise prohibited or if
any judgment, injunction, order or decree enjoining Parent, Buyer or the Equity
Holders from effecting the Closing is entered and such judgment, injunction,
order or decree shall become final and nonappealable; or

                  (d) by Parent, if there shall have been a breach by the Equity
Holders of any of their representations, warranties, covenants or obligations
contained in this Agreement, which breach would result in the failure to satisfy
one or more of the conditions set forth in Section 7.2(a), and such breach shall
be incapable of being cured or, if capable of being cured, shall not have been
cured within thirty (30) days after written notice thereof shall have been
received by the party alleged to be in breach.

            Section 9.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 9.1, this Agreement shall become void and of no effect with
no liability on the part of any party hereto, except (i) that the provisions of
this Agreement set forth in this Section 9.2 and Article XI shall survive the
termination hereof and (ii) that no such termination shall relieve any party of
any liability or damages resulting from any breach by that party of this
Agreement prior to such termination.

            Section 9.3 Fees and Expenses. Other than as specifically agreed to
in writing by the parties or as set forth in this Agreement, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs or expenses,
whether or not the Closing is effected.

                                    ARTICLE X

                                 INDEMNIFICATION

            Section 10.1 Indemnification by the Equity Holders.

                  (a) Subject to Section 10.1(b), the Equity Holders shall
jointly and severally indemnify, defend and hold harmless Parent, each of its
Subsidiaries (including PIC and its Subsidiaries), and each of their respective
Representatives (and the respective heirs, successors of each of the foregoing)
the ("Parent Indemnified Persons") from and against and in respect of one
hundred percent (100%) of all actual losses, liabilities, damages, judgments,
settlements and expenses (including interest and penalties recovered by a Third
Party with respect thereto and reasonable attorneys' fees and expenses and
reasonable accountants' fees and expenses incurred in the defense of any of the
same or in asserting, preserving or enforcing any of the rights of the Parent
Indemnified Persons arising under Article X) incurred by any of the Parent
Indemnified Persons, whether or not involving a Third-Party claim, which are
caused by, arise from or are related to any breach of any representation or
warranty made by the Equity Holders pursuant to Article IV or any covenant of
the Equity Holders contained in this Agreement.

                                       11


                  (b) The Equity Holders' indemnification obligation arising
from Section 10.1(a) shall survive indefinitely. In no event shall the Equity
Holders' obligation to indemnify the Parent Indemnified Persons pursuant to
Section 10.1(a) exceed the Equity Purchase Price.

            Section 10.2 Indemnification by Parent and Buyer.

                  (a) Subject to Sections 10.2(b) and (c), Parent and Buyer
shall, jointly and severally, indemnify, defend and hold harmless the Equity
Holders and their Representatives (and the respective heirs, successors and
assigns of each of the foregoing) (the "Equity Holder Indemnified Persons") from
and against and in respect of one hundred percent (100%) of all actual losses,
liabilities, damages, judgments, settlements and expenses (including interest
and penalties recovered by a Third Party with respect thereto and reasonable
attorneys' fees and expenses and reasonable accountants' fees and expenses
incurred in the defense of any of the same or in asserting, preserving or
enforcing any of the rights of the Equity Holder Indemnified Persons arising
under Article XI) incurred by any of the Equity Holder Indemnified Persons,
whether or not involving a Third-Party claim, which are caused by, arise from or
are related to (i) any breach of any representation or warranty made by Parent
or Buyer pursuant to Article V, or (ii) any covenant of Parent or Buyer
contained in this Agreement ("Equity Holder Losses").

                  (b) Parent's and Buyer's indemnification obligations arising
from Section 10.2(a) shall survive indefinitely. In no event shall Parent's and
Buyer's obligation to indemnify the Equity Holder Indemnified Persons pursuant
to Section 10.2(a) exceed the Equity Purchase Price.

            Section 10.3 Notice of Claim; Defense. A Parent Indemnified Person
or a Equity Holder Indemnified Person that desires to seek indemnification under
any part of this Article X (each, an "Indemnified Person") shall give to each
party responsible or alleged to be responsible for indemnification hereunder (an
"Indemnitor") prompt notice of any third-party claim that may give rise to any
indemnification obligation under this Article X, together with the estimated
amount of such claim (if then estimable), and the Indemnitor shall have the
right to assume the defense (at its expense) of any such claim through counsel
of such Indemnitor's own choosing by so notifying the Indemnified Persons within
fifteen (15) Business Days of the first receipt by such Indemnitor of such
notice from the Indemnified Persons; provided, however, that any such counsel
shall be reasonably satisfactory to the Indemnified Persons. Failure to give
such notice shall not affect the indemnification obligations hereunder in the
absence of actual and material prejudice and in such case, only to the extent of
such prejudice. If, under applicable standards of professional conduct, a
conflict between any Indemnified Persons and any Indemnitor exists in respect of
such third-party claim, the Indemnitor shall pay the reasonable fees and
expenses of such additional counsel as may be required to be retained in order
to resolve such conflict (but not more than one firm of counsel). The Indemnitor
shall be liable for the fees and expenses of counsel employed by the Indemnified
Persons for any period during which the Indemnitor has not assumed the defense
of any such third-party claim. If the Indemnitor assumes such defense, the
Indemnified Persons shall have the right to participate in the defense thereof
and to employ counsel, at its own expense, separate from the counsel employed by
the Indemnitor. If the Indemnitor chooses to defend or prosecute any third-party
claim, the Indemnified Persons shall agree to any settlement, compromise or
discharge of such third-party

                                       12


claim that the Indemnitor may recommend and that, by its terms, discharges the
Indemnified Persons from any Liability in connection with such third-party
claim; provided, however, that, without the consent of the Indemnified Persons,
the Indemnitor shall not consent to, and the Indemnified Persons shall not be
required to agree to, the entry of any judgment or enter into any settlement
that (i) provides for injunctive or other non-monetary relief affecting the
Indemnified Persons or any affiliate of the Indemnified Persons or (ii) does not
include as an unconditional term thereof the giving of a release from all
liability with respect to such claim by each claimant or plaintiff for the
benefit of each Indemnified Person.

            Section 10.4 Survival of Indemnification Claims. The indemnification
obligations set forth in this Article X shall survive the Closing as set forth
in Sections 10.1(b) and 10.2(b).

            Section 10.5 Characterization of Indemnification Payments. Any
payments made pursuant to this Article X shall be treated for all Tax purposes
as adjustments to the Equity Purchase Price.

            Section 10.6 Effect of Investigation. The right to indemnification
and all other remedies based on any representation, warranty, covenant or
obligation contained in or made pursuant to this Agreement shall not be affected
by any investigation conducted with respect to, or any knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the date the Closing occurs, with respect to
the accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant or obligation. The waiver of any condition to the obligation
of any party hereto to consummate the transactions contemplated hereby, where
such condition is based on the accuracy of any representation or warranty, or on
the performance of or compliance with any covenant or obligation, shall not
affect the right to indemnification or other remedy based on such
representation, warranty, covenant or obligation.

            Section 10.7 Exclusive Remedy. Except in the case of fraud or
willful misrepresentation, Parent, Buyer and the Equity Holders agree that the
indemnification provisions of this Article X shall be the exclusive monetary
remedy of the Indemnified Persons with respect to breaches of representations,
warranties, covenants, obligations or other provisions of this Agreement.

                                   ARTICLE XI

                                  MISCELLANEOUS

            Section 11.1 Survival of Covenants, Representations and Warranties.
Each of the covenants, representations and warranties of Parent, Buyer and the
Equity Holders in this Agreement or in any schedule, instrument or other
document delivered pursuant to this Agreement shall survive the Closing Date;
provided, that nothing in Article X or this Section 11.1 shall relieve the
parties or their respective Representatives of any liability following the
Closing Date for any willful or fraudulent misrepresentations contained herein
or in any other certificate or writing delivered pursuant hereto.

                                       13


            Section 11.2 Amendments; No Waivers.

                  (a) Any provision of this Agreement (including the Exhibit
hereto) may be amended or waived at any time prior to the Closing if, and only
if, such amendment or waiver is in writing and signed, in the case of an
amendment, by the Equity Holders, Parent and Buyer, or in the case of a waiver,
by the party against whom the waiver is to be effective.

                  (b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by Law.

            Section 11.3 Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including facsimile or similar
writing) and shall be deemed to have been duly given upon receipt when delivered
in person, by facsimile (receipt confirmed) or by overnight courier or
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified by like notice):

            if to Parent or Buyer, to:

                  United National Group, Ltd.
                  Walker House, 87 Mary Street
                  P.O. Box 908GT
                  George Town, Grand Cayman
                  Cayman Islands
                  Attention: Chief Executive Officer
                  Facsimile No.: (345) 949-7886

            with a copy to:

                  United National Group, Ltd.
                  c/o United National Insurance Company
                  Three Bala Plaza, East
                  Suite 300
                  Bala Cynwyd, PA 19004
                  Attention: Kevin L. Tate
                  Facsimile No.: (610) 660-8884

                                       14


            and:

                  United National Insurance Company
                  Three Bala Plaza, East
                  Suite 300
                  Bala Cynwyd, PA 19004
                  Attention: William F. Schmidt
                  Facsimile No.: (610) 660-8884

            with a copy to:

                  United National Insurance Company
                  Three Bala Plaza, East
                  Suite 300
                  Bala Cynwyd, PA 19004
                  Attention: Richard S. March
                  Facsimile No.: (610) 660-6800

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

                  Skadden, Arps, Slate, Meagher & Flom LLP
                  Four Times Square
                  New York, New York 10036
                  Attention: Daniel Wolf
                  Facsimile No.:  (212) 735-2000

            if to the Equity Holders:

                  Jon S. Saltzman and Joanne Lynch Saltzman
                  435 Dreshertown Road
                  Fort Washington, PA  19034

            Section 11.4 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns; provided, that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other parties hereto, except that Parent or Buyer may
transfer or assign, in whole or from time to time in part, to one or more of its
affiliates, its rights or obligations under this Agreement, but any such
transfer or assignment shall not relieve Parent or Buyer of its obligations
hereunder.

            Section 11.5 Governing Law. This Agreement, including all matters of
construction, validity and performance, shall be construed in accordance with
and governed by the law of the Commonwealth of Pennsylvania (without regard to
principles of conflicts or choice of laws) as to all matters, including but not
limited to, matters of validity, construction, effect, performance and remedies.

                                       15


            Section 11.6 Jurisdiction. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated hereby may be brought in
any federal or state court located in the Commonwealth of Pennsylvania, and each
of the parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by Law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 11.3 shall be deemed
effective service of process on such party.

            Section 11.7 Waiver of Jury Trial. Each of the parties hereto hereby
irrevocably waives any and all right to trial by jury in any legal proceeding
arising out of or related to this Agreement or the transactions contemplated
hereby.

            Section 11.8 Counterparts; Effectiveness. This Agreement may be
executed in one or more counterparts, each of which together shall be deemed an
original, but all of which together shall constitute one and the same
instrument.

            Section 11.9 Entire Agreement. This Agreement (including the Exhibit
hereto) constitutes the entire agreement between the parties with respect to the
subject matter of this Agreement and supersede and cancel all prior agreements,
negotiations, correspondence, undertakings, understandings and communications of
the parties, oral and written, with respect to the subject matter hereof and
thereof.

            Section 11.10 Third Party Beneficiaries. Nothing contained in this
Agreement or in any instrument or document executed by any party in connection
with the transactions contemplated hereby shall create any rights in, or be
deemed to have been executed for the benefit of, any Person that is not a party
hereto or thereto or a permitted successor or assign of such a party.

            Section 11.11 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon such
a determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent possible.

            Section 11.12 Specific Performance. The parties hereby acknowledge
and agree that the failure of any party to perform its agreements and covenants
hereunder, including its failure to take all actions as are necessary on its
part to the consummation of the transactions contemplated hereby, will cause
irreparable injury to the other parties, for which damages, even

                                       16


if available, will not be an adequate remedy. Accordingly, each party hereby
consents to the issuance of injunctive relief by any court of competent
jurisdiction to compel performance of such party's obligations and to the
granting by any court of the remedy of specific performance of its obligations
hereunder without proof of actual damages and without any requirement for the
securing or posting of any bond. Such remedy shall not be deemed to be the
exclusive remedy for a party's breach of its obligations but shall be in
addition to all other remedies available at law or equity.

            Section 11.13 Construction; Interpretation.

                  (a) The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement. As used in this Agreement, (i) unless otherwise specified
herein, the term "affiliate," with respect to any Person, shall mean and include
any Person controlling, controlled by or under common control with such Person,
(ii) the term "including" shall mean "including, without limitation," (iii)
words in the singular shall be held to include the plural and vice versa and
words of one gender shall be held to include the other genders as the context
requires, (iv) the words "hereof," "herein," and "herewith" and words of similar
import shall, unless otherwise stated, be construed to refer to this Agreement
as a whole (including the Exhibit hereto) and not to any particular provision of
this Agreement, and article, section, paragraph, exhibit and schedule references
are to the articles, sections, paragraphs, exhibits and schedules of this
Agreement, unless otherwise specified, (v) the word "or" shall not be exclusive,
and (vi) Parent, Buyer and the Equity Holders and will be referred to herein
individually as a "party" and collectively as "parties" (except where the
context otherwise requires). Where a word or phrase is defined herein, each of
its other grammatical forms shall have a corresponding meaning. A reference to
any party to this Agreement or any other agreement or document shall include
such party's successors and permitted assigns.

                  (b) The parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provisions
of this Agreement.

                  (c) Any reference to any federal, state, local or non-United
States statute or Law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context otherwise requires.

            Section 11.14 Changes in PNG Options and PNG Shares. For all
purposes of this Agreement, the PNG Options and PNG Shares shall include any
securities issued or exchanged with respect to such PNG Options and PNG Shares,
as applicable, upon any recapitalization, reclassification, merger,
consolidation, spin-off, partial or complete liquidation, stock dividend,
split-up or combination of the securities of PNG or any other change in PNG's
capital structure.

                            [Signature page follows]

                                       17


            IN WITNESS WHEREOF, Parent, Buyer, and the Equity Holders have
executed this Agreement or caused this Agreement to be executed by their
respective duly authorized officers as of the date first written above.

UNITED NATIONAL GROUP, LTD.         UNITED NATIONAL INSURANCE COMPANY

By: /s/ David R. Bradley
   -----------------------------
Name: David R. Bradley
Title: Chief Executive Officer      By: /s/ William F. Schmidt
                                       -----------------------------------------
                                    Name: William F. Schmidt
                                    Title: President and Chief Executive Officer

JON S. SALTZMAN                     JOANNE LYNCH SALTZMAN

 /s/ Jon S. Saltzman                 /s/ Joanne Lynch Saltzman
- --------------------------------    --------------------------------------------

EX-99.1

EXHIBIT 99.1

PRESS RELEASE

UNITED NATIONAL GROUP, LTD., PENN-AMERICA GROUP, INC. AND PENN INDEPENDENT CORPORATION ANNOUNCE BUSINESS COMBINATION UNDER UNITED AMERICA INDEMNITY, LTD.

George Town, Grand Cayman, Cayman Islands and Hatboro, Pennsylvania, October 15, 2004 – United National Group, Ltd. (NASDAQ: UNGL), Penn-America Group, Inc. (NYSE:PNG) and Penn Independent Corporation (PIC), a privately-held company, today jointly announced their agreements to combine their operations in transactions aggregating over $800 million in enterprise value. As a result of the transactions, the newly-christened United America Indemnity, Ltd (UAI) will become one of the leading specialty property and casualty insurers in the industry as well as a significant originator of and placement agent for specialty property and casualty insurance coverage.

Under UAI’s ownership, each company will retain its existing corporate identity and the businesses of UNGL, PNG, and PIC will continue to be operated by the existing management teams. UAI will boast more than $700 million in direct written premiums and net commission revenues, more than $1.1 billion in invested assets and approximately $550 million of shareholders’ equity. Based on today’s market values, United America Indemnity, Ltd. would be owned approximately 75% by the current shareholders of UNGL and 25% by the current public shareholders of PNG, with the shareholders of PIC receiving cash consideration. The final ownership proportions between UNGL and PNG will be determined based on market trading values of UNGL prior to closing.

To effectuate the transaction, UNGL, the publicly traded holding company for the United National Insurance businesses, which based on recent market prices has an enterprise value of approximately $528 million, will be renamed United America Indemnity, Ltd.; Class A common shares and Class B common shares of UNGL will continue as shares of UAI; each publicly held share of PNG will be exchanged for $15.375 of value, consisting of $13.875 in UAI Class A common shares and $1.50 in cash, for aggregate consideration of $156 million for all publicly held PNG shares; and all PIC shares will be acquired by a subsidiary of UAI for $97 million in cash. The $132 million of existing trust preferred securities and notes issued by UNGL and PNG will remain in place. The transaction, expected to close during the first quarter 2005, is subject to several conditions and contingencies, including insurance regulatory approvals and the affirmative vote of the shareholders of each of UNGL and PNG.

Saul Fox, UNGL’s Chairman and who will continue as Chairman of UAI, said: “By combining the breadth and depth of the UNGL, PNG, and PIC property and casualty insurance operations under United America Indemnity’s umbrella, each company will significantly enhance its ability to provide specialized products and services to its clients. In addition, United America Indemnity’s larger footprint in the marketplace and the consequent

strengthening of the competitive position of each company should materially assist the management teams of UNGL, PNG, and PIC in achieving their long term growth objectives. Our shareholders should benefit from the earnings accretion and enhanced financial stability provided by a significantly larger capital base, greater diversification of risks, and broader share ownership and liquidity.” Mr. Fox is also Chief Executive Officer of San Francisco based Fox Paine & Co., LLC, whose affiliated private equity funds acquired a controlling interest in United National in September 2003 and will be the largest shareholder in United America Indemnity.

David Bradley, Chief Executive Officer of United National Group, Ltd. (who will remain CEO of the holding company), emphasized the market opportunities and intellectual synergies accelerated by the deal, “We now have four critical platforms in which United America Indemnity has clear market leadership, beginning with United National’s and Penn-America’s growing excess and surplus lines specialty P&C businesses that include self-generated proprietary products, niche programs, brokered lines and franchise relationships with general agents who serve the small business marketplace. The newly acquired PIC agencies and associated businesses will continue to support and give preferred services to its current markets and partners. These, coupled with our new offshore business in Bermuda should enable us to thrive and compete in a broad swath of products, markets and situations.”

Jon S. Saltzman, currently President and Chief Executive Officer of Penn-America Group, Inc., will become President of UAI. Mr. Saltzman will oversee all United States insurance company operations of both United National and Penn-America. Joseph F. Morris, currently Senior Vice President, Chief Financial Officer & Treasurer of Penn-America Group, Inc., will be promoted to President and Chief Executive Officer of Penn-America Group, Inc.

Commenting on the business combination, Mr. Saltzman noted, “We are excited about bringing together two great businesses that have long-term histories of producing superior operating results in the excess and surplus lines market. United National is a leader in developing unique specialty products while Penn-America is one of the leading small commercial limited binding authority companies. I’m looking forward to working with Bill Schmidt, President of United National’s U.S. insurance operations, and his United National team while remaining confident that Joe Morris and Penn-America’s management will continue to create franchise value for Penn-America’s general agents. With a stronger capital base and a larger group of experienced and knowledgeable employees, I believe this combination elevates both companies to financial and operational levels higher than either company would be able to achieve on a stand-alone basis. I believe that agents, policyholders, employees and shareholders of both companies will clearly benefit from this transaction.”

UAI will conduct a conference call regarding the transaction on Monday, October 18 at 8:00am EDT on the following dial-in numbers:

Domestic Dial-In:	(877) 423-3902
International Dial-In:	(706) 679-0881
Conference ID (for both):	1578069

About United National Group, Ltd.:

United National Group, Ltd. (NASDAQ: UNGL) is a holding company formed under the laws of the Cayman Islands that, through its wholly-owned operating subsidiaries, is a specialty property and casualty insurer with a 44-year operating history in the specialty insurance markets. Its U.S. insurance subsidiaries are either licensed or authorized to write surplus lines or specialty admitted business in all states. United National’s underwriting network includes 85 managing general agents and its focus centers on self-generated proprietary products, niche programs and brokered lines. Its non-U.S. operations consist of recently formed Barbados-based and Bermuda-based insurance companies.

About Penn-America Group, Inc.:

Penn-America Group, Inc. (NYSE: PNG), located in Hatboro, Pennsylvania, is a specialty property and casualty insurance holding company which markets and underwrites general liability, commercial property and multi-peril insurance for small businesses that are located in small towns and suburban and rural areas nationwide. Penn-America distributes its products through a network of about 65 wholesale general agents who serve the needs of more than 30,000 retail insurance brokers — some 60% of the 42,000 in the United States.

About Penn Independent Corporation:

Penn Independent Corporation, founded in 1947 and located in Hatboro, Pennsylvania, is a leading U.S. wholesale broker of commercial insurance for small and middle market businesses, public entities and associations. In addition to its ownership of approximately 31.4% of Penn-America, Group, Inc., Penn Independent Corporation is comprised of five major businesses, including: Delaware Valley Underwriting Agency, Inc., a wholesale agency primarily providing insurance polices on an excess and surplus lines basis; Apex Insurance Agency, Inc., a specialty and reinsurance broker for municipalities and government agencies; Stratus Insurance Services, Inc., a niche association-based broker; Summit Risk Services, Inc., a third party claims administrator; and Penn Independent Financial Services, Inc., a premium finance company.

About Fox Paine:

Fox Paine & Company, LLC manages investment funds in excess of $1.5 billion that provide equity capital for management buyouts, going private transactions, and company expansion and growth programs. Fox Paine engages exclusively in friendly transactions developed in cooperation with a company’s management, board of directors, and shareholders. The Fox Paine funds are managed on behalf of over 50 leading United States and international financial institutions, including public pension systems, Fortune 100 corporate pension plans, major life and property & casualty insurance companies, money center and super regional commercial banks, investment banking firms, and university endowments.

Safe Harbor statement:

This release contains forward-looking information about United National Group, Ltd., Penn-America Group, Inc. and the combined operations of United National Group, Ltd., Penn-America Group, Inc. and Penn Independent Corporation after the completion of the transactions described in the release that are intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts. These statements can be identified by the use of forward-looking terminology such as “believe,” “expect,” “may,”

“will,” “should,’’ “project,” “plan,’’ “seek,” “intend,’’ or “anticipate’’ or the negative thereof or comparable terminology, and include discussions of strategy, financial projections and estimates and their underlying assumptions, statements regarding plans, objectives, expectations or consequences of the transactions, and statements about the future performance, operations, products and services of the companies.

UNGL’s and PNG’s businesses and operations, as well as the combined business and operations of United America Indemnity, Ltd., are and will be subject to a variety of risks, uncertainties and other factors. Consequently, their actual results and experience may materially differ from those contained in any forward-looking statements. Such risks, uncertainties and other factors that could cause actual results and experience to differ from those projected include, but are not limited to, the following: (1) ineffectiveness of their business strategy due to changes in current or future market conditions, (2) the effects of competitors’ pricing policies, and of changes in laws and regulations on competition, including industry consolidation and development of competing financial products, (3) greater frequency or severity of claims and loss activity than their underwriting, reserving or investment practices have anticipated, (4) decreased level of demand for their insurance products or increased competition due to an increase in capacity of property and casualty insurers; (5) risks inherent in establishing loss and loss adjustment expense reserves; (6) uncertainties relating to the financial ratings of their insurance subsidiaries; (7) uncertainties arising from the cyclical nature of their business; (8) changes in their relationships with, and the capacity of, their general agents; (9) the risk that their reinsurers may not be able to fulfill obligations and (10) uncertainties relating to governmental and regulatory policies. The foregoing review of important factors should be read in conjunction with the other cautionary statements that are included in UNGL’s and PNG’s respective Annual Reports on Form 10-K for the fiscal year ended December 31, 2003, as well as in the materials to be filed with the U.S. Securities and Exchange Commission (SEC). See “Additional Information” below. Neither UNGL nor PNG makes any commitment to revise or update any forward-looking statements in order to reflect events or circumstances occurring or existing after the date any forward-looking statement is made.

Additional Information:

UNGL intends to file a registration statement on Form S-4 in connection with the transaction, and UNGL and PNG intend to mail a joint proxy statement/prospectus to their respective shareholders in connection with the transaction. Investors and security holders of UNGL and PNG are urged to read the joint proxy statement/prospectus when it becomes available because it will contain important information about UNGL, PNG and the transaction. Investors and security holders may obtain a free copy of the joint proxy statement/prospectus (when it is available) at the SEC’s web site at www.sec.gov. A free copy of the joint proxy statement/prospectus may also be obtained from UNGL or PNG. UNGL and its executive officers and directors may be deemed to be participants in the solicitation of proxies from the shareholders of UNGL and PNG in favor of the transaction. Information regarding the interests of UNGL’s officers and directors in the transaction will be included in the joint proxy statement/prospectus. PNG and its executive officers and directors may be deemed to be participants in the solicitation of proxies from the shareholders of UNGL and PNG in favor of the transaction. Information regarding the interests of PNG’s officers and directors in the transaction will be included in the joint proxy statement/prospectus. In addition to the registration statement on form S-4 to be filed by UNGL in connection with the transaction,

and the joint proxy statement/prospectus to be mailed to the shareholders of UNGL and PNG in connection with the transaction, each of UNGL and PNG file annual, quarterly and special reports, proxy and information statements, and other information with the SEC. Investors may read and copy any of these reports, statements and other information at the SEC’s public reference rooms located at 450 5th Street, N.W., Washington, D.C., 20549, or any of the SEC’s other public reference rooms located in New York and Chicago. Investors should call the SEC at 1-800-SEC-0330 for further information on these public reference rooms. The reports, statements and other information filed by UNGL and PNG with the SEC are also available for free at the SEC’s web site at ww.sec.gov. A free copy of these reports, statements and other information may also be obtained from UNGL or PNG.

This communication shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

Contact:
UNITED NATIONAL GROUP, LTD	FOX PAINE & COMPANY, LLC
Richard March	Andy Brimmer
SVP and General Counsel	Partner
United National Insurance Company	Joele Frank, Wilkinson Brimmer Katcher
Phone: 610-660-6816	Phone:      212-355-4449      ext.      111
rmarch@unitednat.com	AHB@joelefrank.com
PENN- AMERICA GROUP, INC.
Joseph Morris
Senior Vice President. CFO & Treasurer
Penn-America Group, Inc.
Phone 215.443.3612
morris@penn-america.com
David Kirk, APR (media)
(610) 792.3329
davidkirk@thePRguy.com